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Andrey Klimenko_Russ.. - UMD Center for International Policy

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					         Regulatory and Public administration reforms
         in Russian: Major Results and Prospects
                                    Andrey Klimenko
                                  Vice-rector, Professor
                National Research University – Higher School of Economics

                                                Abstract
          The imperfection of the executive power is one of the major factors affecting the
economic and social development of Russia. The article surveys main problems and possible
 improvements in Russian public administration and governance in four areas – Regulation,
 Public services, availability of information and civil society participation, HR development
                                 and incentives in Civil Service.


Key Results of the Past Decade


Since 2002 a number of institutional reforms started in Russia aiming to improve the

performance of the Russian regulatory policy and public administration. These reforms

include Civil service reform, which focused on development of human resources of executive

authorities, on incentives and remuneration system, Public Administration reform –

optimization of structure and functions of public authorities, improving public services,

Regulatory reform – reduction of administrative burden on business and citizens.

Administrative reform, in particular, involves the reform of institutions, that is to say, the

reform of legislation, of the structure and responsibilities of public authorities, of regulations

and of techniques of management and systems of control. It means applying modern methods

of management (dealing with such matters as motivation, accountability, the decentralization

of the decision making process, and a focus on outcomes).

Administrative reform, as a Federal Program, was begun in 2003. Some functions that were

either being duplicated or were superfluous have been abolished. There has been a

redistribution of powers between the Federal authorities and the regions. At Federal and


                                                    1
Regional levels, administrative regulations governing relations between and relations within

executive bodies of authority have been introduced.

Despite the efforts taken, the system of executive power is still far from being optimal. Public

opinion surveys, internal assessments of experts, as well as international indicators (GRICS,

Corruption perception indexes, Growth competitiveness indexes etc.) testify to this fact.



       Key performance indicators of Russian Administrative reform (2005 - 2010)

                                                                Planned to
            Performance indicators                   2004                          Performed
                                                                   2010
 Quality and equal access to Public services         14%           70%           18% (2008 г.)
 (% of respondents)
 Administrative Burden on Business (% in             8,5%          3%              6% (2010)
 total output)
 GRICS: Government Effectiveness                        48          70            45 (2009 г.)
 GRICS: Regulatory Quality                              30          70            35 (2009 г.)

Neither the citizens nor the business have seen significant results of the public administration

reforms, that has failed to improve the business climate and the availability of public services,

reduce corruption, restore confidence in public institutions and public officers, deliver proper

and efficient regulation and administration of the state resources. Only a handful of

innovations have been implemented in full or yielded expected results. Consequently, the

imperfection of the executive power has proved to be one of the major factors affecting the

investment and business climate, as well as the attitude of the citizens to public institutions.

According to nearly all independent indicators describing the quality of the executive bodies,

Russia has lost quite a number of points, also in comparison to many post-Soviet countries.



                 Comparative institutional advantages – former USSR republics
                            (http://www.doingbusiness.org/)

 INDICATORS (2011)          RUSSIA      KAZAKHSTAN           BELARUS         GEORGIA


                                                    2
 Doing business rank          123              59                68             12
 Starting a Business          108              47                 7              8
 Protecting Investors          93              44               109             20
 Enforcing Contracts           18              36                12             41

What this means is that Russia has an inefficient, non-transparent system of public

administration – a system that is, for the most part, unaccountable, is preoccupied with the

collection of bureaucratic rent, and lacks responsiveness to the needs of the society and of

government. The gap between the quality of management in business and in the public sector

is becoming wider and this impedes the efforts of government to manage the economy more

efficiently.

Poor outcome is the result of the defective implementation of the relevant programs, ignoring

a number of groups and interests, underestimating the complexity of the objectives and the

importance of external conditions for their achievement.

Firstly, the existing procedures for drafting the agenda and the identification of the

reformation sequence and stages are over-bureaucratized and detached from the needs and

participation of and control by the civil society. The authorized departments plan the reforms

on the basis of departmental vision of expediency, without dialogue with target groups of the

civil society, or engaging ‘hand-picked’ experts. As a result, a lot of innovations are enforced

as a means to expand the departmental influence and to promote departmental objectives;

sometimes they serve the purpose of expanding the market of consulting services.

Consequently, the reformation initiatives receive no public support and face opportunistic

behavior, resulting in the simulation of reforms and misunderstanding by the public officers.

