55644 BETTER REGULATION FOR GROWTH GOVERNANCE FRAMEWORKS AND TOOLS FOR EFFECTIVE REGULATORY REFORM REGULATORY CAPACITY REVIEW OF ZAMBIA INVESTMENT CLIMATE ADVISORY SERVICES WORLD BANK GROUP WB210_RCRZ.indd i 5/21/10 8:48:48 PM ©2010 The World Bank Group 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to repro- duce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. About the Investment Climate Advisory Services of the World Bank Group The Investment Climate Advisory Services (IC) of the World Bank Group helps governments implement reforms to improve their business environment, and encourage and retain investment, thus fostering competitive markets, growth and job creation. Funding is provided by the World Bank Group (IFC, MIGA, and the World Bank) and over 15 donor partners working through the multi- donor FIAS platform. The findings, interpretations and conclusions included in this note are those of the author and do not necessarily reflect the view of the Executive Directors of the World Bank Group or the governments they represent. Better Regulation for Growth Program The Better Regulation for Growth (BRG) Program was launched in 2007 by the Dutch Ministry of Foreign Affairs, the UK Depart- ment for International Development (DFID) and IC, the investment climate advisory services of the World Bank Group. The objective of the BRG Program is to review and synthesize experiences with regulatory governance initiatives in developing countries, and to develop and disseminate practical tools and guidance that will help developing countries design and implement effective regulatory reform programs. Reports and other documentation developed under the BRG Program are available at: www .ifc.org/brg WB210_RCRZ.indd ii 5/21/10 8:48:49 PM Table of Contents Acknowledgment ................................................................................. v Foreword ............................................................................................ vi Acronyms: Zambia ............................................................................. vii Executive Summary ........................................................................... ix Regulatory Reform in a National Context ............................................. 1 Economic development context .............................................................................1 Administrative and legal environment ....................................................................3 Recent regulatory reforms.....................................................................................6 National Policies and Institutions for Regulatory Reform .................... 11 Regulatory reform principles and policies .............................................................11 Institutions and drivers to promote regulatory reform ..............................................12 Coordination between levels of government .........................................................13 National-local ...................................................................................................13 National ­ international .....................................................................................13 Administrative Capacities for Making High Quality Regulation ........... 15 Administrative transparency and predictability ......................................................15 Provisions for transparency in making laws ..........................................................15 Provisions for consultation ................................................................................17 Communication of regulations ............................................................................20 Compliance and enforcement of regulation ..........................................................20 Public redress and appeals.................................................................................21 Policy instrument alternatives ..............................................................................22 Use of RIA for understanding regulatory effects .....................................................23 Building administrative skills for regulatory reform .................................................23 Updating Regulations ......................................................................... 24 Revisions of existing laws and regulations ............................................................24 Reducing administrative burdens .........................................................................24 Use of ICT to support regulatory reform ...............................................................26 Roles of Donors and IFIs ..................................................................... 27 Conclusions and Recommendations .................................................... 28 Assessment of strengths and weaknesses ..............................................................28 Policy options ...................................................................................................29 iii WB210_RCRZ.indd iii 5/21/10 8:48:50 PM APPENDIX A. Principles of Good Regulation ....................................... 30 APPENDIX B. DB Indicators, DB 2009.................................................. 31 APPENDIX C. The Judicial System in Zambia ....................................... 32 The Supreme Court............................................................................................32 The High Court .................................................................................................32 Magistrates courts .............................................................................................32 Local courts ......................................................................................................32 iv WB210_RCRZ.indd iv 5/21/10 8:48:50 PM ACKNOWLEDGMENT This report was produced by Roy Pepper, consul- Rodrigo, and from interviews with many key tant and former Lead Investment Policy Officer stakeholders and experts on regulatory reform in in FIAS between 2002 and 2007. Delia Rodrigo Zambia, including Claire Harris, Siame Kayula, and Peter Ladegaard of the World Bank Group's Eva Jhala and Reginald Nfula. Investment Climate Department designed the approach for the study and provided ad-hoc guid- Zai Fanai and Vanessa T. Co supported the pub- ance and input. lication of the report. The report benefited from valuable comments from Patrick Banya, Marie Sheppard and Delia v WB210_RCRZ.indd v 5/21/10 8:48:51 PM FOREWORD Regulatory reform has emerged as an important countries in East and Southern Africa (the others policy area in developing countries. For reforms are on Kenya, Uganda, Rwanda, and Tanzania). to be beneficial, regulatory regimes need to be The report is based on a review of public docu- transparent, coherent, and comprehensive. They ments prepared by the government, donors, and must establish appropriate institutional frame- the private sector, and on a limited number of works and liberalized business regulations; interviews with key institutions and individuals. enforce competition policy and law; and open external and internal markets to trade and The report is an input to the Investment Cli- investment. mate Advisory Services (IC) discussions aimed at helping governments improve regulatory This report examines the institutional set-up for quality--that is, reform regulations to foster and use of regulatory policy instruments in competition, innovation, economic growth, and Zambia. It is one of five reports prepared on social objectives. vi WB210_RCRZ.indd vi 5/21/10 8:48:53 PM ACRONYMS: ZAMBIA ACC Anti-Corruption Commission BLRC Business Licensing Reform Committee CLC Cabinet Liaison Committee CLO Cabinet Liaison Officer COMESA Common Market for Eastern and Southern Africa DFID UK Department for International Development DIP Decentralization Implementation Plan EBZ Export Board of Zambia EPZ Export processing zone FDI Foreign direct investment FNDP Fifth National Development Plan IC Investment Climate Advisory Services ICT Information and Communication Technology IFC International Finance Corporation IMCO Inter Ministerial Committee of Officials JCA Judicial Complaints Authority MDG Millennium Development Goals MFNP Ministry of Finance and National Planning MPC Monetary Policy Committee MTEF Medium Term Expenditure Framework OAG Office of the Auditor-General vii WB210_RCRZ.indd vii 5/21/10 8:48:53 PM OECD Organization for Economic Cooperation and Development PAC Policy Analysis and Coordination Division PACRO Patents and Companies Registration Office PEMD Planning and Economic Management Department PEMFA Public Expenditure Management and Financial Accountability Reforms PRSP Poverty Reduction Strategy Paper PSD Private Sector Development PSF Private Sector Federation PSM Public Service Management PSRP Public Service Reform Program RIA Regulatory Impact Analysis RISDP Regional Indicative Strategic Plan RTFP Regional Trade Facilitation Program SADC Southern African Development Community SAG Macroeconomic Sector Advisory Group SME Small and Medium Enterprises SQAM Standardization, Quality assurance, Accreditation and Metrology UNCTAD United Nations Conference on Trade and Development UNIP United National Independence Party USAID U.S. Agency for International development ZAM Zambia Association of Manufacturers ZBC Domestic Business Council ZBF Zambia Business Forum ZCCI Zambia Council of Commerce and Industry ZDA Zambian Development Agency ZEPZA Zambia Export Processing Zones Authority ZIBAC Zambia International Business Advisory Council ZIC Zambia Investment Centre ZRA Zambia Revenue Authority viii WB210_RCRZ.indd viii 5/21/10 8:49:11 PM EXECUTIVE SUMMARY Since the late 1990s, the government of the However, economic recovery has not yet been Republic of Zambia has attempted to reverse the accompanied by a significant increase in private country's economic decline by putting together a savings and investment. While gross investment new approach to economic management, focus- rose from 15 percent of GDP in the early 1990s ing on fiscal discipline, better governance, and to about 20 percent by 2005, the increase came promotion of economic growth. These steps have largely from public investment, with private been designed to introduce a market-based and investment languishing at around 6 percent of private sector-driven economy in place of the state GDP. Private investment will have to increase sig- enterprise-dominated system. As a result, the nificantly if growth targets are to be met. The Zambian economy has experienced positive GDP reforms and the recent improvements in eco- growth for eight consecutive years, with all sec- nomic performance have not altered the percep- tors, but in particular mining, construction, and tions of the business community that the business services, contributing positively. Real GDP growth climate in Zambia is generally poor because of a has averaged more than 5 percent since 2005, and broad range of obstacles listed below: as a consequence, the overall poverty headcount has declined from 73 percent of the population in costs of financing; 1998 to around 68 percent. The government rec- ognizes that, in order to meet the Millennium macroeconomic instability; Development Goals (MDGs), the economy needs tax rates; to move to a higher GDP growth path of between 8­10 percent per annum, and that private sector regulatory policy uncertainty; development will have to be responsible for stim- ulating that growth. access to financing; ix WB210_RCRZ.indd ix 5/21/10 8:49:11 PM crime; government that have regulatory implications. Important components of this system would be: corruption; and the introduction of regulatory impact assess- infrastructure. ment; Numerous reports prepared by donors and the private sector have identified business regulations establishment of consultation procedures in as a major issue, and Zambia accepted the need the development of policies, laws, and regu- for reform in this broad area in its private sector lations; development (PSD) strategy. improved communications of existing regu- Zambia is beginning to respond to the challenge lations; and of regulatory capacity and performance through a broad range of programs and activities involving a focus on compliance and enforcement. public sector and civil service reform; decentraliza- tion and local government reform; anti-corruption Much of what this report endorses has been iden- campaigns; competition and competitiveness pro- tified in the report of the Business Licensing grams; and legal reform. It is also focusing specifi- Reform Committee (BLRC), which establishes cally on business registration and licensing as key an agenda for discussion within government and factors determining the creation of new businesses other stakeholders for broad regulatory reform, as and the formalization of informal businesses. well as for specific reform of business licensing. Despite these efforts, much more remains to be done. Particular attention should be paid to implement- ing regulatory strategy and reform, in view of the This report reviews the current state of regulatory country's past performance in this area. The Phase capacity and performance in Zambia, with a view II strategy of the Public Sector Development to identifying weaknesses that must be overcome Reform Program (PSDRP) outlines a number of and existing strengths upon which the regulatory focus areas for regulatory reform, including management system could be constructed. Much reducing the number of licenses that businesses of the regulatory reform carried out to date has need to get and ensuring that processes and pro- been directed at solving existing problems and cedures for import and export are transparent weaknesses, but it is also essential that the capac- and streamlined. However, there is the real risk ity to make new regulations and to keep them up that these reform programs will flounder like to date is strengthened. The report argues for those before due to a shortage of trained person- building a regulatory management system by nel and funding, irrational incentives that work adopting a broad policy on regulatory reform against reform, and a failure to establish clear tar- that establishes short and medium term objec- gets as well as monitoring and evaluation mecha- tives, and focuses on implementing better regu- nisms. The successful implementation of the lations and regulatory procedures. regulatory aspects of the Phase II PSDRP strategy will take considerable time and require sustained An important step in institutionalizing regulatory effort over several years. The government's pro- reform would be to create a ministerial position gram will need to establish realistic intermediate supported by a technical unit to champion such targets that are attainable and can contribute to reform, and to coordinate the many reforms across building the constituency for reform. x WB210_RCRZ.indd x 