USAID Business Enabling Project

USAID-SEIO Consultative Monitoring under

USAID Assistance Agreement: 169-AA-10-EG/001

Susan Kutor, USAID/Serbia Economic Growth Office Director

February 28, 2012

USAID Business Enabling ProjectSEIO Aid coordination sector: Private Sector Development; Public Administration

Budget and Duration

Total Life of Project funding: $16.7 millionJanuary 2011 – December 2015

Implementing Partner

Cardno Emerging Markets Chief of Party Joe Lowther

Objective A More Competitive Market Economy

Agreement 169-AA-10-EG/001

Components Business Regulation and Economic GovernanceMacroeconomic Policy and Public Financial ManagementFinancial Market Development

USAID Business Enabling Project 2

CONSULATIVE PROCESS TO DATE

• Spring 2011 - Consultations with GoS counterparts helped to develop and reach agreement on Year One work plan priorities

• February 2012 –BEP held two-day retreat with GoS counterparts to discuss Year Two work plan in depth

• Date of USAID-GoS work plan reviews:Last review: May 2011

Next review: February 2012

USAID Business Enabling Project 3

STATE OF IMPLEMENTATION

• Inspections Reform – A series of roundtables and outreach led to the establishment of a GoS inter-ministerial Inspections Reform Coordination Body, and development of an inspections reform strategy is underway.

• Access to Finance – A series of roundtables and outreach has been completed; compilation into detailed issues paper and recommendations for reforms to be completed in Spring 2012

• Quasi-fiscal Charges – USAID is conducting a study of quasi-fiscal charges that will quantify the quasi fiscal charges imposed on business, and will provide recommendations and guidelines for reform.

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STATE OF IMPLEMENTATION (continued)

• Construction Permits – A study and stakeholders dialogue on the main constraints is ongoing, with the study to be completed in March 2012. This study will provide guidelines and an action plan for reform.

• Enforcement of Judgments – Out of 19 bylaws need to implement new law, 4 were developed and adopted; 7 were developed and are ready to be adopted; 8 need to be developed.

• Data Gathering: A representative Business Survey of 1000 Serbian-owned businesses identified issues, established baseline and dialogue.

• A Standard Cost Model quantified the cost of inefficient administrative procedures, helping to establish reform priorities

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KEY CONTRIBUTIONS FROM GOS PARTNERS FOR YEAR ONE

• The GoS Coordination Body for Inspections Reform was formed.

• 11 Bylaws for the new Law on Enforcement were developed; 4 adopted.

• A GoS Decree on conversion of usage rights to ownership rights was enacted, positively affecting the construction business.

• All of the bylaws for the Capital Markets Law were adopted.• The Fiscal Council was established and operating in

accordance with the law; has informed budget decisions.

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INDICATORS – BUSINESS ENABLING ENVIRONMENT IMPROVED

• Decrease in the “Burden of Government Regulations” – World Economic Forum - May

Number of Commerce Laws and Regulations Simplified and Implemented in Accordance with International Standards -

- 24 bylaws/amendments adopted in Year One

Decrease in costs for businesses to comply with the regulatory framework – baseline established through Standard Cost Model

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INDICATORS –MACROECONOMIC ENVIRONMENT IMPROVED

Increase in Foreign Direct Investment Improvements in the Open Budget Index (“OBI”) Score as

reported by the International Budget Partnership – Every 3 years - 2013

Improved score in WEF GCI Financial Market Development indicator – September

Improved Government Budget Balance as percentage of GDP – April

Increased credit to private sector as a percentage of GDP – end of project

USAID Business Enabling Project 8

OBSTACLES AND PROPOSED SOLUTIONS

• Issue 1: The Ministry of Justice is insufficiently focused on proper implementation of the Law on Enforcement of Judgments. Bylaws and system still not in place.

• Risk: The Ministry is not ready for implementation of the law by May 2012, particularly fielding and supervising the new Professional Enforcement Officers, and the law is not successfully implemented.

• Solution: Ministry of Justice needs to appoints a project leader with the authority and time to manage implementation. USAID will transition work on enforcement of judgments to the upcoming GIZ project.

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OBSTACLES AND PROPOSED SOLUTIONS

• Issue 2: USAID has not been able to provide critical assistance in performance-based budgeting as envisioned due to lack of receptivity on the part of the Budget Department of the Ministry of Finance.

• Risk: The lack of performance-based budgeting perpetuates the current practice of basing the budget on short-term considerations and political expediencies.

• Solution: The GoS provides direction to the Budget Department of the Ministry of Finance to implement performance-based budgeting.

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Discussion

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