BUSINESS LICENSING REFORMS INSIGHTS FROM SELECTED COUNTRY EXPERIENCES AUTHOR Aris Molfetas (amolfetas@worldbank.org) is a Private Sector Specialist in the World Bank Group’s Global Business Regulation Unit. He advises governments in a range of areas relevant to business regulation. ACKNOWLEDGMENTS The author appreciates the input, feedback, and advice received from Wafa Aranki (Senior Private Sector Specialist) throughout this work, the insights and input provided by Ursula Blotte (Operations Officer) and Emilia Abusada (Consultant) on the Peru case study, the feedback and comments of Peter Kusek (Senior Private Sector Specialist) and Lars Grava (Senior Private Sector Specialist) and the general guidance of Catherine Masinde (Practice Manager). DISCLAIMER This note is published by the Global Business Regulation Unit of the World Bank Group. It discusses practical considerations and approaches for implementing reforms that aim to improve the business environment. The findings, interpretations, and conclusions in this note are those of the authors and do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. ABOUT THE GLOBAL BUSINESS REGULATION UNIT The Global Business Regulation Unit of the World Bank Group supports client governments through analytics, advice, and lending operations to implement reforms designed to promote an efficient, transparent, and predictable business JUNE 2019 environment for growth. EXECUTIVE SUMMARY Business licensing is a key component of any country’s business environ- ment because government licenses are often required to set up business activities and conduct operations. Licenses and other forms of ex-ante approvals typically impose on businesses a range of conditions and obligations while providing certain rights. If appropriately implemented, licenses can help regulators address market failures, monitor businesses that may pose risks to public goods, restrict entry to businesses failing to meet minimum regulatory standards, and allow the controlled use of valuable and scarce community resources. At the same time, business licensing is often in five jurisdictions. These case studies comple- cited by the private sector—across regions and ment previous publications of the World Bank income levels—as an obstacle to doing busi- Group in the areas of business registration, licens- ness. Entrepreneurs are sometimes constrained ing, and inspections, such as the 2006 publica- by convoluted procedures, onerous compliance tion “Business Licensing Reform: A Toolkit for standards, unaffordable fees, overlapping or Development Practitioners” and the 2009 pub- sometimes duplicating approval processes, and lication “Licensing Case Studies for the Tourism fragmented governance systems, among other Sector.” The 2006 publication provided both an shortcomings. In some cases, business licensing overview of the phases and approaches as well as may be captured by vested interests and deployed specific examples of licensing reform. This collec- as a barrier to new entrants, thus protecting tion of case studies discusses additional examples incumbents from competition. In response, of such reforms by exploring policies, institutions, some jurisdictions have reformed their regulatory and procedures as well as innovative approaches frameworks to lower compliance costs for busi- to licensing reform to inform development prac- nesses, increase compliance levels, and ultimately titioners and governments on practices and solu- improve regulatory outcomes, such as protection tions in this critical regulatory area. of public health, safety, and the environment. The reforms featured in the case studies do not This publication provides a collection of case necessarily represent the most recent or inter- studies documenting successful licensing reforms national best practices. Instead, they have been 1 selected based on the availability of resources licensing. Although Singapore has now migrated and the different angles taken by each reform to an even more comprehensive portal, known as highlighted. LicenseOne, the case study illuminates the impor- tance of having an appropriate institutional setup Canada’s BizPaL illustrates a publicly available multi- for reform when attempting to deliver integrated, jurisdictional database of licenses regulating business cross-agency, government-to-business services. The activity. BizPaL clarified a formerly complicated author relied primarily on the work of Thompson and opaque licensing system, rendering it trans- S.H. Teo, Tat Koon Koh, Pelly Periasamy and parent and client-centric and creating cost savings Siew-Kein Sia for information on the OBLS reform. for business. It started small, with only a few pilot municipalities, but grew organically over the years Malaysia, a middle-income country, successfully into a comprehensive, publicly available database implemented the guillotine approach at the federal of information on business licenses for both local and state level in initiating its Modernizing Busi- and federal governments. ness Licensing program. Similar to the case study on Singapore, Malaysia’s case study highlights the Chicago’s overhaul of the city’s regulatory com- importance of an adequate institutional setup in pliance regime exemplifies the different tools and implementing reforms across ministries and in approaches that can be employed to modernize out- digitalizing procedures. dated regulatory compliance systems, including the use of data analytics. Moreover, the reform’s success Peru’s simplification project for tourism licensing highlights the importance of benefiting from the demonstrates sector-specific regulatory simpli- private sector’s extensive engagement throughout fication at the subnational level. The case study the reform process, during both the diagnostic and underscores how improvements in government-to- the implementation phases. Lastly, this case study business service delivery through decentralization discusses interesting approaches employed to accom- and streamlining help improve both the investors’ modate new business types and promote innovation. journey and authorities’ regulatory oversight. The latter was crucial given the importance of pre- Singapore’s Online Business Licensing Service serving the cultural heritage sites of Peru’s Cusco (OBLS) was one of the first transactional portals for region. 2 BUSINESS LICENSING REFORMS CANADA LEVERAGING TECHNOLOGY SOLUTIONS TO CREATE AN INTERGOVERNMENTAL ONE-STOP SHOP FOR LICENSING Canada’s BizPaL illustrates a publicly available multijurisdictional database of licenses regulating business activity. BizPaL clarified a formerly complicated and opaque licensing system, rendering it transparent and client-centric and creating cost savings for businesses. It started small, with only a few pilot municipalities, but it grew organically over the years into a comprehensive, publicly available database of information on business licenses for both local and federal governments. The author relied primarily on resources from the Canadian government and the Canadian Federation of Independent Business for information on the BizPaL reform. THE CHALLENGE highlighted by entrepreneurs were the lack of clearly communicated regulations and poor cus- In the early 2000s, entrepreneurs in Canada tomer service.3 A growing consensus among Government reported that the regulatory burden posed a the business community and independent think significant challenge to their operations and tanks4 at the time pressured local and federal authorizations were indicated that excessive regulations discouraged authorities to find ways to improve the businesses’ experience dealing with multiple governments. fragmented across business growth. The Canadian Federation of Independent Business (CFIB) estimated that the three government levels: total cost of the regulatory burden amounted to In response to these findings, the Canadian author- US$32.9 billion in 2005.1 Additionally, small ities focused on select areas of the business envi- entrepreneurs often business owners reported that regulations were ronment to improve service delivery to the private had to visit federal, detrimental beyond their direct financial costs. sector. Obtaining authorizations such as licenses For example, a CFIB survey in 20052 found that and permits was one of the areas entrepreneurs had provincial/territorial, and 73 percent of business owners thought that exces- significant struggles with, spending several hours sive regulations added significant stress to their navigating the convoluted regulatory environment. local government offices lives, and 51 percent reported spending time Government authorizations were fragmented and websites to find dealing with compliance issues outside regular across three government levels: entrepreneurs often business hours. Some of the specific challenges had to visit federal, provincial/territorial, and local necessary information. 3 FIGURE 1: THE COMPLIANCE COST FOR CANADIAN FIRMS IS BEING REDUCED AS A RESULT OF PROGRAMS TO CUT RED TAPE, BUT IT REMAINED HIGH WHEN COMPARED TO U.S. FIRMS AND AFFECTED THE SME SECTOR DISPROPORTIONATELY. Total cost of regulation to Canadian Annual regulation cost per employee, by size of firm (in 2012 dollars, Canada businesses—2005, 2008 and 2012 and the U.S.) (in billion 2012 dollars) $5,942 $32.9 $32.4 $30.9 Canada U.S. $4,084 $3,133 $2,620 $2,315 $1,841 $1,713 $1,456 $1,146 $1,278 2005 2008 2012 Note: The Canadian dollar and the U.S. dollar were Fewer than 5 5–19 20–49 50–99 100 or more assumed to be at parity. Number of Employees Source: Canadian Federation of Independent Business, “Canada’s Red Tape Report—With U.S. Comparisons,” January 2013. government offices and websites to find necessary ing with regulations at the three government levels. information. Since the various government depart- BizPaL was the product of a partnership led by the ments were siloed, entrepreneurs frequently received federal department Industry Canada under a shared fragmented or even conflicting advice. A move away governance and costing model with collaborative from an agency-focused approach and toward a more decision making among the governments partici- integrated, client-centric approach was necessary to pating in the platform. address these constraints. BizPaL was conceived The platform launched a pilot phase in December 2005 with a small number of Canada’s leading juris- as a client oriented, dictions, but it has since expanded to include over THE REFORM 700 jurisdictions. For BizPaL to work effectively, it self-service, web-based required seven federal departments, all provinces tool that would Creating a seamless environment for businesses is a and territories, and all municipalities across Canada challenging task for every government; it can be even to agree on a common way of doing business.6 The provide entrepreneurs a more daunting when the reform involves several gov- opportunity for such an interjurisdictional partner- ernments, each at a different administrative level in ship emerged in the early 2000s when a mandate transparent environment a federal system. Its multilevel governance structure to help small- and medium-sized firms and to inte- and save them was a core challenge faced by the Canadian authori- grate government services online coincided with a ties in their efforts to shape government-to-business 2004 federal budget calling for a reduced regulatory significant time and services in the era of digital governance. In response, burden for small businesses. At the time, the com- they forged multijurisdictional partnerships among pliance cost for Canadian businesses was estimated cost in complying with federal, territorial, provincial, and local governments. at over Can$32 billion or around 1.7 percent of regulations at the three Canada’s gross domestic product (GDP).7 Given One of the most successful examples of Canada’s that in small firms it is predominantly the business government levels. digital governance endeavor is BizPaL,5 an innova- owner who deals with regulatory issues, the com- tive online service that provides users with up-to- pliance burden was estimated to be comparatively date information on licenses, permits, and other higher for the SME sector.8 authorization requirements to start and operate a business in Canada. BizPaL was conceived as a cli- Managing the project’s multijurisdictional nature ent oriented, self-service, web-based tool that would required forging horizontal and vertical partner- provide entrepreneurs a transparent environment ships across jurisdictional boundaries.9 To that and save them significant time and cost in comply- end, a governance model was established with 4 BUSINESS LICENSING REFORMS FIGURE 2: FOLLOWING A SUCCESSFUL PILOT IN FEW SELECT PROVINCES, BIZPAL GREW EXPONENTIALLY, BOTH HORIZONTALLY BETWEEN LOCAL GOVERNMENTS AND VERTICALLY AMONG THE LOCAL, PROVINCIAL/TERRITORIAL, AND FEDERAL GOVERNMENT AUTHORITIES Federal Minisries and Municipalites Number of Partners in BizPaL Provinces 800 40 700 35 600 30 500 25 400 20 300 15 200 10 100 5 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Year Municipal Federal Provincial Source: Mike Davis, Partner at Davis Pier. clear partnership roles and responsibilities (see Fig- for maintaining the system. Based on this arrange- ure 3). Participating provincial/territorial partners ment, each jurisdiction was also responsible for signed an Intergovernmental Letter of Agreement adding and maintaining its regulatory information (ILA), agreeing to participate in the project with a in BizPaL accurately. consensus-based