TRADE, INVESTMENT AND COMPETITIVENESS TRADE, INVESTMENT AND COMPETITIVENESS EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT Business Licensing and Inspections Maturity Model — Guidance Note Goran Vranic and Aris Molfetas © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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Cover and layout design: Diego Catto / www.diegocatto.com Acknowledgments The development of this work was led by Goran Vranic (Senior Private Sector Specialist) and Aris Molfetas Lygkiaris (Private Sector Specialist) under the general guidance and supervision of Asya Akhlaque (Practice Manager, Investment Climate Unit), and Sylvia Solf (Senior Private Sector Specialist, Investment Climate). The authors are grateful for the valuable peer review comments received from Ganesh Rasagam (Lead Private Sector Specialist), Penelope D. Fidas (Senior Private Sector Specialist), and Victor Steenbergen (Private Sector Specialist). About the Authors Goran Vranic (gvranic@worldbank.org) is Senior Private Sector Specialist in the World Bank Group’s Investment Climate Unit based in Washington, DC, USA. He advises governments in a range of areas at the intersection of business regulation and regulatory technology (RegTech). Aris Molfetas (amolfetas@worldbank.org) is a Private Sector Specialist in the World Bank Group’s Investment Climate Unit based in Washington, DC, USA. He advises governments in a range of areas relevant to business regulation and construction regulation reform. Contents List of Acronyms 5 Executive Summary 6 Introduction 7 Maturity Assessment Domains 8 Laws and Regulations 9 Institutional Framework and Leadership 11 Key Policies and Capacities 13 Procedures, Tools, and Transparency 14 Regulatory Technology 16 Maturity Assessment Outputs 18 Scoring 18 High-Level Roadmap 20 Budget Considerations 21 Appendix 22 Maturity model assessment questionnaire 22 Terms of reference for the maturity assessment 22 Bibliography 31 List of Acronyms ASA Advisory services and analytics BPM Business process management COTS Commercial off-the-shelf CPD Continuous professional development DCED Donor Committee for Enterprise Development G2B Government to business GovTech Government technology GSB Government service bus HTML HyperText markup language IC Investment climate ICT Information and communications technology ID Identification IPF Investment policy financing JSON JavaScript object notation MIT Massachusetts Institute of Technology MSME Micro-, small, and medium-sized enterprises PforR Program for Results RAS Reimbursable advisory services RegTech Regulatory technology TA Technical assistance TTL Task Team Leader WBG Word Bank Group X2RL Extensible regulatory reporting language XML Extensible markup language EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 5 Executive Summary Several countries implemented Investment Climate (IC) reforms in the past 20 years focusing on legal and administrative improvements and one-stop-shop integration approaches (i.e., first- and second-generation reforms). However, with the advent of emerging technologies and data availability, the needs and opportunities for greater integration of business licensing and inspections and digitalization of government to business (G2B) service delivery have been growing. The need for online, paperless and contactless G2B service delivery became even more pronounced with the COVID-19 pandemic. Therefore, the next generation of reforms requires a higher level of sophistication and more comprehensive and integrated solutions (third generation of reforms). In turn, this requires new approaches in terms of diagnosis and implementation encompassing legal frameworks; institutional frameworks and leadership; key policies and capacities; procedures, tools, and transparency; and regulatory technologies. To that end, the IC unit developed a new diagnostic tool known as the Maturity Assessment (MA)1 to better capture the spectrum of maturity and potential IC reforms that can be considered based on each country’s maturity level. The MA aims to help Task Team Leaders (TTLs) carry out a quick diagnostic of licensing and inspections systems at national, sub-national or sectoral levels. The rationale behind this tool is to allow country teams that design operations and advisory services to take a snapshot of where a jurisdiction stands on business licensing and inspections management. The output of this snapshot can be used to inform project design as well as to produce a high-level estimate of investment needs. The tool is intended to be used by staff and consultants who work on private sector development and who are familiar with the investment climate topics. The MA is an innovation in this area, since it is the first diagnostic on investment climate topics, and on private sector development more broadly, that employs this approach. The authors aim to crystalize the knowledge and lessons learned through the literature and practice by supporting licensing and inspections reforms in different regions and income levels.   1. The Maturity Assessment concept has its roots in the software capability maturity model developed at Carnegie Mellon University. It is an instrument that helps orga- nizations assess and determine the degree of maturity of their implementation processes. This approach was taken further by Gartner and has been applied in other domains, beyond software capability, and more recently by the World Bank Group for FinTech Maturity. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 6 1. Introduction This MA is best suited to be applied when country teams have identified business regulations as a constraint for private sector development. For example, a country partnership framework or similar strategy (e.g., country private sector diagnostic), an investment climate assessment, or a private sector survey may have indicated this area as a weakness for the country’s investment climate. In the context of an Investment Policy Financing operation, the MA should be deployed during the identification phase. In the context of reimbursable advisory services (RAS) or advisory services and analytics (ASA), it could be deployed even before designing the scope of the technical assistance. The MA is structured around five domains, and there are five questions per domain, with three possible responses to each question. Each response is assigned a score (0, 1, or 2); therefore, by completing the MA, the user can quantify and visualize how the country performs across the five domains, as well as receive an indicative list of transformational activities to consider when designing improvements. The MA is modular, and its scope can be easily adjusted depending on client needs. For example, it can be applied horizontally,2 by taking a bird’s eye view of licensing and inspections in a jurisdiction, or vertically, by focusing on a specific economic sector or regulatory domain. Similarly, it can be applied at the national level or at the subnational level. The output of the MA is twofold. Initially, it includes an assessment of the jurisdiction’s maturity level across five maturity domains and three maturity levels (Starting, Developing, and Maturing). Subsequently, the assessment identifies specific transformational activities and produces a high-level roadmap. The roadmap can be used as an important input to the policy dialogue with the client and to the project design. The MA can be implemented with a limited budget and a relatively low level of effort. For example, it can be deployed by hiring a local consultant for five to ten days to carry out an in-country mission to collect data and conduct interviews with regulators, inspectorates, and businesses. Ideally, the consultant should be supervised by an expert (e.g., by a member of the Investment Climate unit with expertise in this area) who can provide guidance throughout the assessment. 2. The term “horizontal” in this context refers to an economy-wide scope. In contrast, the term “vertical” refers to a sector-specific scope. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 7 2. Maturity Assessment Domains Licensing and inspections are often seen as separate components of service delivery; however, they are two sides of the same coin when it comes to business regulation design and implementation. Business licensing encompasses all ex ante authorizations and procedures relevant for businesses entering the market and commencing operations after incorporating and registering with the tax authorities. Business inspections refer to supervision activities relevant after the business enters the market. From a bird’s eye view, this topic can be assessed across five domains (see table below). > > > TA B L E 1 . # I II III Maturity assessment domains Maturity assessment domains Laws and regulations Institutional framework and leadership Key policies and capacities Description Framework laws and regulations and sectoral regulatory requirements on business authorization (permits, licenses) and inspection-related requirements Governance and leadership on business licensing and inspections, including clearly set roles and responsibilities, results framework, and mechanisms to prevent conflict of interest Vision, principles, and values of the business licensing and inspection system, along with resources and competencies for resilience and sustainability Catalog of administrative procedures, risk Procedures, management, planning and reporting, inspection IV tools, and checklists, complaints management, and enforcement transparency management procedures Data management and emerging technologies applied Regulatory to policy making for outcome-based regulations, V technology integrated licensing and inspection management, and feedback mechanisms EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 8 Laws and Regulations A strong legal basis that adequately captures the key principles and the key concepts of risk.4 Moreover, it requires regulators and good practices is key for a successful reform path. to justify the introduction of ex ante authorizations and procedures based on evidence (e.g., by performing risk 1. At the outset, it is important to assess if there is a strong assessments) that indicates a clear need to safeguard a public framework for regulatory delivery. In some jurisdictions interest (e.g., food safety). Additionally, it includes a spectrum this takes the form of horizontal laws for licensing and of regulatory approaches ranging from information campaigns inspections. Horizontal laws in this area typically set out to registration requirements, approvals, and inspections. the key principles, processes, tools, and approaches for Less mature licensing systems typically lack proportionality, the licensing authorities and the inspectorates to adhere