enhancement of the business environment in the iii...public administration responsive to sme needs....

The European Union’s project for ENP South Countries EUROPEAID/133918/C/SER/MULTI

This project is financed

By the European Union

A project implemented by

GIZ IS and Eurecna

Enhancement of the Business Environment in the Southern Mediterranean

SME TEST FOR JORDAN

Final report

Prepared by: Professor Edward Donelan

March 2016

Disclaimer

This report has been prepared with financial assistance from the European Commission. The opinions expressed herein are those of the authors and may not represent the position of the Commission.


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ACKNOWLEDGMENTS

This report has been prepared with European Union funding as part of the implementation of the EU project for the Enhancement of the Business Environment in the Southern Mediterranean (hereafter called EBESM). The preparation of the Report included the dissemination and collection of answers to a questionnaire as well as a series of interviews conducted with officials. The project was managed by the EBESM Team Leader and logistical support was provided by Jordan Enterprise Development Cooperation’s (JEDCO).

Special thanks are due to Mr. Basheer Salaytah, JEDCO, Mr. Eyad Barakat, and Attorney – at- Law, to those who completed the questionnaires and were interviewed and to those who attended the workshop for the purpose of the preparation of the Report


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TABLE OF CONTENT

1. INTRODUCTION AND CONTEXT OF THIS REPORT ............................................................. 5

Jordan 5

This Report ............................................................................................................................ 6

2. SME STRATEGY IN JORDAN ......................................................................................... 9

2.1 Sources of new Policies in Jordan ............................................................................. 9

2.2 Typical steps in the policy process ............................................................................10

2.3 Steps in the policy process in Jordan ........................................................................11

3. SME TESTS GENERALLY .............................................................................................11

3.1 SME Test for Jordan .................................................................................................11

3.2 The simple SME Test ................................................................................................12

3.3 Entity to Support Development and Implementation of the SME Test .......................19

3.4 Suggested strategy for rolling out of SME Test .........................................................20

4. RECOMMENDATIONS ...................................................................................................21

APPENDIX A ..........................................................................................................................23

APPENDIX B ..........................................................................................................................24

APPENDIX C: .........................................................................................................................26

APPENDIX D ..........................................................................................................................28

APPENDIX E ........................................................................................................................29

APPENDIX F ...........................................................................................................................32


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1. INTRODUCTION AND CONTEXT OF THIS REPORT

Small and Medium Enterprises (SMEs) are the backbone of any economy and are a crucial engine of growth in any economy. Given the large number of SMEs, encouraging and nurturing their growth and development should be a priority for The Hashemite Kingdom of Jordan (Mamlakah Al-Urduniyah Al-Hashimiyah) (in this report referred to as Jordan).

One of the many challenges facing SMEs in Jordan is their administrative, legal and administrative environment. This Report proposes a tool to assess the impact of new legislation on SMEs so as to improve the legal and regulatory environment. The Tool, proposed for Jordan draws inspiration from tools used in developed economies, especially those used by the European Commission and the United Kingdom.

This report was written as part of a wider project, namely, the “Enhancement of the Business Environment in the Southern Mediterranean” project (henceforth called the EBESM project) is a partnership between the European Union (EU) and the South European Neighbourhood (ENP-South) region composed of ten countries namely, Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Palestine, Syria1 and Tunisia. It contributes to addressing Micro, Small and Medium Enterprises (MSMEs) development at the macro level and aims to foster the development of a favourable business environment. This project was initiated in January 2014 and is planned to end on 31 January 2017.

The project’s overall objective is to contribute to the improvement of the business enabling environment for MSMEs in the ENP-South region in line with best European and International practices, in particular the Small Business Act for Europe (SBA). This is expected to expand the private sector through the development of more robust, inclusive and sustainable growth.

A regional seminar on the governance of the Small Business Act for Europe (SBA) was held on 17-19 March 2015 in Barcelona. This seminar aimed to improve the governance of SME policies and programmes based on principles 3 and 4 of the Small Business Act for Europe:

Think Small First; and

Public administration responsive to SME needs.

The regional seminar was based on the results and recommendations of the 2014 Assessment of the Implementation of the Small Business Act for Europe (SBA) in the Southern Mediterranean Region. It put the focus on three SBA governance issues: (i) Delegation of responsibility for enterprise policy (not only enterprise creation but also their growth and survival); (ii) Inter-governmental coordination; and (iii) Public-private dialogue.

JORDAN Following that Seminar, Jordan developed an action plan which foresees the development of the SME Test and its institutional integration within JEDCO2, the relevant agency in Jordan for SME policy. Overall, the Jordanian action plan3 aims to anchor the “Think Small Principle” in policy making and to promote SMEs' growth by helping them tackle problems which hamper their 1 The EU cooperation with government and public institutions from Syria is temporarily suspended.

3 The action plan is available via the following link: http://www.ebesm.eu/posts/regional-seminar- sba-governance

http://www.ebesm.eu/posts/regional-seminar-


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development. Legislation, administrative rules and procedures should be simple, easy to understand and to apply. SMEs' voice and interests should be taken into account at the very early stages of policy making in order to make legislation more SME friendly. According to the plan this objective will be achieved by establishing an SME Test unit that will be in charge of assessing ex ante the impact of new legislation on microenterprises and SMEs and to propose, when needed, improvements and amendments. The SME Test Unit will be established within the SME Observatory Department/Policy Support and Advocacy Directorate in JEDCO. This will reinforce JEDCO’s role and function in the area of SBA governance and MSME legal and regulatory environment enhancement. The action plan is in line with Jordan strategy as a National Entrepreneurship and SME Growth Strategy (2014-2018) has been recently developed by JEDCO and is currently being implemented. In addition, Jordan is very much concerned with developing Better Regulations for enterprise development. The mandate to develop a RIA application system has been assigned to the Economic and Social Council established in 2009. An evaluation and Impact Assessment Unit was established in 2012 and pilot applications have been conducted with the support of the Ministry of Planning and International Co-operation and the European Union4. THIS REPORT This Report was prepared following a mission in January 2016 where officials and business interests were interviewed with a view to forming an up to date picture of the situation in Jordan and progress with such issues as the introduction of Regulatory Impact Assessment.

As a result of those interviews, the experts charged with writing a report gave further thought to a number of issues such as what would be the best type of test to be recommended for Jordan and how a policy of using the tool could be implemented to ensure its sustained use. With these objectives in mind, the report proposes a selection of institutional alternatives to those initially proposed by the JEDCO strategy. It is ultimately up to the government of Jordan to make the final policy choices in relation to the introduction of MSMEs.