approach and spirit. The ILA stip- ulated a cost-sharing model based on population Accordingly, Industry Canada led the BizPaL criteria and was intended to provide a framework initiative and was responsible for managing the FIGURE 3: PARTNERSHIP ROLES AND RESPONSIBILITIES FOR THE BIZPAL PROJECT Federal Provincial/ (Industry Canada) Territorial Local Government Managing the National BizPaL Office Enlisting and supporting local Responsible for maintaining the (center of expertise), including governments accuracy of permits and licences in partnership support, hosting, the database Providing funding to support central maintenance, and innovation operations Enlisting provinces and territories Managing Provincial/Territorial Promoting the service locally permits and licences in the database Managing the federal permits and Providing project management, licences in the database training, and quality assurance Participating on committees and Providing strategic guidance for working groups where feasible Acceleration and expansion of BizPaL partnership Source: “Evaluation of Innovation, Science, and Economic Development Canada’s BizPaL Service,” November 2015. INSIGHTS FROM SELECTED COUNTRY EXPERIENCES 5 The National BizPaL centralized governance structure. At the same time, Following the platform’s implementation, all regional and local governments retained author- levels of government and all channels directed Office in charge of ity over their participation, including their own clients to the BizPaL service. Through the online day-to-day platform information and the presentation of their respec- service, entrepreneurs were able to easily identify tive websites. Industry Canada introduced the all the necessary ex-ante approvals, such as the operations reported that National BizPaL Office (NBO), a project team licenses and permits required by each level of gov- tasked with managing BizPaL’s day-to-day opera- ernment, as well as information on how to obtain the BizPaL database had tions, ranging from content management to liaison them. The platform is thus more than an aggre- grown to include more and harmonization activities. As the project gator of authorization requirements for multiple expanded, the NBO assumed a secretariat func- jurisdictions. It provides customized online infor- than 13,000 licenses mation by prompting end users to respond to a tion to support the partnerships, oversee the tech- in 2014 and that the nology infrastructure, and provide links to all question-and-answer wizard and enter details spe- other federal departments and agencies.10 cific to their businesses, such as the firm’s location, platform served more business type, and planned activities. Based on the The BizPaL initiative was developed by Industry user’s responses, BizPaL automatically generates a than 10,000 businesses Canada over a two-year period starting in 2004, list of all required authorizations from all levels of on a quarterly basis. under the umbrella of the multiyear “Govern- government, including information on the cost and ment Online” initiative. Initially, Industry Canada frequency of renewal, the issuing authority’s con- received Can$336,000 to develop a proof of con- tact information, the application forms, and links cept for a licensing service in collaboration with to government websites on which users can find three municipalities across the three levels of gov- more information on the regulatory requirements. ernment and private technology partners. Follow- Even though the platform does not currently12 offer a transactional feature, in some cases users can ing the pilot’s successful launch in 2005, Industry apply for their licenses online, provided that the Canada received additional funding to accelerate government website in the respective jurisdiction BizPaL’s expansion nationwide. As implementa- offers this service. tion moved from the pilot phase into a full-fledged program, a more sustainable governance structure The National BizPaL Office in charge of day- was necessary. A Steering Committee consisting of to-day platform operations reported that the representatives from all participating governments BizPaL database had grown to include more than and federal agencies was introduced as BizPaL’s 13,000 licenses in 2014 and that the platform decision-making body.11 Additionally, a Project served more than 10,000 businesses on a quar- Manager’s Committee was established to work with terly basis. The NBO is currently exploring ways The project aimed the NBO and support the Steering Committee’s to further improve the service and make it even to provide a reliable decision making with informed input and recom- more client-centric by offering industry specific mendations for delivering the BizPaL initiative. bundles that aggregate information beyond licens- information portal, not ing. At the time of this writing, these functional- to overhaul Canada’s The project aimed to provide a reliable informa- ities are offered by some jurisdictions in Canada. tion portal, not to overhaul Canada’s entire licens- For example, Nova Scotia has developed bundles entire licensing regime. ing regime. The reform process, therefore, did not for restaurants, small shops, and accommodation involve a comprehensive policy review and overhaul businesses.13 These are comprehensive business The reform process, of compliance requirements or undertake stream- planning tools that aggregate regulatory informa- therefore, did not involve lining of existing procedures or rationalizing docu- tion for specific business activities (see Figure 5). mentation. Instead, efforts focused on performing The bundles provide entrepreneurs with a bird’s eye a comprehensive policy in-depth business process mapping to create an view of the relevant compliance activities, detailed review and overhaul of inventory and capture each license, permit, and guidelines for each activity, the steps required to be other ex-ante authorization. Additionally, the project taken and the order in which they must be com- compliance requirements intended to chart every step that entrepreneurs were pleted. These allow end-users to complete several or undertake streamlining required to go through to apply for and obtain needed steps online, including registering their businesses, approvals. As a result, local government experts had reserving a name, applying for all relevant business of existing procedures to account for all business types, sizes, and activities. licenses and building permits, scheduling inspec- or rationalizing The platform also required updates and maintenance tions, receiving information about compliance to ensure that it reflected new industries that devel- (e.g., tax or occupational safety), and even explor- documentation. oped and any changes in regulations. ing funding opportunities.14 6 BUSINESS LICENSING REFORMS FIGURE 4: THE BIZPAL APPLICATION GENERATES A CUSTOMIZED LIST OF LICENSES AND PERMITS REQUIRED BY THE THREE LEVELS OF GOVERNMENT: FEDERAL, TERRITORIAL/PROVINCIAL, AND MUNICIPAL Source: BizPaL online platform, available at http://www.bizpal.ca/en/. INSIGHTS FROM SELECTED COUNTRY EXPERIENCES 7 FIGURE 5: THE PROVINCE OF NOVA SCOTIA’S INDUSTRY-SPECIFIC BUNDLE Source: Nova Scotia’s online service; available at https://accesstobusiness.snsmr.gov.ns.ca/a2b_web/portal/industryBundle.jsf. 8 BUSINESS LICENSING REFORMS BOX 1: THE MOBILE BUSINESS LICENSE: ANOTHER LEVEL IN BUSINESS LICENSING SIMPLIFICATION A few years after BizPaL launched, Canada introduced an additional regulatory reform: the Mobile Business License (MBL).a The MBL is another example of a licensing reform across jurisdictional boundaries, in this case at the municipal and provincial levels.b Before this reform, businesses operating across different municipalities or provinces were required to obtain the respective licenses and permits of each jurisdiction. This was particularly burden- The MBL effectively some for mobile contractors such as catering businesses or freelancers, which had to obtain multiple nonresident permits. The MBL effectively eliminated the requirement to issue eliminated the a separate license in each municipality in which a business operated. The MBL allowed requirement to issue a entrepreneurs to obtain from their local government one license—in addition to their basic Business License—that allowed them to do business in any municipality in the province. The separate license in each governments remained responsible for enforcement within their jurisdiction and retained all municipality in which a revenue generated through the MBL. Businesses remained responsible for complying with the bylaws of each local government in which they operated. business operated. After a pilot launched in 2008, businesses in British Columbia that were surveyed reported that the MBL was cost effective. Businesses reported compliance cost savings from purchasing only one rather than multiple permits and that the MBL allowed them to offer their services where needed more efficiently. More importantly, by reducing the administrative burdens and allowing businesses to operate where their services were in demand, consumers had more services to choose from. At the same time, the MBL was beneficial for the local authorities as well. According to the 2008 study, the MBL led to significant revenue gains of over 55 percent in one year as every participating municipality saw a revenue increase and issued more licenses. Additionally, the number of licensed contractors increased by 20 percent in one year, a strong indication that compliance increased under the program. a Also referred to as an Inter-Community Business License or Inter-Municipal Business License. b For more information on the Mobile Business License in British Columbia, please visit: http://www2.gov.bc.ca/gov/ content/employment-business/business/small-business/mobile-business-licence-program THE RESULTS comply with regulations in a much more predictable and transparent business environment while saving The BizPaL reform brought several improvements time and money when searching for information. for both the public and private sectors. The most For example, the government of Ontario reported apparent benefit is the reduced complexity in iden- that BizPaL generated cost savings of US$26.6 mil- tifying all ex-ante authorizations for businesses. lion and saved over 700,000 working hours for the Following the reform, entrepreneurs can access private sector between 2012 and 2016.15 comprehensive regulatory information in a fast, user- friendly, and convenient way through a single access Additionally, the reform improved administra- point. As a result, entrepreneurs in Canada can now tive efficiency in the public sector by promoting INSIGHTS FROM SELECTED COUNTRY EXPERIENCES 9 The BizPaL service cross-jurisdictional collaboration and coordination Lastly, the BizPaL service also provided a viable in delivering services cost effectively. As BizPaL source of reliable and comparable information on also provided a viable facilitated self-service, it freed up government the licensing burden across industries and jurisdic- resources and permitted more efficient allocation tions. This type of information, when combined source of reliable and of staff dedicated to client service. Moreover, it with other sources, can be leveraged to inform pol- comparable information offered an up-to-date tool for government agents icy making. For example, Statistics Canada com- at all levels. Industry Canada estimated that the bined BizPaL information with data on the number on the licensing burden platform generated savings of Can$3 million in of businesses in each sector and the contribution public administration between 2004 and 2009. of each sector to GDP to identify areas that could across industries and The customized information also reduced the risk benefit from regulatory reform. The already exist- jurisdictions. This type of noncompliance, in turn helping regulators reach ing inventory can serve as a solid foundation for better regulatory outcomes. any review of current licenses. of information, when combined with other sources, can be leveraged to inform policy making. 