and they impose horizontal requirements on entire sectors, to. The specific requirements (business authorizations irrespective of the risks posed by each business activity. A and inspection-related requirements) are prescribed in the mature risk-based framework for inspections introduces the sectoral/substantive laws and regulations. In this setup, key concepts of risk as well as the approaches and tools line ministries and inspectorates align their vertical laws that inspectorates must use in their operations. A risk-based and regulations to the horizontal laws. Other jurisdictions inspection framework is anchored in a preventive and advisory regulate licensing and inspections exclusively or primarily approach, not policing and enforcement. Inspections are through sectoral laws and regulations. Either approach prioritized and driven by intelligence. This requires developing can work, depending on the context.3 Since both tools that target businesses based on risks and ensuring approaches are valid, the MA assesses whether such a that inspection planning is proactive instead of reactive. It framework exists and, if it does, whether it is risk based. also requires developing tools that promote consistency, proportionality, and transparency in inspections decisions. Risk-based approaches to regulation are at the frontier Risk-based checklists and enforcement management models5 of regulatory delivery. A mature risk-based framework for can help achieve those objectives. licensing is based on the principle of proportional regulation 3. For more extensive analysis of the various options on legal reform for inspections management, see the note “Approaches to Integrated Inspections Reforms, Based on Selected Case Studies,” available at https://openknowledge.worldbank.org/bitstream/handle/10986/36895/Approaches-to-Integrated-Inspections-Re- forms-Based-on-Selected-Case-Studies.pdf?sequence=5&isAllowed=y, and the paper titled “Inspections Reforms: Do Models Exist?” available at https://openknowl- edge.worldbank.org/bitstream/handle/10986/25077/Inspections0reforms000do0models0exist0.pdf?sequence=1&isAllowed=y. 4. For more information on the key concepts of risk, see the note “Risk-Based Approaches to Business Regulation,” available at: https://openknowledge.worldbank.org/ bitstream/handle/10986/34675/A-Note-for-Reformers.pdf?sequence=1&isAllowed=y. 5. For more details on this, see Health and Safety Executive 2013. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 9 BOX 1 The Kyrgyz Republic achieved a “standardized” maturity level in certain domains for business inspections; however, several areas still require improvements. Adopting the umbrella law defining the general principles of conducting inspections, using inspection checklists to communicate compliance requirements, and publishing the inspection plans online were key successes of previous reform cycles. The risk-based inspection approach is not fully implemented, however, and the quality of checklists is poor, key performance indicators are lacking, and the e-Inspections system does not truly serve as a coordination and planning tool. (See Arynova et al. 2021.) 2. The legal framework on enforcement is at the crux and duplications to reduce the compliance burden on of a preventive and advisory approach.6 In mature businesses and regulatory unpredictability. systems, the legal framework on sanctions includes a spectrum of enforcement actions, ranging from light (such 4. In good practices, sectoral regulations are goals- as guidance and persuasion or warning letters) to more based, whereby businesses are required to comply severe (such as minor fines, major fines, stop orders, with functional requirements expressed in qualitative temporary prohibitions, and permanent prohibitions). terms by stating a goal to be achieved. Functional Mature systems also distinguish between risks and requirements may be complemented by performance administrative infringements. Less mature systems requirements expressed in quantitative terms, the typically lack this spectrum as they include only fines and fulfilment of which can be determined by calculation, possibly prohibitions in their sanctions system and do testing, or simulation. Prescriptive requirements may not permit inspectors to provide guidance and advice to also be used, but this is typically in the form of guidance businesses, focusing instead on revenue generation and (i.e., nonbinding) as to how businesses can achieve policing. Mature systems do focus on providing guidance compliance with the goals and performance requirements and advice to businesses, and inspectors are required to in the regulation. This approach acknowledges the consider contextual factors outside the severity and type several paths available to achieve the same goal. Less of violation when making enforcement decisions, such as mature systems rely on overly prescriptive requirements the business’s compliance history, if the business gains by describing in detail the specifications for facilities, a competitive advantage from the noncompliance, if the equipment, practices, etc., that businesses must adhere business refused to comply, etc. In less mature systems, to. This approach stifles innovation since it mandates only the spectrum of sanctions is more limited, and there is one way to comply. Lastly, systems in a starting phase no room for guidance and warnings. Instead, sanctions of maturity either lack sectoral regulations or the sectoral are typically limited to fines and prohibitions. Starting regulations are underdeveloped. systems go a step further and incentivize the imposition of sanctions by measuring the number of fines as an 5. In good practice jurisdictions, the legal framework on indicator of inspectors’ good performance. the organizational structure of licensing authorities and inspectorates defines the terms of reference for 3. Convoluted and ever-expanding regulator mandates each position in the relevant institutions. Moreover, and jurisdictions is a typical challenge in this area.7 they include the competency frameworks for each This can manifest in unclear mandates between national role and grade of regulatory officers and inspectors to level regulators/inspectorates and unclear or weakly inform recruitment, promotion, and retention of staff. implemented coordination between the subnational This contributes to the professionalization of those level authorities, or both. This can also manifest in units and roles. It also contributes to more transparent overlapping or duplicative sectoral regulations. In good recruitment and retention frameworks. In developing practices, institutional mandates and jurisdictions for the jurisdictions, some of these elements may be missing or licensing issuing authorities and the inspectorates are underdeveloped. Typically, the organizational structure clearly delineated and jurisdictions are clear for each and the terms of reference are present, but not necessarily economic sector and regulatory domain and subdomain. the competency frameworks. At the more initial level, Moreover, sectoral regulations should be free of overlaps none of these elements are present. 6. For a more extensive analysis on enforcement management see OECD 2018 and 2014, and World Bank Group 2020. 7. See, for example, Arynova et al. 2021 for a case study on Kyrgyz Republic for an extensive discussion on the challenges posed by lack of clear institutional mandates. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 10 Institutional Framework and Leadership 1. Institutional organization and leadership for licens- 2. The institutional funding model must ensure sustain- ing and inspections must ensure professional inde- ability of regulatory service delivery and adequate pendence and continuous professional development. compensation for licensing officers and inspectors. Typical safeguards of professional independence include Inadequate compensation for licensing officers and in- (i) preventing inspectors from participating in the work of spectors incentivizes corrupt behavior. An important policy committees or expert bodies that may impact the impartial- for implementing risk-based licensing and inspections in- ity of inspection decisions, (ii) ensuring the ground for re- volves the review of compensation schemes for providing jecting applications for licenses is prescribed in regulations competitive salaries to inspectors comparable to other em- and allowing an appeal procedure with a professionally in- ployers in the market that hire professionals of the same dependent body, and (iii) protecting officials and inspectors profile. The funding model for inspection activities cannot from political and other influence by implementing internal be linked to the monetary amount of issued fines. Con- audit procedures. In addition to the professional indepen- siderations that can ensure an adequate funding model dence safeguards, institutional organization and leadership involve fair business license fees linked to the adminis- replaces routine licensing and inspections with efficient trative expenses (i.e., that implement the cost recovery service delivery and promotes inspectors’ professionalism principle), on-demand consultative inspections that can be and expertise. Instead of routine inspections that count as applied by some jurisdictions,9 and indirectly, savings for successes the numbers of penalties issued, institutional the private sector achieved through streamlined licensing leadership should promote as success the reduction in requirements and inspections. Jurisdictions that recently numbers of penalties and fines.8 implemented business licensing and inspection transfor- 8. For a more extensive discussion on this, see Blanc 2018. 