The JEDCO strategy recognised that the creation of some kind of entity within an institution will be needed to ensure the use of the Tool and its sustainability. That entity will need to implement the Strategy proposed by this Report or a variation of it. It will be necessary also for that institution to:

(i) provide training in the use of the tool,

(ii) technical assistance while the Tool becomes embedded in the day- to-day work of the Public Administration,

(iii) quality control of the use of the Tool

(iv) regular monitoring of the implementation of the Strategy.

(v) an annual evaluation of the implementation of the Strategy set out in a report to (the Parliament: to Government).

Definitions

This Report uses a number of technical terms which may have different meanings in different contexts for different purposes. To assist the reader, these terms defined as follows:

“Compliance costs” means the direct additional costs of trying to meet government

regulation.

4 For more information, see the EC-OECD 2014 assessment report, page 249.


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“JEDCO” means the Jordan Enterprise and Development Corporation.5

JOD (Jordanian Dinars)

“Legislation” includes primary legislation, i.e., laws passed by parliament and

secondary legislation, i.e., regulations, decrees, bye – laws and similar instruments.

“MSME” Micro Small and Medium Enterprises.

“Regulation” includes secondary legislation and any instrument of government policy

that regulates any aspect of an economy or a society. Regulation can take many

forms: legal restrictions promulgated by a government authority, contractual

obligations that bind many parties (for example, "insurance regulations" that arise

out of contracts between insurers or reinsurers and their insureds),[4] self-regulation

by an industry such as through a trade association, social regulation (e.g. norms),

co-regulation, third-party regulation, certification, accreditation or market regulation.

“RIA” means Regulatory Impact Assessment (Analysis). It is a tool used by policy

makers to provide a detailed and systematic appraisal of the potential impacts of a

new regulation in order to assess whether the regulation is likely to achieve the

desired objectives in an efficient and effective manner. It is essentially a cost benefit

analysis study. There is no single model to undertake it properly. Regulation

commonly has numerous impacts. These are often difficult to foresee without

detailed study and consultation with parties likely to be affected before, during and

after the introduction of proposed new legislation. It can be seen as a structured

approach to addressing a policy problem and involves a series of logical steps that

include: problem definition, analysis of alternative solutions to problem (regulation,

incentives, education), an analysis of the costs and benefits of each alternative to

decide the most efficient and effective solution to the policy problem.

“SME” means Small and medium-sized enterprises (SMEs; sometimes also small

and medium enterprises) or small and medium-sized businesses (SMBs) are

businesses whose personnel numbers and turnover range within certain limits.

The European Commission defines SMEs by reference to the following structure:

Company category Employees Turnover Balance Sheet Total

Medium-sized < 250 ≤ €50 m ≤ €43 m

Small < 50 ≤ €10 m ≤ €10 m

Micro < 10 ≤ €2 m ≤ €2 m

At the time of writing of this report, there are a variety of definitions for SMEs in Jordan. For example, the Central Bank of Jordan issued a circular to the licensed banks under its letter No. 10/5/436 on 11/1/2011, and the Ministry of Industry and Trade under its letter number 31/16/2/13458 on 22/9/2005 which provides a definition for MSMEs for industrial enterprises only and circulated it to all ministries to duly implement it.

5 It is a body that is overseen by a Steering Committee headed by H.E. Minister of Industry and Trade and is equally comprised of representatives from both the public and private sectors.

https://en.wikipedia.org/wiki/Law

https://en.wikipedia.org/wiki/Government

https://en.wikipedia.org/wiki/Industry_self-regulation

https://en.wikipedia.org/wiki/Trade_association

https://en.wikipedia.org/wiki/Social_control

https://en.wikipedia.org/wiki/Norm_(sociology)

https://en.wikipedia.org/wiki/Business


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The Ministry of Industry and Trade have the following classifications for industrial enterprises:6

Classification Capital (JOD) Number of Employees

Micro Less than 30 000 1 – 9

Small 30 000 10 – 49

Medium 30 000 50 – 249

Large 30 000 250 and above

The Jordan National Entrepreneurship and Small and Medium Enterprise (SME) Growth Strategy – 2014-15 / 2018-19 proposes the following classification of SMEs:

Microenterprise – Fewer than 5 permanent workers.

Small enterprise – 5-49 permanent workers.

Medium enterprise -50-249 permanent workers.

Support for SMEs

Economic growth and job creation in any given country depends on a countries capacity to support the growth of enterprises. Entrepreneurship creates new companies, opens up new markets, and nurtures new skills. The most important sources of employment in many countries are Small and Medium-sized Enterprises (SMEs).

The Institutions of the EU and many OECD countries have adopted tests for assessing the impacts of new regulations on SMEs. They have also adopted Regulatory Impact Assessment (RIA) as a tool for assessing the impact of new regulations on the economy, society or specific aspects of the economy and society. RIA is of growing importance for the formulation of public policy and the preparation of new legislation.

It should be noted that the European Commission (EC) and the World Bank include the use of RIA as an indicator of the extent to which good regulatory practices are in place in their evaluation of SME policies and the ease of doing business in a particular country.

In the European Union (EU), the European Commission has set itself the objective to encourage people to become entrepreneurs and also make it easier for them to set up and grow their businesses. It is widely understood that government regulations can impose disproportionate administrative burdens on small and medium enterprises due to the fact that implementation costs are higher for SMEs than for large companies.

In Jordan, MSMEs represent (99%) of all employers and (52%) of the private work force and provide virtually all the net new jobs and provide (51%) of private sector output and (96%) of all export of goods. Jordan depends almost entirely on small and medium- sized companies to drive its economy. About (98%) of all businesses in Jordan are classified as SMEs, two third of which have less than (19) employees.7

6 JEDCO report SME Development in Jordan

7 This information was mentioned in interviews. .


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Progress in Jordan Work is taking place to:

reinforce the Policy Support and Advocacy Directorate at JEDCO by institutionalising a separate Public Private Dialogue Department,

establishing an SME Test within the SME Observatory Department in the Policy Support and Advocacy Department of JEDCO.

Work also needs to take place to develop a Regulatory Impact Analysis Unit (RIA) and make progress with the use of RIA in Jordan.

2. SME STRATEGY IN JORDAN

A Strategy for the development of SMEs has been developed by JEDCO on March 2015 and submitted to the ministerial cabinet in January 2016 for endorsement. The main goal of this policy is to foster job creation and income generation by promoting the entry of new start-ups and improving the performance and growth of existing Micro, Small, and Medium Enterprises (MSME)8 to elevate the contribution of this sector to Jordan’s economy.

