Streamlining administrative procedures

 

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2.4 How has the government sought to streamline administrative procedures to quicken and to reduce the cost of establishing a new investment? In its capacity as a facilitator for investors, does the IPA take full advantage of information on the problems encountered from established investors?


Rationale for the question

The importance of transparency in laws and regulations governing investment and the ways in which the administrative burden on investors might be alleviated was discussed under Question 1.1. This question considers first how the IPA might help to streamline administrative procedures involved in the establishment phase of investment, and second how effectively the IPA uses its intermediary role between the government and investors to feed investor views back into the government’s efforts to improve the investment climate.

One common approach to investment facilitation has been the establishment of a ‘one-stop shop’ which informs investors on the necessary steps to start or expand a business and speeds up the granting of necessary permits and licences for both foreign and domestic investors. ‘One-stop shops’ also provide easy access to other information on legal and regulatory matters, on financing options, location choice, or recruitment and training. They make it easier for the government to centralise the quality provision of these services which allows potential and existing investors to save both time and money. At the same time, it is important to ensure that a ‘one-stop shop’ does not become simply ‘one more stop’.

Related PFI questions:

Question 1.1 on laws and regulations concerning investment
Question 2.1 on the business environment and investment promotion
Question 3.1 on administrative barriers to trade
Questions 10.1–10.5 on regulatory barriers

 

Key considerations

IPA organisation for advocacy – Providing a one-stop-shop for investors can be challenging in practice. Other agencies responsible for licensing and approvals may see the IPA as a rival or intruder on their prerogatives, particularly when it is first established. Turf battles and resistance to ceding authority to the IPA can undermine its ability to lobby for change. At the same time, other agencies are often the ones most qualified to assess a project in their area of competence, particularly its environmental impact. As discussed in Chapters 1 and 10, a balance must be established between the removal of administrative impediments and the government’s right to regulate.

Various approaches to IPA design have been attempted to ensure effective cooperation among government departments, including: leading the IPA through a board composed of key government departments; appointing IPA liaisons to key ministries; transferring legal authority to the IPA to issue the relevant permits or positioning the IPA so that it reports directly to the head of state or prime minister so as to have direct access to help in managing cooperation issues on particular investments.

Clear goals – Staff within the IPA should have a clear understanding of how to divide their time between advocacy work (and its associated research) and promotion, servicing and targeting activities. At different times, the proportions of such activity may change and the particular tactics and diplomacy needed within government will vary.

Streamlining administration – Efforts should be made to assess which administrative obstacles are most important to investors generally and within particularly strategic sectors. Once priorities are established, efforts should be made to lower the cost and increase the efficiency of these various forms of administration that affect new investments. Many of the same issues are important to existing investors and will affect their decisions about new investments or expansions. As an advocate or ombudsman acting on behalf of investors, the IPA should have structured approaches to gathering information from investors and have systems for addressing the problems investors face. The IPA should consciously adopt advocacy and influence as goals and consider which tactics and strategy are most appropriate to mitigating or removing delays in investment approvals.

Periodic reviews – No regulation will be useful forever. In time, market conditions, changing technology, inflation and foreign exchange market changes can render various regulations, taxes and duties ineffective. Thus it is a good practice to hold thorough periodic reviews of regulatory regimes to ask what could be discarded or simplified. In many instances regulations accumulate, each with a reason, but the total amount of work they create can become prohibitive. Thus consolidation of approvals, forms and other requirements can save time and money without necessarily harming the original intent of the regulations.

 

Policy practices to scrutinise

Factors commonly cited by investors as sources of delay or added costs include:

  • the cost and time required for approvals of various business licenses and permits;
  • approvals to purchase or lease land or change the zoning restrictions on use of particular pieces of land;
  • environmental impact assessments and agreements on mitigating and monitoring environmental impacts;
  • tax concessions and customs duty waivers;
  • work permits for foreign senior staff and technicians;
  • permits from national and sub-national governments;
  • timely access to public utilities at affordable rates;
  • foreign exchange regulation or restrictions on capital and dividend repatriations;
  • insurance regulations for transported goods;
  • various facets of labour law and pension provisions; and
  • dispute resolution systems.

Some key questions related to administrative procedures include:

  • What are the number and details of procedures for establishing a new investment project?
  • What is the average length of time required to complete a process?
  • What is the total cost for a complete process? How is it compared to other economies in the region, or other developing countries at the same level of development?
  • Are ‘one-stop’ shops established by the government to facilitate setting up new enterprises or acquiring licences/permits for new investment projects? Are they set up by the IPA?
  • Does the IPA provide any enquiry point for information regarding the administrative procedures required to establish a new investment?
  • Does the IPA provide any assistance/support for new investors if they are faced with difficulties during this process?
  • Is there any hotline in the IPA for registering complaints by established investors?
  • How are the complaints handled?
  • Is the IPA effectively cooperating with other relevant State agencies to address investors’ complaints?
  • How are the problems based on these complaints integrated into the IPA’s proposals or advocacy for reform?
  • Does the government have any plans for putting all relevant information for investors on the IPA website and for making it interactive?

Where government seeks to promote specific objectives through investment, investors and government may have to negotiate highly specific agreements. The benefit in terms of industrial development goals can come at a significant cost by delaying or diverting investments. Such issues can include:

  • technology transfers;
  • skills development requirements;
  • development of infrastructure that is directly needed by an investor or that government wants the investor to build as a public good in the vicinity of the investment;
  • agreements for investors to use a certain amount of local content or engage in mineral or agricultural beneficiation;
  • export-processing zone agreements;
  • agreements to promote business linkages with local firms or small businesses.

 

Resources

See the investment promotion and facilitation resource library.

 

 

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