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Policy and Legal Environment for the Growth of the SME Sector in Bulgaria
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2.4 ACTION LINE 2.4: INSTITUTIONAL EFFICIENCY

2.4.1 BACKGROUND
2.4.2 OBJECTIVES
2.4.3 ACTIONS
2.4.4 EXPECTED RESULTS

2.4.1 BACKGROUND

Institutional efficiency is as important as the presence or absence of government institutions themselves. One way to foster institutional efficiency in Bulgaria is to develop uniform operating systems in all institutions.

 

2.4.2 OBJECTIVES

In many cases, high quality legislation in Bulgaria fails to have a positive impact on the relationships governed by it. This is due primarily to inefficient and non-uniform implementation by implementing agencies. One of the purposes which the government must pursue is bringing uniformity and quality in the implementation of laws.

 

2.4.3 ACTIONS

Background

Although Bulgaria is a small country, it sometimes experiences problems with a lack of uniformity and coherence in its legal system. For example, an investor who has to deal with real estate, may be surprised to find that notaries in different parts of the country interpret the same law in any number of ways. The investor will also discover that the type and number of documents required at different locations for what is otherwise an identical transaction can vary enormously. A similar situation exists in Bulgaria’s 29 district courts where the investor must go to register his or her company.

This, of course, results in inefficiency of the market and its agents. No entity can develop standard operating procedures for standard types of transactions. What should be a routine process, needs to be learned every time it is applied in new venues.

In a different situation, central government institutions must often perform administrative functions related to commerce. They grant import/export or trading licenses, give permission, provide information, and exercise other forms of control. These functions may be discretionary or non-discretionary. Regardless, the applicant must furnish such an agency with information and documents. The investor will sometimes be surprised that when approaching the same agency for identical reasons, but on different days, the requirements have changed. The change is not because policy has changed or government employees are malicious, but because there is no clear standard for some administrative requirements. The obvious result is multiplication of the applicant’s efforts and resources spent on obtaining approvals from the central government.

Recommendation

A possible way of fighting internal and external institutional inefficiency is the creation of standardized operating procedures, including the creation of standardized forms. As a result, the inefficiency due to difference in practice of institutions performing identical functions in different venues will be dramatically reduced. Also, the practice of all institutions will become consistent and predictable. The overall result will be that agents on the market will be able to develop standard operating procedures equally workable at any point in time and at any location. The social cost to transacting business will be decreased.

Thr introduction of standardized forms and lists will also help institutions to increase their internal efficiency. It will take much less time for employees of a central government institution to process documents when they are familiar with standard forms. Standardization will also contribute to the simplification of internal procedures.

 

2.4.4 EXPECTED RESULTS

The expected results are that the climate for doing business will improve. SMEs will be a major beneficiary of such an improvement. Increasing the efficiency of institutions will result in decrease of transaction costs.


 
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