One of the goals of the Strategy, developed by JEDCO, is to reduce or at least ease the legal and regulatory burden on SMEs. This will be accomplished in five ways:

1) The development of a better understanding of the impact of new legislation and regulatory requirements for MSMEs

2) The development of a tool to test the impact of new regulations on MSMES, 3) The review of the stock of legislation to eliminate unnecessary burdens, 4) The simplification of administrative and regulatory obligations for SMEs and MSMES. 5) A change in culture amongst officials concerned with the development of new

legislation to ‘think small first’ and consider the implications of new laws for small businesses and ensure that policy goals can be reached with a minimum of unnecessary burdens.

This Report is, primarily, proposes a simple test for the impact of new regulations on MSME’s. The proposed test is based on a wide reading and observations of similar tests in other countries and the institutional settings for such tests. This Report makes reference, as needed, to other issues relating to how to ease the legal and regulatory burden on MSMEs. It also urges the coordination of all these issues and the raising of awareness in all parts of Government and Jordanian society of the importance of SMEs and to make every effort to ensure the growth of the sector.

In order to understand where a SME Test would best fit with current activities in Jordan to implement policies by means of new legislation, it is worth stepping back for a moment to consider the sources of policy decisions, the sources of new legislation and the typical steps in policy processes internationally and those used in Jordan.

2.1 SOURCES OF NEW POLICIES IN JORDAN

8 L. Stevensons, Jordan national entrepreneurship and Small and Medium enterprise (SME) growth strategy,

2014/15-2018/2019, The preparation of this document was funded by the European Union (EU) within the framework of the “Providing Long-Term Technical Assistance to Jordan Enterprise Development Corporation to Support the Implementation of the Support to Enterprise and Export Development Programme (SEEDP).


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Following typical international practices, the sources for the development of new legislation in Jordan are diverse. Sources of ideas for legislation are unlimited. Proposals for new policies originate in many diverse quarters. The King may form the view that there is an issue which can best be resolved by the development of new legislation. Ideas may arise during an election campaign. There may be a need for amendment to or repeal of an existing law or the enactment of a statute in an entirely new field. As part of the day-to-day work of government, proposals may arise. Pressure from think tanks and similar institutions stimulates the need for new legislation. International Treaties and Trade Agreements also give rise to new legislation. The promotion of social welfare, the development of economic progress, ensuring that the market works efficiently and the protection of the environment and the protection of health and safety all stimulate the need for new legislation. All of these changes create winners and losers and impose burdens on the State, on individuals and on business. These burdens fall disproportionately on SMEs as compliance with them takes time and energy which could otherwise be used for the creation of goods or the delivery of services.

2.2 TYPICAL STEPS IN THE POLICY PROCESS

Internationally recognised policy making processes involve similar steps in the development of new legislation. These steps include:

1) An initial assessment of what is the policy problem and how the solution to the policy problem can be solved whether by new legislation, an amendment of existing legislation, the creation of an incentive, an educational programme or otherwise.9

2) In EU and OECD countries, this assessment is undertaken with as much consultation with the stakeholders as possible. The choice of stakeholders depends on the type of proposal, for example, if the consultation concerns standards for pharmaceutical products the pharmaceutical industry would be consulted. If the consultation concerns the development of new proposals on child safety seats in cars the stakeholders would be the makers, importers and sellers of such products and the general public.

3) The next step is the generation of alternatives to the need for legislation. Given the complexity of legislation already in place and the costs related to enforcing and implementing legislation best international experience suggests that alternatives to legislation should always be considered.

4) Some sort of cost benefit analysis should be undertaken to assess the costs of different approaches to solving the policy problem and gain an understanding of the costs for the public administration of the new laws and the benefits and the costs for those to whom the new laws will apply and benefits to society, the economy or the environment.

5) Once the policy is decided the policy is converted into legislation through the use of specialist lawyers who perform no other function (common law model) or by the official(s) concerned with the policy formulation usually in consultation with the legal department of the Ministry or the legal adviser to the Government.

6) A review of the proposed law is then made by a technically competent body before it is submitted to the Cabinet of Ministers.

9 http://www.oecd.org/gov/regulatory-policy/42245468.pdf OECD REPORT: ALTERNATIVES TO

TRADITIONAL REGULATION. The search for alternatives to regulation is a powerful tool to ensure the quality of regulation. This requires testing whether to regulate is the best appropriate form of policy action.

http://www.oecd.org/gov/regulatory-policy/42245468.pdf


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7) The policy and the draft legislation are then considered by the Cabinet before presentation to parliament or for signature by a Minister if the proposal is for secondary legislation (Bye-Laws, regulations and private laws).

Guidance is available on issues to be considered by regulators in developing policies, for example, see the Hampton principles set out in Appendix 1 to this report.

2.3 STEPS IN THE POLICY PROCESS IN JORDAN

This internationally recognised policy developed and law drafting process described above is broadly followed in Jordan with two important exceptions. Public consultation in Jordan is, at best erratic, and, at worst, incoherent and inconsistent. Secondly, little attention is paid to assessing the costs and benefits of different approaches to solving a policy problem and developing an appropriate regulatory solution.

There has been considerable investment by the EU and the international community in the task of developing RIA in Jordan. The efforts have largely failed and only a small number of RIA’S have been undertaken and the practice is not embedded in the public service or supported by any kind of advisory, training or support unit. The latter are considered essential to the success of RIA.

It is suggested that the initiative to introduce RIA into Jordan failed for three main reasons:

lack of a champion or political supporter powerful enough to introduce and

secure the continuation of the policy,

lack of institutional capacity in the Public Service to undertake RIAs,

lack of interest on the part of individuals responsible for the preparation of new

legislation.

The failure to introduce RIA into Jordan offers some valuable lessons for the development and use of the proposed SME Test.

3. SME TESTS GENERALLY

A SME test is, essentially, a process to ensure that proposed legislation (primary or secondary) will not impact disproportionately on SMEs.i It is a tool which involves testing the application of legislative proposals to determine their impact on SMEs. The implementation of the SME Test necessitates a change of culture and attitude amongst officials but it should not necessitate a substantial increase of personnel or the creation of a complex institution.ii The Test should form part of the normal policy making process and become an essential part of the skills and knowledge required by officials engaged in the preparation of new legislation and all others concerned with legislation including Ministers and the Parliament.

3.1 SME TEST FOR JORDAN

The use of the SME Test will require all officials preparing new legislation to ‘think small first’. Officials engaged in the preparation of new legislation need to understand that proposed legislation may impact disproportionately on SMEs. 10Therefore, they need to take account of this disproportionality in the application of new legislation and adjust the legislation, to the extent practicable, to have regard to the needs of SMEs and the burdens to be imposed on them.