10 BUSINESS LICENSING REFORMS CHICAGO STIMULATING THE SMALL BUSINESS SECTOR THROUGH LICENSING REFORM AT THE CITY LEVEL Chicago’s overhaul of the City’s regulatory compliance regime exemplifies the different tools and approaches that can be employed to modernize outdated regulatory compliance systems, including the use of data analytics. Moreover, the reform’s success highlights the importance of benefiting from the private sector’s extensive engagement throughout the reform process, during both the diagnostic and the implementation phases. Lastly, the case study discusses interesting approaches employed to accommodate new business types and promote innovation. The author relied primarily on resources from the Ash Center for Democratic Governance and Innovation at Harvard University’s John F. Kennedy School of Government for information on Chicago’s reform. THE CHALLENGE recommended specific strategies for addressing Chicago’s Plan for some of the bottlenecks that disproportionately affected small and medium-sized enterprises, Economic Growth and Chicago’s Plan for Economic Growth and Jobs, launched in 2012, identified the city’s regula- which play a major role in the region’s economy.20 Jobs, launched in 2012, tory system as one of the city’s major obstacles to growth.16 With more than 1,700 units of Then recently elected mayor Rahm Israel Emanuel, identified the city’s government within the fourteen-county metro who had commissioned the 2012 study, swiftly area,17 governance was fragmented. This posed responded to the report’s findings and rec- regulatory system as an increasing challenge to businesses that had to ommendations by charging the city’s Innova- one of the city’s major navigate a complex bureaucracy for even rou- tion Delivery Team21 with the daunting task of tine tasks. These findings were consistent with overhauling Chicago’s licensing and permitting obstacles to growth. other studies18 and surveys19 indicating that system. The Innovation Delivery Team had been regulations for day-to-day business operations established a few months earlier and was tasked involving taxes, zoning, licensing, and permit- with creating and implementing innovative solu- ting regulations were perceived by local entre- tions to improve the city’s efficiency, primarily preneurs as major obstacles to doing business. vis-à-vis accessibility of government services and The report highlighted the need for reform and energy efficiency.22 11 The number of licenses THE REFORM were introduced every time a business activity was not covered by the established categories. The and administrative number of licenses and administrative formalities The team employed a mix of approaches in formalities had been assessing the regulatory landscape, guided by the had been on the rise since the previous reform in “ideation” process. This involved systematic exami- the mid-1990s, an indication that the framework on the rise since the lacked the flexibility to account for market changes nation of the problems and their possible solutions previous reform in through a four-perspective approach. without introducing new regulations. Additionally, the benchmarking exercise on Chicago’s regula- the mid-1990s, an tory environment revealed that other large U.S. More specifically, the team traced the city’s manage- indication that the ment of business license categories as well as studied cities employed less-complex frameworks with previous licensing reforms. This was important for significantly fewer licenses in most cases. As a framework lacked the result, the team concluded that business process understanding the source of the rising number of flexibility to account for licenses. The team interviewed staff who had reengineering would not be sufficient to ensure worked on the city’s last major licensing reform reform sustainability if the overall framework was market changes without not addressed first. in 1992 to learn from their experiences and gain introducing new their insights into the ever-expanding number of licenses and permits. This exercise revealed a need The team mapped the regulatory framework by regulations. creating an inventory of all licenses; their respective to improve the conceptual framework of licensing more broadly23 rather than simply to reduce the procedures for application, review, and issuance; number of licenses or streamline the existing licens- and the data management systems employed by ing procedures. The team deemed that previous each issuing authority. These findings were comple- reforms had failed to address this since new licenses mented with data provided by the issuing agencies FIGURE 6: THE FOUR-PERSPECTIVE APPROACH EMPLOYED TO REVIEW CHICAGO’S LICENSING REGIME Generating new ideas and The problems redesigning the regulatory manifested within local framework by administration and collaborating with other government stakeholders from the stakeholders including agencies and the exploring the legacy of private sector the existing regulatory model Forward Inward Backward Outward Insights on the “real feel” Other good regulatory of regulations by leveraging practices either various tools (e.g. engaging nationally or entrepreneurs to learn internationally about their experiences, mystery shopping tools) 12 BUSINESS LICENSING REFORMS to quantify and establish baselines on volume, time, asked to rate each prototype or to provide com- The data analysis resources, and level of effort.24 The data analysis ments for improving the services, tools, or guides revealed inefficiencies beyond the licensing admin- presented. This process of prototyping and testing revealed inefficiencies istrative procedures, extending into interrelated areas proved valuable in two ways. First, by testing and beyond the licensing such as zoning and inspections. For example, the refining the prototypes with end users, the team team found that only 42 percent of new restaurants was able to develop customer-centric services. Sec- administrative passed their first health inspection25—an indication ond, the process helped build trust between the of other shortfalls, such as poorly communicated local government and the businesses. This, in turn, procedures, extending compliance requirements or inconsistent inspection was an important factor in building consensus and support for the project. into interrelated areas criteria. Additionally, the financial costs incurred by businesses extended beyond direct licensing such as zoning and costs. For example, for some licensing activities Roundtables with stakeholders from the public entrepreneurs had to wait for months to obtain an sector, such as subject matter experts and represen- inspections. approval, thus bearing the cost of nonrevenue days tatives and frontline staff from city departments, for their businesses. were also carried out to gain a deeper understanding of specific procedures, build consensus, and brain- The team sought to complement the data analytics storm on redesigning government to business ser- with a better understanding of the private sector’s vice delivery. These deep-dive roundtables were held experience. To that end, the team engaged in “mys- over the course of several months and included rep- tery shopping” assignments by impersonating pro- resentatives from various city departments, includ- spective entrepreneurs seeking to open a business, ing Public Health, Planning and Development, collect the necessary documentation, and apply for Consumer Protection, Fire Safety, and others. The the required authorizations. More importantly, the roundtable discussions with the public sector delved team organized roundtable discussions with private beyond streamlining and simplification, aiming to sector representatives and small business owners help determine a framework for establishing which to bulletproof its findings and gain more insights regulatory areas needed more attention and which into the day-to-day challenges local entrepre- needed less.29 Additionally, the roundtables helped neurs dealt with. These discussions revealed redun- promote buy-in from the various agencies by mak- dant licenses and lack of coordination between the ing them part of the problem-solving process. various departments, as well as some overlaps and Bringing together staff from different departments duplications. For example, instead of obtaining and discussing problems that transcended individ- a single motor vehicle services license, auto shops ual agencies helped break the government silos and had to apply for three separate licenses to work on develop shared goals and holistic solutions. cars, on car engines, and on car tires.26 In addition, the roundtables highlighted the challenges entre- The various approaches employed to assess and preneurs faced when trying to access user-friendly analyze the existing regulatory framework under- guidance on technical compliance standards. For scored the failure of the licensing system to serve example, the city had issued a 100-page guide to its mandated purpose of reducing risks for busi- help restaurant owners comply with regulations; nesses, consumers, and the environment. Licensing however, those in the industry found this impen- was instead being used as an “information tracker” etrable to read.27 As a result, entrepreneurs wasted for the enforcement agencies. Since the regulatory their resources going to several agencies just to system was not designed to differentiate the levels understand the regulations, and in many cases, they of control based on risk considerations, however, were unable to comply due to the fragmented and inspections were not targeted, and inspectors were incomplete guidance they received. overwhelmed by the scope of their work. For exam- ple, more than 1,300 buildings required in excess of Lastly, the team sought the private sector’s feedback three different inspections each year, an overwhelm- to improve prototype guides and tools before roll- ing task for the inspectors and a misallocation of ing them out to the public. For example, the team resources for the inspectorates.30 developed prototype versions of its new website and the streamlined 100-page guide for restaurant In response to these findings, the city set forth an owners.28 Groups of business owners were then ambitious reform agenda with a number of mile- invited to provide their feedback on each proto- stone goals, looking beyond the number of licenses type through various techniques: participants were and into performance For example, it sought to INSIGHTS FROM SELECTED COUNTRY EXPERIENCES 13 Following the in-depth improve compliance rates for health inspections to licensing regime designed based on this framework over 65 percent (for more information see Box 2) established three license categories: review of both regulatory and, to increase impact, to significantly reduce the average time required to open a business in specific • Limited Business Licenses (LBLs), which codes and instruments high-business-density activities. applied to low-risk activities (e.g., retail stores) (i.e., licenses, permits, • Regulated business licenses, which applied Following the in-depth review of both regulatory to moderately regulated industry-specific or other ex-ante codes and instruments (i.e., licenses, permits, or activities (e.g., tattooing, body piercing, and other ex-ante requirements), the team categorized tanning facilities) requirements), the team all business licenses into three tiers, based on type • Specialty licenses for more heavily regulated categorized all business and mandated objective (e.g., consumer protec- activities (e.g., retail sale of liquor, tobacco, tion). This bundling helped differentiate between or animals) licenses into three tiers, more heavily regulated activities (e.g., retail sale of liquor), where a license served a legitimate and spe- The majority of licenses mandated under the old based on type and cific objective, versus more moderately regulated regime were either eliminated or combined based on mandated objective (e.g., activities, where the licensing requirement was not “smart enforcement decisions”: the concept of reduc- always justified. The team was hoping to lower ing enforcement of violations with low public safety consumer protection). redundancy by ensuring that the selected regula- risk and targeting resources toward riskier activities, tory instruments were proportional to the regula- repeat offenders, or more serious violations (e.g., This bundling helped tory control mandated by the code. The reformed consumer fraud). More importantly, a business that differentiate between more heavily regulated activities (e.g., retail BOX 2: PILOT ON FOOD INSPECTION FORECASTING: OPTIMIZING INSPECTIONS WITH ADVANCED ANALYTICS sale of liquor), where a license served a Chicago is home to more than three million people and more than 15,000 food establish- legitimate and specific ments. At the same time, only around 35 inspectors undertake annually inspections of all food retail businesses. To optimize its risk-based inspection regime, the city partnered with objective, versus more the Department of Public Health and the private sector (consulting and insurance groups) in moderately regulated a pilot program to leverage data and build a predictive analytics platform. This platform was intended to aggregate all the data stored in disparate systems, such as food inspection reports, activities, where the complaints received, and weather records, among other resources. licensing requirement The platform has the ability to analyze relationships in the data and to predict which estab- was not always justified. lishments might present risks. In processing and analyzing the data, Chicago found several key predicting variables that, when observed, indicated considerable likelihood that a restau- rant could commit a serious violation. These predicting variables included prior history of serious violations, length of time since the previous inspection, possession of a tobacco and/ or incidental alcohol consumption licenses, average three-day temperature, and establishment location, among others. Following a pilot launch in 2014, Chicago’s analytics team found that inspections could be allocated more efficiently using the data-optimized forecast list than with the list generated by traditional procedures, and inspectors were able to identify serious violations much more quickly. Chicago’s pilot on inspections demonstrates the increasing adaptation of advanced analytics to improve service delivery to the private sector, allocate government resources more efficiently, and deliver better regulatory outcomes for the community, including protection of health and safety. 