5/21/10 8:49:13 PM REGULATORY REFORM IN A NATIONAL CONTEXT Economic development context were introduced during the 1980s, and some attempts were made to improve incentives for agri- Until very recently, the people of Zambia were cultural production and manufacturing, most steadily becoming poorer. The per capita GDP fell reforms were short-lived and hampered by poor for more than three decades, from $700 in 1970 to implementation. The diversification that took place $390 in 1998. At independence in 1964, the Zam- depended heavily on either subsidies or protection bian economy was concentrated around a single against competition. Zambia's exports continued sector--the mining sector, particularly copper pro- to decline, its foreign debt mushroomed, and the duction. This sector accounted for some 45 percent pace of per capita GDP decline accelerated. of GDP, nearly 90 percent of exports, 65 percent of public revenue and the bulk of formal sector In October 1991, Zambia moved to a multiparty employment that was not in public services. In the democratic system. In the following years, the gov- first decade after independence, Zambia's copper ernment implemented a number of policy and exports reached an all-time high, yet the remainder structural reforms, liberalizing exchange and inter- of the economy stagnated, and overall GDP est rates; simplifying the tariff structure and remov- growth--averaging 3 percent per annum--lagged ing quantitative restrictions on trade; privatizing behind the rate of population growth. most state-owned enterprises; and substantially withdrawing from the agriculture sector. Despite The collapse of world copper prices in the mid- these reforms, economic growth remained lacklus- 1970s created an enormous adverse shock for the ter, and poverty and social conditions continued Zambia economy. Equally devastating was the gov- to worsen.1 Between 1991 and 2000, real per ernment's response to this shock, comprising heavy international borrowing, the imposition of perva- 1 Overall poverty increased from 70 percent in the early 1990s sive controls over factor and product markets, and to 73 percent by the end of the decade, and other social indicators declined as well: life expectancy declined from 49 widespread nationalization of productive assets years to 38 years; under-five mortality rate rose from 151 per outside of the mining sector. While partial reforms 1,000 live births to 162 per 1,000; net primary school 1 WB210_RCRZ.indd 1 5/21/10 8:49:13 PM capita GDP declined at an average annual rate of As of today, Zambia has experienced positive 1.5 percent a year, so that by 2000 real per capita GDP growth for eight consecutive years with all GDP was no more than half what it had been at sectors, particularly mining, construction, and Independence.2 In 2000, Zambia found itself in services, contributing positively. Real GDP the unfortunate and unique position of a coun- growth has averaged more than 5 percent since try that had not undergone the trauma and dislo- 2005, and as a consequence, the overall poverty cation of war or civil strife, yet had experienced a headcount has declined from 73 percent of the virtually continuous contraction of per capita population in 1998 to around 68 percent.4 The income over three and a half decades. government recognizes that, to meet the MDGs.5, the economy needs to move to a higher GDP Since the late 1990s, the government has attempted growth path of between 8-10 percent per annum, to put together a new approach to economic man- and that private sector development will have to agement, focusing on fiscal discipline, better gover- be responsible for stimulating that growth. In nance, and promotion of economic growth. This June, 2004, the government publicly launched new way of thinking was reflected in a series of an ambitious private sector development agenda policy statements, including the Interim Poverty during a workshop involving both public and Reduction Strategy Paper (I-PRSP, July, 2000) and private sector stakeholders. This forum put the the Poverty Reduction Strategy Paper (May, 2002).3 government on record that it intended to imple- Over the past decade, Zambia has implemented ment its private sector development strategy. stabilization and structural adjustment reforms designed to introduce a market-based and private However, economic recovery has not yet been sector-driven economy in place of the state enter- accompanied by a significant increase in private prise-dominated system. savings and investment. While gross investment rose from 15 percent of GDP in the early 1990s However, an inability to reduce budget deficits to about 20 percent by 2005, the increase came and to restrain growth of public employment largely from public investment, with private resulted in high rates of inflation averaging some investment languishing at around 6 percent of 20 percent per annum, and in high real interest GDP. Moreover, foreign direct investment (FDI) rates exceeding 20 percent per annum in the first has been declining, with relatively little flowing half of the decade. Not surprisingly, the econo- into manufacturing, tourism, non-copper min- my's response to these reforms was muted, with ing and agro-processing, which the government GDP growth accelerating to 3.8 percent per wishes to promote as part of its diversification annum between 2000 and 2004 and per capita program. GDP growth increasing to 1.8 percent per annum. Modest by international standards, such growth The reforms and the recent improvements in eco- was significantly higher than Zambia had achieved nomic performance have not altered the percep- in the past, and the first time since independence tions of the business community that the business that the country had achieved positive per-capita climate in Zambia is generally poor. The Inward GDP growth for more than five years in a row. FDI Potential Index of the United Nations Con- ference on Trade and Development (UNCTAD), enrollment fell from 77 percent to 67 percent; and adult for example, places Zambia towards the bottom of literacy declined. all countries. In contrast to many of its regional 2 In the period 1991­95, annual GDP growth was negative, averaging­1.1 percent per annum, while at least it was posi- tive, averaging 2.1 percent per annum, in the second half of 4 During the past four or five years, inflation has been reduced the decade. to less than 10 percent per annum, and the macro-economic 3 Interim Poverty Reduction Strategy Paper (I-PRSP) July position has improved significantly. 2000, and the Poverty Reduction Strategy Paper, May 5 The MDG goal for poverty is to halve the percentage of the 2002. population living in absolute poverty by 2015. 2 WB210_RCRZ.indd 2 5/21/10 8:49:17 PM competitors, Zambia's ranking has fallen in recent as 100th globally in the "ease of doing business" years. Similar conclusions are drawn through the synthetic indicator, and 7th in Sub-Saharan Africa Heritage Foundation's Index of Economic Free- (SSA).8 The report identifies starting a business, dom. Firms in the Investment Climate Assessment getting credit, and paying taxes as areas where sample ranked regulatory policy uncertainty as the Zambia compares favorably to its neighbors, and fourth most pressing constraint to growth. Fifty- permitting/licensing, labor rules, and cross-border seven percent of Zambian respondents rated regu- trade as areas where Zambia's performance lags. latory policy uncertainty as an important (major DB2009 confirms that Zambia has gradually or severe) problem for their firm, compared to, for improved its standing in comparison to other SSA example, only 28 percent of Ugandan firms. Sev- countries, but also shows that it lags well behind enty percent of firms judged that government offi- international best practice. cials' interpretation of regulations affecting their businesses are inconsistent and unpredictable. Red tape and excessive government interference in private sector activities are the main constraints Although some aspects of this broad category, such to private sector development. One indicator of as business registration and customs administra- this is the large share of GDP generated in the tion, do not rank highly on their own as serious informal sector and its continuing growth. Some constraints on investment and operations, the 50 percent of GDP is estimated to be generated overall cumulative impact of these regulations and within the informal sector, and a very large pro- policies is considered to be high. Firms reported portion of enterprises are estimated to be infor- that these shifts in policy exacerbate the risks that mal to some degree.9 In turn, the impact of the they associate with doing business in Zambia and large informal sector on formal sector enterprises create a disincentive to invest.6 There are also can be gauged by the fact that "practices of the numerous relatively new agencies within the gov- informal sector" was the second-largest constraint ernment, some of which require licenses of one to enterprise investment in 2007, according to type or another, such as the Competition Com- the World Bank enterprise survey.10 mission, Communications Authority, Investment Centre, and the Environmental Council, not to mention the licenses required from relevant indus- Administrative and legal environment try regulatory bodies. The Zambian legal system is based closely on that These findings are corroborated by the Doing of England and Wales, and Zambian courts Business 2009 indicators.7 DB 2009 ranks Zambia widely apply principles of English common law. Customary law is also applied.11 Zambia's judicial 6 For example, the immigration laws were suddenly changed in practice and procedures are governed by the 2003, requiring all non-Zambians to renew unexpired per- Zambian High Court Act. However, where the mits at high cost. In addition, as was indicated in the Admin- istrative Barriers Study carried out by FIAS, non-Zambian 8 Rankings in Africa for Zambia's regional competitors were businesses are required to renew licenses and immigration 5th for Kenya, 10th for Uganda, 14th for Tanzania, and 17th permits every year, and uncertainties in the application and for Rwanda. interpretation of the policy tend to reduce the willingness of 9 See "Zambia: Informal Investment Climate Assessment," businesses to invest. Another good indicator of the cost of Africa Private Sector Group, June 2006. regulatory uncertainty is the amount of senior management 10 See http://rru.worldbank.org/BESnapshots/Zambia/default time spent on regulations (e.g. tax, customs, labor regula- .aspx tions, licensing, and registration), completing forms and 11 The dual legal system in Zambia, in which both statutory dealings with officials. In Zambia, this amounts to about 13 and customary laws apply, has often led to discriminatory percent, a rather high percentage compared to only 4 percent practices which, in most cases, are biased against women, in Uganda, but lower than 14 percent in Kenya and 16 per- especially in the application of customary law which is not cent in Tanzania. written. For this reason, the government has initiated the 7 The World Bank Group, Doing Business Indicators, review of customary laws to avoid arbitrary interpretation Washington, D.C., 2009. of the customary laws and to align them to statutory laws. 3 WB210_RCRZ.indd 3 5/21/10 8:49:17 PM Zambian provisions are deficient, the appropriate The Republic of Zambia is today "a unitary, indi- provisions of the Rules of the Supreme Court of visible, multi-party and democratic sovereign England and Wales are applied. state" (Part I, Article 1). The government has three organs: Legislature (established under Part V), In terms of the hierarchy of legal, administrative, the Executive (established under Part IV) and and regulatory instruments, the Constitution12 is Judiciary (established under Part VI), whose the supreme law, and any law or custom in con- functions and powers are laid out in the 1996 flict with it is null and void to the extent of its Constitution. The Constitution provides for leg- inconsistency (Article 3). The second tier of the islative supremacy of Parliament and indepen- hierarchy is statute law or acts, which are pub- dence of the Judiciary. lished in the Official Gazette. The third source of law is decree law.13 The fourth source is case law, Executive power in Zambia is vested in the presi- comprising judgments from the Supreme Court, dent (Article 33 (2)). The president, who may the High Court, and the Court of Appeal, which serve for two terms of seven years each (Article 35), serve as precedents for lower courts. The fifth is elected by universal suffrage through secret bal- source of law is customary law. Finally, interna- lot, and can be elected by a simple majority of tional treaties and conventions are a source of votes cast (Article 34). Article 45 authorizes the domestic law as long as they have been ratified by president to appoint a vice president15 from the Parliament.14 members of the National Assembly; Article 46 authorizes the president to appoint ministers, also 12 The current constitution was adopted in 1996. Prior to from the members of the Assembly; and Article this, Zambia functioned under the constitution adopted in 47 permits the president to appoint deputy minis- 1973, which provided for a strong president and a unicam- eral National Assembly. National policy was formulated by ters (whose role is to assist the ministers) and pro- the Central Committee of the United National Indepen- vincial deputy ministers (whose role is to be dence Party (UNIP), the sole legal party in Zambia. The cabinet executed the central committee's policy. In accor- responsible for administration of the country's dance with the intention to formalize UNIP supremacy in provinces), also from the membership of the the new system, the constitution stipulated that the sole National Assembly. candidate in elections for the office of president was the person selected to be the president of UNIP by the party's general conference. The second-ranking person in the The Cabinet, which is responsible for formulat- Zambian hierarchy was UNIP's secretary general. In ing the government's policy (Article 50), consists December 1990, President Kaunda signed legislation end- ing UNIP's monopoly on power. In response to growing of the president, vice president, ministers, and popular demand for multi-party democracy, Zambia ministers of state. According to Article 51, the enacted a new constitution in August 1991. The constitu- tion enlarged the National Assembly from 136 members to Cabinet and the deputy ministers are accountable a maximum of 158 members, established an electoral com- collectively to the National Assembly, and subject mission, and allowed for more than one presidential candi- to a code of conduct promulgated by the Assem- date who no longer had to be a member of UNIP. The constitution was amended again in 1996 to set new limits bly. Article 53 makes provision for appointment on the presidency (including a two-term limit, and a by the president, subject to ratification by the requirement that both parents of a candidate be Zambian- born). The current Constitution allows for amendments in Assembly, of a Cabinet secretary, who is head of the event that they are approved on a vote by no less than the public service16 and in charge of the Cabinet two thirds of the Assembly's members. In 2003, the gov- ernment appointed the Mung'omba Constitutional Review Commission (CRC) to address shortcomings of two earlier commissions and to come up with a widely accepted con- stitution. The CRC released its report and draft constitu- it is currently putting in place mechanisms for the ratifica- tion in December 2005. tion of the International Convention on the Recognition 13 Decrees may be issued under the name of the president, and Enforcement of Foreign Arbitral Awards. but have to be submitted to Parliament for ratification at 15 One of whose roles is to be the leader of the government in its next session. the National Assembly. 