The gap between public expectations and the results of the reforms is getting broader.

Secondly, inefficient reforms administration and coordination. The reforms were prepared

and performed in such a quick-paced manner that they exceeded the adaptive capacity of

executive bodies. Innovations are enforced at the times when neither their authors, nor the



                                                    3
executives fully understand all the details and implications of the suggested mechanisms.

Inflation of the reform initiatives develops an attitude when the reforms are treated as a new

assignment that is to be done by a certain deadline.

Thirdly, provisions for the participation of civil society institutions were very weak, and no

extensive coalitions are formed in support of the reforms. The involvement of parliament

members at any level of power is very poor. In this situation the executive authority

(particularly the government and the involved departments) automatically assumes full

liability for the success or failure of the reforms.

The bureaucratic approach and perfunctory control of the results turn the reform strategy into

the tactics of assignment completion, the specific weight of which is inconsistent with the

long-term, socially significant result.

Fourthly, there are no provisions to make the reforms irreversible and their trends topical.

Against the background of departments fighting to retain their powers, redundant functions

and regulations in any particular sphere sort of flow over to another sphere, which does not

contributes to a reduction but rather increases the administrative burden on the citizens and

businesses. There is no system of performance assessment for the reforms and for the new

agenda drafting.

Consequently, the risks of global loss of competitiveness of the state and deterioration of the

institutional environment vital for businesses and citizens have grown over the last few years.

The trust in state institutions and the public officers have plummeted. The governance in

Russia is still poor which manifests itself in ‘manual control’ and uncoordinated performance

of certain departments. Neither human, nor managerial resources are accumulated or

developed in the executive authorities system, which cannot be tolerated especially on the

federal level.




                                                       4
The priority task for Russian Federation is still to establish the institutional environment

favorable for the development of the business, innovation and investment activities, ensuring

the provision of quality public services, devoid of the corruption component and containing a

developed feedback system covering the citizens and the business on the one hand, and the

state authorities on the other.

In other words, the task is to build a system of executive authorities that is light-weight,

capable of responding to the needs of the society and the external changes in an adequate and

flexible manner, respected by civil society and has capable human resources.

Accomplishment of this task would call for reformation of the regulatory and legal

framework, public and municipal services, as well as extensive reformation of the

relationship between the state and the civil society, harmonized development of every branch

of authority based on the distribution and proper performance of their respective functions.

Firstly, this would require a judicial system thoroughly independent from the executive

authorities and reporting to the society. Secondly, representative authorities should exercise

democratic principles for the reconciliation of the interests of citizens, businesses and the

state in the course of drafting, approval and monitoring of compliance with legal acts, rules

and regulations. Thirdly, the public administration system is unable to develop without proper

funding of the administrative innovations, functions exercised and services provided by the

authorities.


Optimization of the government Regulatory Functions
Government regulation functions include all laws, rules and procedures defining the ‘entry’

to and ‘operation’ on the market, the requirements for access to the limited state resources.

These functions involve licensing, accreditation, supervision of product compliance and other

administrative tools regulating the market and enterprises.



                                                    5
Government regulations inevitably entail expenditures – both for the state and for the

controlled entities (enterprises, citizens, etc.). Such expenditures should reasonably include

both actual expenses and lost profit, because regulation also shapes behavioral strategies.

There is a consistent pattern – the more rigid the regulation is (fewer opportunities of

evasion), the higher expenditures it entails. Direct relationship between expenditures and

rigidity of regulation is the basis of many proposals of de-regulation and withdrawal of the

state from the economy.

However, one should, firstly, keep in mind the benefits of the society from regulation, and,

secondly, rely on the ‘second best’ principle implying that any originally unoptimized

situation can be improved through the state’s interference, which would be irrational in any

other cases.

The problems in the sphere of regulation in Russia appear to be the following: firstly,

inadequacy of state regulation measures to the declared objectives (enforcement of regulation

measures without due regard for risks of damage). As a result, the amount of prevented

damage is often exceeded by the costs incurred by the market participants. New forms of

regulation are developed without due regard for the balance of interests and involvement of

the relevant groups.

Secondly, unenforced and vague regulation requirements lead to multiple interpretations,

ambiguous assessment of compliance allowing officials and judicial bodies in Russia to make

decisions at their own discretion, thereby raising the risk of corruption.