9. The New York City Health Department offers two types of consultative inspections to provide basic food safety education and guidance to restaurant operators upon request: one can be requested before the official inspection (at a cost of US$100); the other can be scheduled after an official inspection was conducted (at a cost of US$400). EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 11 mation achieved return on their investment in business developing awareness of the new risk-based approach, licensing and inspection reforms in a matter of a year or in which success is measured through reduced risks and two, measured through direct benefits only. For example, improved compliance. Internal communication should in Moldova the estimated annual savings achieved for the also promote ethical behavior and provide mechanisms private sector thanks to the licensing and inspection reform that protect officers’ and inspectors’ professional indepen- are US$15 million, and in Jordan inspection reform gener- dence. External communication should support informing ated US$12.4 million in annual savings.10 Indirect benefits economic operators about risk-based regulatory require- are significantly higher; for example, in Moldova, combined ments and their rights and responsibilities in regulatory investment climate reforms and capacity development for processes. Public relations strategies often include pub- MSMEs generated 2,079 jobs and more than US$225 mil- lic campaigns that help inform economic operators about lion in new exports. new regulatory approaches, requirements, and risks (e.g., campaigns promoting occupational health and safety, in- 3. Regulatory bodies enable the private sector to pro- tellectual property rights, or new digital G2B services for vide feedback on licensing services and inspections. licensing and inspections). Ideally, such feedback will be integrated into the service de- livery; e.g., for licensing services, the feedback should be 5. To ensure efficient and effective licensing services captured through online services, such as online search of and inspections, coordination and information shar- business licensing requirements or a transactional online ing across regulators is also essential. Coordination service for applying for and obtaining a business license. shall exist horizontally between inspectorates operating Feedback should be accounted for by measuring perfor- on the same governance level in different domains (such mance at various levels, from the individual officer/inspec- as occupational health and safety and construction safety) tor level to a department level to the regulatory body level. and vertically between national and subnational inspector- Feedback should be used as input when deciding on an ates operating in the same domain. An institutional frame- individual officer’s or inspector’s professional development work that ensures coordination typically involves a national and as input for suggesting improvements in regulations. level central coordinating body. Good practice shows that such a central coordinating body should be established 4. Risk-based and preventive licensing and inspections under a prime minister’s office and be responsible for the require strong internal and external communica- design of horizontal guidelines (such as the development tion. Pivoting away from command-and-control regulation and use of inspection checklists, risk models, complaints and from punitive to preventive and risk-based licensing management, inspection planning, and enforcement man- and inspections requires developing internal communica- agement) and for developing and operating shared licens- tions to officials and inspectors and external communica- ing and inspection management digital solutions. Such a tions to economic operators and the public. Internal and horizontal framework and shared digital solutions enable external communication is an important tool for developing the coordination necessary to implement risk-based licens- trust between economic operators and regulators. Internal ing and inspections. communication within the inspectorates has to support 10. Source: World Bank 2022, Implementation Completion and Results Report. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 12 Key Policies and Capacities 1. Strengthening regulatory service delivery requires motion, and retention of staff. Moreover, it can be sup- having a reform strategy and an action plan to imple- ported by developing training curriculums to onboard new ment that strategy. Given the cross-cutting nature of li- staff and improve capacities and performance of existing censing and inspections reforms, ideally this strategy staff as a result of periodic evaluation. Mature systems should be led by the ministry responsible for economy-wide provide trainings for new inspectors and require existing issues (e.g., Ministry of Investment and Commerce, Minis- inspectors to complete continuous professional develop- try of Economy, Ministry of Trade and Industry, or similar). ment (CPD) on a periodic basis so that they can keep up- However, such strategies may exist at the sectoral level to-date with developments in their fields of expertise, new as well (e.g., sector regulators produce reform strategy in technologies that businesses use, and new approaches the food safety domain). Such a high-level strategy should to verify compliance. include the high-level vision and mission for reform, an- chored around prevention and risk management. The high- 4. Equipment is an important component of a modern level vision should be supported by a high-level roadmap inspection system, allowing inspectors to adequately and an action plan that cover all key dimensions of reform carry out their mandates. Equipment in this context can (i.e., legal, institutional, administrative, and regulatory tech- include vehicles that enable inspectors to be mobile and nology), including defining clear roles and responsibilities make planning decisions based on risk factors and not of all relevant authorities in the action plan. Ideally, the ac- based on which businesses are more reachable. It also tion plan should be leveraged to coordinate support from includes laboratory equipment for fast indication to sup- international development agencies, and there should be port decision-making about official laboratory analysis and a process to review and update these documents periodi- mobile devices that can help inspectors in their site-visits cally. Continuous revisions are important to recalibrate the (e.g., testing, measuring, etc.). More mature systems may strategy and identify bottlenecks to implementation. Less even equip inspectors with advanced technologies such mature systems may include some but not all of the afore- as drones, tablets, and other devices for remote virtual mentioned components, and starting systems do not have inspections.12 reform strategies in place. 5. In some jurisdictions, inspectors are also subject to 2. A robust strategy is underpinned by a sound monitor- a different (higher) salary scale than other civil ser- ing system that can help policy makers and regula- vants in the public sector. This helps reduce opportuni- tors assess performance in regulatory service deliv- ties for corruption. It also helps attract talent and create ery. Mature systems incorporate performance indicators a cadre of professionals with expertise in their regula- to monitor the overall implementation of regulations11 in tory domain. In mature systems, inspectorates maintain the relevant institutions (e.g., license issuing authorities competitive salaries for professionals hired as inspec- and inspectorates). In the absence of performance indi- tors and incentive schemes (e.g., annual awards to high cators, it is difficult to identify bottlenecks and assess the performers, promotions, bonuses, certification to train quality and efficiency of such services. In developing sys- other trainers and/or inspectors, opportunities for continu- tems, the performance indicators may be available, but ous professional education and development) to reward they may be inadequate or poorly designed (e.g., measur- high performers who promote the preventive role of the ing number of fines issued) or inadequately implemented inspectorate, train other colleagues, and continuously de- (due to the lack of data). In starting systems, performance velop their expertise. In less mature systems, incentive indicators are not available. schemes are typically designed to promote policing and enforcement rather than to advise businesses and pre- 3. Mature inspection systems emphasize the profes- vent risks from materializing. Most commonly, this is the sionalization of inspections. This can help reduce case when inspectors are rewarded for the amount and/or corruption and attract subject matter experts. The pro- number of fines they issue on businesses. fessionalization in service delivery can be achieved by developing competency frameworks for recruitment, pro- 11. For example, a performance indicator in the OHS regulatory domain is the number of profession-related diseases or injuries at a workplace or work environment. These are broader and not specifically related to service delivery. 12. See the International Code Council 2020. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 13 Procedures, Tools, and Transparency Assessing the maturity of procedures and tools and the de- 2. Designing and implementing risk-based regulatory gree of transparency can help determine the transformational delivery for licensing and inspections requires de- activities required at a more downstream level. veloping tools. In the case of licensing, this requires developing risk assessments13 and benchmarking with 1. The inventory of sectoral regulations and administra- other good practices to determine the appropriate level tive procedures is an important component of a mod- of risk for each business activity. It also requires design- ern licensing and inspections system for several rea- ing and implementing different instruments (i.e., registra- sons. First, it is a starting point for any efforts to review tions, approvals, ex ante inspections, etc.), procedures, and streamline regulations. For example, jurisdictions that and documentation requirements for each business ac- engage in wholesale reviews of the regulatory stock first tivity depending on the risk. For example, low-risk busi- need to map the universe of sectoral regulations. This ex- nesses should be able to commence operations without ercise can also help identify overlaps and duplications in being subject to ex ante inspections or authorizations. In the ex-ante authorizations and sectoral regulations. Sec- mature systems, low-risk businesses either do not need ond, it is a starting point for developing other operational to be licensed or, if subject to licensing, licenses should tools such as checklists for the inspectorates. Finally, it be obtainable through a simple registration that can is a prerequisite to improve transparency. Developing li- help the authorities gather all relevant data for planning censing and inspection information portals, publishing ex post inspections. Medium-risk activities can typically the most up-to-date sectoral regulations, and developing benefit from streamlined procedures and documentation guidance for businesses, requires having these invento- requirements, as well. It is only high-risk businesses that ries. The most challenging aspect of such inventories is should typically be subject to more stringent ex ante con- their sustainability. Since their value lies in the accuracy trols. When it comes to inspections, mature inspectorates of the information, keeping them up-to-date every time a carry out risk assessments to identify and evaluate risks new law or regulation comes into force is crucial. in their regulatory domain. The risk assessments are typi- 13. For a more extensive discussion on risk assessments, see United Kingdom, Better Regulation Delivery Office (BRDO) 2012. 