STRENGTHENING COMPETITIVENESS IN MEXICO THROUGH REGULATORY POLICY AND GOVERNANCE Savings in administrative burdens in Colima and Jalisco with the National One-Stop Shop STRENGTHENING COMPETITIVENESS IN MEXICO THROUGH REGULATORY POLICY AND GOVERNANCE Savings in administrative burdens in Colima and Jalisco with the National One-Stop Shop JUNE 2016 Preface The Ministry of Economy (SE, due to its name in Spanish), and the Federal Commission for Regulatory Improvement (COFEMER) requested the Organisation for Economic Co-operation and Development (OECD) to elaborate a report that includes the measurement of administrative burdens, through an adaptation of the standard-cost model, in 29 Municipalities of the States of Colima and Jalisco, with the purpose of developing parameters to measure the reduction of burdens deriving from specific policies of administrative simplification, particularly of the digitalization of business procedures and their incorporation to the National One-Stop Shop in Colima and Jalisco, Mexico. Pursuant to this commitment and to the actions that have been promoted from the Ministry of Public Administration and the Coordination of the National Digital Strategy of the Head of the Office of the President of the Republic for the implementation of the Pilot Program of the National One-Stop Shop for Government Procedures and Services (PVUN, due to its name in Spanish) in which the States of Colima and Jalisco participate, and which allows offering affordable, user-friendly, and easily-accessible administrative procedures and services for the citizens, the measurement of administrative burdens of municipal procedures of these States in Mexico was carried out. Thus, the objective of this work is to measure the administrative cost produced by the administrative procedures of these two States which belong to the PVUN, and to estimate the savings for the users derived from digitalization. For such reasons, the monetary value of administrative burdens that users face when making these procedures is calculated in this document. From this measurement, it will be possible to design strategies of regulatory improvement and digitalization that allow the reduction of economic resources aimed at complying with the regulation, without neglecting the public policy objectives established. Also, savings deriving from the digitalization of procedures included in the PVUN could be estimated. Studies like this allow to make better decisions of public policy that derive in benefits and economic savings for citizens, and ultimately in procedures of regulatory governance that contribute in building a more competitive Mexico. 3 Acknowledgements The work that supports this report was led by Manuel Gerardo Flores Romero under the supervision of Nick Malyshev, Chief of the Regulatory Policies Division, and under the direction of Rolf Alter, Director of Public Governance and Territorial Development of the OECD. The main authors of this report are Andres Blancas Martinez, Itzel de Haro Lopez, and Alberto Morales Villarreal. Valuable comments were obtained from Adriana Garcia Campos. All of them belong to the Regulatory Policy Division. The OECD would like to give special thanks to the Governors, Mayors, and officers of the States of Colima and Jalisco, because it was due to their interest, engagement and decision that making this report was possible. We thank Mr. Virgilio Andrade Martinez, Secretary of Public Administration; Ms. Rocio Ruiz Chavez, Undersecretary of Competitiveness and Regulation of the Ministry of Economy; Ms. Alejandra Lagunes Soto Ruiz, Coordinator of the National Digital Strategy of the Head of the Office of the President of the Republic, for their valuable support, empowerment and intense work in favor of the regulatory governance of our country, and the facilities to finish this project. We thank Mr. Mario Emilio Gutierrez Caballero, Head of the Federal Commission of Regulatory Improvement, and his work team, for their comments to previous versions hereof. We would also like to thank Dr. Jose Eduardo Mendoza Contreras, Chief of the Unit of Design and Implementation of Public Policies for Productivity from the Ministry of Economy, and to his work team including Mr. David Lopez Victoriano, Mr. Gustavo Rodrigo Perez Valdespin, and Ms. Alin Martinez Morales for their support in the elaboration of this report, and for their comments. We thank Ms. Yolanda Martinez Mancilla, Head of the Unit of Digital Government of the Ministry of Public Administration, and to Mr. Tonatiut Alejandro Rios Dieguez, Deputy Director General of Strategy and Regulation of Digital Government, who was working in said Unit while making this report; all of them made an extraordinary work of management and lobbying In order to fulfill the