14 BUSINESS LICENSING REFORMS previously required a number of separate licenses, one These reforms were complemented by various other The new instrument, for each regulated activity, could now comply with initiatives geared toward small businesses. For various sets of regulations through a single license. example, the city reengineered procedures for issu- named Emerging ing licenses and renewals, introduced fast-track lanes Business Permit (EBP), Additionally, a new form of licensing was introduced for customers with less complex requests, and for newly founded businesses engaging in activities simplified documentation requirements and appli- would be issued with that did not fall within any of the license categories cation forms. Moreover, the city clarified inspection prescribed by the city Code. The new instrument, criteria; implemented strict timelines for concur- a two-year validity. named Emerging Business Permit (EBP), would be rent reviews through a cooperation agreement This was conceived as issued with a two-year validity. This was conceived (e.g., Memorandums of Understanding or Service as a strategy to enable entrepreneurs with innovative Level Agreements) between the various stakeholder a strategy to enable ideas to enter the market fast by avoiding entangle- agencies; and launched an online portal31 with both ment in a prescriptive regulatory regime. As a result, educational material and transactional services. entrepreneurs with innovative business activities that could not be innovative ideas to classified under the existing licensing categories The portal provides information on all regulated would receive a provisional license to commence activities that require a business license. This includes enter the market fast by operations, subject to a two-year “probation.” At information on the fee to obtain each license, the end of the two years, the city would either shut whether entrepreneurs can apply online, if a zoning avoiding entanglement down the new business activity—due to unmitigated review and/or a criminal history review is required, in a prescriptive risks—or incorporate it under one of the existing a list of all the on-site inspections that may take license categories. EBP provided city regulators place, and links to the relevant technical require- regulatory regime. and enforcement agencies with an opportunity to ments with which each business establishment evaluate the risks associated with new activities must comply (see Figure 7). Additionally, the city and the time to develop appropriate regulatory developed an online portal called Chicago Business responses without hindering innovation. Direct32 through which entrepreneurs can apply for FIGURE 7: INFORMATION ENTREPRENEURS CAN ACCESS ON CHICAGO’S BUSINESS LICENSES Source: City of Chicago online platform, available at https://www.chicago.gov/city/en/depts/bacp/sbc/business_licensing.html#Personal. INSIGHTS FROM SELECTED COUNTRY EXPERIENCES 15 More than 6,000 or renew the majority of business licenses, file their no longer require a general business license,34 while tax returns, or make tax payments. Lastly, the city heavily regulated activities can comply through a businesses no longer provides a helpline to the business community to single license instead of obtaining multiple agency- resolve issues relating to business regulations, includ- specific authorizations. Process reengineering and require a general ing tax, licensing, consumer protection, and other form simplification yielded results as well. For business license, while business affairs. End users submit their inquiries to example, the average time required for zoning the Small Business Center over the phone or online reviews dropped from one to two weeks to just heavily regulated through the Chicago Business Direct portal.33 two days, and the previously convoluted 17-page restaurant application was simplified into three activities can comply pages. Lastly, a pilot program implemented for through a single license restaurants revealed encouraging results for com- THE RESULTS pliance, with participating newly founded busi- instead of obtaining nesses passing inspection at a 72 percent rate, a Overall, the new regulatory framework provided a 30 percent increase over the previous regime. All multiple agency-specific more transparent and predictable environment for these initiatives have saved businesses in Chicago authorizations. businesses. The number of license types was reduced an estimated US$2 million in license fees in each by 60 percent from 117 to 49, and entrepreneurs year since implementation of the reform. At the can now save significant time and money when same time, the city deployed its resources more obtaining approvals. More than 6,000 businesses efficiently and improved compliance. 16 BUSINESS LICENSING REFORMS SINGAPORE DEVELOPING A MULTIAGENCY, CUSTOMER-FOCUSED INFORMATION SYSTEM FOR LICENSES Singapore’s Online Business Licensing Service (OBLS) was one of the first transactional licensing portals. Although Singapore has now migrated to an even more comprehensive portal, known as LicenseOne, this case study illuminates the importance for licensing reform of an appropriate institutional set up when attempting to deliver cross-agency, integrated, government-to-business service delivery. The author relied primarily on the work of Thompson S.H. Teo, Tat Koon Koh, Pelly Periasamy and Siew-Kein Sia for information on the OBLS reform. THE CHALLENGE agencies regulating business registration, use of premises, food hygiene, liquor distribution, fire The licensing regime Singapore is now recognized internationally for safety, and tax collection (Figure 8).36 In short, the licensing regime was agency focused rather than was agency focused its positive scores in various indicators measur- ing the attractiveness of the investment climate. client focused. In some cases, the registration and rather than client Starting a business in Singapore was not always licensing process could take months, particularly easy, however. In the late 1990s, opening a new when licensing arrangements were linked and focused. In some business required filling out multiple forms, approval of one license depended on approval of another.37 cases, the registration interacting with several regulatory agencies, and spending hours in tedious and convoluted pro- and licensing process cedures. The licensing procedures used to be a In 2000, Singapore’s business community spoke particular bottleneck both for new business regis- out against these conditions and communicated could take months, trations and for existing business license renewals. its concerns to the Pro-Enterprise Panel (PEP), a high-level public-private dialogue panel com- particularly when Most business activities fell under the purview of prised of business leaders and senior civil servants. licensing arrangements more than one agency, and as a result, entrepre- PEP in turn raised these concerns with the neurs had to visit multiple departments, spend Committee of Permanent Secretaries (COPS),38 were linked and hours filling out separate applications for each who in turn appointed the Ministry of Trade approval, and in many cases enter the same infor- and Industry (MTI), the Ministry of Finance approval of one license mation repeatedly. For example, starting a public (MoF), and Infocomm Development Authority depended on approval entertainment outlet35 required license applica- (IDA) to deliver a solution. These actors worked tions, payments, and approvals from at least seven closely together to reform the licensing regime of another. 17 FIGURE 8: BEFORE THE OBLS SYSTEM WAS IMPLEMENTED, OBTAINING A LICENSE FOR A PUBLIC ENTERTAINMENT OUTLET IN SINGAPORE REQUIRED SEVERAL INTERACTIONS FOR APPLICATIONS, PAYMENTS, AND APPROVALS AND INVOLVED AT LEAST SEVEN AGENCIES Inland Revenue Authority of Singapore Ministry of Manpower Central Provident Fund (work permits for foreign (registration of employees for manpower) provident contributions) National Environment Agency Singapore Civil Defence Force (food) (fire safety) Singapore Police Force Urban Redevelopment Authority (entertainment permit and Entrepreneur liquor license) (land use) Source: Jeannie Chua, “National Strategies to Harness Information Technology: The e-Transformation Journey of Singapore,” November 2011. and leverage information and communication tech- developed to fill the gap and deliver an integrated nology (ICT) to implement a one-stop-shop solu- registration and licensing portal to the business tion for business registration and licensing in line community. with the government’s “Many agencies—One government vision.”39 The MTI assumed the lead- ing role, while IDA served as project manager and the MoF provided the funds. THE REFORM As part of a strategy of using technology to In the OBLS project, a formal governance struc- enable government transformation, since the 1980s ture was introduced with the COPS at the top, The Online Business Singapore had committed to e-governance reforms providing political leadership and ensuring buy-in to modernize public administration and service from the various stakeholder agencies. A Steering Licensing Service delivery, starting with the five-year National Com- Committee consisting of senior-level representatives (OBLS) project was puterization Plan in 1980 and successive National from key agencies ensured coordination, top-level Infocomm Plans in the following decades. Although vision, and project alignment with the government’s developed to fill the the provision of government services through one- other e-governance programs and strategies. A stop solutions such as TradeNet, LawNet, and Core Project Team consisting of MTI and IDA gap and deliver an MediNet had been part of early efforts to com- representatives took the lead on project manage- integrated registration puterize civil service, many agencies were still ment and oversaw the agency task force, the proj- siloed. Moreover, these systems were principally ect implementation committee, and the central and licensing portal informational in nature rather than being able administrator. The agency task force consisted to the business to provide integrated government services with of staff from the implementing agencies tasked transactional features.40 In response, the Online with process reengineering and integration to the community. Business Licensing Service (OBLS) project was platform. A project implementation committee 18 BUSINESS LICENSING REFORMS FIGURE 9: GOVERNANCE STRUCTURE FOR THE ONLINE BUSINESS LICENSING SERVICE PROJECT Committee of Permanent Secretary (COPS) OBLS Steering Committee Core Project Team Project Implementation Agency Task Forces Central Administrator Committee Authorized Agency Officers Source: Periasamy and Sia, “Challenges in Delivering Cross-Agency Integrated e-Services: The OBLS Project,” Nanyang Business School, Nanyang Technological University, Singapore (November 2007). provided technical support to the agency task force and the number of agencies involved, among oth- Some licenses were and quality control for each agency’s OBLS imple- ers. The second step involved reviewing the policy mentation. Lastly, a central administrator worked and process for each license. This was performed deemed redundant with officers at each implementing agency to ensure jointly by the Core Project Team and members and were eliminated. that the portal’s content was up to date. of the Agency Task Force (see Box 3 for more details). In other cases, two The project was delivered in three main stages: Among the 156 licenses undergoing the initial com- or more licenses were i. conceptualization prehensive review, several revealed opportunities for combined if the teams ii. policy review and business process streamlining. Some licenses were deemed redundant re-engineering and were eliminated. In other cases, two or more identified overlap or iii. automation licenses were combined if the teams identified over- lap or duplication among them. In still other situa- duplication among At the outset, the agency task force bundled licenses tions the license was converted into a less onerous them. In still other based on sectors. For example, all licenses regulat- instrument (e.g., notification instead of approval). ing activities in the food and beverage industry or In two cases, the licenses were preserved but require- situations the license in childcare and education services were grouped ments for renewal were eliminated. Moreover, seven together. This approach helped prioritize sectors in licenses were converted into composite licenses for was converted into a less which licensing was more complex, thus execut- specific business activities. The composite licenses onerous instrument ing the project more effectively. More importantly, allowed entrepreneurs to obtain one license for mul- this approach was part of a broader buy-in strat- tiple locations, instead of a separate license for each (e.g., notification instead egy targeting high-transaction volume clusters location. Lastly, in some cases substantive conditions and engaging with more technologically mature were made less onerous for applicants required to of approval). agencies early on to accomplish quick wins and obtain a license. convince the less receptive agencies to join later.41 To that end, a number of business-based criteria When the policy review was completed, the were taken into account, such as process complex- Agency Task Force identified potential areas for ity, the number of documents required to apply, streamlining, following a license review model INSIGHTS FROM SELECTED COUNTRY EXPERIENCES 19 of Education. As Ministry staff admitted that they were not always able to review the documentation, BOX 3: THE LICENSING POLICY REVIEW FOR OBLS this requirement added very limited value for the CHALLENGED EVERY ASPECT OF THE EXISTING regulator and was