14 While Zambia is not a signatory to any international con- 16 And responsible for securing the general efficiency of the vention regarding the enforcement of foreign judgments, public service. 4 WB210_RCRZ.indd 4 5/21/10 8:49:17 PM office.17 Finally, the president is responsible (Arti- again, with or without amendment, on a vote of cle 54) for appointing the attorney general, who no fewer than two-thirds of all members of the is ex-officio, a member of the Cabinet and the Assembly, the president may provide his assent, or government's legal adviser.18 else is required to dissolve Parliament (Article 78). Legislative power in Zambia is vested in Parlia- Part XIII of the Constitution provides for the con- ment, which consists of the president and the cept of tribal chiefs and the institution of the National Assembly (Article 62). The Legislature House of Chiefs. Article 127 provides for the elec- has three main functions: to make laws, to appro- tion of chiefs in accordance with traditions and priate money for public expenditure, and to over- customs of the population, while Article 129 pre- see government administration and subject its cludes chiefs from participating in partisan poli- activities to scrutiny. A single chamber, the tics. Article 130 establishes the House of Chiefs as National Assembly, consists of 150 elected mem- an advisory body to the government on traditional, bers, not more than eight nominated members19 customary, and other matters referred to it. It can (Article 68) and the speaker (Article 63). The consider proposed legislation that has implications elected members20 are directly chosen by secret for custom and tradition, can itself instigate dis- ballot and by universal adult suffrage, using the cussion and decide on matters relating to custom- simple majority (or "first-past-the-post") system. ary law and practice, and can submit resolutions Each elected member represents a geographical on bills to the National Assembly through the constituency, defined by the Electoral Commis- president. The House of Chiefs consists of 27 sion, which exists to supervise elections.21 All chiefs, three each from the nine provinces. Each members of the Assembly serve five-year terms. member holds office for three years, with the pos- Article 73 establishes the post of Clerk of the sibility of renewal for a second three-year term. National Assembly, who, along with his staff, is responsible for the Assembly's activities. Article The judiciary in Zambia comprises various insti- 88 stipulates that there shall be a session of Parlia- tutions concerned with the provision of legal ser- ment at least once a year. vices, enforcement of laws, and administration of justice. The main institutions include the Supreme The Parliament exercises its powers through pas- sage of bills by the Assembly and by the president Court, the High Court, the Industrial Relations assenting to them. Should the president choose Court, Subordinate Courts, and local courts. (For not to provide assent, the bill is returned to the further details, see Annex C). The Constitution Assembly for reconsideration; if the bill is passed also provides for the creation of posts of the direc- 17 And responsible for arranging the business of the Cabinet tor of Public Prosecutions (Article 56) and an and conveying decisions made by Cabinet to the appropri- investigator-general (Article 90).22 ate authorities. 18 Article 54 stipulates that the Attorney General is responsi- ble for signing all government bills presented to Parlia- Within the Executive, the Ministry of Justice ment. It also requires that a person shall only be qualified and Constitutional Affairs has jurisdiction over to be appointed to the office if he/she is qualified for appointment as a judge of the High Court. A similar legal matters, including the Law Development requirement is stipulated (Article 55) for the appointment Commission. The Ministry of Justice has two of the Solicitor-general. chambers, namely, Attorney-General's Cham- 19 Article 74 allows the president to terminate the appoint- ment of any nominated member, without limitation. bers and the Director of Public Prosecutions, 20 Articles 64 and 65 stipulate conditions for running for the which are constitutional appointments. The Assembly. Article 65 states that a tribal chief is ineligible to run for the Assembly, unless he/she abdicates the office of ministry has departments structured along its chief before lodging his nomination. 21 Articles 76 and 77 establish rules for the specification of 22 The investigator-general is the chairman of the Commis- constituencies. sion for Investigations. 5 WB210_RCRZ.indd 5 5/21/10 8:49:19 PM constitutional and statutory mandates. The min- districts, the donor community, and civil society. istry also supervises some statutory bodies: the Vision 2030 reflects the collective aspirations of the Zambia Law Development Commission, the Zambian people to be a "prosperous middle-income Zambia Institute of Advanced Legal Education, country," and provides the framework for developing and the Administrator General and Official medium-term plans.23 The Vision is being opera- Receiver and Legal Aid Board, and several depart- tionalized through five-year plans containing spe- ments falling under the Attorney-General's cific policies, programs, and projects, predominantly Chambers and the Administration Department. targeted towards wealth creation and poverty reduc- The ministry also houses the Governance Devel- tion. The first of these plans is the FNDP . opment Unit, which was created following the adoption of the National Capacity Building Pro- The FNDP establishes a real GDP growth target gram for Good Governance in Zambia by Cabi- of at least 7 percent per year, and starts from the net in March 2000. presumption that the environment for growth, development, and poverty alleviation needs to be According to the Fifth National Development substantially improved, especially with regard to Plan, which is being implemented from 2006 to the business and investment climate. The FNDP 2010, all statutory bodies and departments of the draws an explicit link between the quality of the ministry face severe challenges in fulfilling their business and investment climate and sustained mandates because of low staffing levels due to growth, employment, and poverty reduction. It unattractive working conditions; inadequate logis- identifies the Private Sector Development (PSD) tics ranging from office space, transport, and office Program as the strategic instrument for promot- equipment; and poor funding of their operations. ing improvements in the business environment. The PSD Program24 has six reform pillars, which Recent regulatory reforms are: (a) improvement of the policy environment Zambia has been engaged in economic reforms for 23 The Vision sets out three scenarios for development options: a baseline, a preferred, and an optimistic option. The socio- the past 20 years, as outlined briefly in section 1.1. economic development objectives enshrined in the preferred Starting in the early 1990s, in response to a long- scenario were: to attain and sustain annual real growth of 6 term decline in economic fortunes, Zambia imple- percent per annum for 2006­2010, 8 percent for 2011­ 2015, 9 percent for 2016­2020, and 10 percent between mented stabilization and structural adjustment 2021 and 2030; to attain and maintain a moderate inflation reforms designed to introduce a market-based and rate of 5 percent; to reduce the national poverty head count to less than 20 percent of the population; to reduce income private sector-driven economy in place of the state inequalities to a Gini coefficient of less than 40; to provide enterprise-dominated system of the previous two secure access to safe potable water sources and improved decades. Increasing attention in recent years has sanitation facilities to 100 percent of the population in both urban and rural areas; to attain education for all; and, to been given to structural and regulatory reforms: provide access to quality health care to all by 2030. the agenda has been broad, involving a mix of 24 The PSD Program was the product of extensive discussions between government and the private sector between 2000 establishing a market-based system and reforming and 2004. The catalyst for these discussions was Anglo- past policies, which included constraints and disin- American Corporation's withdrawal from its mining opera- centives on private sector activities and continued tions in Zambia, which led to government realizing the need for diversification and creation of a business environment application of outdated laws and regulations. that would promote both local and foreign investment in manufacturing, services, agriculture, and infrastructure. Dis- cussions about a new generation of growth policies started Currently, the government is framing its economic with the Copperbelt Diversification Conference held in development programs within a national long-term Kitwe in June 2002, which led to publication of a strategic planning instrument entitled "Vision 2030," pre- plan, but no implementation. Subsequently, several reports and studies were carried out (Zambia; the Challenge of pared in consultation with line ministries, provinces, Competitiveness and Diversification, Zambia Privatization 6 WB210_RCRZ.indd 6 5/21/10 8:49:19 PM and institutions that serve the private sector; (b) Under the third pillar, the key regulatory activity regulations and laws, (c) infrastructure develop- was to revise the Telecommunications Act and the ment, (d) business facilitation and economic licensing framework for operators. Under the diversification, (e) trade expansion, and (f ) citi- fourth pillar, the plan called for review and ratio- zens' economic empowerment. Within these pil- nalization of all business registration and licensing/ lars, the PSD Program identified a wide range of inspection procedures; establishment of service administrative and regulatory activities for imme- standards; time limits for consideration of review diate implementation. of applications; streamlining of environmental procedures; and modernization of the gemstone Under the first pillar, the plan called for effective and mining regulatory regime. implementation of the "ministerial code of con- duct," creation of a single Zambian Development The fifth pillar called for rapid finalization of an Agency to serve as a "one-stop shop," implemen- export processing zone (EPZ) strategy, legislation, tation of FIAS's recommendations for service regulations and incentives; and increased capacity standards; and formalization of a meeting sched- within the Bureau of Standards to provide testing ule for the Domestic Business Council. services for exports. Finally, under the sixth pillar, the PSD Program called for development of a Under the second pillar, key actions included: government procurement policy for local busi- nesses and the development of incentives and review by joint public-private groups of all procedures to encourage conversion of informal investment-related legislation to harmonize firms into formal enterprises. with the new Investment Act; The PSD Program contained a framework for preparation of a "comprehensive business managing implementation that fed upwards to redesign project"; the Domestic Business Council. However, the framework turned out to be flawed, and imple- simplification of customs procedures; mentation of the PSD Program essentially did not start until the end of 2006. In early 2007, the streamlining of immigration and work per- government asked FIAS to carry out an assess- mit procedures; ment of the implementation arrangements, and several of the recommendations have subsequently accelerated review of retirement and termina- been implemented. The PSD Program formally tion clauses of the labor legislation; and ended in December 2008, with only limited areas of it having been implemented. A new plan, Phase review of policies and procedures for acquisi- II of the PSDRP, is now being prepared. tion of customary land and for land develop- ment. Since the adoption of the PSD Program, there Review, Financial Sector Assessment, Agribusiness Sector have been a number of regulatory reforms that Development, Framework for Tourism Development, and have registered progress. The PSD Program sought Gemstone Sector Review), but for some time these were not discussed widely within Zambia. In late 2003, after receiving to enhance the efficiency of the institutions that from the World Bank an Investment Climate Assessment serve the private sector. A pilot program of action and an Administrative Barriers Study, the government in to improve delivery of services in three institu- partnership with the newly-created Private Sector Founda- tion decided to use all these reports as the basis for preparing tions started in late 2006. These are the Ministry a Private Sector Development Plan and Implementation of Lands, Immigration Department of the Minis- Framework. A draft report was presented to a PSD Forum held in Livingstone in June 2004, modified through discus- try of Home Affairs, and the Zambia Revenue sions and presented to the president for his endorsement. Authority (ZRA), which are being supported by 7 WB210_RCRZ.indd 7 5/21/10 8:49:20 PM the USAID-financed Threshold Program.25 For opportunities for corruption. Results are not all the three institutions, the aim was to imple- clear at this time. ment institutionally-tailored regulatory reforms to simplify processes, and reduce red tape, and The ZRA has been involved in a broad reform corruption. Once successfully implemented in the effort in the past three years. The objective of this three pilot institutions, the program could then be activity has been to make tax and customs proce- replicated in other similar service institutions. dures