14. Note that inspection activities can include a broad range of activities, not just site inspections. For example, they can include awareness-raising campaigns, develop- ment of guidance to businesses, and information-sharing with other authorities, among others. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 14 cally based on set criteria that may combine both intrinsic when deciding on official laboratory analysis or applying factors (e.g., type of activities) and extrinsic factors (e.g., temporary bans, such decisions can be better informed if compliance history). The purpose of these tools is to as- inspectors possess mobile laboratory equipment for fast sist inspectorates and inspectors in developing risk cri- indications. More mature systems have a well-developed teria to prioritize their inspection activities14 and improve framework for how and when to deploy equipment based targeting of high-risk subjects and objects (e.g., repeat of- on the types of inspections carried out and the procedures fenders, structures with a high impact in terms of loss of for its use (e.g., calculation, testing, simulation, etc.). life or injury, etc.). Risk assessments are a primary source They also have a framework and budget for maintenance. of information in designing inspection planning. This can Developing systems may provide the inspectorates with help inspectorates target high-risk businesses and thus equipment, but this is not supported by a deployment and allocate their resources efficiently. Other sources of in- sustainability framework. Lastly, starting systems do not formation for inspection planning include complaints re- allocate adequate resources for equipment or, if they do ceived from the public and intelligence collected through allocate funding, it does not cover all inspectorates; they site-inspections. also lack deployment and sustainability frameworks. 3. Checklists are compliance assessment tools that 5. Enforcement management is an important component guide inspectors during site inspections and com- of a preventive and risk-based system. This consists of plaints management by helping them determine the a legal framework that stipulates a spectrum of sanctions most appropriate response to mitigate risks. Check- that enable proportional enforcement (see question 2 in lists can also help improve standardization and consis- the legal domain). For example, minor infringements that tency in inspections, as well as simplify and strengthen do not pose risks to the regulators’ objectives should be the inspection procedure by ensuring that inspectors fo- dealt with through guidance, advice, or warnings. More cus on the key elements of compliance and on what are severe responses should be reserved for repeated in- likely to be the main risk areas. In addition, checklists can fringements and/or for when the businesses’ operations help raise private sector awareness and compliance re- pose significant risks. Moreover, enforcement manage- garding the areas on which the inspection subjects will be ment consists of operational tools that help inspectorates scrutinized. Finally, checklists are a useful tool to collect, ensure consistency, proportionality, and transparency process, and analyze information in an efficient, reliable, in enforcement decisions. This is typically achieved by and standardized manner to inform risk assessments and developing decision-making tools (e.g., guidelines to in- risk-based planning. By ensuring consistency, checklists spectors and decision trees), to help inspectors identify serve as especially important tools for less mature sys- the most appropriate enforcement action in the event of tems trying to implement a risk-based approach. A com- noncompliance. Moreover, in mature systems, decision- prehensive checklist consists of a list of questions with making tools distinguish between risks and administrative assigned weighting, references to the legal basis for each noncompliance. This must be reflected both in the legal question, and an aggregate score. framework and in the decision-making tools that imple- ment the law on sanctions. Moreover, in mature systems 4. Inspection equipment can help inspectorates deliver inspectors are required to consider several factors when on their mission to improve compliance and safe- making an enforcement decision, such as the businesses’ guard public goods. This is an important area to mea- compliance history, the severity of the violation, and the sure since it is a proxy for the extent to which inspectorates associated degree of risk, among others. This must be have adequate resources to carry out their mandates, as reflected both in the legal framework and in the decision- well as for the extent to which they focus on prevention making tools. and advice. Moreover, inspection equipment is important for implementing a risk-based approach. For example, EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 15 Regulatory Technology 1. A key prerequisite to digitalizing licensing and in- sults or severity of inspection measures, when digitalizing spections are digital and interoperable business reg- risk-based licensing and inspections. Further, an exten- istries and databases that allow initial risk categori- sion to integrating private sector data, such as IoT-driven zation. Typically, the first challenge for regulatory bodies data, enables inspections to advance to the next level: digitalizing licensing and inspections is availability of ac- risk intelligence to capture forward-looking risks to inform curate data on businesses. Many developing jurisdictions decision-making for inspection activities that can prevent still face fragmented, poor-quality business databases. the risks from arising, i.e., to identify potential risks and A common workaround is to use a taxpayer’s registry to act to prevent them from emerging.16 form a database of subjects and objects of inspection. This approach does not offer a data management mecha- 2. An initial step in digitalizing licensing and inspec- nism to keep the data updated, however, and is missing tions is publishing online information on sectoral information on the profile of establishments or facilities regulations and administrative procedures. Experi- where economic activities operate. These constraints limit ence shows that establishing informational online portals the initial risk categorization of businesses and objects to and publishing business administration procedures that the intrinsic risk data available. A comprehensive data- allow businesses to easily navigate them is not sustain- base of subjects and objects of inspection requires inte- able without a mechanism to ensure data updates follow- grating business registries and registries of issued per- ing regulation changes. These mechanisms range from mits and licenses with an inspection database. Only such an internal online notification mechanism requesting man- an integrated regulatory database allows application of ual updates of administrative procedures from relevant both intrinsic and extrinsic risks,15 such as inspection re- regulatory bodies following relevant regulation changes BOX 2 Technical Safety Authority in British Columbia (BC), Canada, achieved a “maturing” level in certain domains for business licensing and inspections. It is a delegated administrative authority that oversees the safe installation and operation of technical systems and equipment across the province of British Columbia. The Authority developed policy, institutional, and digital technology transformations to improve efficiency and risk management. Using a combination of data generated through inspections along with permits and declarations, the developed AI/machine learning algorithm predicts the risks associated with regulated assets in BC. It informs the development of annual inspection plans, but also informs inspectors’ daily priorities. (See Donor Committee for Enterprise Development (DCED) 2020.) 15. Intrinsic risks refer to those internal to a business or establishment (e.g., economic activities, size, scale, location), while extrinsic risks are external to a business or establishment (e.g., last inspection visit result, severity of violations, received complaints). 16. Risk intelligence goes beyond risk management. While risk management prevents risks from materializing, risk intelligence identifies potential risks to prevent them from emerging. It requires real-time and integrated business data and emerging technologies for data insights (such as AI). It allows regulators to act earlier (as compared to risk management, for which actions are organized after a risk has already emerged) to prevent them from materializing. Recent implementations involve the Technical Safety Authority of British Columbia in Canada and Andra Pradesh in India (for more details, see Donor Committee for Enterprise Development (DCED) 2020). EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 16 to machine-readable regulations where data on adminis- tion. Implementation ranges from an online informational trative procedures is attached to regulation (i.e., the ad- portal publishing information on administrative proce- ministrative procedure becomes regulation metadata and dures and basic ICT automation of physical one-stop is updated along with regulation changes).17 Typically, the shops for business licensing to fully digital and integrated administrative procedures for business authorizations solutions for business licensing and inspections. Coun- (permits, licenses, certificates, etc.) are published on- tries advance first in digitalizing business authorization line, followed in the next phase by publishing the inspec- processes, implementing both the online services for tion checklists. More advanced informational portals on businesses and the backend digital processing workflows administrative procedures are integrated into the overall for issuing licenses. Experience shows that the digitaliz- e-Government portal and structure administrative pro- ing the highest priority business authorizations (e.g., typi- cedures according to business life events (entry, expan- cally 100) is a major milestone that results in significant sion, internationalization) and economic activities. They benefits for the private sector.18 Digitalizing inspections also implement chatbots to support users in navigating requires more effort, and a phased approach despite through administrative procedures and allow application the possibilities that shared e-Inspections platforms of- of advanced mechanisms for regulatory risk management fer. Digitalizing inspections