eliminated.42 In other cases, where LICENSING POLICY the license was converted to a notification, docu- mentation requirements were replaced with a self- declaration of compliance. This way, the regulator • What is the rationale for the license? received notice about the new business and could • What are the requirements for obtaining the license? verify compliance through ex-post controls, such • Why were these requirements selected? as an inspection. During the on-site visit, inspec- • How often are these requirements waived and why? tors could then ask the entrepreneur to provide any • What is the fee charged for the license and why? documents and certificates required by regulation. • How often is an application rejected and why? More importantly, the BPR addressed interdepen- • How often are inspections conducted? dency across agencies. Previously, in some cases • How often are violators caught? applicants had to obtain various approvals from • Is there a need to meet the applicant in person, and if yes, what is the other agencies before submitting a license applica- purpose of the meeting? tion. Prior approvals often resulted in significant delays and unpredictable outcomes. These interde- Source: Periasamy and Sia. pendencies were addressed through the introduction of a common reference number (unique business identifier), which allowed concurrent reviews. Agencies evaluating an application for compliance with its specific regulations could do so in parallel More importantly, developed by the Core Project Team. The model with other authorities. The common reference num- guided the respective licensing review activities in ber allowed agencies to check on prior approvals the BPR addressed each agency vis-à-vis both the substantive licensing by other agencies as well as to retrieve information interdependency across conditions and the procedures for application and relevant to their scope of work. renewal. First, the task force members in each agency agencies. Previously, in reviewed the substantive requirements to ensure that Design and implementation of the OBLS portal some cases applicants these aligned with the stated policy objective; they commenced while the process reengineering work then removed overly prescriptive requirements and was underway at the agency level. Representa- had to obtain various developed positive and negative lists for licensing tives from the agencies liaised with the Project approvals from other conditions. Second, the review delved into a com- Implementation Committee to provide feedback prehensive mapping, rethinking, and redesigning of on the reengineering activities and to make sure agencies before licensing procedures through business process reengi- their in-house information systems aligned with submitting a license neering (BPR). This involved comprehensive review the OBLS systems. This was important to permit of administrative formalities, such as the procedures real-time data exchange and automated process- application. Prior for application renewal, termination, documentation ing. One challenge at this stage was that the vari- approvals often resulted requirements, levels of approval, and fees. Addition- ous agencies were at different levels of maturity ally, at this point the review delved into institutional and automation. This is a unique feature in multi­ in significant delays and issues such as the degree of integration and informa- agency projects, and it increases the complexity and unpredictable outcomes. tion sharing between the various agencies. standardization during project implementation.43 For example, in some cases agencies had neither the These interdependencies For example, in some cases the applicants were front-end interfaces for their users to use in apply- were addressed through repeatedly asked to provide the same information ing for licenses nor the back-end systems needed to to several different agencies. Improving information process applications.44 To fill this gap, where auto- the introduction of sharing across agencies and leveraging existing data- mated back-end procedures were not in place, the bases that had previously captured this information OBLS developers created an application called the a common reference drastically streamlined application forms. Similarly, business administrative tool (BAT). In other cases, number (unique business supporting documentation and other administrative where the agencies had already developed high- requirements found to be excessive were rational- end, well-integrated technology solutions, migra- identifier), which allowed tion to the OBLS platform was more challenging, ized. For example, private schools were being asked concurrent reviews. to provide a detailed course syllabus to the Ministry as in most cases this entailed discontinuing the 20 BUSINESS LICENSING REFORMS agency’s “ownership” of the application process. THE RESULTS Moreover, it entailed adapting those agencies’ back-end systems to the OBLS platform to ensure The success of the OBLS was evident early on, interoperability for processing and data-exchange. with notable improvements across the board for The project team had to overcome resistance and both the private sector and the government. First, convince these agencies of the strategic vision and by removing or reducing the scope of licenses, the benefits of the client-centric approach.45 regulatory burden was lowered in multiple sectors. Second, processing times were significantly reduced As each agency completed its BPR activities and for all new license applications, including those not was integrated into the platform, license processing handled by OBLS, as a result of the process reengi- was transferred to OBLS.46 At the end of this migra- neering. The average approval processing time was tion process, OBLS was a fully-fledged one-stop reduced by 65 percent, and in some cases, improve- shop online portal, offering informational, advisory, ments were even more drastic. For example, the and transactional services. The portal introduced application process for the electricity generation an automated client-centric platform that allowed license at the Energy Market Authority was reduced Following the platform’s end users to customize their searches based on their from six months to six weeks.50 Third, as the BPR specific business activities. Accordingly, the system activities removed redundancy and optimized the success, the government allowed end users to perform their searches by gov- process, opportunities for cost reductions emerged, ernment agency, industry, business activity, or key- of Singapore further and some agencies were able to lower their licensing word and generate a single application form tailored fees. Based on a cost-benefit analysis of its eighteen modernized the business to each applicant’s individual needs. When the end months of operation, businesses benefited from the user completed the application, the system would OBLS project with an estimated cost savings of licensing system by automatically route the request to the relevant gov- US$27 million.51 ernment agencies for processing. introducing a new Lastly, information exchange between government platform effectively At the time it was initiated, one of the platform’s agencies immensely improved, and this trickled most notable innovations was its data verification down to the end users as data entry requirements upgrading the OBLS. system. OBLS captured data concurrently with the during the application, renewal, or termination pro- application and verified it against other information The new platform, cesses were significantly streamlined. Early estimates stored in the Public Service Infrastructure47 or other reported that the OBLS accounted for 98 percent called LicenseOne, offers databases at the agency level. For example, existing of all transactions for newly founded companies users who signed in with their Singpass passwords48 in Singapore. Given that small and medium enter- additional features would permit the OBLS system to load information prises were the main target of the OBLS project, relevant to their profile from other government data- this is strong evidence of the uptake by the private and functionalities, as bases. This integration and interoperability across sector and attests to the project’s success. Following well as integrates more databases reduced applicants’ need to fill in the same the platform’s success, the government of Singapore information repeatedly on forms for different agen- further modernized the business licensing system by government licenses. cies. Each time an applicant provided information introducing a new platform effectively upgrading online to the government, the information was the OBLS. The new platform, called LicenseOne,52 captured and stored and later leveraged in further offers additional features and functionalities, as transactions. The integrated application form elimi- well as integrates more government licenses. For nated duplicate information, as the applicant was example, LicenseOne offers end users tracking asked only once for the information. As a result, of current and past transactions; a single point of data entry was estimated to have been reduced by contact for communication with licensing officers; up to 60 percent.49 Another important OBLS fea- and the ability to seamlessly track items requir- ture was its tracking and notification application. ing action, search by keyword or agency, apply for This allowed applicants to receive automatic SMS multiple licenses from the same or different agen- or email notifications as soon as their applications cies in a single application, and submit information were processed. In turn, successful license appli- only once. LicenseOne also sends alerts to amend cants would be able to pay the fees for all required information, submit supporting documents, or take licenses in a single consolidated online payment. action on pending payments. INSIGHTS FROM SELECTED COUNTRY EXPERIENCES 21 MALAYSIA OVERHAULING THE LICENSING REGIME THROUGH THE REGULATORY GUILLOTINE APPROACH Malaysia, a middle-income country, successfully implemented the guillotine approach at the federal and state level in initiating its Modernizing Business Licensing program. Similar to the case study on Singapore, Malaysia’s case study highlights the importance of an adequate institutional setup in implementing reforms across ministries and in digitalizing procedures. The author relied primarily on government resources documenting the guillotine and BLESS reforms. THE CHALLENGE cross-ministerial task force introduced to address PEMUDAH was the issues of regulatory and administrative con- In 2010, the government of Malaysia unveiled straints through public-private dialogue. successful in part an ambitious plan known as the New Eco- because it delved nomic Model (NEM) introducing reforms to PEMUDAH was originally established in 2007. promote private sector investment through It comprised twenty-three individuals (nine deeply into issues by economic liberalization and to help the coun- from the private sector and the rest from gov- try reach high-income status by the year 2020. ernment) and reported directly to the prime using data to diagnose A key pillar of NEM aimed at reducing the cost minister.54 Three working groups and nineteen problems and set targets, of doing business and enhancing government to focus groups, co-chaired by the government business service delivery by, inter alia, review- and the private sector, collaborated to identify as well as because it ing and simplifying regulations and procedures; bottlenecks and then worked with the imple- employed monitoring expediting issuance of licenses, permits, and menting agencies to develop evidence-based, approvals; and promoting greater transparency. practical solutions. Trust between the private and evaluation tools to sector and the government, fostered over sev- Following the example of earlier reformers, such eral years, allowed PEMUDAH to successfully assess implementation. as Sweden, South Korea, Mexico, and Hungary, lead a number of reform initiatives. Addition- Malaysia employed the regulatory guillotine ally, PEMUDAH was successful in part because approach,53 pioneered by Sweden in the 1980s, it delved deeply into issues by using data to to review and streamline the licensing regime. diagnose problems and set targets, as well as The licensing reform was implemented under because it employed monitoring and evaluation the leadership of PEMUDAH, a high-powered, tools to assess implementation. The private sec- 23 tor dialogue revealed that the licensing system exist- business process reengineering “lab.” MAMPU ing at the time was inefficient, with the number coordinated activities and monitored simplifica- of licenses growing exponentially over the years, tion and streamlining of business licensing pro- and in need of an overhaul.55 cesses across all relevant public sector agencies. The scope of this reform Subsequently, the ICU oversaw implementation in the final phase of the reform, automating busi- was remarkably broad, ness processes and making them publicly available THE REFORM through a transactional portal. as it involved activities at both the federal PEMUDAH introduced the Focus Group on The scope of this reform was remarkably broad, Business Process Re-engineering (FGBPR), under as it involved activities at both the federal and the and the state levels. the working group on efficiency issues, in June state levels. A total of twenty-three ministries,56 2010 to coordinate and monitor