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 Cutting Red Tape: Simplification, SCM, and the Regulatory Guillotine™  

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“Give me a place to stand and with a lever I will move the whole world.” -- Archimedes 

Cutting through the jungles of rules is hard work that has defeated many reformers. Our innovative work tosimplify regulations and formalities has helped cut and simplify 25,000 regulations and formalities in 10countries, with $7.8 billion in annual cost savings to businesses. That is real change for people’s lives.  

Much of our work is simplifying government formalities and red tape to cut costs and reduce corruption. Wethen help build quality control mechanisms so that governments can continue to better design and implementformalities in future. Our work includes:

Simplification: Simplifying business licenses and other formalities such as in the Doing Business agendaAdapting the Standard Cost Model as a tool to measure operating costs to businessesRegulatory Guillotine™  reforms, large and smallBuilding registries of licenses, formalities and other forms of regulation to improve access to forms,procedures, and application processes by users such as businesses.

The need for the Regulatory Guillotine™  

What is the Regulatory Guillotine™? 

Speeding up the guillotine with the eGuillotine™ management software 

What are the results of the Regulatory Guillotine™?  

What Donors and Investors are saying about the Regulatory Guillotine™  

Links to guillotine reforms around the world 

The need for the Regulatory Guillotine™  

Governments everywhere face the difficult task of reviewing and updating the enormous accumulation of regulations and formalities – often, thousands or even tens of thousands -- that has built up over decades. Manyof these rules are outdated, fail to protect citizens, and drag down economic growth. The question we faced in

designing the guillotine method is this: How can review and simplification of many regulations be organized and carried out quickly, at low cost, and with the full participation of civil society? 

Guillotine reforms around the world 

Croatia’s

HitroRez

guillotine

reform 

Egypt’s

ERRADA

reform 

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The modern Regulatory Guillotine™approach was engineered by Jacobsand Associates in 2003 to meet thisneed, based on successful experiencesin OECD countries. It has beenrefined in several countries. (The

term Regulatory Guillotine is atrademark of Jacobs and AssociatesInc.)

What is the Regulatory Guillotine™? 

The guillotine is an orderly, systematic, transparent, rapid and low-cost means of COUNTING and thenRAPIDLY REVIEWING a large number of regulations against clear criteria, and eliminating those that are nolonger needed. It results in economically-significant regulatory cost reductions for businesses, either on a

government-wide scale or targeted at specific problem areas such as licenses or sectors. Extensive stakeholderparticipation helps to ensure that the reviews are realistic and factual.

Its core principle is that:

 Any regulation that is not successfully justified as legal and needed for future policy needs for market-led 

development will be eliminated, and any regulation that is needed but not business-friendly will be simplified to

the extent possible. 

The guillotine must have strong political leadership at the center of government. It is operated by a small,capable reform unit at the center of government set up especially for the guillotine. The HitroRez Unit inCroatia, the Project 30 Unit in the Office of Government in Vietnam, and the Working Committee on

 Regulatory Reforms for Business Activity in Kenya are examples of such units. The reform process works likethis:

The government rapidly counts all regulations or formalities affecting businesses. The inventory is placed into adatabase. In many countries, this is the first complete inventory of regulations.Each rule or formality is reviewed three times by civil servants in ministries, by business stakeholders, and bythe central unit.

Each rule or formality is reviewed against simple filters in a checklist format:Is it legal?Is it needed?Is it business friendly?Each rule or formality is placed into one of three categories: maintain, simplify, or eliminate.The Council of Ministers eliminates regulations not needed and simplifies regulations that are too complex.The remaining rules or formalities are placed into a permanent registry where users can find information,download forms, and apply for permits. This registry can be the basis for a One Stop Shop if desired.The reform moves from start to finish in 15-18 months.

The guillotine is almost never the end of reform, because the gains of simplification can easily be reversed by

new rules and formalities. Most governments have followed the guillotine by building new capacities for

Vietnam’s

Project 30 

Bosnia

Republic

Srpska’s

reform 

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Speeding up the guillotine with the eGuillotine™ management software 

The eGuillotine™ software is a flexible IT management tool that speeds up any broad regulatory reform andreduces its labor costs.

With SenseConsult, a Croatian firm, we have developed a software called the eGuillotine that assistsgovernments in effectively managing an inter-ministerial regulatory reform involving multiple licenses andparticipants, and that also establishes a communication channel for feedback from businesses about specific

licenses, and creates a basis for a public electronic registry (e-Registry) database of licenses with access overthe Internet for all businesses operating in a country.

For more on the eGuillotine software, go to http://www.e-guillotine.com/ . 

What are the results of the Regulatory Guillotine™?  