more efficient and responsive to the needs of the public. It was expected that successful For the Ministry of Lands, the focus was to implementation of this program would result in streamline and shorten technical procedures in faster access to service, quicker and less onerous land administration, including the recording of customs procedures, and greater customer satis- deeds and titles; to quicken service delivery; and faction with the targeted institutions. The FNDP to minimize corruption by making information set a goal of raising the country's tax revenues about land acquisition processes more transparent from 16 percent of GDP in 2006 to 18 percent and accessible to the public. At the same time, the in 2010, through a broadening of the tax base government committed to review the organiza- and rationalization of tax rates, incentives, and tional structure of the Ministry of Lands with a reliefs. ZRA undertook a comprehensive tax view to restructuring and strengthening its capac- review,26 which formulated reforms that were ity to manage land more transparently and profes- introduced into the 2007 budget. The ZRA has sionally to secure fair and equitable access to, and also given attention to introducing performance control of, land for sustainable socio-economic standards in addition to tax targets. development. As a result of these reform pro- grams, registering property has been streamlined, ZRA has also been engaged in customs reforms and reduced from 70 days in 2006 to 39 days in related to trade facilitation. The problems facing 2008. The reduction came about because the exporters and importers in this area have been Land Registry introduced a Customer Service established clearly,27 and include: Relations Center in June 2008 and computerized its operations. excessively bureaucratic trade procedures due to the involvement of multiple government For the Department of Immigration in the agencies and clearance systems at borders; Ministry of Home Affairs, the primary objec- tive of the reform was to simplify, clarify, and lengthy inspection and certification processes; make transparent the procedures for permits to reduce discretionary authority, thus reducing 26 FIAS contributed to this review by providing an assessment 25 The overall objectives of the project are to: build capacity of of the impact of the tax system on investment decisions. the Anti-Corruption Commission (ACC) to implement 27 See, for example, the Diagnostic Trade Integration Study the National Corruption Prevention Plan; work with Min- 2005, and the Administrative Barriers Study, FIAS, 2004. istry of Lands, the Immigration Department, and ZRA to The Diagnostic Trade Integration Study (DTIS) was devel- reduce opportunities for administrative corruption; help oped in support of the context of the PSD Reform Program Zambia establish the ZDA as a "one-stop shop" for busi- and focused on specific priority areas for intervention and nesses and investors by consolidating operations of five support: making export incentives work for exporters; previous agencies; minimize start-up costs for business improving trade facilitation; enhancing the capacity to for- investment and licensing, including supporting the expan- mulate, coordinate and implement trade policy; and negoti- sion of the Patents and Companies Registration Office into ating trade agreements. This includes streamlining the duty provincial capitals; improve border management operations drawback scheme, the development of a single processing by building capacity in modern customs and inspections and payment window for all border agencies, and the techniques in border agencies, including Immigration, amendment of the Standards Act to separate standard test- ZRA, the Zambia Bureau of Standards, the Ministry of ing from the regulatory functions. The extent of issues fac- Agriculture's Plant Quarantine and Phytosanitary Services ing importers and exporters is demonstrated by Zambia's Division, the Ministry of Health. ranking in DB2009 at 30th country in Sub-Saharan Africa. 8 WB210_RCRZ.indd 8 5/21/10 8:49:20 PM poor or non-existent border information and began operations in 2007.28 The aim of the ZDA communication technology (ICT) infra- is to create a "one-stop-shop." It is proposed to structure; revise the Investment Act in support of this aim.29 The operation of ZDA is being supported by a inadequate application of modern customs US$15 million project financed by the European techniques; and Union. The project is scheduled to run from December 2006 to April 2010. The goal of the insufficient and skilled personnel. project is four-fold: ZRA has been addressing these issues through the improve the regulatory framework for private Integrated Framework (IF), which is an interna- business; tional initiative to respond to developing countries' trade needs, particularly focusing on supply-side improve access to and quality of business ser- constraints. vices offered by the development agency; The PSD Plan identified business entry as one of improve the internal organization of ZDA the areas in which improvements and streamlin- through integration of ZIC, SEBD and EBZ; ing were most urgently needed. The PSD Plan and sought to cut by two-thirds the number of steps and the amount of time needed to open a busi- enable the private sector to contribute to the ness in Zambia. As a result of the USAID-funded development of the business environment. Threshold Project, business registration has As part of the project outputs, a strategic plan already been simplified, so that the amount of for ZDA was developed during 2007, includ- time dropped from 35 days in 2006 to 18 days in ing a three-year trade and investment promo- 2008 (DB 2009), although the number of steps tion strategy, a three-year SME development was not affected. The reduction of time was strategy, and a coordination strategy.30 accomplished through process reengineering and computerization in the Patents and Companies Zambia has also carried out reforms that have Registration Office (PACRO). In response to some regulatory dimensions through a Public complaints from industry and small and medium Service Reform Program (PSRP), which has an enterprises about having to go to Lusaka to deal overall goal of improving the quality, efficiency, with PACRO procedures, PACRO is establishing cost-effectiveness, and delivery of public services provincial offices, first in the Copperbelt and to the people of Zambia. Under the FNDP, the Southern and Eastern provinces, and subse- PSRP focuses on three main areas, namely, Public quently in the other provinces. Expenditure Management and Financial Account- ability Reforms (PEMFA); Public Service Man- Zambia has started to introduce institutional and agement (PSM); and decentralization. legal reforms to deal with business entry issues. In 2005, the Zambian Development Agency (ZDA) was created by the Cabinet. It brings together the 28 USAID is assisting the establishment of the ZDA by help- operations and procedures of five statutory bodies, ing design the institutional and procedural mechanisms. namely, the Zambia Investment Centre (ZIC), the 29 The existing Investment Act 1991 already stipulates that Zambia Export Processing Zones Authority ZIC should be a "one-stop-shop," a role that it was never able to play because other ministries involved in the business (ZEPZA), the Export Board of Zambia (EBZ), start-up process, in particular the Immigration Department, the Zambia Privatization Agency, and the Small refused to give up their responsibilities. 30 For details, see "Capacity Building for Private Sector Devel- Enterprise Development Board. The creation of opment: Annual and 3rd Quarter report for September ­ the ZDA received Cabinet approval in 2005 and it October 2008," dated Dec. 21st, 2008. 9 WB210_RCRZ.indd 9 5/21/10 8:49:20 PM The main objective of the PSM program compo- to effectively participate in the formulation and nent of the PSRP is to enhance service delivery implementation of development programs. The and program implementation by improving man- National Decentralization Policy aims to achieve agement systems in the public service. This is nec- a fully decentralized and democratically elected essary because the restructuring of the civil service system of governance characterized by open, pre- that began in 1993 has not greatly improved ser- dictable and transparent policy making and vice delivery. The government ascribes these implementation processes. The government devel- weaknesses to inadequate pay for professional and oped a Decentralization Implementation Plan technical staff; ministerial and institutional estab- (DIP) that provides a roadmap that will guide the lishments that are unaffordable given government efforts of all stakeholders through the articulation priorities and limited resources; and lack of effec- of their roles in implementing the decentralization tive performance incentives. policy. The key components of DIP include: The reform process underway is expected to sensitization and civic education; enhance the performance and effectiveness of the public service. For example, under rightsizing, legal and regulatory framework; the objective is to ensure that all government ministries and institutions have staffing levels institutional and human resource capacity commensurate with their mandates and afford- building; able in relation to their MTEF ceilings. Major actions include the completion of the restructur- local development planning and budgeting; ing of the remaining ministries; the enforcement of entry and hiring policies; and the development financial management and accounting; of a strategy on unclassified workers. With regard to pay reforms, the main objectives are to ensure fiscal decentralization and revenue mobiliza- that: (a) employee remuneration is related to job tion; responsibilities and performance; (b) essential technical, professional, and managerial staff are sector devolution; attracted and retained in the public service; (c) pay arrangements support and reinforce improved infrastructure development and services pro- service delivery; and (d) increases in pay levels are vision; and consistent with the FNDP resource envelope. monitoring and evaluation. (See section 2.3. The goal of the decentralization component of the for more details of central-local government PSRP is to empower local government structures coordination.) 10 WB210_RCRZ.indd 10 5/21/10 8:49:20 PM NATIONAL POLICIES AND INSTITUTIONS FOR REGULATORY REFORM Regulatory reform principles Nonetheless, there are elements and arrange- and policies ments in place that are consistent with good reg- ulatory principles and which could provide the Governments should be clear about why they are backbone for development of an explicit policy. pursuing private sector development and reform- The Preamble to the Constitution provides a ing regulation. They should also be clear about basic statement of the democratic principles of the principles and objectives of reform, and the the Zambian state, in declaring that the people responsibilities of the groups involved in reform. "resolve to uphold the values of democracy, trans- The most effective way to do this is to establish parency, accountability and good governance." an explicit regulatory reform policy, based on However, the Constitution is silent on how these internationally accepted principles of good regu- principles are to be applied to the rights of citi- lation (See Annex A). zens to participate in the country's government. As detailed in the previous sections, Zambia has As discussed in greater detail in section 3.1, the been pursuing numerous policy reforms that have development strategy documents adopted by gov- legal, administrative, and regulatory implications. ernment during the past decade have been devel- There is a multiplicity of projects with various oped to an increasing extent within a framework ministries supported by various donors that of public-private dialogue and consultation. Con- involve review and reform of laws, regulations, sultation involving non-governmental stakehold- policies and institutions affecting the business ers was first introduced for specific areas, such as environment. However, to date, Zambia has not tax reform, but was a central feature of the devel- adopted an explicit policy on regulatory reform opment of the Vision 203031 and of the FNDP. and the principles and objectives of regulatory 31 "This Vision was a result of a nationwide consultative pro- reform, in order to ensure that they are mutually cess involving various stakeholders, who included, among consistent and supportive of each other. others traditional leaders, civil society, government 11 WB210_RCRZ.indd 11 5/21/10 8:49:21 PM Zambia created the Domestic Business Council Zambia has not yet introduced a central institu- in 2004 and the Zambia International Business tion to carry out and coordinate regulatory Advisory Council (ZIBAC) in 2003, both chaired reform. However, there have been a number of by the president, to provide fora for public-private institutions within government that have become discussion of development priorities and reforms. or have the potential to become strategic leaders in the course of developing policies and regula- tions associated with implementing the govern- Institutions and drivers to promote ment's reform agenda. regulatory reform The late President Mwanewasa was a public Reform mechanisms with explicit responsibilities champion for reform of the business environ- and authorities for managing and tracking reform ment and by implication for regulatory reform inside the administration are needed to keep reform designed to reduce the costs of doing business. on track and on schedule, and to ensure regulatory He endorsed the PSD Program formulated at quality standards continue to improve. It is often the Livingston PSD Forum, and advocated difficult for ministries to reform themselves, given for implementation of the plan's priorities. countervailing pressures and deficient financial and human resources. Initiating and taking up a reform The institution with the most substantial agenda, maintaining its consistency, and pursuing coordinator role has been the Steering Com- systematic approaches across the entire administra- mittee established to guide and oversee tion is necessary if reform is to be broad-based. This implementation of the PSD Program and the requires the allocation of specific responsibilities Program Coordination Unit that was estab- and powers to agencies at the centre of government. lished to provide day-to-day assistance in Experiences from developed countries have shown implementation. that central oversight units seem to be most effec- tive if they have the following characteristics: The Cabinet Secretariat has also been a cham- pion for reform. Its Policy Analysis and Coor- independence from regulators (i.e., they are dinating Division has responsibilities for not