implementation including the agencies under their purview, as well A total of twenty-three of the Modernizing Business Licensing (MBL) as two federal agencies under the Prime Minister’s ministries,56 including initiative. FGBPR relied on three other govern- Office were part of this exercise at the federal ment units to implement the MBL reform. The level. The review had a vertical scope as well, as it the agencies under their overall effort was spearheaded by the Implemen- encompassed business licenses in thirteen states. tation Coordination Unit (ICU) of the Prime Including the state-level governments was criti- purview, as well as two Minister’s Office. Two other agencies, the Malay- cal, as these were often involved in service deliv- federal agencies under sian Administrative Modernization and Manage- ery and regulatory enforcement for several of the ment Planning Unit (MAMPU) and the Malaysia areas covered by the business licenses. Due to the the Prime Minister’s Productivity Corporation (MPC), took the lead on reform’s broad scope, activities were carried out the “heavy-lifting” exercises and laid the ground­ in a phased approach over several years. Project Office were part of this work for the reform. implementation was initiated at the federal level by reviewing all business licenses in five ministries exercise at the federal In particular, the MPC coordinated with all the and sub­ sequently included reviews at the remain- level. The review had a relevant ministries and agencies under the FGBPR ing line ministries and at the state level. The initiatives. Moreover, the MPC reviewed the first review of regulations and business process vertical scope as well, as licensing framework and the quality of licensing reengineering was carried out between 2011 and administration in the competent agencies. This also 2014. Subsequent reviews have followed since. it encompassed business The reform was anchored around five principles included a rigorous review of each business license, licenses in thirteen states. consistent with the regulatory guillotine approach, specifying the purposes of the reformed licensing by assessing its legality and necessity. The MPC regime: served as the secretariat for this initiative as well. As soon as the MPC completed the inventory and Use minimum requirements to achieve the i.  review exercises, MAMPU took the lead as the regulatory objectives. Be less prescriptive when establishing ii.  regulatory requirements on how businesses should operate. FIGURE 10: ROLES OF THE KEY AGENCIES INVOLVED Provide easy and transparent access to iii.  information. IN THE MODERNIZING BUSINESS LICENSING INITIATIVE Be integrated and consistent with other iv.  licensing tools. Communicate effectively with businesses v.  and other stakeholders.57 MAMPU The first step in the reform process involved a com- Business Automation licensing of reformed prehensive review of all existing licenses by exam- Business inventory process re- business ining their legal justification. Following this first and review engineering processes screening, regulators evaluated the proportionality of the remaining regulatory instruments in achiev- MPC ICU ing the mandated regulatory objectives (i.e., their necessity). Following this in-depth review, some licensing regulations were deemed to impose 24 BUSINESS LICENSING REFORMS excessive, unjustified requirements and were either FIGURE 11: OVERALL PROJECT IMPLEMENTATION OF THE reformulated or eliminated altogether. The review MODERNIZING BUSINESS LICENSING (MBL) PROJECT process also revealed overlaps and duplication between a number of existing licenses issued by different authorities. These licenses were either eliminated or combined to improve efficiency and Regulatory Business Process Automation Guillotine Re-engineering coordination in public administration. The remain- ing licenses that met these criteria (i.e., legality and necessity) but were deemed not business friendly Source: The authors. (i.e., delivered efficiently to the private sector), were simplified. Subsequently, the project focused on improving ser- tions as a one-stop service center for licenses and vice delivery by reviewing all procedures and docu- permits. The portal consolidates information mentation requirements related to the application on regulatory requirements and facilitates trans- As of 2015, more and approval processes. This exercise aimed to assess actions between the private sector and various the compliance burden these processes posed for the regulatory agencies by handling the application, than 1,400 licenses private sector: namely the time and effort required submission, monitoring and approval of licenses to obtain each of the remaining licenses. First, the and permits. Being a virtual one-stop service cen- were reengineered and project team under MAMPU’s guidance reviewed ter, BLESS allows businesses to apply through stan- amalgamated into the compliance burden related to each license and dardized application forms, pay the fees online, presented its findings to the Focus Group on Busi- and obtain their licenses by interacting through a 900 new licenses at ness Process Re-engineering. Following a consulta- single access point. Moreover, a company’s pro- tion process, the team proceeded to implement the file is entered only once in BLESS. Applicants the federal level. This reengineered procedures. Subsequently, the team need not fill in the same information twice, even reduction was achieved formulated operation modules for online applica- when applying for an additional authorization tions and determined standards for service delivery. in the future. This information can be accessed largely through license The final phase of the reform involved automating automatically from the Companies’ Commission government to business service delivery by imple- of Malaysia (CCM) because BLESS has integrated rationalization and, since menting a government portal where entrepreneurs CCM’s company profiles. July 2011, an estimated could apply for and obtain their licenses. Additionally, BLESS offers online tracking and US$172 million To that end, the Business Licensing Electronic monitoring features as well as an online communi- Support System (BLESS) was introduced. BLESS cation platform through which entrepreneurs can savings in business is an online portal based on the Malaysian gov- obtain feedback on the status of their applications. compliance costs has ernment’s service delivery concept of “one service, For example, issuing agencies can follow up with one delivery, no wrong door.” The platform func- applicants directly, informing them if an application been achieved. FIGURE 12: BUSINESS PROCESS REENGINEERING: PROJECT IMPLEMENTATION Stage 1 Stage 2 Stage 3 Stage 4 • Review of licenses, • Presentation of • Formulating • Raising public formation of working results to the FGBPR operation modules awareness on the teams and action Review Panel, for online changes in regulatory plan conduct public applications, matters and impact consultation and determining analysis on the implementation of standards of services regulatory initiative the new framework and finalizing online licensing Source: Malaysia Productivity Corporation. INSIGHTS FROM SELECTED COUNTRY EXPERIENCES 25 THE RESULTS BOX 4: MAIN FEATURES OF THE BUSINESS LICENSING By the end of 2014, 843 business processes had ELECTRONIC SUPPORT SYSTEM PLATFORM been reviewed at the federal level, and more than 2,500 business processes had been reviewed across • Multiple licensing applications 13 states. As of 2015, more than 1,400 licenses • Simultaneous processing and updating by respective agencies were reengineered and amalgamated into 900 new licenses at the federal level. This reduction was • Composite and standardized forms achieved largely through license rationalization • Online submission, approval, and notification and, since July 2011, an estimated US$172 million • Online queries savings in business compliance costs has been • Online tracking and monitoring achieved.58 Moreover, at the state level, 2,659 licenses • Electronic payments were reviewed, reengineered, and reduced to • Feedback mechanisms 1,915 composite licenses, involving estimated poten- tial compliance cost savings of RM1.7 billion (about US$390 million in 2017 prices).59 At the early stages of automation, when the BLESS system was introduced, 136 licenses and permits were offered is deemed incomplete or offering clarification on by 45 agencies in the construction, manufacturing, the regulatory requirements. This way entrepre- and hotel sectors within the Greater Kuala Lumpur neurs can avoid multiple on-site visits or the need region. Automation and centralization of business to deal separately with each licensing authority, license applications and approvals into the BLESS saving time and resources both for the agencies and portal was an ongoing project, and more licenses for the private sector. were planned to be incorporated in the next phases FIGURE 13: AT LEFT IS AN EXAMPLE OF THE AGENCY-CENTRIC APPROACH, BEFORE THE MBL REFORM. AT RIGHT IS AN EXAMPLE OF THE CLIENT-ORIENTED APPROACH DELIVERED THROUGH THE BLESS ONLINE PLATFORM Malaysian Malaysian Investment Investment Development Development Department of Authority Authority Occupational Customs Health & Safety Department of Occupational Customs Safety & Health Other related Investor Local Authority BLESS services Other related Local Authority services Investor 26 BUSINESS LICENSING REFORMS of the reform, covering additional sectors such as added activities. Automation also improved trans- tourism, health, education and training, logis- parency and predictability for all transacting parties. tics, and distributive trading. This second phase was Entrepreneurs were able to navigate the system expected to cover 350 licenses from 73 agencies, faster and access and collect information from and at the time this report was being written, a total authoritative sources at a lower cost. of 217 business licenses had been automated.60 Following the success of the MBL reforms, By overhauling its licensing regime, Malaysia Malaysia undertook similar initiatives to lower made compliance easier for businesses by elimi- the regulatory burden for businesses in select nating excessive regulatory requirements, reducing sectors.61 This endeavor, known as the Reducing the number of agencies involved, extending the Unnecessary Regulatory Burdens (RURB) proj- validity period for business licenses, and empow- ect, is currently being led by the MPC. It involves ering more government officials to make admin- a substantive review of all regulations relevant to istrative decisions. Moreover, the reforms lowered the sector in an effort to remove regulatory overlap compliance costs for the private sector by simplify- and overly prescriptive requirements that hinder ing the regulatory instruments and by improving innovation, to ensure uniform implementation, processing times through simplified forms, fewer and to improve regulatory cohesion and enforce- documentation requirements, streamlined proce- ment practices. Similar to the MBL reform, MPC dures, and automation. Additionally, savings were will combine mapping exercises, interviews with achieved for the public sector due to the lowered regulators and the private sector, and cost-benefit administrative costs for processing standardized analyses to identify potential improvements across forms and procedures and by removing low value- each sector’s value chain. INSIGHTS FROM SELECTED COUNTRY EXPERIENCES 27 PERU SIMPLIFYING LICENSING PROCEDURES TO BOOST TOURISM IN CUSCO The Cusco region is home of Machu Picchu, the Incan citadel hidden deep in the Andes Mountains. A World Heritage Site since 1983, Machu Picchu is an international tourist destination attracting millions of visitors every year. Cusco is growing steadily, and the numbers of international tourists is climbing. This poses challenges for the domestic private sector, with local firms sometimes struggling to provide the infrastructure and services needed to meet the increasing demand. The author relied exclusively on information shared by the World Bank Group’s Latin America and the Caribbean region team which carried out the reform in the Cusco region. Source: World Bank Development Indicators, World Bank Group. 