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Cablegate: Croatia Sharpens Regulatory Guillotine

VZCZCXRO0159
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHVB #1415 3321239
ZNR UUUUU ZZH
R 281239Z NOV 06
FM AMEMBASSY ZAGREB
TO RUEHC/SECSTATE WASHDC 6976
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS ZAGREB 001415

SIPDIS

SIPDIS

STATE FOR EUR/SCE BALIAN AND RIEHL

E.O. 12958: N/A
TAGS: ECON EINV EAID HR
SUBJECT: CROATIA SHARPENS REGULATORY GUILLOTINE


1. Summary: The Croatian government has undertaken an ambitious
regulatory reform campaign aimed at easing bureaucratic impediments
for business and improving the investment climate. The program,
supported by USAID, is known as the "regulatory guillotine." Its
aim is to create an inventory of all existing regulations that
affect business and subject them to a period of government and
public scrutiny and comment, following which only those regulations
deemed worthy of maintaining will remain in effect, while all others
will be declared null and void. Nobody is certain just how many
regulations there are, but with a flare for bureaucracy dating back
to the Austro-Hungarian period, the "guillotine" will have its work
cut out for it in Croatia. End Summary.

2. With the approval of Prime Minister Sanader and the support of
USAID, Croatia has embarked on an effort to streamline its hefty
body of government regulation. The aim of the program, known as the
"regulatory guillotine," or "hitro-rez (the quick cut)" in its local
version, is to eliminate unnecessary and overly-burdensome
regulations that hinder the efficient operation of businesses and
the economy. In taking this step, Sanader is determined to improve
Croatia's chronic low-ranking in international economic
competitiveness reports and send a strong signal to foreign
investors that the GOC is serious about economic reform.

3. Hitro-rez received formal GOC approval in September and has
since hired a staff of 12 and leased office space in Zagreb. As an
organization, it has a strong mandate and a short lifespan, so the
time line for its work is relatively short. Following the
government decision initiating the process, ministries and
government agencies were given until December 1 to submit lists of
regulations for review. The ministries themselves will then have
until January 15 to submit preliminary opinions as to which
regulations are necessary and which should be allowed to expire.
The hitro-rez staff itself has an independent list of regulations
based on previous work to serve as a check on the ministries.

4. One of the key elements of the program is transparency and
public involvement. The director told us that all regulations and
comments will be available on the internet, an element equally aimed
at increasing the pressure on the ministries to cooperate. Nobody
knows exactly how many regulations there are in Croatia, except that
there are too many. Hitro-rez estimates that there are anywhere
from 1,500 to 15,000.

5. After the ministries have a chance to review the regulations,
there will be a private sector comment period until March 1. The
process ends with a final review lasting until June 1. Every
regulation will have to pass some basic tests: Is it necessary? Is
it legal? Is it business friendly? Is it WTO compliant? Is it in
keeping with EU law and directives? Once the final list is approved
by the Government, any identified regulations that do not meet the
three tests will become null and void. The remainder will then be
codified in an electronic registry, available on-line and updated as
necessary and will be a single reference of all extant regulations
affecting business in Croatia. The hope of Hitro-rez is that, in
increasing transparency, the registry will reduce opportunities for
corruption.

6. Comment: It is still unclear what interest groups will emerge to
protect their fiefdoms from this cruel cut, although notaries public
are likely candidates. Nevertheless, even if the project is
successful in eliminating only a small fraction of Croatia's onerous
and Byzantine regulations, its impact on the business climate is
likely to be substantial and positive. End Comment.

BRADTKE

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