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Semi-Annual Report 2011 Promoting public-private dialogue, strengthening advocacy, building capacity, improving business environment and investment climate ANNUAL REPORT BUSINESS SUPPORT OFFICE EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT This report provides a comprehensive overview of the EBRD BSO’s activities across four main areas of its operation in Armenia over the past year. It features summary of engagement, key facts and figures, and illustrates main achievements. EBRD BSO EBRD BSO Annual report 2011 Table of Contents EXECUTIVE SUMMARY .......................................................................................................................... 3 THE ACHIEVEMENT OF THE BSO OBJECTIVES ............................................................................... 7 ACTIVITY 1 - ASSISTANCE TO THE INSPECTION REFORMS COORDINATION COUNCIL SECRETARIAT .........................................................................................................................................11 ACTIVITY 1.1 ADOPTION OF THE RA LAW ''ON MAKING AMENDMENTS TO THE RA LAW ON ORGANIZING AND CARRYING OUT INSPECTIONS''.............................................................................................................................. 14 ACTIVITY 1.2 IMPLEMENTATION OF THE RA LAW ''ON MAKING AMENDMENTS TO THE RA LAW ON ORGANIZING AND CARRYING OUT INSPECTIONS'' ................................................................................................. 15 ACTIVITY 1.3 RISK BASED INSPECTION SYSTEM .............................................................................................. 16 ACTIVITY 1.4 DRAFT LAW ON MARKET SURVEILLANCE .................................................................................. 18 ACTIVITY 1.5 TRANSPARENCY AND PUBLICITY OF INSPECTION REFORMS ....................................................... 19 ACTIVITY 2 - ASSISTANCE TO THE SME DEVELOPMENT COUNCIL SECRETARIAT .............21 ACTIVITY 2.1 FACILITATION OF SME DEVELOPMENT COUNCIL ESTABLISHMENT ........................................... 22 ACTIVITY 2.2 ASSISTANCE TO THE SME DEVELOPMENT COUNCIL SECRETARIAT ........................................... 23 ACTIVITY 3 - ADVANCING COOPERATION WITH DONORS .........................................................29 ACTIVITY 4 - DAY TO DAY ACTIVITIES AIMED AT ACHIEVING THE BSO OBJECTIVES ......32 ACTIVITY 4.1 – MANAGING THE PPD PROCESS ................................................................................................ 32 ACTIVITY 4.2 –CAPACITY BUILDING OF THE BSO AND THE SECRETARIAT STAFF ............................................ 34 ACTIVITY 4.3 – THE BSO REPORTS .................................................................................................................. 34 CONCLUSION ...........................................................................................................................................35 APPENDIXES ............................................................................................................................................37 2 EBRD BSO Annual report 2011 EXECUTIVE SUMMARY The Business Support Office (BSO) is a project by the European Bank for Reconstruction and Development established to support the implementation of economic reform in Armenia and facilitate public policy dialogue aimed at improvement of business environment. The vision of BSO is to become an integral and valuable catalyst between the Government and business community through ensuring an effective dialogue aimed at improving the country’s business environment and investment climate. The mission of BSO is to raise key issues that affect the business environment, provide technical assistance to the Government in the process of developing strategies/reforms to address identified impediments, in parallel, facilitate prior consultations with the business community and transmit feedback on proposed reforms to the authorities. Since January 2010, upon the request from the Ministry of Economy, the BSO started active cooperation with the Executive Body (the Secretariat) of the Inspection Reform Coordination Council (IRCC). The main focus of the IRCC has been on introducing EU approach of risk-based inspections in all inspectorates which would ultimately reduce the burden that inspections impose on businesses, improve the quality of these inspections and significantly reduce the occurrences of corruption and violation. The EBRD BSO has provided broad assistance to the Council Secretariat in all aspects of the reform – mapping of current inspections, reviewing about 500 laws, decrees and regulations pertaining to inspections, defining the risk-based approach, drafting the checklists and the new law introducing risk based inspection concept. In particular, the BSO worked extensively with the business community in raising the awareness of this reform, discussing and seeking comments on legal and regulatory changes and assisting in presentations to the Council. Since its inception in mid 2010, this reform has achieved tangible results (presented throughout the report). Below is the excerpt from the article published by the Oxford Analytica, a global analysis and advisory firm (Box 1). 