requires that inspection tools and compliance (such as self-assessment). and procedures (checklists, complaints management, risk models, sampling, enforcement management) be de- 3. Digitalizing risk-based licensing and inspections veloped first, along with inspectors’ capacity to apply the requires having e-Government shared services in new risk-based approach and e-Inspections. Such tools place. Digital ID and signature, cloud hosting, e-Payment, and procedures are specific to inspectorates, and require and interoperability of e-Government shared services are adaptation to each inspectorate’s specific needs; i.e., the prerequisites to digitalize licensing and inspections. Con- new inspection tools and shared e-Inspection system are siderations on the use of mobile e-Inspections for field configured and rolled-out in phases organized according visits depend on internet connectivity and broadband. to the individual inspectorates. Lack of government technology (GovTech) and digital infrastructure prerequisites makes digitalizing licensing 5. Sustainable operation of digital solutions for busi- and inspections difficult to achieve. For example, with- ness licensing and inspections requires institutional out digital ID and signature, paper documents cannot capacities and adequate budgetary resources. Coun- be completely removed from the processes, creating the tries and jurisdictions that have implemented separate possibility for parallel flows and uncertainty (e.g., a per- e-Inspection and e-Business Licensing digital platforms mit can be processed using paper application and docu- found it more challenging to implement sustainable solu- ments without data recorded to the digital platform). The tions, as decision-makers (i.e., ministries of finance) could lack of a horizontal interoperability system or government not see a direct revenue stream coming from risk-based service bus (like X-Road in Estonia) would require imple- inspections when deciding on the budget. Furthermore, menting point-to-point data exchange interfaces between an in-house ICT staff must be engaged by regulators from digital business licensing and inspection digital platforms the beginning of implementing digital solutions to develop and external registries. Such fragmented approaches to the necessary capacity for supporting its use and main- data exchange impede overall sustainability and increase tenance. Along with in-house ICT staff, the maintenance maintenance costs of the licensing and inspections digi- and required upgrades of digital solutions also require the tal solutions. Lastly, recent revelations of cybersecurity engagement of external software vendors. If commercial- threats emphasized a need for an e-Government cloud off-the-shelf (COTS) software products are used, the to ensure continuity of operation and resilience of digital system will depend on the software vendor that owns the solutions for public service delivery. software product for future system maintenance and up- grades; this should be taken into account when designing 4. Digitalizing licensing and inspections requires an an implementation approach in a transformational project evolutionary and phased approach to implementa- to improve business licensing and inspections. 17. Machine-readable formats for regulations, such as XML or JSON, represent a higher level of digitization and enable greater machine understanding of documents through the use of ontologies, elements, attributes, and tags that create metadata describing the structure and content of text in a way machine readers can use. For more details, see MIT Drafting X2RL: A Semantic Regulatory Machine-Readable Format, available at https://law.mit.edu/pub/draftingx2rl/release/2. 18. Setting priorities for regulatory streamlining and digitalization applying the Pareto principle was applied in Singapore and Moldova and resulted in significant and quick- er benefits to the private sector while also maintaining the momentum needed to continue the efforts. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 17 3. Maturity Assessment Outputs Scoring The scoring for calculating results according to five maturity domains is linked to the answers given to the domain questions. Each of the five domains has five questions with three possible responses: 0, 1, or a maximum of 2 points. The maximum number of points for each maturity domain is thus 10. If the aggregate number of points for a domain is between 0 and 2, the ma- turity level is designated as “Starting”; if it is between 3 and 6, the level is labeled “Developing”; and if the number of points is between 7 and 10, the domain maturity level is termed “Maturing” (Table 2). > > > TA B L E 2 . Level Starting Developing Scoring and maturity levels Description This maturity level is characterized by fewer than three questions in a domain/category achieving minimum points (1) and other questions receiving zero points. This level indicates at least three questions in a domain/ category achieved the minimum score (1). This level shows at least two questions in a domain/category achieved a maximum score (2) and other questions received Point range 0–2 points 3–6 points 7–10 points Maturing at least the minimum score (1). EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 18 > > > FIGURE 1. Example of maturity assessment radar chart Laws and regulations Regulatory Institutional technology framework and leadership Procedures, tools, Key policies and and transparency capacities Starting Developing Maturing Maturity assessment EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 19 High-Level Roadmap The High-Level Roadmap is intended to provide TTLs with an This can be used to initiate the policy dialogue with the cli- indication of the potential activities and an estimated timeline ent and determine the appetite for reform across one or more for implementation depending on the jurisdiction’s maturity domains. At the same time, when it comes to designing opera- level in each domain. The Roadmap can also help TTLs se- tions for technical assistance or lending, it is recommended quence transformational activities during a reform cycle. The that the TTLs consult with subject matter experts and/or the maturity model assessment characterizes transformational global team to ensure the implementation roadmap is ade- activities according to five maturity domains (see Figure 2). quately tailored to the specific client needs. > > > F I G U R E 2 . High-level indicative transformational roadmap Indicative transformational roadmap Short- Medium Medium-to Maturity Maturity term -term long term domain level (1-2 years) (2-3 years) (4+ years) Laws and regulations “Starting”, “Developing”, Institutional framework and leadership or “ Maturing” to the Key policies and s a c c ording eline ctivitie ion tim capacities f o r m ational a implementat Trasn in and at u r it y doma Procedures, tools and m transparency Regulatory technology EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 20 Budget Considerations The cost of modernizing business licensing and inspections number or type of prioritized business sectors). The cost of depends on the starting maturity level and the size of the juris- developing institutional capacities typically requires invest- dictions; the typical range in between US$5 million and US$20 ments in the millions (e.g., over US$10 million for national- million. Experience shows, however, that while this is a mul- level initiatives) when new buildings must be equipped and timillion endeavor, return on investment is quick and signifi- specialized inspection equipment (such as mobile laborato- cantly exceeds the investment, including for initial results. Re- ries, ICT equipment, and relevant training) provided. cent examples of projects in Moldova and Jordan show direct annual savings for the private sector of approximately US$15 Digitalizing licensing and inspections require between US$1 million and US$12 million, respectively. The indirect savings, and US$2 million to implement or upgrade a shared digital such as new export sales or paid wages, go to nine digits. In licensing and inspection solution (see examples in Table 3 Moldova, recent licensing and inspections reform and support below). These costs do not include digital assessment for for MSMEs generated new export sales of US$225 million and developing the technical concept and technical requirements 2,079 new jobs. specifications for the digital solution. They also assume that prerequisite e-Government shared services are ready and can The typical costs of modernizing licensing and inspections be integrated, including digital ID and signature, cloud hosting, include costs of legal analysis and design, capacity develop- e-Payment, service bus for data sharing (GSB), and business ment, and digitalization. Legal work involves review of sec- process management (BPM). Experience from WBG opera- toral laws regulating business authorizations and inspection tions shows that one or more e-Government shared services requirements for risk-based approaches, as well as setting up may require upgrades as a prerequisite to digitalizing licens- a framework for cross-institutional collaboration and digitaliza- ing and inspections. The cost estimate of these e-Government tion. The cost of these activities ranges from several hundred platform upgrades is beyond the considerations addressed in to one million US dollars, depending on the scope (such as this maturity model. > > > TA B L E 3 . Examples of typical costs of modernizing licensing and inspections19 Jurisdiction Contract Amount Description Implementing the legal framework for licensing and inspections as well as the operational tools for the inspectorates to implement a risk-based approach. Implementing a risk-based Licensing & €3.2 Greece This cost does not include implementing the digital Inspections System million technology platform but does include the design of the technical concept and technical requirements specification. A contract with the vendor to implement a shared Integrated Inspection Management System US$1.6 Jordan inspection management digital solution for 12 for Jordanian Inspectorates (2016) million inspectorates. A contract with the vendor to implement a digital Information system for US$1 solution for business licensing. As of December Moldova Mechanism for Managing and Issuing million 2021, 78 business permits were fully digitalized, Permits of Moldova (2017) and 54% of applications were submitted online. US$1.1 A contract with the vendor for digitalization of 100 Serbia e-Permitting System for Serbia (2019) million business permits. 19. Content for this table was drawn from published World Bank Group corporate procurement contract awards and World Bank documents and reports. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 21 Appendix Maturity model assessment questionnaire The maturity model assessment is developed as an HTML interactive document. It allows TTLs and investment climate experts to answer the questionnaire, see the results of the maturity as- sessment according to five maturity domains, and generate a list of indicative transformational activities that can be considered for improvements. The assessment results and indicative trans- formational activities can be used for policy discussion with a government client to decide on the scope of business licensing and inspection modernization and to plan the transformational project. Terms of reference for the maturity assessment Objectives of the Assignment The World Bank (WB) is hiring a Short-Term Consultant to carry out the Maturity Assessment for licensing and inspections in country XX. The Consultant is expected to use the inputs provided by the WB, fill out the maturity assessment questionnaire, and suggest transformational activi- ties that can be considered based on the maturity assessment scoring. Inputs provided by the WB • The maturity assessment questionnaire • The maturity assessment roadmap • The maturity assessment user manual Tasks The Consultant is expected to perform the following tasks: 1. Review the inputs provided by the WB team. 2. Collect information and fill out the maturity assessment questionnaire by conducting desk research and by interviewing regulators, inspectors, businesses, and private sector repre- sentatives. Deliverables The Consultant is expected to deliver: • a complete maturity assessment questionnaire • a short write up on the findings (2 to 3 pages) • a table of recommended transformational activities based on the maturity assessment scoring EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 22 Required Qualifications Supervision and Timing • Advanced academic degree (masters or PhD), in public The consultant will be supervised by Task Team Leaders (XX) policy, law, economics, or a related field. Where the diagnostic focuses on a specific economic sec- Timeline: (insert dates) tor or regulatory domain, a different academic background may work as well. For example, if the diagnostic focuses Level of effort: 15 to 20 days on the environmental domain, the Consultant could have an academic background in environmental management, Confidentiality Statement environmental law, environmental science, environmental All data and information received from WB for this assignment engineering, or similar. are to be treated confidentially and are only to be used in con- • At least 5 years of experience in regulatory reforms. nection with the execution of these Terms of Reference. All • Experience in business licensing and inspection reforms. intellectual property rights arising from the execution of these • Experience in interacting with government officials and Terms of Reference are assigned to the WB. The contents of representatives from the private sector. written materials obtained and used in this assignment may • Experience in business regulation reform; particularly de- not be disclosed to any third parties without the express ad- sirable is experience in licensing and inspection reforms. vance written authorization of the WB. • Strong analytical skills; ability to translate findings into ac- tionable policy recommendations. • Ability to work under pressure, collaborate effectively on a team, and learn and assimilate new information/topics swiftly. • Strong analytical and writing skills; ability to translate find- ings into actionable policy recommendations. • Ability to work independently with minimal guidance. • Fluency in English. • Conversant with Microsoft Office Suite applications (Word, Excel, and PowerPoint). EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 23 Licensing & Inspections Maturity Assessment Questionnaire Laws and Regulations Questions & Answers Points Methodology/data source 1. Is there a regulatory delivery framework for licensing (e.g., law on licensing) and inspections (e.g., law on inspections)? a. There is no framework for regulatory implementation (law on licensing, law on inspections). 0 Interview with regulator (e.g., b. There is a legal framework for licensing and/or inspections with some level of risk management. 1 licensing agency, inspectorates) or the Ministry of Economy. c. There is a risk-based legal framework for licensing and inspections. 2 2. Is the regulatory framework on inspection measures (e.g., actions, sanctions, and fines) supportive of a preventive and risk-based approach to inspections? a. Sanctions and fines in inspections are measured as an indicator of good performance. There is a lack of preventive measures, including advice, warnings, orders to remove irregularities in certain 0 period, etc. Statistical reports on inspections. b. Sanctions and fines are routinely imposed without applying the preventive and risk-based ap- 1 proach starting first with preventive measures. Legal framework on enforcement measures and sanctions/fines. c. Sanctions and fines are imposed only when absolutely necessary to sanction an intentional infringement and to stop breaches. The regulatory framework includes a spectrum of inspections 2 measures including preventive measures, sanctions, and fines. 3. Are the institutional mandates of licensing issuing authorities and inspectorates, as well as the sectoral regulations, free of overlaps and duplication? a. Institutional mandates are broad and unclear for both licensing and inspection authorities; sectoral 0 Focus group with businesses regulations are not streamlined, and there is significant overlap and duplication. and/or business associations b. Institutional mandates are clear but sectoral regulations are not streamlined and there is some to identify if businesses receive 1 overlap and duplication multiple inspections from different inspectorates who are checking the same aspects; and c. There is a leading agency identified in the law for both licensing and inspections (e.g., a leading Interview with regulator and legal inspectorate for each regulatory domain), and sectoral regulations are streamlined so there is no 2 review to identify the institutional overlap and duplication. mandates of licensing authorities and inspectorates based on the law. 4. Is there a regulation on the organizational structure (e.g., departments, positions, reporting lines) and competency frameworks (e.g., qualification requirements, terms of reference) for regulatory officers and inspectors? a. The regulation on the organizational structure, the Terms of Reference, and reporting lines does 0 not exist. b. There is a regulation on the organizational structure, Terms of Reference, with some level of com- 1 Interview with regulator. petency framework. c. There is a regulation defining the organization, workplaces, and competency framework for regula- 2 tory officers and inspectors. 5. Are sectoral regulations on licensing and inspections streamlined and performance based? a. Sectoral regulations do not exist, or they exist but they are not well-developed, they are unclear 0 and difficult to interpret. b. Sectoral regulations exist, but they are overly prescriptive, and businesses have to comply with 1 Interview with businesses, which very detailed requirements (command and control approach). can be complemented by a desk c. Sectoral regulations are well-developed, and goal/outcome based. For example, regulations are review of selected regulations. based on requirements which are expressed using qualitative terms, stating a goal to be achieved 2 (functional requirements) and using quantitative terms the fulfillment of which can be determined by calculation, testing, or simulation (performance requirements) EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 24 Institutional Framework and Leadership Questions & Answers Points Methodology/data source 6. Is leadership for licensing and inspections focused on continuous improvements and professional independence? a. There is no institutional framework and safeguards preventing political influence to licensing and inspection activities. As a result, decisions on licensing and inspections may be influenced from 0 political decisions and priorities. Interviews with businesses, which b. There is an institutional framework and safeguards preventing political influence, however licensing can be complemented by a desk and inspection activities are routine without promoting continuous improvement, expertise and 1 review of selected regulations on professionalization. the institutional framework. c. Licensing and inspection activities are professionally independent, with strong emphasis on 2 expertise and professional development. 7. Is there a funding model that ensures cost recovery in regulatory delivery for licensing and sustainability in regulatory delivery for inspections? a. There is no sufficient funding for licensing and inspection activities, i.e., resources and inadequate to ensure sustainability of the service, and the compensation of licensing officers and inspectors is 0 inadequate and incentivizes corruption. b. There is a funding model that ensures sustainability of service delivery for licensing and Interviews with regulator inspections, including cost-recovery and adequate compensation for licensing officers and (e.g., licensing officers, the 1 inspectors; however, this funding model is not sufficient to enable developing and improving the inspectorate’s management) and service. interviews with businesses. c. There is a funding model that ensures sustainability of service delivery for licensing and inspections, including cost-recovery and adequate compensation for licensing officers and 2 inspectors. The funding model is sufficient to enable developing and improving the service. 8. Are there measures in place to enable the private sector to provide feedback on licensing services and inspections? a. There are no measures in place to enable the private sector to provide feedback to service 0 delivery. b. There are measures in place to enable the private sector to provide feedback to service delivery, Desk review of the inspectorates’ 1 however this feedback is not accounted for the performance review. reports; interviews with businesses. c. There are measures in place to enable the private sector to provide feedback to service delivery, and the feedback is accounted in reviewing the performance at various levels, from the individual 2 officer or inspector to the department or organization level. 9. Do the licensing and inspection authorities have a public relations function that promotes transparency and prevention (e.g., information campaigns, communication measures on planned and implemented reforms, statistics on KPIs)? a. Inspection authorities do not have a public relations function. 