closely tied to specific regulatory mis- ensuring the quality of Cabinet papers, and sions); has supported the use of good regulatory prac- tices in developing high quality proposals operation in accordance with a clear regula- from sponsoring ministries. However, it does tory policy, endorsed at the political level; not have capacity to provide rigorous training and advice to the ministries to promote qual- horizontal operation (i.e. they cut across gov- ity improvements, so that systemic improve- ernment); ments in policymaking and preparation of legislation are something for the future. expert staffing (i.e. they have the information and capacity to exercise independent judg- The Ministry of Finance oversees the financial ment); and implications of policy and reform efforts. Over the last decade, the ministry has developed a links to existing centers of administrative and more sophisticated approach to budgeting, budgetary authority (centers of government, and has required proposals brought before finance ministries). the Cabinet to be costed. While the approach is restricted to estimating the fiscal costs and departments, cooperating partners, and ordinary citizens." benefits of proposals, this is a first step towards Executive Summary, Vision 2030. the introduction of a regulatory impact 12 WB210_RCRZ.indd 12 5/21/10 8:49:23 PM assessment that would provide a broader large towns have councils or town management assessment of the net benefits of regulatory boards. Most townships, however, are directly reforms. But again, in the absence of any administered by government officers. Local formal definition of costing methodology, urban authorities can levy taxes, borrow money, great variations remain in the quality of and own and manage housing projects. They financial estimates. control roads, water, power, town planning, health facilities, and other public services within The Ministry of Justice is responsible for the their areas, including administration of trade and legal quality of policy proposals. business licensing, and therefore have a signifi- cant impact upon the regulatory environment The Ministry of Commerce, Trade and for businesses. Industry has been a champion for regulatory reform related to business entry. Administrative districts lying outside municipal and township areas are governed by rural coun- The Ministry of Local Government has a cils, consisting of members elected by universal potential role as a champion of regulatory adult suffrage and a minority of nominated mem- reform, in its role of coordinating local bers, mainly chiefs. The functions and powers of authorities. rural councils are similar to those of the urban local authorities. Steps are under way to create another level below the local council to be called Coordination between levels of Area Development Committees (ADCs). government The government has promulgated a decentraliza- The 1997 OECD Report advised governments to tion policy that is being implemented slowly. "encourage reform at all levels of government." Local governments fund their expenditures from This difficult task is increasingly important as regu- three sources: inter-governmental transfers, own latory responsibilities are shared among many levels source revenues and borrowing. Own source rev- of government, including supranational, interna- enue is small in relation to transfers from the cen- tional, national, and sub-national levels. High qual- tral government budget. The relationship between ity regulation at one level can be undermined by central and local government is mainly through poor regulatory policies and practices at other lev- fiscal issues. els, while, conversely, coordination can vastly expand the benefits of reform. The policies and Institutional mechanisms for coordination mechanisms for coordination between levels of between the levels of government on regulation administration are thus becoming increasingly and regulatory policy do not exist at this time. important for the development and maintenance of an effective regulatory framework. National ­ international National-local Zambia is a member of The Common Market for Eastern and Southern Africa (COMESA) and the Zambia is divided into nine provinces, adminis- Southern African Development Community tered by officials appointed by the central gov- (SADC). Both have ambitions to create free trade ernment. Each province is further divided into areas as a first step in wider cooperation. COME- districts, presided over by district secretaries. SA's strategy so far has been to emphasize the inte- There are 72 local authorities (including 4 cities gration of the member economies through removal and 14 municipalities). Lusaka, Ndola, Living- of trade and investment barriers. In the short to stone and Kitwe have city councils, and the other medium term, the emphasis will be on trade 13 WB210_RCRZ.indd 13 5/21/10 8:49:23 PM development and investment, specifically, the Within SADC, the Directorate of Trade, Indus- elimination of impediments to trade and invest- try, Finance and Investment has developed a work ment. SADC32 strategy is geared to promoting program in the following areas: economic cooperation and integration among its members. The SADC Free Trade Area was 1. Customs Cooperation and Modernization launched on Aug. 17, 2008, during the 28th Sum- mit of SADC Heads of State and Government. 2. Investment and Development Finance Both organizations are involved in a variety of 3. Macroeconomic Convergence consultations and exchange of information in fur- therance of their immediate goals. As a framework Macroeconomic Policies and Conver- for promoting regional economic integration, gence Program SADC developed a Protocol on Finance and Investment, which attempts to give legal and Tax Coordination practical effect to commitments that SADC mem- ber states made through the SADC Treaty and the 4. Mining Regional Indicative Strategic Plan (RISDP). 5. Productive Competitiveness The RISDP seeks to remove barriers that prevent economic relationships between countries in the 6. Regional and Multilateral Trade Policies region and to harmonize the regulatory and legal 7. Standardization, Quality assurance, Accredi- environments across member states. One specific tation and Metrology (SQAM). area of emphasis appears to be tax coordination,33 and the protocol calls for development of a tax Further details of the work program are not cur- database for all members. Presumably, the next rently available in the public domain. step in this area will be efforts to harmonize tax rates and administration procedures across the Over the past couple of years, there have been countries, but little information is available in discussions within the Zambian government as the public domain about precise plans and activi- to whether continued membership in COMESA ties, or whether common procedures have been and SADC is possible and, if it is not, in which agreed upon. organization Zambia should continue to hold membership. The Regional Trade Facilitation 32 SADC adopted milestones to facilitate the attainment of a SADC Free Trade Area (FTA) by 2008, a Customs Union Program (RTFP) has conducted research on this (CU) by 2010, a Common Market (CM) by 2015, Mon- issue, and the latest position appears to hold that etary Union (MU) by 2016 and a Single Currency by 2018. no decision is possible until each organization's 33 http://www.sadc.int/tifi/tax/index.php. strategy has been fleshed out in greater detail. 14 WB210_RCRZ.indd 14 5/21/10 8:49:24 PM ADMINISTRATIVE CAPACITIES FOR MAKING HIGH QUALITY REGULATION Administrative transparency and In the early 2000s, the National Assembly pub- predictability lished for public consumption various reports and brochures on Parliamentary practice, procedure, Transparency of the regulatory system is an essen- traditions, and administration. Under the Parlia- tial feature, because it establishes a stable and mentary Reform Project (PRP),34 the National accessible regulatory environment that promotes Assembly has been reforming its operations in competition, trade, and investment. It helps five key areas: the legislative process; member- ensure against undue influences of special inter- constituency relations; administration of the ests and reinforces the legitimacy and fairness of National Assembly; support services to Parlia- regulatory processes. Transparency involves a ment; and the Committee system. wide range of practices, including standardized processes for making and changing regulations; The PRP activities include: consultation with interested parties; plain lan- guage in drafting; publication, codification, and development and implementation of a strate- other ways of making rules easy to find and gic plan; understand; and implementation and appeal pro- cesses that are predictable and consistent. It is not review of the standing orders; easy to establish in practice. use of ICT; Provisions for transparency in making laws 34 The National Assembly of Zambia assigned an agreement in November 2002, with the Canadian High Commission, Embassy of Ireland, Embassy of the Kingdom of the Neth- Transparent and consistent processes for making erlands, Embassy of Sweden and USAID/Zambia to carry and implementing laws and regulations are fun- out a two-stage process for reform, PRP Stage I being the design and planning phase and Stage II implementation. damental to ensuring public confidence in the Stage I lasted from November 2002 to December 2003 and rulemaking process. Stage II lasted from December 2003 to November 2006. 15 WB210_RCRZ.indd 15 5/21/10 8:49:24 PM enhancement of National Assembly opera- Zambia does not have a "How to Legislate Act," tions; and does not have formal guidelines on how leg- islation is to be developed. Although it stresses development of a directory of all civil society the need for dialogue and consultation in broad organizations; terms, the Constitution is silent on the frame- works for and process of policy and law making. a members' handbook; Formal policymaking begins with the ministry establishment of constituency offices; responsible for the sector or issue for which a new policy or a review of an existing policy is required. design of an internship program; It starts by identifying and conceptualizing the policy problem to be addressed. Policy issue and indexing of committee hearings and bills; problem identification and definition is the and responsibility of the ministry's Cabinet Liaison Committee (CLC) which comprises of the Min- the National Assembly directory. ister, Deputy Minister, Permanent Secretary, technical experts in the ministry including the Overall objectives have been to develop the Head of Department responsible for the subject capacity of the National Assembly to play the under consideration and the Cabinet Liaison roles assigned to it by the constitution (i.e., rep- Officer (CLO). resentation, legislation, accountability and over- sight), develop a strong committee system, have Once the committee has signaled its go ahead, the a permanent professional staff trained to serve relevant department, working closely with the MPs in a non-partisan manner, and to apply CLO, is expected to lead the effort to outline a principles of good governance--accountability, policy proposal on behalf of the ministry or agency. openness and transparency--in all aspects of In preparing the policy outline, a team might rely Parliament's activities, and to ensure that govern- on its own effort or outside technical expertise, ment does so as well.35 especially when there is no technical capacity in the ministry to achieve this. Draft proposals may While these activities are important building also emerge from a stakeholder consultative exer- blocks to improve the functioning of Parliament, cise, especially in cases where policies are being they do not address directly the legislative process revised. While the CLC is expected to take owner- as it affects regulation and regulatory procedures. ship of and direct the policy development process Zambia does not have specific laws, regulations, within the ministry, policy drafts may be discussed or guidance documents setting out rulemaking within the ministry through meetings, retreats, requirements. For example, unlike Tanzania, and workshops. 35 Subsequently, the National Assembly signed a MOU with It expected that the Policy Analysis and Coordina- the Economics Association of Zambia (EAZ) in December 2008, to have the EAZ provide capacity-building support tion Division (PAC) of Cabinet Office is informed to Members and staff. The EAZ had previously provided about the intention of the ministry to draft a policy similar support to National Assembly under the PRP Phase II. The support focuses on capacity building in economic at the earliest opportunity. Once this information affairs and the Budget process through training workshops is received from the ministry, the PAC determines and seminars. In March 2009, the government announced whether the policy proposal would require Cabinet a third phase of the PRP (whose US$6.5 million will be financed by DFID, Irish AID, the EC, and UNDP) to attention and advises the ministry accordingly. In achieve improved member-constituent relations and the event that the draft policy is likely to impact increased autonomy and transparency of Parliament as the legislature, including its capacities in bill drafting, budget- other ministries and stakeholders, PAC arranges ing and legislative oversight and foresight. for an Inter Ministerial Committee of Officials 16 WB210_RCRZ.indd 16 5/21/10 8:49:31 PM (IMCO) to ensure effective cross-government con- within the Zambian government. Private lawyers sultation on the draft proposal. In some instances, experienced in drafting bills on behalf of minis- the IMCO can the take lead in submitting the tries report that there is great variation in the policy proposal to Cabinet for its consideration quality of supporting documentation, and that in and decision. many cases the analysis and justification of policy options are incomplete, to the point that the law- After the initial policy consideration, ministries ­ yer becomes responsible for creating the policy guided by the CLO are expected to focus on spe- rationale as well as drafting the legislation. One can cific policy options by identifying the range of say that policy is made through the law-drafting possible courses of action, and comparing their process. One consequence of this state of affairs is relative merits, including the costs, benefits, and that there is a tendency for framework laws to be risks associated with them. The focus is on estab- introduced that leave a large amount of discretion lishing the policy need; defining the objectives; to the respective ministry to issue enabling regula- identifying and describing options; identifying tions. It has also been suggested that the passage the costs, benefits, risks and other relevant impacts of these regulations