The guillotine eliminates and simplifies many regulations in a short period at low cost, while strengthening thegovernment’s ability to focus on regulations needed to protect health, safety, and the environment.

If the guillotine is successful, the costs and risks of doing business in the national economy will be visiblyreduced, improving competitiveness, investment, and job creation. South Korea, the 11th largest economy inthe world, reviewed over 11,000 regulations in 11 months and eliminated almost 50% of them, which was

projected to produce over 1 million new jobs and $36 billion in new FDI as a result of the lower barriers toentry and lower compliance costs on businesses.

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Summary of Results of Regulatory Guillotine Reforms in 10 Countries (July 2010)  

Type of review 

Targetrules 

Number of regulations

beforecleanup 

% of regulationseliminated 

% of regulationssimplified 

Economic gains 

Korea 

(11 months) 

Legality,Need, Cost 

Regulations  11,125  48.8%  21.7% 

1,066,200 new jobs 

Business cost savings:+4.4% of GDP/10 years 

$36.5 billion extra FDI over5 years1 

Mexico 

(9 months) 

Legality,Need, Cost 

Formalities  2,038  54%  27% 

Kenya 

(18 months) 

Legality,Need, Cost 

Licenses andfees  1,315  24%  29% 

Savings to businessesestimated at US$ 146

million/year, or .06% of GDP2 

Moldova 

(6 months) 

Legality  Regulations  1,130  44.5%  12.5% 

Legality Fee-basedPermits 

400  68%  20.3% 

Ukraine 

(12 weeks) Legality  Regulations  14,000  36%  7,2% 

Bosnia /RS 

(4 months) 

Legality, Need  Formalities  331  27%  42%  Direct savings to businessestimated at US$ 2

million/year, and indirectsavings of US$ 13

million/year3 

Legality  Inspections  2,473  43%  31% 

Croatia 

(9 months) 

Legality,Need, Cost 

BusinessRegulations 

1,451  15%  10% 

Savings of US$ 65.6million/year. or 0.13% of 

GDP4 (actuallyimplemented) 

Serbia 

(XXX) 

Legality,Need, Cost 

Formalities,including

local levels ??  ??  ?? 

US$ 106 million (includingrecommendations from

local level implemented atnational level)5 

Montenegro 

(xxx) 

Legality,Need, Cost 

Business

Regulationsat municipal

level 

??  ??  ?? 

Municipalities only US$ 4

million if allrecommendations are

implemented6 

Vietnam 

(3 years) 

Legality,Need, Cost,

WTO impact 

Allprocedures at

all levels of government 

5,700  Underway  Underway 

Cost savings for first 268formalities estimated atover $300 million/year7 

1. Projection, using input-output tables, as cited in Byungki Ha, 1999, Economic Effect on Regulatory Reform in Korea, Seoul, Korea Institute for IndustrialEconomics and Trade. 2. Measuring Impacts: Monitoring and Evaluation of the Government of Kenya’s Business Licensing Reform. Study conducted by Jacobs andAssociates, July – October 2008 under FIAS Contract in Support of FIAS/World Bank Group's Kenya Regulatory Performance and Capacity Building Program. Finaldraft report October 2008 3. http://limun.hr/en/main.aspx?id=560374&Page=1 4. An evaluation of the SCM measurements done as part of the regulatory reform work in Croatia, Final draft report, 5 June 2009, Report submitted by short term consultant Peter Bay Kirkegaard. Prepared under contract with FIAS/World Bank Group.

5. Staff estimates 6. Staff estimates 7. Estimates made by Office of Government, Vietnam

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 What Donors and Investors are saying about the Regulatory Guillotine™  

“Project 30 has proven very efficient in taking stock of the complexity and in defining the content of simplification measures.” OECD Deputy Secretary General Mario Amano, November 2010(http://en.baomoi.com/Info/Big-admin-hurdles-still-remain/3/87495.epi)

“A top-down, comprehensive reform process, similar to the so-called “guillotine”… approaches…. [T]here ismuch to be gained from a comprehensive approach that targets the whole licensing system. [O]n efficacy

grounds, bold successes are more likely when not giving in to special interests.” How to Reform BusinessLicenses, IFC/World Bank Group, June 2010 

“A government regulatory reform programme in Croatia known as Hitrorez or “the guillotine” receivedworldwide acclaim at the Capacity is Development Global Event  for enhancing the country’s economiccompetitiveness, decreasing costs for doing business and including the private sector in the design of regulatoryframeworks.” UNDP, 18 March 2010 