0 b. The public relations function is organized and provides information on requests and regular 1 information about licensing and inspection activities. Interview with the regulator and desk review. c. The public relations function operates on a basis of an adopted public relations strategy, using various techniques (e.g., informational campaigns) to promote risk prevention and compliance and 2 concerning achievements toward meeting the institution’s KPIs. 10. Is there a framework for coordination of inspections and information sharing? a. There is no framework for coordinating inspections between inspectorates in the same domain 0 (e.g., national and subnational levels), and there is no information sharing between inspectorates. b. There is ad hoc information sharing between inspectorates. Although there is a framework to coor- Interviews with the inspectorates 1 dinate inspections, this is not adequately implemented. and interviews with businesses. c. There is a framework for coordinating inspections between inspectorates in the same domain, and 2 there is systematic information sharing on businesses and the inspectorates’ operations. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 25 Key Policies and Capacities Questions & Answers Points Methodology/data source 11. Is there an adopted strategy and action plan for the transformation of regulatory delivery for licensing and inspections across all key dimen- sions (i.e., legal, institutional, administrative, and digital technology)? a. No strategy defines a new preventive and risk-based approach, nor is there an action plan for its 0 implementation. Interviews with regulator (e.g., licensing officers, the b. There is a strategy that defines mission and vision and a high-level roadmap for its 1 inspectorate’s management) and implementation. desk research if the strategy and c. There is a strategy, high-level roadmap, annual action plans, and established process of action plan are publicly available. 2 continuous revisions. 12. Are there performance indicators that are defined and monitored for regulatory delivery in licensing and inspections? a. There are no KPIs to measure performance on licensing and inspections. 0 Interviews with regulator b. KPIs are defined, but they are not well developed, or they are defined and well developed but they (e.g., licensing officers, the 1 are not fully implemented. inspectorate’s management) and desk research to find examples of c. KPIs are defined, well developed, and adequately implemented. Reports submitted to political 2 statistical reports. leadership must include reference to performance-based KPIs. 13. Do the inspectorates have a defined training curriculum and continuous professional development for inspectors? a. No, inspectorates do not have a defined training curriculum and continuous professional 0 development for inspectors. Inspectorates have training b. Trainings are organized to onboard new staff, and on an ad hoc basis depending on available curriculums for onboarding 1 funding. and continuous professional development for inspectors. c. Inspectorates have training curriculums for onboarding and continuous professional development 2 for inspectors. 14. Do the inspectorates have the equipment necessary to carry out their supervision mandate (e.g., equipment for field work, laboratory equipment, surveillance equipment, etc.)? a. The availability of equipment is limited, and the capacity is at different levels for various Interview with regulator (e.g., 0 inspectorates. licensing agency, inspectorates) and review of planning b. Some equipment is made available, but it is not systematically used. 1 procedures on risk management c. Necessary equipment is available, and it is systematically used (such as the use of a mobile and planning for the use of 2 laboratory for fast indications when deciding on official laboratory analysis). equipment. 15. Do the inspectorates have in place incentives for inspectors (e.g., salary increases, promotions, inspector training roles)? a. No, the inspectorates do not have incentives for inspectors, or incentives exist but they are designed to promote enforcement instead of prevention (e.g., by rewarding the number and/or the 0 monetary value of fines issued). Interviews with inspectors and b. Inspector’s positions are recognized as specific in the public administration system and have desk review of laws, regulations, 1 higher salaries compared to other public officials. and procedures. c. Incentives are provided to inspectors on an individual level based on performance evaluations, 2 promoting a preventive and advisory role, and results. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 26 Procedures, Tools, and Transparency Questions & Answers Points Methodology/data source 16. Is there an inventory of sectoral regulations and administrative procedures (business permits, licenses, and inspection-related requirements) that is kept up-to-date and is publicly available? a. There is no inventory of sectoral regulations for business authorizations and inspection-related 0 requirements. b. The inventory is developed to map the business authorizations and inspection-related requirements according to business sectors (e.g., ISIC4, NACE). It may be publicly available, but it 1 Desk review and online research. is not accurate and up-to-date. c. The inventory is developed with implemented mechanisms to keep the data updated; it’s publicly 2 available and includes inspection checklists representing inspection-related requirements. 17. Is a risk-based approach applied in licensing and inspections? a. Licensing requirements have not been designed and implemented according to a risk-based 0 approach. b. Licensing requirements are designed and implemented according to a risk-based approach. Inspection planning and inspection-related regulatory requirements (e.g., technical regulations) are 1 Interviews with regulators and not risk-based. inspectors, and desk review of laws and operating procedures. c. Licensing requirements are designed and implemented according to a risk-based approach. Inspectorates plan inspections based on risk assessments. Inspection planning and inspection- 2 related regulatory requirements (e.g., technical regulations) are risk-based. Complaints are used as inputs into risk assessments. 18. Do the inspectorates use any form of checklists in their operations? a. No, the inspectorates do not use any checklists in their operations. 0 Interviews with inspectors and b. Yes, the inspectorates use checklists; however, these are regulation based. 1 businesses and desk review of checklists. c. Yes, the inspectorates use checklists, and these are risk based. 2 19. Do the inspectorates have a framework to manage and deploy inspection equipment (e.g., mobile sampling equipment)? a. The inspectorates do not have a framework that governs deployment of inspection equipment and 0 maintenance/sustainability. b. The inspectorates do have a framework that governs deployment of inspection equipment and maintenance/sustainability; however, it does not follow a risk-based approach (such as the use of 1 Interviews with inspectors and mobile laboratories for fast indications to decide on the need for official laboratory analysis). desk review of the procedures. c. The equipment is provided to the inspectorates, along with the procedures for using it to support the risk-based approach and sustainability plan to ensure adequate maintenance (i.e., budget 2 resources are sufficient to ensure sustainability in using the special inspection equipment). 20. Do the inspectorates have a framework for enforcement management? a. No, the inspectorates do not have a well-developed framework for enforcement management. Inspectors are not equipped with decision-making tools to ensure consistency, transparency, and 0 proportionality in enforcement decisions. b. There is an enforcement management framework; however, this is not well developed. The decision-making tools may not distinguish between risk-related and non-risk-related infringements. Inspectors and interviews with 1 Moreover, inspectors do not have to consider factors outside of the type of infringement (i.e., businesses. contextual factors). Desk review of procedures, c. There is a well-developed enforcement management framework that is supported by decision- guidelines, and tools. making tools (e.g., guidelines, knowledge base in e-Inspections, flowcharts). The decision-making tools distinguish between risk-related and non-risk-related infringements. Moreover, decision-mak- 2 ing tools include contextual factors that inspectors must take into account when making enforce- ment decisions such as the history of compliance, whether the business is gaining an economic advantage by its lack of compliance, and whether the business is willing to comply, among others. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 27 Regulatory Technology Questions & Answers Points Methodology/data source 21. Is there a registry of licenses, a registry of establishments, and a registry of legal entities with initial risk categorization? a. There is no registry, or there are some fragmented databases used by different inspectorates on 0 businesses; however, they’re not systematically updated, and there is no risk classification. b. An initial database of businesses subject to inspection is developed mainly based on business or taxpayers registry data. It may include an initial risk classification by applying intrinsic risks (such 1 Regulators, and desk review of as those based on business activities and firm size). relevant online portals. c. A comprehensive database of businesses subject to inspection and facilities/objects of inspection is developed, with established data exchange between the relevant registries (businesses, 2 licenses) and risk categorization. 22. Is there an information portal with comprehensive information on administrative procedures, sectoral regulations, and guidance for businesses (e.g., on licensing requirements, inspection procedures, and technical regulations)? a. There is no online informational portal that publishes information on regulations, business 0 authorizations and inspection-related requirements b. There is an online information portal that publishes business authorizations and inspection-related 1 requirements according to regulatory domains/areas. This portal is regularly updated. Desk review of online portals. c. There is an e-Business portal (typically under the e-Government portal) for businesses to receive information on business authorizations and inspection-related requirements. This portal 2 includes inspection checklists and guidance to businesses and enables application of advanced mechanisms for regulatory risk management and compliance (such as self-assessments). 