10 See Appendix C for a draft template to be followed by officials


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A two step test is proposed for Jordan. The first step is that officials preparing new legislation to undertake a preliminary assessment of the impact of a proposed new law on SMEs. This will be a sort of intuitive analysis where officials ask a series of simple questions and make a qualitative analysis of what needs to be done.

If the preliminary assessment suggests that there will be a substantial impact of a proposed new law on SMEs, the second step will be to undertake a more comprehensive cost benefit analysis of the impacts of the proposed legislation. The test will take account of costs and benefits for the economy and society and take account of the costs and benefits for both the public sector and the SMEs concerned. These assessments should help ensure that the benefits of the proposal do not outweigh the costs.

3.2 THE SIMPLE SME TEST

For the first or simple SME Test, officials engaged in the task of developing new legislation need to ask themselves:

1) What is the problem to be solved?

2) Are there means to solve the problem other than the introduction of new legislation

and impose fewer costs on SMEs?

3) Will this proposal have an impact on MSMEs? If the proposal has an impact, specify

the sectors affected and what segment? Of MSMEs

4) If the proposal has an impact, roughly what will be its costs and benefits?

5) Are there any ways in which that impact can be reduced without adversely affecting

the objectives of the proposed regulation?

A more complete set of questions is set out in Appendix B to this report in the form of a

Template to be used by officials when assessing the impact of new policy proposals and

considering how they will impact on SMEs.

3.2.1 What is the problem to be solved?

Before a policy can be developed to address a policy issue, the problem must be given shape and boundaries.11 A well structured problem is one open to a solution. The best way to structure a problem is to break it into smaller well structured issues. To define a problem is to shape the options for a solution.12 For example, are you imposing a reporting requirement to gather data so as to understand ways to support a sector of the economy or as a disguised way of assessing enough tax is being paid by that sector or simply because someone has said in Parliament “there ought to be a law”.

3.2.2 Are there means to solve the problem other than the introduction of new legislation and impose fewer costs on SMEs?

There is a tendency amongst officials to seek to create a legislative solution to a policy problem without giving thought to alternative means to solve a policy problem. Alternatives to

11 Simon, H.A. 1973 ‘the Structure of Ill Structured Problems, Artificial Intelligence, 4-181 – 201 see also the

Australian Policy Handbook, Althaus and others (2007) 12

Australian Policy Handbook, Althaus and others (2007, p.52 - 53


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regulations provide opportunities to maximise the flexibility of regulations while still meeting the desired outcomes. The development of alternatives can also increase the level of business involvement to ensure that regulatory systems are designed effectively.

There are a number of well documented alternatives to prescriptive regulation. These alternatives include:

Codes of Conduct (a set of rules drawn up by an organization, for example those

involved in the advertising industry or the legal profession develop codes of conduct

to set norms and guidelines for the industry or members of the profession),

Performance based regulation, (for example, in the regulation of utilities such as

electricity incentives such as tax breaks are provided to strengthen the performance

of the service provided,

Standards, (the obligations laid down for the specification or design features of a

product. A law may prescribe in general that a product be “safe” leaving it to the

industry to develop a set of standards that it believes to meet the criteria of safety);

Tradable Permits, (these allow an industry to allocate between itself responsibility

for reducing emissions, for example, if one factory is allowed a certain level of

emissions but does not use its allowance it can sell the allowance to another factory

in the same industry)

Third party certification, (this is a method, for example, of allowing legal professions

to set their own certification process for entry and exit from the profession)

Education Program/Information strategies, (educational programmes or information

strategies can be more effective than tough threats of prosecution to achieve public

policy goals)

Risk based insurance, (insurance schemes are made available to compensate

victims of accidents from particular products or services rather than leaving the

losses to be compensated by litigation)

Rewarding Good Behaviour (this could include allowing some flexibility from some

rules if the individual or firm appears to be making an effort to comply generally with

the laws generally applicable to that individual or firm).13

3.2.3 Will this proposal have an impact on SMEs?

The answer to this question will depend on the type of legislation. For example, proposed legislation concerning family law is not likely to have an impact on SMEs. Answering this question involves making a broad assessment of the characteristics of the legislation and whether businesses or sector(s) likely to be affected and, if so, how?

Consideration needs to be given to the type of businesses likely to be affected. During this stage of the analysis, policy makers should establish whether SMEs are among the population likely to be affected by the new legislation. They should identify the characteristics of the businesses / sector(s) likely to be affected. Relevant sources of information should be explored including SME representatives. A non- exhaustive list of elements to consider, when applicable include:

13See www.wbginvestmentclimate.org/uploads/23.Queensland.pdf also www.oecd.org/gov/regulatory-

policy/42245468.pdf

http://www.wbginvestmentclimate.org/uploads/23.Queensland.pdf




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The number of businesses and their size (micro, small medium or large enterprises),

The proportion of the employment concerned in the different categories of

enterprises to be affected,

The weight of the different kind of SMEs in the sector(s) (micro, small medium or

large enterprises),

Links with other sectors and possible impacts on subcontracting.

Consultation

The task of addressing the issues referred to above will be made easier by systematic and consistent consultation14 with SMEs representatives. In order to achieve this goal, Jordan needs to develop a policy on public consultation which should be based on the following principles:15

Consultation documents should be clear, concise and include all necessary

information

As many stakeholders as practicable should be consulted16

There should be sufficient publicity supporting the consultation and the tools used

should be adapted to the stakeholders concerned

Sufficient time must be allowed for the consultation exercise to be effective

As far as practicable, collective or individual — acknowledgement of responses and

feedback should be provided.

3.2.4 If the proposal has an impact, what will be the costs and benefits of the impact?

Costs

Costs may be administrative or substantive. These terms are explained in the paragraphs below. It should be noted that the introduction of new regulations involves costs being imposed on both those who will be affected by them but also on the State which will have to enforce or otherwise secure compliance with them.

14 The use of consultation with stakeholders during the preparation of new regulations does not seem to be well developed in Jordan; A detailed analysis of the value of public consultation and the tools needed is beyond the scope of this report; Nevertheless, the success of a SME test is very dependent on the development of a better structured, more coherent and more consistent use of consultation.

15 The principles suggested here are based on those of the European Commission.

16 There are a variety approaches to how consultations can be undertaken from the simplest to advertisements in the press inviting comments on a new proposal to more complex discussions with stakeholders by means of face to face discussions with those most likely to be affected, Test Panels of entrepreneurs to check new initiatives in flexible and quick manner, Specific committees, Use of IT tools (on-line consultations, forums),


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Administrative costs

Administrative costs include costs to the public service in the administration of the proposed legislation as well as the costs to the enterprises that have to comply with the new legislation.

