Mrs. Jigjidmaa Dugeree, Local Coordinator of IFC-Funded Mongolian Business Inspection Reform Project, IFC

1. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Investment climate program of IFC in
Mongolia
IFC Mongolia Business Inspections Reform Project
BCM meeting
November 1, 2010
Ulaanbaatar, Mongolia

2. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
IFC Advisory work
IFC Advisory services provide advice, problem solving, and
training to companies, industries and governments
Funding – donors, IFC, and client contributions
For 2010 financial year - $268 million (61% to IDA
countries)
AS has 4 business lines: Access to Finance, PPP,
Sustainable business and Investment Climate
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3. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
The goal of the project: improve investment
climate by reducing regulatory burden
Project started in May 2009
Counterpart is GoM represented by DPM
Main two components of the project:
- Business inspections reform
- Permit reform (was added in July, 2010)
Estimated impact - $ 4 millions in savings by end of 2012
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4. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Business inspections reform component
Steering committee chaired by DPM
GASI is the main client
Milestones of the project:
- completion of the baseline survey (report is to be
published)
- amendments to the State inspection law were passed
in July 2010
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5. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Business inspections reform component
Survey findings:
- Law on state inspections gives excessive discretional power to inspectors
- Inspections are burdensome: average company spends $195 on labor cost and fines,
total annual cost is $3.7 millions, annual compliance cost is $15.5 million
- Inspection coverage is high (58 % of all businesses in Mongolia) but not effective (index
of digestive diseases is 2.5 times higher comparing to Uzbekistan where percentage of
coverage is 20)
- Inspections focus on fine collections rather than on assisting businesses to increase
compliance
- Inspections are conducted neither in transparent nor in consistent way, subjective opinion
is prevailed
- Inspections are not risk based, requirements are far from risk focus
- Overlapping of different inspection types (within GASI and between different gov’t
organizations
- Capacities and skills of inspectors are low
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6. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Business inspections reform component
Main recommendations:
- Inspections should be based on risk assessments, and check lists should be
introduced
- Set clear procedures for conducting inspections
- Eliminate inspections that overlapping and do not have any value on minimizing
risk and hazards to health, public and environmental safety
- Decrease discretion of inspectors in setting administrative sanctions
- Make information on compliance to businesses easy to access, understandable
- Consider compliance requirements from health and safety protection point of
view
- Amend laws and regulations based on these recommendations
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7. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Business inspections reform component
Amendments to the law on inspections: IFC proposed
amendments based on international best practices
- Inspections will be planed on risk base, three categories of risks: high, medium, low
- Inspections will use check lists
- Inspections process of conduct is clearly set
- Sample and lab test costs are covered by GASI (except border inspections) if results are
within norms
- Inspectorates are not responsible for contribution to the state budget: MoF should not
give them annual plans on fine collection
- Rewarding for erasing irregularities and increasing compliance – if entities eliminate
irregularities before deadline for paying fines, the amount of fines can be reduced, or
even the decision on this sanction can be revised
- Results of inspections will be publicly announced
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8. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Business inspections reform component
Current focus and activities of the project:
- Focus on streamlining inspections on food safety
- Capacity building and knowledge sharing: organized and delivered
several training sessions (domestically and abroad) on risk evaluations,
check lists and food safety –main message: increase compliance by
giving advice and necessary information, decrease sanctions and
policing
- Consultations on check list developments and pilot testing at
companies facilities
- Providing advice on risk based planning, defining roles of each
inspection types
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9. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Business inspections reform component
Plans for nearest future:
- Public announcement of the survey report findings and
recommendations
- Assist in finalization of check lists of food producers such as
meat and dairy processing, catering and selling businesses
- Deliver trainings on use of check lists during inspections for
inspectors and private sectors
- Provide further assistance and advice on regulatory issues
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10. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Permit reform component: facts
IFC proposed Guillotine approach: tight deadlines, permits that are not on the
final list are considered invalid
PM resolution dated June 30, 2010
Conference on permit reform, July 1, 2010
Development of process of inventory and submission forms for permits and
legal acts – inventory list
Training on inventory stage, August 23-27, 2010 (173 gov’t officials attended)
Development of analysis process and forms
Training on analysis stage, October 12-15, 2010 (117 gov’t officials, 17
business representatives)
Government Working Group – hold meetings twice
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11. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Permit reform component
Issues and problems:
Good political will – but strong resistance from mid and low level gov’t
officials (in some cases even from high ranking officials)
Losing focus on relieving regulatory burden for businesses: delegating
authority over permit from gov’t to NGO’s and third parties without first
considering the necessity of the regulation and permits
Bringing private sector views and recommendations into the reform
process is going slower than anticipated
Technical skills need to be developed faster
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12. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Investment climate program in Mongolia
IFC AS is open to discuss private sector views and proposals
on the project work to make it more effective. Please
contact us:
by phone: 976-11-312694
by email: jdugeree@ifc.org, hshrader@ifc.org
Or visit us: MCS Plaza building, 4th floor, IFC office
Thank you!
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