is subject to less public scru- (indicative); and summarizing the findings with a tiny than primary legislation. recommendation for the preferred policy option, and how the policy would be managed, moni- Provisions for consultation tored and evaluated. Government expects policy to be based on sound evidence derived from a Consultation is a systematic attempt to discover variety of sources ­ expert knowledge; existing the opinions of groups affected by regulation and local, national, and international research; exist- to obtain data useful in regulatory development ing statistics; stakeholder consultation; evaluation and analysis. It may be general (e.g. advertise- of previous policies; new research, if appropriate; ment for comment) or specifically targeted (e.g. or secondary sources, including the internet. focus groups, working parties). Consultation can contribute to regulatory quality by: However, there is evidence to suggest that many policies are not evidence based, and that resources bringing new ideas, perspectives, and data to in government and among other stakeholders the attention of regulators; required to support evidence-based policymak- ing are inadequate. The effectiveness of the effort helping to balance opposing interests and is also influenced by vested interests that may be reduce the risk of capture; benefiting from the status quo. It is also common practice for government officials charged with identifying unintended effects and practical guiding the policy development process to pre- problems; pare and submit drafts based on existing policy scripts rather than investing efforts in researching gathering information on compliance issues; and presenting fresh proposals. Before major pol- and icy reforms are undertaken, government officials often go on study tours in the region and further afield as a way of learning. However, it is difficult providing a quality check on the administra- to ascertain the impacts of these study tours on tion's assessment of costs and benefit. the quality of policy proposals. Consultation can also enhance voluntary compli- Interviews conducted for this report suggest that ance by creating a sense of "ownership" of the there is considerable variation and inconsistency resulting regulations, and reducing reliance on of approach to the process of law and rulemaking enforcement and sanctions. 17 WB210_RCRZ.indd 17 5/21/10 8:49:31 PM Consultation within government: The Cabinet umbrella bodies that provide the opportunity for Office has issued elaborate guidance (in the Cabi- high-level reviews of the government's economic net Handbook) on how and when intra-government policies and programs as they relate to the busi- consultation should take place and who should ness environment and the prospects for private participate. The CLO in each ministry is the sector development. They function as public pres- focal point for consultation within ministries. sure on the Zambian government to ensure that Once a policy idea is put on the table, the CLO the momentum for implementation of its plans is informs the PAC at Cabinet Office. The PAC sustained. However, the record in this regard has then advises on whether the proposal will require been very mixed, and for several years, the meet- Cabinet attention and whether other stakehold- ings of ZIBAC could be characterized as opportu- ers need to be consulted. When PAC determines nities for the government to explain why plans that other ministries should be involved, it initi- were not being implemented.37 In fact, evidence ates across government consultation through of systematic and structured consultation between meetings of IMCO. The role of IMCO is to har- government and non-government stakeholders in monize positions of all ministries with interest Zambia is patchy at best. in the policy. PAC also plays a quality control role to ensure that other important policy devel- The responsibility for undertaking consultation opment parameters are adhered to during and rests mainly with the ministry initiating the pol- after the consultation process. icy. While requirements for intra-government policy consultations are elaborately laid out in Once the draft policy proposal has been approved government policy guidance manuals and docu- by the initiating minister, copies are sent to all mentation, minimal guidance is given with regard ministers requesting them to send comments to how ministries are expected to conduct con- within 14 days. Ministers are expected to make sultations with other stakeholders. Government substantive comments, which are incorporated in only requires that the permanent secretary in the the draft memorandum. Apart from formal and concerned ministry certifies, in writing, that con- informal consultation throughout policy devel- sultations took place while submitting policy opment, government encourages early dialogue at memoranda for Cabinet decision. a senior level between the ministry development and delivery bodies, including other ministries, There is much bureaucratic discretion when government agencies, or districts, in planning for ministries are handling this issue. While some implementation. The goal is to ensure that deliv- ministries are open and see stakeholders as part- ery bodies give due priority to the policy and to ners, others engage in cosmetic consultation and secure the interest and ownership of the ultimate consider outside input as a form of interference implementers. If a policy is cross-cutting in in government affairs. Some officials consider the nature, the government recommends the use of consultative exercise as a way of earning allow- partnership arrangements to plan its delivery at ances and waste resources in organizing unneces- the local level. sary workshops ­ the preferred consultation across government. There is little indication that Public Consultations: In the formal sense, public systematic stakeholder mapping and analysis is consultations have become a regular feature of done to inform the consultation process. Stake- Zambia's policy development over the past decade. holder consultation is sometimes poorly planned, Zambia has established an international business council (ZIBAC36) and a Domestic Business 37 Indeed, after the third meeting, there were proposals made Council, both chaired by the president. These are by several of the international private sector participants that ZIBAC meetings should be discontinued, which prompted more serious attempts by the government at the 36 Zambia International Business Advisory Council. next meeting to announce real progress. 18 WB210_RCRZ.indd 18 5/21/10 8:49:31 PM ad-hoc, and superficial. There is also evidence was to re-regulate and intensify the need for that consultation is sometimes resource driven approvals) and not willing to provide drafts of with a focus on how much is budgeted, not how policies or laws. effective the proposed approach might be. ZIC claimed that it was forbidden by law from The Domestic Business Council (ZBC) has had a sharing position papers or draft legislation before number of meetings. It offers the opportunity for it had gone through Cabinet. Similar dissatisfac- the private sector to inform the government tion has been expressed concerning the decision about private sector priorities and grievances. It is process to establish the ZDA, and the private sec- not clear yet whether the vehicle works well. The tor has recently lobbied hard for the law establish- Zambia Business Forum (ZBF), an umbrella ing the ZDA to be reconsidered only a couple of organization that includes many, but not all the years after it was passed. ZBF hired a consultant major business associations in the country, has to write a report on the law, and is now participat- called for the council to meet on a quarterly basis, ing in a committee set up expressly to consider but this has not yet been accepted. how to deal with criticisms of ZBF and other organizations. However, the record appears to be more varied in the case of consultations on specific issues, and The ZBF and other representative groups are there appears to be considerable variety as to gaining experience in representing their positions when and how stakeholders outside the govern- to government and dealing with policy issues in a ment are involved in the process. A general criti- proactive rather than a reactive manner. The cism leveled against ministries is that consulta- major spokesman for the private sector has been tions with the private sector or civic society are the ZBF.39 Perhaps because the ZBF was sup- usually held after a government position has been ported by the major donors, the government has decided. This often makes it difficult for changes tended to favor it as the business association that to be introduced or produces delays in the pro- it invites for consultation. There is some concern cessing of proposals until multiple layers of con- developing in government and business circles sultation are held. about whether ZBF is adequately representing the business community. In the specific case of tax issues, the ZRA has consulted with clients/customers, and the record According to interviews with the organization's seems to be favorable.38 In the case of the Invest- staff, ZBF faces two major difficulties in repre- ment Act revision sponsored by the Zambia senting its members. The first is that it requires Investment Center (ZIC), there was also consul- resources and staff to carry out research. Since its tation with the Private Sector Federation (PSF), research officer recently left, it faces capacity the Zambia Council of Commerce and Industry issues, which it hopes to overcome by recruiting (ZCCI), the Zambia Association of Manufactur- new staff. It has secured funding from the Dutch ers (ZAM), etc, but there was considerable dis- government to finance its research program. In satisfaction expressed by the private sector because addition, ZBF faces member organizations that ZIC officials were willing to indicate only in gen- are also limited in their ability to contribute to eral terms what they were planning to do (which policy formulation. The second difficulty is in formulating positions that are supported by the 38 When FIAS conducted its tax incentives study, ZRA orga- whole membership. nized a workshop to present and discuss its findings with the private sector, and representatives of the private sector emphasized strongly the improvement in recent years in 39 It now does not include the Zambian Associations of their ability to present information and positions to the tax Chambers of Commerce and Industries (ZACCI), which authorities. withdrew from ZBF last year. 19 WB210_RCRZ.indd 19 5/21/10 8:49:33 PM One such example has been trade policy, where and regulatory agencies that have benefited from some member organizations have supported free development partner interventions under the gov- trade and lower tariffs, whereas others have pressed ernment PSD program. These institutions now for protection against imports of goods, capital, publish information on policies, laws, regulations, and skilled labor. The policy positions for ZBF service charters, etc, on their official Web sites. are prepared within its Policy Committee and validated by the ZBF Board. In addition, ZBF is All laws and regulations, including statutory facing pressures to develop programs for rural and instruments, are published in the Official Gazette. small businesses in response to criticism from Article 78 of the Constitution states that no law some members that it is oriented towards Lusaka- may come into effect until it has been published based and larger businesses. in the Gazette, but Parliament (and a Minister issuing implementing regulations) can delay the effective date of any law after publication. Communication of regulations Another dimension of transparency is the need FIAS recommended that the PSD Reform Pro- for the government to effectively communicate gram should institute a formal communications the existence and content of all regulations to the program and hire staff to devise and implement a public. This means that the regulations are avail- public relations/communications strategy.40 able to the public at reasonable cost, in a language ZRA has taken steps to improve its communica- that can be easily understood. Communication is tions about tax administration procedures and also essential to achieving effective compliance. regulations to taxpayers, both through its Web site Written government policy guidance is largely and through preparation of brochures and similar silent on communicating policy effectively to tar- forms of communication. ZRA has gone much geted groups and the general public. Multiparty further than most government agencies in this political dispensation in Zambia has made gov- respect. However, the impact of these communica- ernment very sensitive to media comments and tions initiatives may be attenuated to a significant criticisms of its policy decisions. This has rein- degree: FIAS's Administrative Barriers Study in forced the tendency of public officials driving 2004 reported that it was unable to find evidence policy development to downplay the role of com- of any more than a handful of businesses making munication. The tendency to consider policymak- use of the Web site. This has more to do with over- ing a preserve of government officials is also very all Internet and telecommunications issues in strong in many ministries. It is not uncommon for Zambia than the Web site itself. ministries to consider draft policy documents "top secret," thereby making them inaccessible to key Compliance and enforcement of stakeholders. This is often after cabinet has regulation endorsed principles of the draft policy. The adoption and communication of a law or The minister of Information and Broadcasting is regulation is only part of the regulatory process. the government's focal point with regard to com- The law can achieve its intended objective only if municating government policies. However, in it is adequately implemented, applied, complied most instances, the minister comes in with reac- with, and enforced. A low level of regulatory com- tions to controversial policy developments ­ well pliance threatens the effectiveness of regulations, short of effective policy communication. There is public policies, and ultimately the capacities and also limited availability of information on govern- 40 "Review of the Zambia's PSD Reform Program and Rec- ment policies and regulations. This situation is ommendations for Enhancing Impact," report prepared by slowly changing, especially in those institutions FIAS and PEP-Africa, May 2007. 