The costs to the enterprises affected include: the obligation to pay fees or duties and the question to be addressed is whether these costs are proportionate to the size of the business. An enterprise with a turn over of 1,000,000 JoD will not have a big problem paying a retainer to a lawyer of (1,000 JD a year) but this will be a significant sum for a micro enterprise.

Administrative costs are costs created by the obligation to provide information on the activities or products of the company including one-off and recurring administrative costs (e.g. resources to acquire or provide information). Costs arise also through the need for permits. In order to collect data on this issue, other ministries should be consulted as well as consulting with SME representatives. Issues to be considered at this stage are:

the number of businesses and their size (micro, small, medium or large enterprises)

the proportion of the employment concerned in the different categories of

enterprises affected

the weight of the different kind of SMEs in the sector(s) (micro, small and medium

ones)

links with other sectors and possible effect on subcontracting.

Substantive costs

Substantive costs are those imposed by the obligation to adapt the nature of the product or service to the new law. The adaptations may be requited to meet economic, social or environmental standards. For example, the purchase of new equipment, the training of staff or additional investments to be made to comply with the proposed legislation. The costs will depend on the nature of the obligation.

Policy makers should invest time and energy in understanding the nature and extent of the costs involved by the creation of a new obligation. They then need to evaluate the question of the necessity of imposing these costs on SMEs and whether or not the same result can be achieved in a less costly manner. It is reasonable, for example, to impose the obligation of making retail premises accessible to disabled people but it is reasonable to expect every small shop to adapt to the needs of the disabled?

Cost and impact comparisons

Cost and impacts identified for SMEs should be compared with those of large enterprises. For this purpose, one can for instance compare the costs to a firm of employing persons to undertake an administrative task. One could also compare the costs to the firm in relation to the total overhead or turnover of the company.

In addition, it would be useful to consider the following additional elements:

possible loss of competitiveness due to external factors such as the availability of

finance, tax regimes, access to resources or skills, etc.

possible changes in the behaviour of competitors, suppliers or customers


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possible impacts on barriers to entry, competition in the market and market

structure, for example, in terms of possibilities for SMEs to enter markets

possible impact on innovation, understood as both technological and non-

technological innovation (process, marketing, etc.)

benefits, if applicable, coming from the proposal (burden reduction, improved

productivity and competitiveness, greater investments or innovation etc.).

Officials proposing new legislation need to weigh costs against the benefits. If a cost/benefit analysis shows that SMEs are facing a relatively higher burden, one might consider the use of SME specific measures in order to ensure a level playing field and the respect of the proportionality principle. When the analysis made under the previous section shows that SMEs are disproportionately affected or disadvantaged compared to large companies then action should be taken.

In cases where the simple test suggests to the officials preparing legislation that there will be significant costs and benefits arising from the proposed legislation it may be necessary to move to the second step which is a Cost Benefit analysis of the proposal in relation to SMEs.

Cost–benefit analysis (CBA)

CBA is a systematic approach to estimating the strengths and weaknesses of proposed courses of action for calculating and comparing benefits and costs of a government policy. Ideally, for each policy proposal alternatives should be generated so that some sort of sense of what is the best value for money. The first solution that comes to mind is rarely the best solution.

In a CBA, benefits and costs are expressed in monetary terms, and are adjusted for the time value of money, so that all flows of benefits and flows of project costs over time (which tend to occur at different points in time) are expressed on a common basis in terms of their "net present value."

The exact form and approach of the CBA to be included in the SME Test is a matter for decision for the entity which will be responsible for the SME Test, bearing in mind the skills and knowledge available in the Jordanian public service and the realities of what is practicable. The exact approach should be developed incrementally by means of a series of pilot projects as suggested later in this Report. The road testing of the proposed SME Test during the Workshop in March will be a good start to consultation on the issue of the best form of the CBA. It will also be an interesting test of the capacities of the public service in Jordan to assist in the development and application of the SME Test.

Benefits

There is no commonly agreed taxonomy of regulatory benefits although the comprehensive study undertaken by the EBESM project17 recommends a convenient classification into two categories: Direct Regulatory Benefits and Indirect Regulatory Benefits.

A Direct regulatory benefits.

The improvement of the well-being of individuals, which in turn encompasses health, environmental and safety improvements; and

17 See Benchmark Study developed for this project.

https://en.wikipedia.org/wiki/Cost

https://en.wikipedia.org/wiki/Government_policy

https://en.wikipedia.org/wiki/Time_value_of_money

https://en.wikipedia.org/wiki/Time_value_of_money

https://en.wikipedia.org/wiki/Net_present_value

https://en.wikipedia.org/wiki/Net_present_value


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Efficiency improvements, which include, notably, cost savings but also information availability and enhanced product and service variety and quality for end consumers.

B Indirect regulatory benefits:

Spill-over effects related to third-party compliance with legal rules (so-called “indirect

compliance benefits”);

Wider macroeconomic benefits, including GDP improvements, productivity

enhancements, greater employment rates, improved job quality etc.; and

Other benefits, which are difficult to measure in monetary terms include protection of

fundamental rights, social cohesion, reduced gender discrimination, international

and national stability, etc.

3.2.5 Are there any ways in which that impact can be reduced without adversely affecting the objectives of the proposed regulation?

There are four main approaches by which the impact of proposed legislation on SMEs can be reduced:

1. full exemption from the scope of the proposed legislation,

2. partial exemption from the scope of the proposed legislation,

3. simplification of the procedures for SMEs faced with new legislation or

4. amendments to existing legislation.

When assessing possible mitigating measures for SMEs, it is important that the costs this could produce for the Public Administration, as well as the costs to be imposed on SMEs, are also fully considered and included in the final assessment

Exemptions

In some cases, SMEs can be excluded completely from the scope of regulations. However, excluding SMEs from the scope of regulations should only be considered when the exclusion would not result in the undermining of the legislative or regulatory initiative. The exclusion should be justified by reference to whether or not the legislation can achieve its goals fully without their application to SMEs. For example, the exclusion of SMEs should not undermine fundamental rights or give an unfair competitive advantage to SMEs. The challenge is to determine what ‘fully’ means and the decision on what ‘fully’ means in this context is a matter of policy choice for Jordan.

The decision as to how SMEs can be excluded from the application of new regulations should be based on a proportionate assessment of factors such as the:

Risks arising from their exclusion, taking into account, for example, the share of

micro-enterprises in a particular sector, their specific needs (e.g., regarding legal

certainty or recruitment and skills) and the possible obstacles to growth that

"regulatory thresholds"

may introduce.

Negative impacts that coverage would have on them (direct cost increases, loss of

competitiveness etc.): the higher the negative impact (especially relative to costs),

the weaker the argument for the full application of the proposed law to SMEs.