29 THE CHALLENGE project, they claimed that delays in obtaining the Ministry of Culture permit were so significant that Despite the world-renowned historic and cultural they decided to initiate the development with- attractions in the region, Cusco has been one of out the proper authorization. Several people were Peru’s poorest regions. More than 20 percent of its later convicted, including former employees of the population has at least one basic need unmet, and Cusco regional government’s culture office. the average monthly family income is US$165 per capita. Accordingly, unlocking opportunities for In response to a request from the government of the local private sector, improving its productivity, Peru in 2012, the World Band Group (WBG) ini- and creating linkages between domestic and for- tiated a project, financed jointly by the Interna- eign businesses becomes even more important for tional Finance Corporation (IFC), Switzerland’s the region. State Secretariat for Economic Affairs (SECO), and Corporación Andina de Fomento (CAF), to design Red tape in Peru was typically one of the obstacles a strategy for bringing together stakeholder agen- contributing to uncertainty for both local and cies from the three levels of government (national, foreign investors, who faced convoluted proce- regional, and local) to improve the business envi- Red tape in Peru was dures, high compliance costs, arbitrary decision ronment, with a focus on the hospitality sector typically one of the making, and long delays in obtaining the approvals (broadly defined to include hotels, tour operators, necessary to start and operate their businesses. restaurants, and other enterprises). obstacles contributing Particularly in Cusco, deficiencies in service delivery to uncertainty for were often attributable to lack of coordination both local and foreign among the different subnational entities. Tourism THE REFORM licensing involved at least four different agencies investors, who faced from all levels of government, and the process was Because it is home to a diverse set of tourist plagued by overlaps and duplication, high fees, attractions ranging from the Inca empire’s ruins to convoluted procedures, excessive documentation requirements, and lack of Spanish colonial architecture and national reserves, high compliance costs, transparency, among other failures in government- Cusco was selected as the pilot for this reform. to-business service delivery. Additionally, the combi- Four different entities from the three levels of gov- arbitrary decision nation of low capacity and the limited use of infor- ernment were involved in entry and operations mation and communication technology (ICT) procedures for tourism businesses: the Ministry of making, and long and project management tools in government to Culture, through its local department in Cusco, business service delivery contributed to an unfa- the Regional Direction of Foreign Trade and Tour- delays in obtaining the vorable investment climate. ism, and the Provincial Municipalities of Cusco and approvals necessary to Urubamba. A complete diagnostic of the regulatory As a result, local entrepreneurs often carried out their framework was carried out to help the team select start and operate their businesses informally. In the hospitality sector, the the appropriate approach for implementation and overall number of hotels and other accommodation to prioritize activities. businesses. providers in Peru was one of the highest in the region on a per capita basis. Between 52 and 55 percent of Specific institutional arrangements were introduced all firms in the tourism sector were estimated to con- to ensure buy-in from the stakeholders and success- duct their business informally, however. The bureau- ful project implementation. The WBG team had cratic barriers were perceived as key contributors to identified from the outset that the various stake- the moderate formalization numbers. holder agencies were siloed from one another with separate reporting lines, misaligned incentives, and In turn, this resulted in suboptimal regulatory a narrow focus on each agency’s individual mandate. oversight, ultimately jeopardizing the protection Two working groups were introduced to address of Cusco’s cultural heritage. For example, in 2010 this institutional failure and to provide a participa- the Ima Sumaq shopping mall development caused tory, transparent and consultative platform where irreversible damage to a wall that once belonged to public sector employees and decision makers would a palace constructed for Inca Emperor Pachacutec. be able to voice their concerns and offer insights. Although the project’s investors sought to obtain several authorizations from local and central gov- One working group was established at the national ernment authorities before implementing their level to lead the reform agenda, ensure buy-in 30 BUSINESS LICENSING REFORMS from the various agencies, and provide an over- For example, the project engaged in activities to arching strategy and vision. This included repre- raise awareness among citizens and local media on sentatives from the applicable ministries as well the importance of reforming the existing licensing as entities from the private sector, such as the regime and easing the compliance burden, while at National Chamber of Tourism and the National the same time ensuring protection of the region’s Hotel Association. A second, regional level of cultural heritage and meeting urban planning working groups was introduced to operationalize requirements. Additionally, the project highlighted the strategy and oversee day-to-day implementation the benefits of formalization for economic growth, at the agency level. The regional working groups job creation, and the protection of the cultural consisted of representatives from the implement- heritage by using the slogan “Ser formal es un buen ing agencies, such as the regional department on negocio!” (Being formal is good business) in sev- cultural heritage, the regional management unit on eral communication campaigns. This was achieved foreign trade and tourism, and the municipalities. through local public awareness campaigns consist- The private sector These regional working groups were perceived as ing of 26 radio programs, 18 television programs, important elements in fostering ownership of the 5 publications in printed media, and 10 virtual played a key role at reforms at the local level, especially given the legacy bulletins promoting new local tourism businesses. of mistrust between the largely native population both the design and the living in the mountainous Cusco region and the The review took stock of the instruments employed implementation stages. central government in Lima. The regional working by the authorities to regulate businesses. This groups were regularly updated on project imple- included licenses, permits, other ex-ante authoriza- At the design stage, mentation. Moreover, they were regularly invited tions as well as ex-post procedures necessary to start to provide feedback and recommendations during up and operate a business in Cusco. The team pri- entrepreneurs offered implementation to minimize the gap between the oritized the activities affecting the business catego- valuable insights based law’s intended interpretation and its actual, on-the- ries most closely linked to the tourism sector. At the ground interpretation, as well as to ensure reform outset, this involved reviewing the legal basis for on their first-hand sustainability in the longer term. each requirement and subsequently mapping the procedures, documentation requirements, and fees experiences, the major Representatives from the private sector, such as necessary to obtain and renew operating licenses. This bottlenecks encountered, the regional chambers of commerce and tourism- also involved taking stock of the on-site inspections specific associations were also engaged in the regional typically carried out for the hospitality sector, restau- and market failures. working groups to ensure that the private sector rants, and tour operators. Additionally, the project had a strong voice and embraced the agenda. After helped develop an improved framework for archeo- During implementation, all, the project was initiated in response to requests logical evaluations by defining clear and specific the private sector from the private sector for an improved business requirements as well as by providing a more transpar- environment with strengthened stakeholder coor- ent framework to enable consistent decision making. was a key partner in dination and a lower cost compliance burden for economic activities. More importantly, engaging Following the stock-taking exercises, the WBG promoting the reform with the private sector was crucial to building trust team and the public sector officials worked hand- between the regional authorities and the reform’s efforts and ensuring in-hand through workshops to identify specific intended beneficiaries. The private sector played a activities and procedures with limited value added. they became priorities at key role at both the design and the implementation This exercise revealed quick wins that were lever- stages. At the design stage, entrepreneurs offered aged to build momentum for the reforms and higher levels. valuable insights based on their first-hand experi- motivate other implementing agencies. Identi- ences, the major bottlenecks encountered, and fying quick wins was important, particularly in market failures. During implementation, the pri- ensuring buy-in at the municipal level. As the local vate sector was a key partner in promoting the reform authorities were bracing for elections shortly after efforts and ensuring they became priorities at higher the advisory project was initiated, showcasing tan- levels. Additionally, the private sector helped com- gible reforms to their constituents was at the top municate with the community about the reform of their political agendas. efforts. These contributions were key to the proj- ect’s success, empowering public sector officials, In support of these activities, the WBG experts building consensus, catalyzing partnerships, and engaged with the process owners and regulators to ensuring the necessary buy-in of local private sector foster a “cultural shift” from a prescriptive “tick-the- stakeholders. box” to a more client-oriented approach. The team INSIGHTS FROM SELECTED COUNTRY EXPERIENCES 31 used visuals and flowcharts to communicate low THE RESULTS added value procedures that could be streamlined or eliminated without jeopardizing the regulators’ man- The licensing reforms lowered the regulatory dated objectives and public sector outcomes. This burden for businesses beyond the tourism sec- exercise helped build consensus through a participa- tor and generated spillover benefits for small and tory process and fostered a behavioral change in the medium-sized firms in the region. The project’s implementing agencies’ culture on service delivery. activities helped reform 80 licenses and eliminate more than 150 unnecessary ex-ante requirements, Moreover, the project leveraged ICT solutions to such as duplicative forms and procedures or excessive improve record management and firm registration requirements, like clearances from nontechnical in the tourism sector at the agency level. Two cus- bodies (e.g., elected officials), that imposed com- tom-developed software solutions were introduced pliance costs on businesses without adding value to support the issuing authorities’ activities. These to achieving the mandated regulatory objectives. were back-end solutions implemented to improve Removing these excessive requirements reduced internal workflows and data management. The the business registration process by three years. back-end solutions were complemented by two platforms for customer support and by the devel- Furthermore, the project significantly improved turn- opment of informative materials such as a proce- around time between the various agencies. The time dure manual with detailed flowcharts and other for approval was reduced across the chain of proce- user-friendly features to communicate the new dures under the project’s review and reengineering procedures to tourism businesses. A component on activities, as shown in Figure 14 below. In some cases, capacity building was also used to train agency staff procedures were deemed to add inconsequential value on the new software. The project supported hands- compared to their regulatory burden, and these were on training activities for more than 750 public sec- eliminated altogether. For example, every construc- tor officials, with a view to improve customer service tion or business operation located near or adja- and administrative processes. cent to a land plot demarcated as part of the cultural FIGURE 14: THE PROJECT REALIZED SIGNIFICANT GAINS BY STREAMLINING PROCEDURES, ULTIMATELY IMPROVING EFFICIENCY AND PREDICTABILITY IN THE LICENSING AND PERMITTING PROCESS. Timeframes of the procedures involved: Diagnostic Phase Real estate intervention Total duration of 1514 calendar days 326 326 346 1066 1182 1325 1514 Deadlines for the involved procedures after the reform Time reduction of 1,130 days Total duration of 384 calendar days 160 288 320 384 Source: Ursula Blotte, Operations Officer, World Bank Group. 