23. Are the e-Government prerequisites in place to enable the digitalization of business licensing and inspections? a. e-Government prerequisites for digitalization of licensing and inspection processes and services are either not in place or are at early stages of development (e.g., digital ID and signature, cloud 0 hosting, e-Government portal, e-Payment, interoperability system). b. Basic e-Government prerequisites are in place, including at least the digital ID cloud hosting, while other functionalities to automate inspection and licensing processes would have to be included in 1 the scope of the relevant licensing and inspections digital platform. Interview with ICT staff. c. e-Government shared services are at an advanced level of maturity and allow the licensing and inspection processes to leverage these shared services instead of developing custom functionalities (such as data exchange using the e-Government interoperability platform instead of 2 point-to-point data exchange interfaces). Still, certain modules/functionalities have to be developed specifically to licensing and inspection processes (such as modules for risk assessment, planning of inspections, and management of inspection checklists). 24. What is the level of digitalization of business licensing and inspection procedures? a. A digital platform for licensing and inspection management does not exist. There may be an initial informational portal and possibility to submit online applications for business licensing (e.g., these 0 initial developments typically support operation of physical one-stop shops for licensing, while still requesting mandatory in-person visits to finalize the business licensing procedure). b. The digital platform for licensing and inspection is in place. Some licensing procedures are digitalized, both in terms of online applications, online information for applicants, and back-end processing. Still, some developments are required in terms of data and registries to digitalize other relevant permits for Interview with ICT staff and 1 businesses. Digitalization of inspections is at a more initial level of development (i.e., without automat- officials, including inspectors. ing risk-based planning) OR digitalization of inspections is implemented for some (2-3) inspectorates. In both cases, there is no integration between digital processing of licensing and inspections. Interview with businesses. c. Most licensing procedures are digitalized in terms of online applications, online information for ap- plicants, and back-end processing. There is a significant level of interoperability of registries and data- bases, relevant for licensing and inspection processes. The digitalization of inspections is implemented 2 and used by most inspectorates and is integrated with licensing (i.e., processing of licenses generates data for risk-based inspection planning). The digital licensing and inspections utilize data to a significant extent, including data from the private sector to improve overall efficiency in risk assessments. 25. Are the capacities in place to ensure sustainability in the development and maintenance of digital technology solutions? a. A business continuity plan does not exist, and no budget has been allocated to support mainte- 0 nance and improvement of digital technology solutions. Interview with ICT staff in the b. A business continuity plan is in place; however, the institutional capacities and budget do not allow 1 licensing issuing authority and/or for adequate implementation. inspectorate. c. A business continuity plan is in place. There are adequate institutional capacities and budget to 2 enable for its full implementation. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 28 Indicative transformational roadmap Maturity # Domain Transformational activity Timeline level 1 Laws and regulations a. Develop or amend the framework law(s) on licensing and inspections. Short term: 1–2 years Starting 2 Laws and regulations b. Develop a regulation on organization and workplaces. Short term: 1–2 years Starting 3 Laws and regulations c. Amend the sectoral regulations to clarify institutional mandates. Medium term: 2–3 years Developing 4 Laws and regulations d. Amend the legal framework on enforcement measures and penalties. Short term: 1–2 years Developing 5 Laws and regulations e. Introduce outcome-based sectoral regulations. Medium-to-long term: 4+ years Maturing 6 Laws and regulations f. Make the legal framework digital-ready, to enable licensing and inspections to achieve full potential from the data available and digital Short term: 1–2 years technologies. Maturing 7 Institutional framework a. Introduce a coordinating body for licensing and inspection activities. and leadership Short term: 1–2 years Starting 8 Institutional framework b. Introduce measures to ensure inspections are politically independent. and leadership Short term: 1–2 years Starting 9 Institutional framework c. Develop a funding model (financial plan) that ensures sustainability for and leadership licensing and inspections service delivery. Short term: 1–2 years Starting 10 Institutional framework d. Improve transparency by building a public relations function for the and leadership coordinating body. Short term: 1–2 years Starting 11 Institutional framework e. Introduce channels for submitting and managing complaints. and leadership Short term: 1–2 years Starting 12 Institutional framework f. Develop and implement a framework to coordinate inspections and and leadership ensure information sharing between relevant the inspectorates. Medium term: 2–3 years Developing 13 Institutional framework g. Develop strong emphasis on leadership in areas of expertise and and leadership continuous professional development. Medium term: 2–3 years Maturing 14 Institutional framework h. Implement private sector feedback to inform performance management. and leadership Medium-to-long term: 4+ years Maturing 15 Key policies and a. Develop a strategy that defines the mission/vision using a risk-based capacities preventive licensing and inspection system and a high-level roadmap Short term: 1–2 years for the implementation. Starting 16 Key policies and b. Develop trainings to build the capacity of staff who work on licensing capacities and/or inspection procedures to shift to a risk-based approach. Short term: 1–2 years Starting 17 Key policies and c. Define and implement KPIs for licensing activities. capacities Medium term: 2–3 years Developing 18 Key policies and d. Develop trainings to onboard new inspectors. capacities Medium term: 2–3 years Developing 19 Key policies and e. Promote participation in international initiatives and partnerships. capacities Short term: 1–2 years Developing 20 Key policies and f. Invest in equipment for the inspectorates and develop procedural capacities guidelines to deploy the equipment. Medium term: 2–3 years Developing 21 Key policies and g. Define and implement KPIs for inspection activities. capacities Medium-to-long term: 4+ years Maturing 22 Key policies and h. Design incentives to evaluate staff performance and promote a capacities preventive and advisory role and results. Medium term: 2–3 years Maturing 23 Key policies and i. Develop continuous professional development curricula. capacities Medium term: 2–3 years Maturing EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 29 Maturity # Domain Transformational activity Timeline level 24 Procedures, tools, and a. Develop an inventory of business authorizations and inspection-related transparency requirements according to business sectors (e.g., ISIC4, NACE). Short term: 1–2 years Starting 25 Procedures, tools, and b. Develop priority procedures to implement the new licensing and/or transparency inspection role (such as on safe disposal of confiscated goods, marking Short term: 1–2 years bans, identification of inspectors, etc.). Starting 26 Procedures, tools, and c. Develop inspection checklists. transparency Short term: 1–2 years Starting 27 Procedures, tools, and d. Develop risk-based tools such as risk assessments, risk-based transparency planning methodology, complaints management system, and risk-based Medium term: 2–3 years inspection checklists. Developing 28 Procedures, tools, and e. Develop an enforcement management model with a spectrum of transparency measures. Short term: 1–2 years Developing 29 Procedures, tools, and f. Develop to the framework to manage and deploy inspection equipment. transparency Short term: 1–2 years Developing 30 Procedures, tools, and g. Develop a mature enforcement management model supported by transparency decision-making tools. Short term: 1–2 years Maturing 31 Procedures, tools, and h. h. Develop advanced approaches to risk-based tools by leveraging data transparency and Artificial Intelligence. Medium term: 2–3 years Maturing 32 Regulatory technology a. Design an online information portal that publishes information on regulations, business authorizations, and inspection-related Short term: 1–2 years requirements. Starting 33 Regulatory technology b. Design basic software to initiate collecting relevant data for inspections (e.g., database of businesses and objects, inspection outputs, statistical Short term: 1–2 years reporting, etc.). Starting 34 Regulatory technology c. Develop digital tools for mapping inspection procedures, developing checklists, and managing complaints. Short term: 1–2 years Starting 35 Regulatory technology d. Organize training for officials and inspectors to apply digital tools. Short term: 1–2 years Starting 36 Regulatory technology e. Develop technical requirements for a licensing and inspection management digital platform, including the interoperability of relevant Short term: 1–2 years registries and databases. Developing 37 Regulatory technology f. Implement a licensing and inspection digital platform, including an online transactional portal for businesses and modules and Medium term: 2–3 years functionalities for risk management and processing of licenses and Developing inspections. 38 Regulatory technology g. Develop capacities for implementing and maintaining the licensing and inspection digital platform. Medium term: 2–3 years Developing 39 Regulatory technology h. Implement emerging technologies for risk management by leveraging the increased data availability (e.g., AI for risk-based inspection Medium term: 2–3 years planning, dynamic checklists, business intelligence reporting) Maturing 40 Regulatory technology i. Design sectoral regulations and licensing and inspection requirements by leveraging emerging technologies and increased data availability. Medium-to-long term: 4+ years Maturing EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 30 References Blanc, F. 2018. 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