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For example, if a proposed new law imposes an annual reporting requirement to a central body perhaps that requirement could be waived in the case of a SME. This is already the case with certain fiscal obligations whereby the tax authorities ignore the smallest of business activities as the cost of administering certain taxes exceeds the revenue that would be raised if the law is applied with full rigour.

A non-exhaustive list of issues to consider in this context might include consideration of:

complete or partial exemptions for SMEs or micro-businesses (e.g., businesses

below certain thresholds do not have to comply with certain specific obligations

when this does not invalidate the original purpose of the legislation),

temporary reduction or exemptions (e.g., transition periods during which SMEs are

exempted or longer intervals for certain obligations),

tax reductions or direct financial aid to compensate costs incurred provided this is

compatible with existing legislation (on competition or international trade),

reduced fees (e.g., for calculating and comparing benefits and costs of a

government policy when these fees are particularly high and/or represent a fixed

cost that would will be felt disproportionately by SMEs),

simplified reporting obligations for SMEs (e.g., in the area of statistics, explore

possible synergies with already existing reporting obligations),

specific information campaigns or user guides, training and dedicated help-

desks/offices (e.g., specific SME help-desks providing tailored information for small

businesses),

systematically consider general simplification initiatives which can particularly

benefit SMEs (e.g., possibility to use on-line facilities, simplified inspections).

Partial exemption, exclusion or simplification

A revision or simplification of a legislative proposal should be considered so as to take account of the needs of SMEs by reducing the burdens imposed by the proposal. The objective of the SME test is to minimise the administrative and legal burdens on SMEs. This is not to suggest that SMEs can avoid legal responsibilities but, instead, to ensure that where a legal duty is to be imposed by a new regulation the duty can be undertaken by the SME with the minimum of disruption to that enterprise and in a manner that is appropriate to its size.

Most laws have as their object or effect the improvement of social welfare, ensuring health and safety, promoting sustainable development and the protection of the environment. These issues need to be taken into consideration when considering partial exemption, exclusion or simplification. This requires a balance being struck between the objectives of the proposed law or amendment to existing law and the capacity and importance of SMEs complying with it. The decision as to the appropriate response will require the development of skills and judgement which will take time to develop. 18

18 See also http://ec.europa.eu/enterprise/entrepreneurship/support_measures/stakehold/index.htm

http://ec.europa.eu/yourvoice/ebtp/faqs/index_en.htm

https://en.wikipedia.org/wiki/Cost

https://en.wikipedia.org/wiki/Government_policy


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3.3 ENTITY TO SUPPORT DEVELOPMENT AND IMPLEMENTATION OF THE SME TEST

Given the experience of introducing RIA in Jordan, a modest proposal for the SME Tool should be adopted initially in Jordan. However, some form of entity will be needed to explain the concept to the government and its stakeholders, to select the projects and Ministries where the Tool can be piloted, to train personnel, review the quality of the efforts made to use the tooliii and to monitor and evaluate the pilot projects so as to develop experience that will help the full and sustainable introduction of Tool. Where the Entity is located is a matter of policy for Jordan but some ideas on the choices for the location are set out in the following table with suggested advantages and disadvantages for each location.

Institution Arguments for Arguments against

Legislation Opinion Bureau

Well placed given its functions as reviewer of legislation and the requirement that legislative proposals have to be ‘justified’ before they are submitted to the Cabinet for approval.

No economic expertise or familiarity with Better Regulation Tools or the specific problems associated with SMEs. Nor has the LoB much knowledge of international developments.

Prime Minister’s Office

A powerful body in the centre of Government with substantial influence. A logical place for an SME test based on international experience.

Some discussion will need to be undertaken to get them to accept this role. There will be a need to build capacities in this Office and an individual identified who will ‘champion’ this initiative and ensure its success.

JEDCO

Given that JEDCO has brought this initiative to this point and is developing an SME Observatory with staff that will be ideally placed to provide technical assistance on CBA issues, there is a case to be made for that Observatory to take responsibility for the implementation of the SME test. However, this will be discussed internally in JEDCO as the task of rolling out an SME Test is not within the current scope of the role of the Observatory or any other part of JEDCO. In addition, a substantial amount of work needs to be done to promote understanding of the use of the tool, training officials, ensuring the quality of the tests undertaken and

The Institutional setting and role of JEDCO does not make it a logical place, from an objective point of view, for the development and implementation of a project which will impact the operation of all government Ministries.


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providing technical assistance to officials undertaking tests. 19

Similar arguments apply to the location of a much needed RIA Unit.

3.4 SUGGESTED STRATEGY FOR ROLLING OUT OF SME TEST It is suggested that the Test should be introduced incrementally and not by way of a ‘big bang’. This will involve undertaking a number of pilot studies to evaluate the effectiveness of the Test in Jordanian conditions. The process to develop fully and operate the SME Test started with an initial workshop, held March 20 and 21, 2016. That Workshop was designed to achieve a number of objectives, namely,

1. To explain the wider context of SME Tests and how they fit into Better Regulation and

Regulatory Reform projects in the EU Member States and OECD countries,

2. To explain different approaches to SME tests internationally,

3. To explain what an SME Test is and why it is important?

4. To explain, what will be involved in its introduction?

5. To undertake a pilot SME, based on the information provided in this report, on one or

more draft pieces of primary or secondary legislation.

From the feedback given by the participants these objectives were achieved though many officials did not see how this proposal would be relevant to their work and did not seem to appreciate the impact regulations have on SMEs. The Workshop included undertaking a piloting of the test on draft Tourism and Travel companies and offices regulations The pilot study undertaken in the Workshop enabled a preliminary assessment to be made of how the tool will work in practice. A few modifications to the test were proposed. The most important of which was to provide a Template to guide officials in the use of the test. This template is set out in Appendix B to this Report. Follow up to Workshop The test revealed that more training and support will be needed to implement the SME Test policy. The test did not appear to present any particular problems for the participants but most failed to grasp the purpose of the test and instead of answering the questions proposed by the test most adopted a more traditional approach to the review of draft legislation and made arguments that had nothing to do with the potential impact of the draft. It is suggested that this Report should be submitted to Government, proposing the undertaking of further pilot studies and, eventually, the introduction of legislation to underpin the SME Test. It is advisable to introduce the SME Test by way of regulations or bye-laws so that it can be amended as experience of its use develops without having to return to Cabinet and Parliament to amend the legislation enacted by parliament. A preliminary draft of such a set of Regulations is set out at Appendix ‘E’ pending further decisions.