objectives set. We thank Ms. Elsa Regina Ayala Gomez for promoting the elaboration of this report, and for her comments to previous versions hereof. We thank the Ministries of Economic Development of Colima and Jalisco in duties at the moment of elaboration hereof, Mr. Rafael Gutierrez Villalobos and Mr. Jose Palacios Jimenez, for all the facilities granted and for the excellent host. Also, to the Directors of Regulatory Improvement of Colima and Jalisco in duties at the moment of the elaboration hereof, Ms. Adriana Garcia Campos and Mr. Luis Gerardo Sandoval Fernandez, for their intense work and unconditional commitment to make this great endeavor. We also thank the work of Carlos de la Rosa and Jorge Escartin from Logos Consultoria. 5 Table of Contents Acronyms and abbreviations . 11 Glossary and definitions . 13 Executive Summary . 15 Introduction . 17 Chapter I. Methodology . .23 Chapter II. Measurement of administrative burdens and total savings. 47 Chapter III. Prioritization analysis of digitalization of administrative processes . 57 Chapter IV. Public policy options. 63 Bibliography . .66 Annex I. Selection of Municipalities to survey . .68 Annex II. Survey to measure administrative burdens . 77 Annex III. Survey for public officials to measure administrative burd . 85 Annex IV. Construction of complexity indexes . 92 Annex V. Administrative burdens and savings per Municipality . 96 Colima . .96 Jalisco . .102 List of Illustrations Illustration 1. Costs for companies deriving from regulation . 25 Illustration 2. Summary of the methodology used to measure administrative burdens and savings derived from digitalization . 30 Illustration 3. Basic Structure of the Standard Cost Model . .32 Illustration 4. Procedures per group for which the administrative burden was measured in the State of Colima . 48 Illustration 5. Process of procedures to open a business and construction permit in the State of Colima . 49 Illustration 6. Administrative burdens and savings due to digitalization per process in the State of Colima . 50 Illustration 7. Process of administrative procedures of opening a business and construction permit in the State of Jalisco . 53 Illustration 8. Administrative burdens and savings due to digitalization per process in the State of Jalisco . 53 7 TABLE OF CONTENTS List of Tables Table 1. Municipalities included in the Pilot Program of the National One-Stop Shop . .21 Table 2. SCM’s stages and steps . 31 Table 3. Total procedures to measure by Municipality . 33 Table 4. Standard administrative activities for the management of procedures . 33 Table 5. Municipalities selected for the application of direct surveys to users. 36 Table 6. Procedures to analyze through direct surveys to users . 37 Table 7. Occupation Profile Salaries. 38 Table 8. Surveys applied to users to measure the administrative burden . 40 Table 9. Distribution of procedures through surveys and interviews in Jalisco and Colima . 42 Table 10. Questionnaires answered by public officers per Municipality . 43 Table 11. Variables associated to complexity . 44 Table 12. Expected percentage of reduction in administrative burdens due to digitalization . 46 Table 13. Administrative burdens and savings due to digitalization per Municipality in the State of Colima . 51 Table 14. Administrative burdens and savings due to digitalization per procedure in the State of Colima. 51 Table 15. Administrative procedures per group for which the administrative burden was measured in the State of Jalisco . 52 Table 16. Administrative burdens and savings due to digitalization for the process of opening in the State of Jalisco . 54 Table 17. Administrative burdens and savings due to digitalization for the process of construction in the State of Jalisco. 55 Table 18. Administrative burdens and savings due to digitalization per procedure in the State of Jalisco . 56 Table 19. Feasibility analysis for digitalization per Municipality in the State of Colima . 59 Table 20. Feasibility analysis for digitalization per Municipality in the State of Jalisco . 60 Table 21. Municipalities included in PVUN . 68 Table 22. Classification of Municipalities by population criteria . 69 Table 23. Municipalities of Colima, population criteria . 70 Table 24. Municipalities of Jalisco, population criteria . 70 Table 25. Municipalities of Colima, poverty criteria . 72 Table 26. Municipalities of Jalisco, poverty criteria . 72 Table 27. Municipalities of Colima, inequality criteria . 73 Table 28. Municipalities of Jalisco, inequality criteria . 73 Table 29. Municipalities of Colima, Municipality expenditures criterion. 74 Table 30. Municipalities of Jalisco, Municipality expenditures criterion . 74 Table 31. Municipalities of Colima, geographic criterion. 75 Table 32. Municipalities