Thirdly, redundant, duplicating forms of inspection (control, supervision) are some times not

in compliance with the established requirements.

Fourthly, abuse of preventive forms of the state regulation, ‘presumed guilt’ of entrepreneurs

erects strong administrative obstacles for business activities and development of the market.




                                                    6
Fifthly, a broad range of fee-based agency services (expert examination, certification and

approvals by subsidiary organizations or affiliated persons) assisting the state authorities to

exercise their licensing and supervisory functions. This inspires additional administrative

expenditure and lowers efficiency of business.

Finally, objects, requirements and forms of regulation are noticeably inferior to the best

international practices.

The main scope of the regulations improvement process consists in providing it with a target,

which implies prevention of unacceptable risks of damage to life and health of the citizens

and the environment, restrictive business practices, and provision of equal access to limited

resources. This principle requires enforcement of demonstrative verification of the necessity

and efficiency of any particular type of regulation. To this effect, the state should properly

identify and establish the values of inadmissible risks in specific spheres of business activity.

It is important to make provisions for the transition from preventive forms of compliance

assessment (control), limiting entry to the market, to routine control (supervision)

accompanied by the increased liability for failure to comply with the established

requirements.

The scope of open-end permits, application of uniform procedures should be expanded, to

simplify and minimize the amount of submitted papers, and expedite their review.

If the risk of damage is moderate, it seems reasonable to outsource the compliance

assessment functions to accredited organizations. Until a competitive market emerges in this

sphere, the accredited organizations may charge customers for compliance assessment service

at the rates regulated by the state, and after the market is established – at market prices.

The targeted nature of regulations should be ensured through feedback including monitoring

and analysis of the existing state regulation, and identification of the measures to support the

improvement of state regulation on the basis of the monitoring and analysis results.


                                                    7
As many other countries Russia is introducing so called Smart Regulation principles. For this

purpose new department within the Ministry of economic development was established,

which responsibility is to examine drafts of new regulation acts according to principles of

Regulatory Impact Assessment. It is planned to perform retrospective assessment procedures,

as well as regular and comprehensive analysis of current legislation and tracking the impact

of normative-regulatory acts on the performance of the regulatory sphere.

Another suggestion consists in inclusion into the financial and economic feasibility

assessment of draft laws as an obligatory component not only for assessing budget

expenditure of different levels, but also costs and benefits of private organisations and

civilians

It is intended to develop mechanisms for involving recipients of regulatory activity

(businesses, not-for-profit organisations and civilians) in the planning of normative-

regulatory acts (Internet panels, public evaluation, public consultation and so on). In this

respect creation of a unified public information resource of RIA to facilitate disclosure of

draft normative-regulatory acts at the early stages of their elaboration is important.


Improving Public Services
One of the key management tools for improving quality of public services in Russia is an

administrative regulation, or reglamentation of administrative functions and services. The

idea of reglamentation of administrative functions and services came from business where it

is well known as re-engineering, optimization of business processes, streamlining of

operation etc. European countries have been widely applying the procedures of administrative

simplification. In Russian the experts of National Research University - Higher School of

Economics, voiced the idea of elaboration of administrative regulation for the performance of

public functions and provision of public services in 2003. On the one hand, it was based on

the Weber’s “ideal” bureaucrat model, which demands abidance by specific rules, on the

                                                    8
other hand, on the concept of performance-oriented management aimed at reaching quality

standards of public services. An administrative regulation is a step-by-step description

(algorithm) of the optimized process of performing a function or providing a service,

including the criteria of decision-making and detailed characteristics of the outcome in the

form of a standard of performance.

An endorsed administrative regulation is a legal act available to clients, which can be used for

control and appeal against incorrect or illegal actions of officials, first and foremost if they

fail to comply with the established standards of state services.

Administrative regulation contains the description of every stage of administrative process

specifies the responsibilities of officials, necessary documents and payments and as an

indispensible part standard of public services, which relate to quality, to informing the public,

and to conditions of service delivery.

Probably, the idea of reglamentation is not that topical for countries with well-established

legal culture and administrative traditions as it is for Russia where bureaucracy and civil

society are still trying to establish balance of mutual rights and commitments. At present,

administrative regulations in Russia are playing the role of original public commitments of

executive bodies delineating guarantees of quality services and interaction of the civil society

with the state.