19 See, for example, Appendix B to this report for an overview of the role of the EU Regulatory Scrutiny Board and the explanation of the workings of ACTAL given during the Workshop held March 20 and 21 2016


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Proposed structure for the use of the test The proposed test should not involve the recruitment of new staff to the public service. How the test is to be managed and administered is a matter for Jordan. Best international practice suggests that the test be undertaken by officials in ministries. Those officials need to be supported by a central body. That body should have the following five functions:

1. An advocacy role so as to promote the use of the test in the public service,

2. A capacity building and training role, and

3. A supervisory role so as to ensure the quality of the use of the tests in Ministries,

4. A technical support role to provide advice and information issues that arise in the use of the test, and

5. The role of monitoring and evaluating the use of the tool so as to ensure its

robustness and sustainability. Pilots Once the necessary structures are put in place, the SME Tool should be piloted in three Ministries on three new laws. The experience gained from those pilot studies can then be studied with a view to modifying the test, if necessary. The SME Tool then needs to be rolled out eventually to all Ministries. This should be done through a series of activities and events including the following:

1. A decision of government, as proposed above 2. A major conference where the value of the SME tool will be explained and put in an

international context. This will offer an opportunity to show how Jordan can take a lead in the region in promoting SMEs and is a valuable opportunity to demonstrate that Jordan is a good place to do business. The event should be followed by a series of training activities in each Ministry. The SME Test should be then fully operational and its operation monitored and evaluated annually – perhaps with a report to Parliament on its application and its impact.

4. RECOMMENDATIONS

1. Maintain political support from the highest levels for the development and use of the SME

tool.

It has been suggested that political support and the championship of the SME policy in general and the use of the SME test is already available. However, it is essential to the success of this effort that this support be sustained and regularly re-enforced. If political support is not clearly available and visibly backed this initiative will fail in the same way and for the same reasons that the introduction of RIA failed.


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2. Adopt the SME test in Jordan by means of the drafting and enactment of appropriate

legislation. A suggested SME law is set out in Appendix E to this report.

Given the probability that the implementation of a SME policy will necessitate legislation, I advise that the tool be incorporated into that legislation. However, we advise that the tool be set out in secondary legislation so as to enable it to be modified without having to go through the full process of parliament.

3. Decide on the Location of the entity to develop and implement the SME Test.

This is a matter of policy for Jordan. However, some alternative approaches have been set out above. We have concluded that, in the first instance, JEDCO is the logical institution, in the short term, to be the entity responsible for the development and implementation of the SME Test. In the longer term we are of the view that the activities should eventually be taken over by the Prime Ministers Office to ensure that the SME Test lies at the heart of the policy making and law drafting process.

In addition, the Rules regulating the Legislation Opinion Bureau should be amended to state that “a proposal may not be presented to government without evidence that the SME Test has been applied to the satisfaction of the entity charged with reviewing the quality of SME Tests”.

4. Adopt the strategy proposed by this report or one modified to suit local conditions.

JEDCO should takes the steps necessary to ensure the success of the development and implementation of the SME Test proposed by this Report.

5. Evaluate and monitor the implementation of the strategy.

This recommendation assumes adequate resources (from the national budget, using as much of the existing resources as possible or funds from international organisations) will be made available for the implementation of this Report or such variations on it as are necessary for development and use of the SME Tool. The Report should be revised with an action plan and specific deliverables to be monitored on a regular basis against these deliverables and at the end of the first 12-month period the project should be evaluated and a report submitted to parliament and the EU noting successes and failures, weaknesses and strengths and what should be done to ensure the success of the project. Success should look like the successful implementation of a SME Test and a visible easing of regulatory burdens on SMEs with corresponding growth in employment.

6. Co- ordinate the operation of the SME Test with the Regulatory Guillotine exercise and

similar initiatives.

There is no point in undertaking a SME Test for new regulations unless consideration is given strategically to reviewing the stock of legislation affecting SMEs and modernizing it also.

7. In parallel with the development of the SME Test, a strategy should be developed to re-

establish the policy on RIA with an appropriate entity being appointed to develop and

manage the implementation of a policy on RIA.

Jordan needs to address the challenges posed by the introduction of RIA. There has been a substantial volume of international investment in the development of RIA and a lot of work has been done at different times by different international experts and Jordanian officials; this needs to be followed up on in the interests of international credibility.


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APPENDIX A

Hampton Principles of Good Practice for Regulators20

1. Regulators, and the regulatory system as a whole, should use comprehensive risk

assessment to concentrate resources on the areas that need them most.

2. Regulators should be accountable for the efficiency and effectiveness of their

activities, while remaining independent in the decisions they take.

3. No inspection should take place without a reason.

4. Businesses should not have to give unnecessary information, nor give the same

piece of information twice.

5. The few businesses that persistently break regulations should be identified quickly

and face proportionate and meaningful sanctions.

6. Regulators should provide authoritative, accessible advice easily and cheaply.

7. Regulators should be of the right size and scope, and no new regulator should be

created where an existing one can do the work.

8. Regulators should recognise that a key element of their activity will be to allow, or

even encourage, economic progress and only to intervene when there is a clear case

for protection.

20 Hampton, P. (2005), Reducing Administrative Burdens: Effective Inspection and Enforcement.

(London: HM Treasury). <http://www.berr.gov.uk/files/file22988.pdf>.


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APPENDIX B

Step 1 of The test In order to undertake the test officials should complete the following questionnaire when drafting new legislation or regulations

SME TEST TO BE UNDERTAKEN ON ALL PROPOSED LEGISLATION

Title of Proposed Legislation

Name of Ministry

Name of contact Person in Ministry

What is the problem to be solved by the proposed legislation?

If the problem requires detailed explanation those details should be set out in an Appendix to this form

Will this proposal have an impact on SMEs?

If the proposal has an impact, what will be the impact?

Has a systematic review of the proposed legislation been having been conducted so as to evaluate the necessity and effectiveness of obligations and information requirements to be imposed?

Has consideration been given to eliminate requirements that could reasonably be described as unnecessarily burdensome?

If consideration has been given to eliminate requirements that could reasonably be described as unnecessarily burdensome explain what has been done to reduce burdens

If this requires extensive explanation set it out in an Appendix to this form.

In the development of the legislative proposal were there consultations carried out with potential stake-holders?

If consultations were carried out set out a summary of those consultations in an Appendix to this form.

If no consultations carried out


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explain why there were no consultations.

Were alternatives, options or opportunities for achieving the objectives of the legislation considered and if so what were they?

If this requires extensive explanation set in out in an Appendix to this form.

If information requirements are to be imposed by the proposed legislation has it been determined whether the information can be obtained through alternative means or in a different manner or point in time in the commercial process, and still meet the policy or programme objectives?