20 WB210_RCRZ.indd 20 5/21/10 8:49:33 PM credibility of governments in taking action. Com- In general, levels of compliance with basic busi- pliance and enforcement issues can be considered ness environment regulations are less than the in terms of processes and practices as well as insti- government would like to see. The size of the tutional structures. informal sector is testament to the limited extent to which many regulations can be enforced. There are lots of macroeconomic monitoring and evaluation frameworks in Zambia collecting infor- There are extensive requirements in the country's mation on economic policies and targets. These regulatory regime for inspection on a regular basis. include: (a) the Economic Management and Mon- According to the DB 2009, these requirements for itoring Committee; (b) the Macroeconomic Sec- inspection often lead to significant delays in com- tor Advisory Group (SAG); (c) the recently formed pleting regulatory processes, because of a shortage PEMFA Working Group; (d) the Financial Sector of inspectors or because the agency has insufficient Development Plan Working Groups; and (e) the transport.41 Inspections conducted by different Budget Execution Monitoring Committee. There agencies are rarely coordinated, in part because of are also other institution-based frameworks, such the difficulty of sharing documentation. as the Monetary Policy Committee (MPC) of the Bank of Zambia and the Medium Term Expendi- Public redress and appeals ture Framework (MTEF) Committee at MoFNP, the Central Administration Sectoral Advisory Mechanisms to redress regulatory abuse must also Group, and the PSRP Steering Committee. All be in place, not only as a fair and democratic safe- these bodies address various aspects of the macro- guard in a rule-based society, but also as a feedback economic and Public Service Delivery Service Sys- mechanism to improve regulations. The first stage tem programs. of seeking redress is to complain directly to the gov- ernment agency that has taken the decision. The Other mechanisms for monitoring and evaluat- second stage is to seek review by the courts; and ing macroeconomic performance are documents there may be other institutions for redress, such as such as the annual Economic Report produced arbitration, mediation, or an ombudsman. by the Ministry of Finance and National Plan- ning (MFNP). The overall coordination of The first stage of seeking redress against adminis- implementing the FNDP rests with MFNP, with trative and regulatory decisions in Zambia is to the participation of line ministries, other govern- request reconsideration by the agency that has ment institutions, civil society, and cooperating taken the decision. It does not appear that there partners. The Planning and Economic Manage- are clear directions as to how redress mechanisms ment Department (PEMD) in MFNP is the focal should be organized, and there appears to be con- point for the FNDP coordination, monitoring, siderable variations. In some cases, seeking redress and evaluation. essentially involves appealing to the person who took the original decision, even when the appeal is The FNDP is a results-based plan that focuses judged formally by a higher level of the ministry on agreed targets and results. The plan incorpo- or department. In other cases, such as in the immi- rates a system to monitor inputs, outputs, out- gration field, there are legislative provisions for the comes, and impacts so that resources can be appeal to be heard by the minister. In a few cases, strategically managed and progress tracked. formal appeals mechanisms have been developed. These monitoring frameworks do not serve to The best example may be the Tax Tribunal. monitor regulatory policies and results, but they could be developed to provide a framework for 41 During the preparation of the Administrative Barriers Study in 2003/4, FIAS learned that businesses frequently monitoring and evaluating compliance and per- were required to provide transport to officials in order to formance of regulations. accelerate inspections. 21 WB210_RCRZ.indd 21 5/21/10 8:49:33 PM In Zambia, considerable efforts have been made to iv) Office of the Auditor-General (OAG). introduce a range of broader institutions that have Established under the Constitution, the the potential to provide redress against administra- OAG's function is to submit an audit report tive and regulatory abuse. These include: to the president on the accounts relating to the general revenues of the country and i) Anti-Corruption Commission (ACC). Estab- expenditures appropriated by Parliament, lished in 1980, it has three main functions: and accounts relating to the stocks and stores first, to prevent corruption; second, to investi- of the government. The OAG is also man- gate and prosecute offenders; and third, to dated to audit every statutory body; all pri- educate the public about corrupt practices and vate institutions that receive government foster public support in the fight against cor- grants, subsidies or subventions, government ruption. The ACC consists of five part-time ministries and departments, and to report to commissioners who are answerable to Parlia- Parliament on the results of the audit. The ment and supervise the director-general who OAG also conducts environment, IT and heads the directorate. The ACC has established performance audits. offices in all the provincial centers of the coun- try. A review of ACC's strategy and organiza- v) Office of the Ombudsman. The Office of tional structure was conducted in 2003, follow- the Ombudsman is a constitutional post. ing which revisions were introduced. Also in Appointed by the Parliamentary Service 2003, a National Governance Baseline Survey Commission and subject to ratification by was carried out to measure public perceptions the National Assembly, the Ombudsman has of corruption and public service delivery and to the right to investigate the actions of public develop a comprehensive strategy to combat officials, to instigate proceedings against corruption and enhance public service delivery. officials, recommend disciplinary actions in The FNDP committed the government to a the event of misconduct, to issue opinions follow-up National Governance Survey. on administrative actions, and to make rec- ommendations for review and harmoniza- ii) Commission of Investigations. Established in tion of laws. 1973, the commission is charged with redressing grievances from members of the public and employees in the public service, which arise as a result of maladministration Policy instrument alternatives or abuse of office by public organizations. In A core administrative capacity for good regula- 2004, the commission handled a total num- tion is the ability to choose the most efficient ber of 825 cases, out of which 526 were con- and effective policy tool, whether regulatory or cluded. In 1998, a strategic plan for restruc- non-regulatory. In developed economies, the turing the commission was developed for the range of policy tools and their use are expand- following five years, but was never formally ing as experimentation occurs, learning is dif- approved and implemented. fused, and understanding of the markets iii) Judicial Complaints Authority (JCA). Estab- increases. Increasingly, guidelines for regulators lished in 1999, the JCA began operating in require ministries and agencies to consider 2003 with a mandate to investigate complaints whether "command and control" regulation is from the public on alleged misconduct by likely to be the most effective policy instrument judicial officers42 and to make recommenda- or whether other options might succeed in tions for disciplinary action. Industrial Relations Court, magistrates, local court jus- 42 Judicial officers are judges, including the chief justice, tices, and all persons who have the power to hold or exer- deputy chief justice, chairman and vice chairman of the cise the judicial powers of a court. 22 WB210_RCRZ.indd 22 5/21/10 8:49:34 PM achieving policy goals at lower cost. But the use problem. A range of different approaches to RIA of regulatory alternatives in OECD countries, exist, depending on policy preferences and while increasing, is still at a relatively low level. administrative capacities. At the core of any RIA system, however, are the following: i) an At the same time, administrators, rule-makers assessment of selected types of impact of spe- and regulators often face risks in using relatively cific types of regulation; ii) assessment method- untried tools. A clear leading role ­ supportive of ology according to pre-defined standards and innovation and policy learning ­ must be taken procedures; and iii) a process of quality control by reform authorities if alternatives to traditional by an independent government agency/unit. regulations are to make serious headway into the policy system. In Zambia, RIA is not yet being used as either a technique for evaluating costs and benefits or as a Government intervention should be based on part of "good regulatory process." Nevertheless, clear evidence that a problem exists and that the government is aware of the importance of government action is needed. This should RIA to well-grounded policymaking. There seems include assessments of the size of the problem, of to be an informal expectation that policy propos- likely government effectiveness and of the likely als are supported by the components of RIA, costs of government intervention. Good practice such as an analysis of the positive and negative is this area is increasingly seen as requiring con- impacts of policy proposals and the importance sideration of both regulation and alternative of discussing the implication for different seg- policy tools. ments of society. In practice, the components of RIA are rarely applied due to a combination of In the absence of any policy guidelines, ministries factors, including a lack of capacity. There is a that are responsible for regulatory processes are formal requirement that the Ministry of Finance not required to consider alternatives to regulation and National Planning is consulted before Cabi- of the traditional "command and control" type. net decisions are sought. Proposals with financial To the extent that the purpose of regulatory implications that are not consulted on with Min- reform in Zambia has been clearly stated by the istry of Finance and National Planning are not government in its various strategies, there is placed on the Cabinet agenda. There is some evi- clearly scope for ministries to take innovative dence that this rule is in some cases relaxed and approaches. However, there appears to be little does not always apply. documentation of such approaches. The Zambian government does appear to have Building administrative skills for introduced institutions that are outside govern- ment but play a regulatory role similar to a gov- regulatory reform ernment department. A skilled and well-trained civil service recruited on the basis of merit is a prerequisite for develop- ing and maintaining high-quality regulations and Use of RIA for understanding regulatory policies. regulatory effects As part of the World Bank-supported PSRP, Regulatory impact analysis (RIA) provides a sys- upgrading of civil servants is one component. It tematic basis for choosing the best regulatory is not clear what precisely is being supported in (or non-regulatory) alternative to respond to a the form of skills training. 23 WB210_RCRZ.indd 23 5/21/10 8:49:35 PM UPDATING REGULATIONS Revisions of existing laws and groups if coordination between regulators is lack- regulations ing, new technologies are not used to assist in information gathering, and if unnecessary infor- Assessment of new regulations is not enough to mation is sought by regulators. Governments ensure a high quality regulatory structure. As tech- worldwide are adopting programs to reduce the nology, the economy, and society change, existing administrative burdens associated with regulatory regulations often become less relevant and effec- requirements. tive. Regulatory management should involve peri- odic reevaluation of whether existing regulations An earlier section described the reforms of the still constitute the best available solutions to the business registration process in Zambia through problems they seek to address. A systematic the Threshold Project, aimed at reducing the approach is required to ensure that all regulations financial and time costs faced by businesses in are regularly subjected to this reassessment. registering their operations. Zambia has a Law Development Commission FIAS is currently working with the government of designed to review laws for their relevance and Zambia to reform business licensing. In December consistency. Unlike other countries in East Africa, 2007, the government announced its intention to it does not appear to have a Web site, and there is undertake comprehensive licensing reform. In no information available on its current work pro- May 2008, a formal circular was issued to all min- gram and priorities. istries and regulatory authorities, indicating the government's regulatory reform objectives and requiring active support and participation of all Reducing administrative burdens ministries and regulatory authorities in the reforms. The government appointed the high-level Regulatory paperwork and government formali- BLRC, chaired by a private sector lawyer and ties can be unnecessarily burdensome on regulated with representation from the MFNP, MCTI, 24 WB210_RCRZ.indd 24 5/21/10 8:49:35 PM Local Government, and Housing and Justice. there is excessive duplication of information The committee was mandated to identify, scruti- requirements for original applications and nize, and review all business licenses in Zambia, renewals, in part because agencies are not defined broadly as "any ex-ante authorizations able or not willing to share information. required for any business activity to commence," in order to determine whether the business The BLRC report recommends: licenses were legal, necessary, or efficient. retention of 287 licenses on the grounds that The BLRC adopted a "regulatory guillotine" they serve legitimate regulatory purposes, but approach to its review work, whereby it invited also recommends that many of them can be licensing authorities to justify the continuation streamlined to reduce the costs of the licens- of licensing requirements in terms of legality, ing process for both businesses and the regu- necessity, and efficiency. According to the com- lator; mittee's report,43 it identified 520 licenses after reviewing some 86 laws and many other rules, elimination of 168 licenses on the grounds by-laws and notices. The licenses are adminis- that they are illegal or serve no legitimate tered by 18 ministries, 72 local authorities and regulatory purpose;44 33 regulatory institutions, and issued at national, provincial, and local government levels. The main reclassification of 47 licenses into notifica- findings of the review are that: tions or information reports, and a total of 38 local government licenses into a single the competitiveness of Zambian business is "business levy;" and severely affected by the "inefficient and cum- bersome" licensing framework, and the total consolidation of 85 licenses into 18 licenses costs incurred by the business community to reduce duplication and overlapping of amount to some ZMK 2.2 trillion (about licensing procedures. $465 billion), approximately 5 percent of current GDP; More broadly, the report makes these recommen- dations for introducing more systemic regulatory many laws and regulations are obsolete or reform: archaic, with licensing practices typically not keeping pace with best practices in other setting a target for all regulatory authorities countries. Laws overlap, leading to duplica- to reduce administrative and compliance tion in the licensing system; costs by at least 30 percent over a 6­8 month period, and placing an emphasis on there is a proliferation of regulatory authori- using ICT and data sharing to achieve these ties at all levels of government with broad and savings; complex mandates and discretionary powers that make the licensing procedures opaque; expediting the implementation of the gov- ernment's decentralization policy, so that there are too many contact points during the local authorities can become effective agents licensing process, which, along with unclear for regulatory agencies; requirements and discretionary powers, increase the potential for corruption; and 44 A significant portion of these licenses are under local govern- ment and in agriculture and forestry, and many are issued 43 "Report on Business Licensing and Regulatory Reforms," under outdate legislation, much dating back to colonial January 2009. times, and are focused on revenue raising. 