3 EBRD BSO Annual report 2011 Excerpt from the article published by Oxford Analytica Box 1 Armenian Tax System Becomes Lighter Burden on Firms The Government has published the list of 2386 companies that are to be inspected by the State Revenue Committee in 2012. Such advance notification is being given for the first time, and will lead to a decrease in tensions between the tax authorities and business. It is an important step towards simplifying the procedure for tax inspections, which has long been identified as the most serious obstacle to doing business in Armenia, and it is part of ongoing reforms in taxation and customs. What Next From 2012, only businesses that are considered risky will be subject to inspections, and the list of such companies will be known beforehand. Source: Oxford Analytica, January 9, 2012, http://www.oxan.com/display.aspx?ItemID=ES172976 The successful cooperation through the platform under the IRCC set a stage to broaden the scope of the policy dialogue and establish a more advanced module to enhance the effectiveness of the public consultations. Trusting the BSO as a bridge for effective public- private policy dialogue, the Business Advocacy Network consisted of already 31 associations, unions, foundations representing the interest of SMEs, addressed a letter to the EBRD RO with the request to broaden the successful cooperation format and promote another platform for policy dialogue aimed at addressing developing challenges of SMEs (find the copy of the letter in Annex 1). The excerpt from the letter by the Business Advocacy Network Box 2 Dear Mr. Razlog, On behalf of “Business Advocacy Network (BAN) I am pleased to express our appreciation regarding EBRD’s Business Support Office efforts on facilitation of Public-Private Dialogue in our country. … Due to this collaboration the voice of SME community through our Network gets heard and our suggestions considered in the process of inspection reform design and implementation… We are hopeful that our established cooperative relationships and complementary expertise due to BSO’s efforts will facilitate the process of smooth implementation of inspection reform in Armenia. In this regard, we would like to express our intention to replicate such a successful cooperation format with Business Environment Improving Unit of the Ministry of Economy as well. We envisage the BSO as a potential facilitator for promoting an efficient Public-Private Dialogue between this Government unit and our Network in the framework of business environment improvement reforms. We are sure that our collaboration which has a successful precedent as mentioned above can offer considerable promise in addressing the development challenges of private sector, in particular, SME community in our country. 4 EBRD BSO Annual report 2011 Therefore, the BSO expedited the dialogue between the key stakeholders and provided timely advice in the course of establishment of such a module. In the meantime, relevant Government ministries relying on the BSO’s expertise in the field, requested assistance to facilitate and support the process of establishment of a new forum where the private sector is expected to become more proactive and maintain effective pipeline of issues for regular consideration (Box 3). Excerpt from the letter of the RA Minister of Economy to the Donor Community Box 3 Dear all, I am pleased to inform you that with the ultimate goal to succeed in the reform programs aimed at improving the business environment for small and medium enterprises, the Government of Armenia jointly with the European Bank for Reconstruction and Development have initiated measures to ensure structured partnership and constructive policy dialogue between the state and the private sector. Directed with the above mentioned objective, the RA Prime Minister’s decision “On Establishment the Council for Small and Medium Entrepreneurship Development” has been drafted…. Sincerely, Tigran Davtyan Thus, as a result of mutual concentrated efforts, SME Development Council (SME DC) was formed by the Prime Minister’s decision as of July 7, 2011 to serve as a platform for identifying, prioritizing and resolving key constraints to the SME development (find Annex 2). The functioning of the Council is supported by the Council Secretariat. It was agreed that the BSO will provide technical
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