“The Serbian Association of Employers is appealing to the Ministry of Economy and Regional Developmentand the government over all to speed up process of Regulatory Guillotine in order to help Serbian economy tocut cost in yet another hard year for the business.” Serbian Association of Employers, Belgrade, February

24, 2010 (http://www.poslodavci.rs/?page_id=10)

“The Foreign Investors Council strongly supports … the initiative to launch the project of the regulatoryguillotine to … help present investors in their everyday business and encourage new directinvestment.” Foreign Investors Council, Serbia, 2008 

“The guillotine is “…a fast-track approach that can deliver short-term results This combination of simplicityand speed, and the results already achieved, provide a relatively promising foundation for the reform, and forusing its achievements as a stepping stone for further regulatory reforms.” -- Business Licensing Reform: AToolkit for Development Practitioners, World Bank, 2006 

“Evidence compiled to date suggests that guillotining can be an effective means of reducing needless bureaucracy and achieving a more carefully considered regulatory system.” -- Best Practice Guide for aPositive Business and Investment Climate. Organization for Security and Co-operation in Europe(OSCE), 2006 

“Application of the Guillotine Law is one of the most significant events in the reform process since Moldova’sdeparture from the USSR.” USAID Frontlines, February 2006 

“Reduction by regulatory guillotine of business licenses in Kenya … is a key result that will contribute toreducing the cost of regulation of the private sector in Kenya , and toward improving transparency and fighting

corruption.“ Demba Ba, Head, Africa Region’s Private Sector Development Group in the World Bank(June 2006) 

Links to guillotine reforms around the world 

General sources on the regulatory guillotine 

USAID Business Enabling Environment: "Top-Down" Approaches

http://apps.develebridge.net/amap/index.php/Types_of_Approaches

IFC Guillotine Approach 

http://www.fias.net/ifcext/fias.nsf/Content/BRG_Bibliography_Toolsimproveexistingreg_Guillotine  

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 Vietnam 

Vietnam Project 30 Administrative Simplification Reform

http://www.thutuchanhchinh.vn/index.php/?language=en  

Bosnia 

Bosnia Srpska Republic Registry of Approvals and Inspection Procedures

http://www.regodobrenja.net/index.php?akc=sadrzaj&id=1&jezik=3  

Business Community Greets Regulatory Guillotine in RS

http://www.usaidspira.ba/news2.php?nid=4

Egypt 

ERRADA (Egyptian Regulatory Reform and Development Activity)

http://www.errada.gov.eg/  

Croatia 

Croatia HitroRez (Rapid Cut) Reform

http://www.hitrorez.hr/  

The Regulatory Guillotine™ Strategy: Preparing the Business Environment in Croatia for Competitiveness in

Europe (USAID, December 2005)

http://pdf.usaid.gov/pdf_docs/PNADG614.pdf  

UNDP Top Prize for Croatia Guillotine (February 2010)

http://europeandcis.undp.org/gender/show/AECA8C17-F203-1EE9-B59522FEC109F58E  

Croatian approach to estimating administrative cost savings from regulatory guillotine project (2010)

http://www.senseconsulting.eu/en/articlecontent.php?id=10&what=insights&src=home  

Improving Business Regulations in South East Europe. Monitoring and Evaluating better business regulations:Croatian approach. OECD: Second Working Group meeting. Vedran Antoljak, Sense Consulting, Vienna,Austria, 2-3 April 2008

www.oecd.org/dataoecd/3/36/40469467.pdf 

Moldova 

Egyptian Reformers Learn from Moldova's Success (2009)

http://www.usaid.gov/locations/europe_eurasia/press/success/2007-11-18.html  

Montenegro 

Montenegro implements “Regulatory guillotine” project (Dec 2009) 

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http://www.mrt.com.mk/en//index.php?option=com_content&task=view&id=7861&Itemid=28

Serbia 

Serbia's regulatory guillotine (Oct 2009, Public Service Review: European Union - Issue 18)

http://www.publicservice.co.uk/article.asp?publication=European%20Union&id=402&content_name=Overview&article=12793 

Kenya

Kenya’s Radical Licensing Reforms, 2005-2007: Design, Results, and Lessons Learned, by Scott Jacobs, PeterLadegaard, and Ben Musau, October 2007

http://www.ifc.org/ifcext/fias.nsf/AttachmentsByTitle/FIAS_BRG_KenyaRadicalLicensingReformsPaper/$FILE/Kenya+Radical+Licensing+reforms_paper.pdf  

PUBLIC CONSULTATION ON BUSINESS LICENSING REFORMS. THE WORKING COMMITTEE ONREGULATORY REFORMS FOR BUSINESS ACTIVITY IN KENYA

www.tradeandindustry.go.ke/documents/licence.pdf