Have possible costs been

taken into consideration in

relation to time and money to

business of gathering,

retaining and reporting

information when drafting this

legislation?


Explanatory Notes

In setting out the problem to be solved by the legislation officials should provide a brief summary of the objectives of the legislation, why it is needed and the outcomes expected from its enactment and implementation.

The following burdens should be considered as part of the SME test: Administrative burdens

These arise from information obligations to the government – example: identification obligation

Substantive compliance costs These arise from obligations to live up to the content of the legislation – examples: measures for fire safety Supervisory burdens These burdens arise from supervision and inspection to ensure compliance, for example: costs for firms due to inspections


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APPENDIX C:

Flow chart for process of assessing impact of regulations on SMEs


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Small Firms Impact Test Flowchart

Policy Proposal

Does the proposal affect small business, their customers or competitors?

Contact a sample of small businesses/business representatives to explore issues. As part of this you should consider:

A) Whether a more flexible approach, or possibly exemptions, would be appropriate for firms with fewer than 20 employees; AND B) Is there potential to fully or partially exempt small business (those with fewer than 50 employees)?

Does the impact fall more heavily on small businesses (those with up to 50 employees) than

large businesses?

More detailed exploration of impact with representative bodies and small firms.

Update SFIT and note Template

Proceed to public consultation

Finalise policy proposal

No

Yes

Yes No


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APPENDIX D

EU Regulatory Scrutiny Board

The Regulatory Scrutiny Board provides a central quality control and support function for Commission impact assessment and evaluation work. It was set up on 1 July 2015 and replaced the Impact Assessment Board.

The Board examines and issues opinions on all the Commission's draft impact assessments and of major evaluations and "fitness checks" of existing legislation. In principle, a positive opinion is needed from the Board for an initiative accompanied by an impact assessment to be tabled for adoption by the Commission. The opinion accompanies the draft initiative together with the impact assessment throughout the Commission's political decision-making. All impact assessments and all related RSB opinions are published once the Commission has adopted the relevant proposal. Evaluation/"fitness check" reports and the related opinions are also published.

The Board is independent of the policy making departments. It is chaired at Director General level. In addition to the Chair, the Board consists of three high-level Commission officials and three members who are recruited from outside the Commission, selected on the basis of their expertise. All members work for the Board full time, with no other policy responsibilities. Until all members of the Board have been appointed, the members of the previous Impact Assessment Board will act as interim members of the Board.

http://ec.europa.eu/smart-regulation/impact/ia_carried_out/cia_2015_en.htm

http://ec.europa.eu/smart-regulation/impact/iab/members_en.htm


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APPENDIX E

DRAFT SME LEGISLATION


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APPENDIX F

Further information

Study prepared by the Centre of European Policy Studies on the assessing the costs and

benefits of regulation .

OECD Regulatory Compliance Cost Assessment Guidance . Unit C2 of the Secretariat General can provide advice on the content of this tool via its functional mailbox [email protected] . 439 For example, assume that a new technical standard will impose an additional €1 billion of direct costs to car manufacturers, and that half of these are passed-on to consumers. Counting both the €1 billion of additional direct costs for manufacturers and the half billion that will fall on consumers would lead to an incorrect overestimation of the costs of the regulation. However, the opportunity cost borne by those consumers that, as a result of the price increase, will decide not to buy a car should be counted separately, as a net loss for society.

Assessing the Costs and Benefits of Regulation; CEPS (2013) a study prepared for the European Commission. OECD (2014), OECD Regulatory Compliance Cost Assessment Guidance. See page 62 for a list of regulatory compliance activities The categorization proposed in the OECD Regulatory Compliance Cost Assessment Guidance is presented below CEPS (2013), p.25-26. See tool on useful analytical methods to compare options or assess performance This is because of the extreme nature of some of the methodological assumptions required, even when adapted on the basis of survey results. This applies to the “normally efficient business” concept, the assessment of the BAU factor, the importance of learning curves suggesting compliance costs are likely to decrease with time and the various methodological decisions such as the level of overhead, the specific allocation of given personnel and human resources to specific substantive obligations, the allocation of fixed and common costs etc. For a list of possible implementation and enforcement activities, see p. 63 in OECD (2013). Thus, an option that provides greater flexibility in the ways in which business can comply with the regulatory requirements may minimise costs to firms, but may increase the costs of administering the regulation, since verifying compliance will be more complex and involve a higher degree of professional judgment. Total direct costs may well be higher than under a less flexible regulatory option. Total costs would of course also depend on indirect impacts such as impacts on business competitiveness, innovation, the ultimate goal of the regulation etc. See Tool on the SME test See The Study on Assessing the costs and benefits of Regulation prepared by the Centre for European Policy Studies (December 2013); pp 70 for description of the model and its strengths and weaknesses in relation to impact assessments and evaluations. See tools on the health impacts, consumer impacts, resource efficiency, employment,

http://ec.europa.eu/smart-regulation/impact/commission_guidelines/docs/131210_cba_study_sg_final.pdf


http://www.oecd-ilibrary.org/docserver/download/4214101e.pdf?expires=1416408255&id=id&accname=guest&checksum=159C54CF700F7ED22CF2E9E19969ED20

mailto:[email protected]


http://dx.doi.org/10.1787/9789264209657-en


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education/youth/culture etc. which cover a wide range of social and environmental benefits (impacts).

http://ec.europa.eu/internal_market/retail/docs/140711-study-utp-legal-framework_en.pdf

In the US, dedicated databases are available, which make it easier to estimate the response of supply and demand curves to a given change in price or in the quality of products. See, for example, http://www.ers.usda.gov/data-products.aspx#.UnUkoZTk-Es and in particular the section on commodities and food elasticity's. In the economics literature, several estimates of elasticity are available, which could be collected into a single dataset made available to the desk officers wishing to perform CBA. See for example in relation to air transport, http://www.iata.org/whatwedo/Documents/economics/Intervistas_Elasticity_Study_2007.pdf

i For EU examples of simplification see, for example, etc.

http://ec.europa.eu/growth/tools-databases/sme-best-practices/SBA/index.cfm?fuseaction=welcome.detail

ii For a flow chart illustrating how the SME test fits into the policy process in the UK see Appendix B

iii See Appendix C for a description of the role undertaken by the EU Regulatory Scrutiny Board

http://ec.europa.eu/internal_market/retail/docs/140711-study-utp-legal-framework_en.pdf

http://www.iata.org/whatwedo/Documents/economics/Intervistas_Elasticity_Study_2007.pdf

http://www.iata.org/whatwedo/Documents/economics/Intervistas_Elasticity_Study_2007.pdf

