The Regulatory Guillotine™: A National Commitment to Better Regulation

Briefing: Frequently Asked Questions about the Guillotine

Effective and Sustainable Regulatory Reform: The Regulatory Guillotine in Three Transition and Developing Countries (10 January 2006)

Regulatory Guillotine™

Regulatory Guillotine™
A National Commitment to Better Regulation

Most developing countries face the challenge of speeding up and broadening “enabling environment” reforms to stimulate economic growth, create jobs, and raise living standards. Outdated and unnecessary laws and other regulations impose massive efficiency costs on economic activity, promote corruption, and reduce government performance in protecting people and the environment. Yet reviewing, assessing, and updating hundreds or thousands of rules across many ministries, other regulatory bodies, and levels of government imposes huge administrative, legal, and political costs, is highly resisted by those who benefit from rules, and takes a long time. Reforming regulations one at a time can exhaust reformers without producing any lasting benefits for businesses. A broad and coordinated approach is needed to significantly reduce unneeded regulatory costs.

A rapidly spreading regulatory reform tool is the Regulatory Guillotine™, designed to rapidly reduce regulatory costs and prepare countries for more sustainable reforms. The guillotine strategy was used in various forms by OECD countries in the 1990s, and since then has been extensively refined, tested, and developed by Jacobs and Associates. The term Regulatory Guillotine™ is a trademark of Jacobs and Associates.

Assessments of the guillotine suggest that the guillotine reform:

  1. Produces very rapid results (3-18 months) in cutting hundreds or thousands regulations and reducing regulatory costs on businesses (concrete results are summarized in the Results link to the left);
  2. Improves understanding and management of the regulatory problem by mapping out the full scale of regulatory interventions; 
  3. Increases reform capacities by reducing the political and administrative costs of reform and eroding the capacities of insiders to block change; 
  4. Creates the processes and organizational conditions for continued reform to the regulatory role of the public sector;
  5. Stimulates the development of active private partners for reform that will be useful in sustaining momentum

What Is the Regulatory Guillotine™

The regulatory guillotine is a flexible method but is specifically designed through a precise sequence to produce good results even where resistance is high. Essentially, it is a means of rapidly reviewing a large number of regulations, and eliminating those that are no longer needed. It counts the regulations that exist, and then reviews them against clear criteria, using an orderly and transparent process built on extensive stakeholder input. The basics of the guillotine work like this:

  1. The government establishes the scope of the guillotine, that is, defines precisely the kinds of regulatory instruments to be included and the regulatory bodies. 
  2. The government adopts a legal instrument – usually a law or decree -- that sets out the guillotine process, schedule, and institutions.
  3. The government creates a central guillotine unit at the center of government that manages the whole reform and carries out independent reviews.
  4. In the guillotine process, each regulation must be justified as meeting basic criteria. That is, the burden of proof is on the regulator to defend why the regulation should be kept. Three typical criteria are: Is the regulation legal? Is the regulation necessary for future policy needs? Is the regulation business-friendly?  
  5. The regulation passes through three levels of review – by ministries themselves, by stakeholders, and by the central unit, which makes the final recommendations. In each review, unnecessary, outdated, complex, and illegal rules are identified.
  6. The final recommendations are sent by the central unit to the Government or to Parliament for adoption as a single package. 
  7. Surviving regulations are placed into a comprehensive electronic registry that improves legal security and transparency as it is maintained in the future.

For more information on how the Regulatory Guillotine™ can be used to speed up regulatory reforms and the transition to markets in your country, please contact Scott Jacobs at scottjacobs@regulatoryreform.com

The eGuillotine™

Regulatory reform is faster and cheaper with eGovernment solutions. The eGuillotine™ solution is powerful web-based Management Portal System for the Regulatory Guillotine™ with capabilities to manage processes, documents, and content. The eGuillotine™ is an open source programmed application with multi-lingual support. It has high level of adoptability to meet demand of different legal systems and project’s structures and organization – which is critical for managing processes and high document flow efficiently in the different environments, as well as ensuring the transparency of the Regulatory Guillotine™ project.

In sensitive and dynamic projects like the Regulatory Guillotine™ that deals with a ten of thousands different documents and other information, eGuillotine™ solution provides project managers and team(s) with the tool for efficient monitoring and controlling of the project processes and team performance; for appropriate archiving of the documents and information in different formats; and for assuring transparency towards the public through fully integrated content management system. The eGuillotine™ application, developed from the approach used in Croatia, is in 2008 being used to support regulatory reforms in Egypt and Vietnam.

For more information, see www.e-guillotine.com.  

The eGuillotine™ trademark is jointly owned by Jacobs and Associates, and VAPS of Croatia, and copyright to the software is owned by VAPS.

Results of the Guillotine

Many governments should be able to make rapid and visible progress by using the Regulatory Guillotine™ approach, one of the most widely known innovations of Jacobs and Associates. The guillotine is intended for situations where governments are moving rapidly to become more competitive in changing markets.  