25 WB210_RCRZ.indd 25 5/21/10 8:49:40 PM establishing an electronic registry to provide the users of government procedures, and can also easy access to information about licensing enable users and applicants to submit requests requirements; for services in a structured and consistent fash- ion. Moreover, use of ICT for regulatory and investigating the feasibility of establishing a administrative tasks within the public sector is "Business Regulatory Unit," whose main increasingly seen as an important way of combat- function should be to act as a "gatekeeper" ing corruption. for all new regulations;45 In general, Zambia's government is lagging preparing a five-year regulatory strategy and behind its regional neighbors on development of introducing RIA, both to be the responsibil- e-government programs. In part, this reflects the ity of the BRU; and delays encountered in the government's negotia- tions on the international gateway and develop- introducing a monitoring and evaluation sys- ment of broadband facilities. In addition, there tem to monitor the outcome of regulatory are extensive challenges facing the government in reforms. introducing e-government programs. "Although Zambia has recognized the importance of The BLRC's report is now under discussion e-government, its benefits are yet to be realized within government. while challenges such as environmental issues, leadership, change management, human capi- tal, funding and infrastructure are critical to the Use of ICT to support regulatory successful implementation of e-government in reform Zambia, there is little evidence to suggest that effort is being applied to counteract these chal- Once government procedures have been stream- lenges. The lack of context-specific e-government lined and redesigned as part of regulatory reforms, programs and the absence of mar46 but at the use of computerized databases and registries can moment, there are no business regulatory appli- lead to further improvements in regulatory perfor- cations that can be submitted online. The BLRC mance, particularly for enterprises that are a long report on licensing gives an impetus to renewed distance away from the agencies they have to deal efforts in the area of ICT and e-government in with. ICT can be used to provide information to the area of business regulation. 45 The report also suggests that the BRU should house the 46 A start has been made through the Threshold Project with registry. the computerization of PACRO activities. 26 WB210_RCRZ.indd 26 5/21/10 8:49:45 PM ROLES OF DONORS AND IFIs In economies where public revenue is scarce, The PSD Reform Program is supported by a donors have often stepped in to finance the costs donor pool, which does not include the World of regulatory reform programs. The financing Bank, although the Bank is heavily involved in horizon of donors has been variable: some donor- private sector development issues. One reason for assisted programs have been relatively short, the delay in its implementation was that the focused on achieving "quick wins," while others funding arrangements were complicated. The have been geared to capacity building and cre- harmonized funding and approval procedures ation of a new approach to developing policies, developed by the donors were complex, and sev- laws, and regulations that requires a long-term eral working groups spent far too much time try- commitment. Irrespective of the donor time ing to formulate their plans in a form that would horizon, an exit strategy and the transfer of pro- bring funding approval. gram costs to the host government remain impor- tant issues. In addition, there is often an issue of At the same time as the PSD Program is in place, donor coordination and dialogue. Increasingly, Zambia had support from the MDG and from a donors are introducing jointly financed programs large Japanese program. It is not obvious that (often through donor pools) with "harmonized" there are clear arrangements in place to coordi- procurement and financing arrangements. nate the various efforts. Aspects of regulatory reform have been supported in Zambia through a variety of programs sup- ported by a variety of donors. 27 WB210_RCRZ.indd 27 5/21/10 8:49:46 PM CONCLUSIONS AND RECOMMENDATIONS Assessment of strengths and regulation. The projects have focused on specific weaknesses areas of regulation and have not to date been used to broaden the application of good regulatory There is increasing pressure within Zambia for practice. more extensive economic reforms. This pressure originates from the population at large, which Within these reform initiatives, there has been wants a better standard of living and better pub- some progress made in consultations, in response lic services. The pressure also comes from the to donor pressure in many cases, increased efforts business community, which wants a policy frame- have been made to engage stakeholders in discus- work that reduces the cost of doing business and sions ­ from the preparation of overall plans, such provides positive incentives for the creation and as Vision 2030 and the Five-year Development expansion of business opportunities. Finally, the Plans, to the development of new legislation, such pressure also comes from within the government, as the Investment Act or Tax Act. Government which needs to demonstrate that it can provide performance, however, varies considerably: inclu- services and support to the development of the sivity of stakeholders remains a problem, whether economy. All these pressures add up to an impe- it is because government selects whom it wishes tus for good policy and better regulation. to consult or because the private sector and civic society have difficulties in representing their own The impetus for better regulation has been trans- members' views. lated into a number of programs and projects that have been funded by the donor community. In general, consultation occurs only after a gov- These projects often embody facets of good regu- ernment position has been developed, which may latory practice where relevant, but it has been make modifications to that position politically or applied in an ad-hoc and partial fashion, and administratively difficult to accept. This practice these projects have not been a vehicle for promot- may also cause delays in finalizing proposals ing systemic change in the approach towards because proposals have to be referred back to the 28 WB210_RCRZ.indd 28 5/21/10 8:49:46 PM government agency for reconsideration. There is b. Establish a Cabinet-level position to promote no mechanism for improvements in consultation regulatory reform and coordinate regulatory techniques being publicized across government, reform efforts. given the fact that the ministries tend to operate as "silos." c. Establish a technical unit to support the min- ister. Zambia has, in a formal sense, good machinery for dealing with regulatory abuses. However, the d. Determine a number of areas that should institutions all suffer from resource and capacity make use of RIA over the medium-term as constraints, which may reflect budgetary pres- demonstration projects for introducing ben- sures or represent a deliberate attempt by the gov- efit/cost calculations. ernment to restrict access and render the appeals process less effective. e. Define mandatory consultation procedures to be followed for all business-related poli- One of the most serious weaknesses facing the cies, laws, and regulations. government in the development of regulatory reform is the shortage of skilled policy analysts f. Institute a review of all existing regulations within government, particularly within the through the Law Development Commission. Department of Industry, and the shortage of gov- ernment lawyers. Capacity building in these areas The BLRC report on business licensing estab- will be necessary in order to permit a regulatory lishes a clear agenda for both reform of licenses reform program to be implemented in a timely that can take place in the short to medium term, fashion. There is a grave need for review of busi- and also for the development of the long-term ness legislation to rationalize the body of law and regulatory agenda, much along the lines sug- to remove inconsistencies and redundancies. gested above. Its recommendations are broad, and reflect the fact that regulatory reform has to be tied closely to other facets of the govern- Policy options ment's administrative and development agenda. This section makes some recommendations for future actions by government that would support The resource implications of the report's recom- the development of a high-quality regulatory mendations, in terms of both personnel and regime in Zambia. finance, require extensive consideration. In addi- tion, careful consideration should be given to the a. Establish an overarching regulatory policy timing of the reform activities proposed in the that provides clear objectives and frameworks. BLRC report. While, in view of the size and com- While individual regulations and policy areas plexity of the future regulatory agenda, it is can be rationalized by applying a methodol- important to press forward with actions, it is ogy tuned to the area, broad and systemic important that time required for action should regulatory reform needs a framework derived not be underestimated. from principles of good regulation, such as those promulgated by OECD. 29 WB210_RCRZ.indd 29 5/21/10 8:49:49 PM APPENDIX A. PRINCIPLES OF GOOD REGULATION The 1997 OECD Report on Regulatory Reform includes a coordinated set of strategies for improving regulatory quality, many of which were based on the 1995 Recommendation of the OECD Council on Improving the Qual- ity of Government Regulation. These were: A. BUILDING A REGULATORY MANAGEMENT SYSTEM 1. Adopt regulatory reform policy at the highest political levels. 2. Establish explicit standards for regulatory quality and principles of regulatory decision-making. 3. Build regulatory management capacities. B. IMPROVING THE QUALITY OF NEW REGULATIONS 1. Regulatory Impact Analysis. 2. Systematic public consultation procedures with affected interests. 3. Using alternatives to regulation. 4. Improving regulatory coordination. C. UPGRADING THE QUALITY OF EXISTING REGULATIONS 1. Reviewing and updating existing regulations. 2. Reducing red tape and government formalities. The OECD report recommended adoption of a set of regulatory quality standards based on the OECD principles as follows: "Establish principles of "good regulation" to guide reform, drawing on the 1995 Recommendation on Improving the Quality of Government Regulation. Good regulation should: (i) be needed to serve clearly identified policy goals and effective in achieving those goals; (ii) have a sound legal basis; (iii) produce benefits that justify costs, considering the distribution of effects across society; (iv) minimize costs and market distortions; (v) promote innova- tion through market incentives and goal-based approaches; (vi) be clear, simple, and practical for users; (vii) be consistent with other regulations and policies; and (viii) be compatible as far as possible with competition, trade and investment-facilitating principles at domestic and international levels." Source: OECD Report to Ministers on Regulatory Reform,1997. 30 WB210_RCRZ.indd 30 5/21/10 8:49:50 PM APPENDIX B. DB INDICATORS, DB 2009 Ease Trade of Business Constr. Property Investor Paying across Economy DB start-up permit Employment Regist. Credit Protection Tax borders Contracts Closure Global Ranking Kenya 82 109 9 68 119 5 88 158 148 107 76 Zambia 100 71 146 135 91 68 70 38 153 87 80 Uganda 111 129 81 11 167 109 126 70 145 117 57 Tanzania 127 109 172 140 142 84 88 109 103 33 111 Rwanda 139 60 90 93 60 145 170 56 168 48 181 SSA Ranking Kenya 5 14 1 10 16 2 14 36 26 19 10 Zambia 7 7 32 26 11 6 11 5 30 15 12 Uganda 10 21 14 1 41 14 20 15 24 21 2 Tanzania 14 14 42 28 27 7 14 21 9 1 19 Rwanda 17 5 16 13 5 27 43 10 40 4 34 31 WB210_RCRZ.indd 31 5/21/10 8:49:55 PM APPENDIX C. THE JUDICIAL SYSTEM IN ZAMBIA The hierarchy of the judicial branch is as follows: Court has jurisdiction to try in the first instance the Supreme Court, high courts of the Republic, certain serious offenses committed in Zambia. provincial courts, districts courts, and mediation committees. Magistrates courts The Supreme Court There are three classes of magistrate's courts, with progressive degrees of criminal and civil The Supreme Court is the highest court in the jurisdiction. country. It consists of the chief justice, deputy chief justice, and several other justices. It is the court of Local courts last resort. The decisions of the Supreme Court are not be subject to appeal, except in terms of peti- Local courts consist of a president sitting alone or tions for the exercise of the prerogative of mercy or with other members, all appointed by the Judi- revision of a judicial decision. Its decisions are cial Services Commission. Local courts also deal binding on all parties concerned, whether organs with civil cases of a customary nature. Customary of the State, public officials, civilians, military, law is followed when it is not incompatible with judicial officers or private individuals. other legislation. The High Court The High Court is presided over by a chief jus- tice and is basically an appellate court. The High 32 WB210_RCRZ.indd 32 5/21/10 8:50:02 PM