USAID Praises the Regulatory Guillotine™ in Moldova. View the article here.

First Multi-Country Assessment of the Regulatory Guillotine™ Download Article.

First Multi-Country Assessment of the Regulatory Guillotine™ Download Article.

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 In each review, unnecessary, outdated, complex, and illegal rules are identified.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

Regulatory Guillotine™: A TESTED tool to assist countries in BROAD, rapid regulatory simplification

Most developing countries face the challenge of speeding up and broadening “enabling environment” reforms to stimulate market growth. Outdated and unnecessary regulations impose large efficiency costs on economic activity, and reduce government performance in protecting people and the environment, while promoting corruption. Yet reviewing, assessing, and revising hundreds or thousands of rules on the books imposes huge administrative, legal, and political costs, is highly resisted, and takes a long time.

A rapidly spreading regulatory reform tool is the Regulatory Guillotine™, a reform strategy first used in Europe in the 1980s, and since then extensively refined and further developed by Jacobs and Associates to speed up regulatory simplification in many countries. Results of the guillotine in eight countries since 1995 suggest that the guillotine process:

• Produces very rapid results (less than a year) in cutting hundreds or thousands regulations and reducing regulatory costs on businesses (see Table 1 below);
• Improves understanding and management of the regulatory problem by mapping out the full scale of regulatory interventions; 
• Increases reform capacities by reducing the political and administrative costs of reform and eroding the capacities of insiders to block change; 
• Creates the processes and organizational conditions for continued reform to the regulatory role of the public sector;
• Stimulates the development of active private partners for reform that will be useful in sustaining momentum

Results of the Guillotine in 5 Countries

	Target of Reform	Number of regulations before cleanup	% of regulations eliminated	% of regulations simplified
Korea (11 months)	Regulations	11,125	48.8%	21.70%
Mexico (5 years)	Formalities	2,038	54.1%	51.2%
Moldova (16 weeks)	Regulations	1,130	44.5%	12.5%
	Permits	400	68.0%	20.3%
Ukraine (12 weeks)	Regulations	15,000	46.7%	43.3%
Croatia (10 months)	Formalities	1,500	30% (anticipated)	30% (anticipated)

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

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.

 

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.

 

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