The guillotine eliminates and simplifies many regulations in a short period at low cost, while strengthening the government’s ability to focus on regulations needed to protect health, safety, and the environment. If the guillotine is successful, the costs and risks of doing business in the national economy will be visibly reduced, improving competitiveness, investment, and job creation. South Korea, the 11th largest economy in the world, reviewed over 11,000 regulations in 11 months and eliminated almost 50% of them, which was projected to produce over 1 million new jobs and $36 billion in new FDI as a result of the lower barriers to entry and lower compliance costs on businesses. The table below shows the immediate results achieved in various countries.

Results of the Guillotine in 6 Countries

 

Type of review

Target of Reform

Number of regulations before cleanup

% of regulations eliminated in the reform

% of regulations simplified in the reform

Korea
(11 months)

Legality, Need

Regulations

11,125

48.8%

21.7%

Mexico
(9 months)

Legality, Need

Formalities

2,038

54%

27%

Moldova
(6 months)

Legality

Regulations

1,130

44.5%

12.5%

Legality

Fee-based Permits

400

68%

20.3%

Ukraine
(12 weeks)

Legality

Regulations

14,000

36 %

7,2%

Bosnia /RS
(4 months)

Legality, Need

Formalities

331

21.1 %

22.7 %

Legality

Inspections

2,473

58%

-

Croatia
(9 months)

Legality, Need

Business Regulations

2,683

27%
(leg pending)

30%
(leg pending)

Source: Jacobs and Associates, 2007

What Donors are saying about the Regulatory Guillotine™:

  • “The guillotine is “…a fast-track approach that can deliver short-term results (the “guillotine approach”). This combination of simplicity and speed, and the results already achieved, provide a relatively promising foundation for the reform, and for using its achievements as a stepping stone for further regulatory reforms.” -- Business Licensing Reform: A Toolkit for Development Practitioners, World Bank, 2006
  • “Evidence compiled to date suggests that guillotining can be an effective means of reducing needless bureaucracy and achieving a more carefully considered regulatory system.” -- Best Practice Guide for a Positive Business and Investment Climate. Organization for Security and Co-operation in Europe (OSCE), 2006
  • “Application of the Guillotine Law is one of the most significant events in the reform process since Moldova’s departure from the USSR.” USAID Frontlines, February 2006
  • The "guillotine of regulations" will cut through unnecessary measures that prevent investments in BIH.” USAID BIH Director Howard Sumka
  • “Reduction by regulatory guillotine of business licenses in Kenya … is a key result that will contribute to reducing the cost of regulation of the private sector in Kenya , and toward improving transparency and fighting corruption.“ Demba Ba, Head, Africa Region’s Private Sector Development Group in the World Bank (June 2006)

Meet the National Guillotiners

Each country operating a guillotine has created a central guillotine unit to run the reform. These units take various forms, but each one is composed of dedicated and trained men and women who are largely responsible for the success of the reform. Below are photographs of the guillotine teams from various countries.

GuillotineCrowd
 The Guillotiners: The Secretariat of the National Working Group on Implementing Regulatory Reform in Moldova carried out a rapid guillotine on thousands of business regulations in 2005 and 2006.

Kenya
The Kenya Guillotiners: The Working Committee on Regulatory Reforms for Business Activity in Kenya is carrying out a guillotine program on 1,500 business licenses in 2005-2006. On the right of Scott Jacobs is Working Committee Chair Ben Musau, and on his left is Peter Ladegaarde from the Foreign Investment Advisory Service.

GuillotineCrowd
Staff of the Croatian HitroRez (guillotine) unit, in the midst of the review of 1,500 business regulations (Feb 2007)

Reference Materials on the Guillotine

  • Effective and Sustainable Regulatory Reform: The Regulatory Guillotine in Three Transition and Three Developing Countries, Scott Jacobs (Jan 2006), Jacobs and Associates Working Papers. Download Here.
  • Briefing Note: Frequently Asked Questions on the Regulatory Guillotine™ on the Jacobs and Associates website.Go to Link Here.
  • The Regulatory Guillotine™: A Tool for Rapid Regulatory Simplification, presentation given by Scott Jacobs in Jakarta, April 2007. Go to Link Here.
  • The Regulatory Guillotine™ Strategy. Preparing the Business Environment in Croatia for Competitiveness in Europe. Download Here.
  • Dealing with the Stock of Regulation: A Case of Korean Regulatory Reform by Professor Jong Seok Kim, at Go to Link Here.

  • USAID Success Stories: The Regulatory Guillotine™ in Moldova

    Entering a New Era of Business

    • Law limits unwarranted state regulation of private sector

  • Kenya’s Radical Licensing Reforms, 2005-2007: Design, Results, and Lessons Learned By Scott Jacobs, Peter Ladegaard, and Ben Musau, October 2007. View PDF

How Can I Find Out More?

For more information on how the Regulatory Guillotine™ can be used to speed up regulatory reforms and the transition to markets in your country, please contact Scott Jacobs at scottjacobs@regulatoryreform.com or Diana Rowen at janda@regulatoryreform.com