32 BUSINESS LICENSING REFORMS heritage was subject to plan review and approval and attribute to focused interventions such as the one by the Ministry of Culture. As this procedure was in question. The reality remains, however: Each day only carried out centrally by the authorities in of delayed project implementation in the hospitality Lima, it usually took several months for completion. sector translates into “rooms not booked, employees In response, to improve efficiency, the government not hired, purchases from local business not made, amended the law to include a representative from and taxes to local and national authorities not paid.”62 the Ministry of Culture in the construction permit issuing process and decentralized that process to the This project was aligned with the Peruvian Govern- regional authorities in Cusco. Moreover, the project ment’s National Competitiveness Agenda and built eliminated this procedure as a requirement for obtain- momentum for further simplification efforts at other ing an operating license as it was deemed to dupli- tourist destinations. Following project completion cate the checks carried out for construction permits. and Peru’s change of government, the new Minister of Tourism and Foreign Trade articulated a clear By rationalizing the registration fees and improving message, namely strengthening Peru’s position as a processing times, the reforms generated more than competitive, sustainable, quality tourism destination US$1.9 million in compliance cost savings for the able to deliver a diversified product and contribute private sector after just eight months. The drastic to the country’s economic and social development reduction in the cost to obtain licenses and permits in a decentralized manner. The minister established was largely attributed to the introduction of a cost- two ambitious milestones to be reached by 2021: based methodology in calculating administrative first, 100 percent growth in the number of interna- fees. This activity was not part of the project’s initial tional tourists (from 3.5 million to 7 million), and design but was incorporated at a later stage when the second, 50 percent growth in the number of domestic pricing policy was identified as a source of uncer- tourist trips, from 40 million to 60 million. tainty and inflated costs for the private sector. For The WBG received a prize from the National Cham- example, fee calculations were reportedly performed ber of Tourism acknowledging the institution’s nota- on an ad hoc basis, lacked transparency, and served ble contribution to developing Peru’s tourism sector. a tax collection—rather than a regulatory—func- More importantly, as a result of the success of the The number of licenses tion. Accordingly, the team’s technical assistance sup- WBG project, the team was asked to build client issued by project ported the implementing agencies in aligning their capacity to implement similar reforms in other Peru- pricing policies with international good practices by vian cities, this time without WBG’s technical assis- completion in 2016 was rendering fees affordable for local firms while at the tance. Currently, similar reform activities are under same time ensuring cost recovery that would support way in five additional cities in the Cusco region, 70 percent higher than sustainable service delivery. Additionally, the number employing the same methodology and approach. the number of licenses of licenses issued by project completion in 2016 was 70 percent higher than the number of licenses issued An innovation of the WBG strategy was its partner- issued in 2014, a strong in 2014, a strong indicator of increased formalization ship with the Destination Management Organiza- and compliance. tion of Cusco (DMO), a public-private nonprofit indicator of increased organization promoting sustainable development in The reform’s notable impact on the private sector Cusco, and with other public and private stakehold- formalization and is also supported by anecdotal evidence. For ers. During implementation, the WBG built capac- example, before the reform, a leading operator in compliance. ity in the DMO to further expand reforms in other Cusco’s hospitality sector reported taking a total locations in Cusco. The DMO is currently imple- of eight years to realize a project from inception to menting a project, financed by SECO, to introduce completion, primarily due to excessive bureaucracy. simplified licensing reform in five additional district Following the reform, another leading operator municipalities in Cusco, using the WBG project’s in the hospitality sector reported taking a total of design, methodology, and delivery model. six months for a project of about the same size. Evidently, measuring the benefits of such reforms At the national level, the project supported the narrowly in terms of compliance cost savings at the creation of a one-stop shop, currently being imple- firm level can tell only part of the story. Facilitat- mented by the Ministry of Tourism and Foreign ing investments and addressing inefficient service Trade. The project offered valuable insights for the delivery can yield spillover effects and generate WBG team as well, and similar projects are now broader benefits for local employment, businesses, being rolled out in other countries, such as Benin, and tax revenues that are more difficult to capture drawing on Peru’s experience. INSIGHTS FROM SELECTED COUNTRY EXPERIENCES 33 ENDNOTES 15 For more information, see https:// www.ontario.ca/page/2016-burden- 1 In 2012 dollars. reduction-report#foot-2 (last visited 2 Canadian Federation of Independent Business, on January 24, 2017). “Rated R: Prosperity Restricted by Red Tape” 16 “A Plan for Economic Growth and Jobs,” (2005). World Business Chicago (March 2012), p. 33. 3 Ibid. 17 Metropolis Strategies, analysis of 2007 4 For example, see a series of studies carried out Census of Governments Data. by the Fraser Institute on Canada’s regulatory 18 Study by the Institute for Justice Clinic on burden. Entrepreneurship. 5 http://www.bcbizpal.ca. 19 Illinois Chamber of Commerce, Opportunities 6 “Case study: Industry Canada BizPaL”; see and Challenges of Doing Business in Illinois: http://www.ctlabs.ca/client-sectors/government/ A Survey of Illinois Commercial and Industrial case-study-industry-canada-bizpal/ (last Real Estate Agents and Brokers: 2008. visited December 19, 2016). 20 “A Plan for Economic Growth and Jobs,” 7 Canadian Federation of Independent World Business Chicago (March 2012), Business, “Canada’s Red Tape Report—With p. 46. U.S. Comparisons” (January 2013). (Note: 21 An initiative funded by the Bloomberg estimate is in 2012 prices.) Philanthropies, based out of the Mayor’s 8 A survey of regulatory compliance costs by Office, tasked with bringing innovative and Statistics Canada found that businesses with more informed solutions to local governance fewer than 20 employees were disproportion- and service delivery challenges. ately affected by compliance; a small business 22 City of Chicago Press Releases, Mayor’s Press with one to four employees incurred at least Office, July 14, 2011. seven times more cost per employee than did 23 “Chicago Licensing and Permitting Reform” larger counterparts (i.e., those with 20 to (Paper Series: Regulatory Reform for the 99 employees). 21st Century City, Ash Center for Demo- 9 Horizontal partnerships refer to collaboration cratic Governance and Innovation, John F. between municipalities; vertical partnerships Kennedy School of Government, Harvard refer to collaboration among local governments University, January 15, 2015). and authorities at the provincial/territorial and 24 Ibid. federal levels. 25 Ibid. 10 “Evaluation of Industry Canada’s BizPaL 26 Sean Thornton, “Regulatory Reform in Service, Final Report” (March 2011). Chicago: A Discussion on Innovation” 11 More specifically, the Steering Committee (Paper Series: Regulatory Reform for the included a representative from each province/ 21st Century City, Ash Center for Demo- territory, a representative from local govern- cratic Governance and Innovation, John F. ment from each province/territory, a represen- Kennedy School of Government, Harvard tative from Industry Canada, and a member University, April 8, 2014). representing all other different participants. 27 “Governing the States and Localities”; 12 According to a recent evaluation report, see http://www.governing.com/blogs/bfc/ the NBO is exploring the possibility of col-ideation-innovation-delivery-teams- moving to a transactional model. For more four-directions.html. information, see https://www.ic.gc.ca/eic/ 28 NYU Wagner Innovation Labs, “Getting site/ae-ve.nsf/eng/h_03810.html (last to Innovation: How Cities Are Rethinking visited January 24, 2017). Municipal Governance” (October 2012). 13 For more information, see https://accessto 29 Thornton (2014). business.snsmr.gov.ns.ca/a2b_web/portal/ 30 “Chicago Licensing and Permitting Reform” industryBundleStartUp.jsf (last visited (2015). February 24, 2017). 31 For more information, see https:// 14 For more information, see https:// www.chicago.gov/city/en/depts/bacp/sbc/ www.youtube.com/watch?v=BHJEDC-ej4E business_licensing.html. and https://www.youtube.com/watch?v= 32 For more information, see https://webapps1. 5kYqwH8UU_Y. cityofchicago.org/AccountServices/login.jsp. 34 BUSINESS LICENSING REFORMS 33 For more information, see https://webapps1. 47 The Public Service Infrastructure refers to a cityofchicago.org/AccountServices/ public centralized software designed to sup- contactUs.jsp. port the delivery of government services. 34 “Chicago Licensing and Permitting Reform” 48 Singpass is a common password used by (2015). citizens to transact business with government 35 Unless exempted, a public entertainment or departments online. arts entertainment license is required under 49 Teo and Koh (2009). the Public Entertainments and Meetings 50 Periasamy and Sia. (PEM) Act, Chapter 257, for any entertain­ 51 Anita Mittal, “Case Studies on E-Governance ment provided in any place to which the in India: E-Biz.” (2013–2014). public or any class of public has access, 52 For more information, see https://licence1. whether gratuitously or otherwise. For more business.gov.sg/. information, visit https://www.police.gov.sg/ 53 The Regulatory Guillotine is a technique for e-services/apply/licenses-and-permits/ rapidly reviewing a large stock of existing regu- public-entertainment/important-notice. lations and eliminating those deemed obsolete, 36 Jeannie Chua, “National Strategies to Harness without the need for lengthy and costly legal Information Technology: The e-Transformation action on each regulation. The core principle Journey of Singapore” (November 2011). of the Regulatory Guillotine is that regula- 37 K. Pelly Periasamy and Siew-Kien Sia, tions not required to meet the future policy “Challenges in Delivering Cross-Agency needs of market-led development or not justi- Integrated e-Services: The OBLS Project,” fied as legal, are eliminated. Any regulation Nanyang Business School, Nanyang that is needed but is not business-friendly will Technological University, Singapore be simplified to the extent possible. (November 2007). 54 PEMUDAH’s composition is dynamic. For 38 The Committee of Permanent Secretaries is example, in 2016 it comprised of 15 heads of Singapore’s highest civil service committee and government ministries and 10 leaders of the sets the agenda of the public sector reform Malaysian business community. program. It comprises public officers appointed 55 PEMUDAH, Annual Report 2014: “Your by the president to head a ministry. Business Our Priority,” www.pemudah.gov.my. 39 See https://www.challenge.gov.sg/2003_06/ 56 The first phase involved reviews in five cover_story/gov.html (last visited February 22, ministries: Ministry of Rural and Regional 2017). Development; Ministry of Domestic Trade, 40 Thompson S.H. Teo and Tat Koon Koh, Co-operatives, and Consumerism; Ministry “Lessons from Multi-Agency Information of Energy, Green Technology, and Water; Management Projects: Case of the Online Ministry of Plantation Industries and Com- Business Licensing Service (OBLS) Project, modities; and Ministry of Federal Territories Singapore,” International Journal of Informa- and Urban Wellbeing. The second phase tion Management (2009). involved reviews in nine ministries: Ministry 41 Ibid. of Tourism; Ministry of Transport; Ministry of 42 Periasamy and Sia. Natural Resources and Environment; Ministry 43 K. Layne and J. Lee, “Developing Fully Func- of Housing and Local Government; Ministry tional e-Government: A Four-Stage Model,” of Finance; Ministry of Human Resources; Government Information Quarterly 18, no. 2 Ministry of Science; Ministry of Technology (2001): 122–36. and Innovation; and the Ministry of Informa- 44 Teo and Koh (2009). tion, Communication, and Culture. Lastly, 45 Ibid. the third phase of the project at the federal 46 In some exceptional cases where license level involved reviews in nine ministries: processing involved special clearance (e.g., for namely the Ministry of Works; Ministry of national security purposes), the license was Education; Ministry of Agriculture and retained at the agency level. In these cases, the Agro-Based Industry; Ministry of Inter- online application portals were maintained at national Trade and Industry; Ministry of the agency level and a hyperlink was included Higher Education; Ministry of Home Affairs; in the OBLS portal to redirect users. Ministry of Women, Family, and Community INSIGHTS FROM SELECTED COUNTRY EXPERIENCES 35 Development; Ministry of Youth and Sports; at the Capam 2016 Biennial Conference, and the Land Public Transport Commission. August 20, 2016). 57 PEMUDAH (2014). 61 These are Oil, Gas, and Energy; Financial 58 Thiruchelvam K., Aini Suzana, and Mazlan Ali, Services; Wholesale and Retail; Palm Oil; “Igniting Productivity Improvements in the Tourism; Electronics and Electrical; Busi- Public Sector: A Case Study on Organizational ness Services; Communications Content Innovation in Malaysia” (Perdana School of and Infrastructure; Education; Agriculture; Science, Technology, and Innovation Policy, and Healthcare. Also addressed are activities Universiti Teknologi, 2015). (Note that the in the Greater Kuala Lumpur/Klang Valley. estimated compliance cost savings amounted The 11 sectors account for almost one-third to RM729.2 million, or US$172 million at the of Malaysia’s total gross domestic product, exchange rate of US$1 = RM4.26 at the time while the urban agglomeration in the Greater the report was written.) Kuala Lumpur/Klang Valley is considered a 59 Government of Malaysia, Annual Report on potential driver of economic growth. Modernization of Regulations (2016). 62 World Bank Group, “Peru: Easing Business 60 Datuk J. Jayasiri, Ministry of International Regulations in One of the World’s Most Trade and Industry, “Good Regulatory Famous Tourist Destinations” (World Bank Practice (GRP) in Malaysia” (presentation Group, Washington, DC, November 1, 2016). 36 BUSINESS LICENSING REFORMS