Thanks to the introduction of administrative regulations the civil society has been granted an

opportunity to take a look into the bureaucratic machinery, which was an absolutely closed

entity until recently, able to expand its authority at its own will, and assess the results of its

own performance. Open standards and administrative regulations ensure transparency of

bureaucracy.

As was mentioned above, quality standards of a public service are an integral part of

administrative regulations, established mandatory requirements to information, deadlines,


                                                     9
range and forms of required documents, as well as the quality of services including the

interior of reception areas.

The standards of public services are aimed at minimizing all types of transaction costs laid

upon individuals and organizations in their interaction with the state bodies, their greater

openness, accessibility of information on the procedure and progress of the function

performance, and availability of services at each stage. The pre-set standards ensure actual

opportunities for public control over executive bodies’ delivery.

In Russia the Government Commission on administrative reform reviews administrative

regulations, including standards, of most socially and economically significant public

functions and services. In the majority of instances the degree of simplification of an

administrative procedure is the key criterion of the administrative regulation and standards

quality.

A precondition for the endorsement of an administrative regulation is an independent expert

examination. Expert examination has to determine the conformity of the procedure and

quality standards of a service specified by the administrative regulation with the needs of

social groups affected by this regulation.

By the end of 2010 approved about 500 administrative regulations on Federal level, what

covers approximately half of the functions and services of federal executive bodies. In 2012

the Process of “reglamentation” should be completed.

The 2011-2013 Concept for Reduction of Administrative Burden and Enhancement of

Availability of Public Services makes provisions for key measures envisaging the completion

of ranking and updating of standards, optimization of most demanding public services,

promotion of the ‘single window’ or ‘one-stop’ approach to provision of public services at

multi-functional centers. Within fulfillment of ‘Information society in 2001-2020’ federal

program e-services will be developed, instruments of e-democracy will be introduced.


                                                   10
To focus the public and municipal services system on the needs of the citizens and the

business implies optimization of services provision based on real-life situations, the

development of mechanisms allowing the consumers to control service quality (complaint

procedures).

Implementation of the principle of integrated and targeted servicing requires systematization

and integration of services provided by various departments and levels of public authority.

Combination of services into packages sorted by real-life situations requires organization of

interdepartmental information exchange and joint development of standards for interrelated

public and municipal services. It is also important to introduce the mechanisms of services

delivery allowing to take into account the individual preferences of particular applicant.

Expanding the front office functions (interaction with applicants, consultations, suggestions,

etc.) of the executive agencies is also an issue for the improvement of services.

The bureaucratic structure of public authorities makes it difficult to exercise customer-

oriented service functions implying “individualized approach” and active consulting, the

provision of not only requested information but also information across the entire spectrum of

the applicant’s needs. This problem could be solved by means of outsourcing of front office

functions to nonprofit, nongovernment organization. This kind of approach is currently

implemented in Russia in the course of establishment of multi-functional centers (MFC).

A multi-functional center is an integrated reception area for registration and issuance of

documents to an applicant when providing various public and municipal services. Its

organizational background is interdepartmental information exchange, information sharing

agreements and documents circulation among federal, regional and municipal executive

authorities.

By the end of 2010 166 multi-functional centers were established in 50 regions of Russia,

what provide 100-200 public services each. Although MFCs are very costly (74% of total


                                                  11
budget of Administrative Reform in 2007-2010), they demonstrate good results – high clients

satisfaction, reduction of risk of corruption and all kinds of transaction costs.

The quality public services require that the consumer should be able to effectively control all

components of it standards. Active quality control implies the existence of an effective pre-

trial appeal and incentive systems to economically motivate quality services.

It is also necessary to establish a permanent quality monitoring system for the provision of

public and municipal services. This system should have two objectives: firstly, promote

quality service assessment by the consumers to identify the performance indicators for any

particular organization; and, secondly, provide information for the re-engineering of public

and municipal services, for simplification of administrative processes.

As the information society and e-Government advance, the bulk of public and municipal

services will be rendered in distant form through the portals exercising the functions of

interaction with the customers. However, depending on the specifics of various services and

the customers’ preferences the development of multi-channel forms of public services

delivery is required.

The development of administrative regulations is closely connected with the formation of the

e-Government. The transfer to e-services occurs above all to those services, for which

administrative regulations have already been approved. Such an approach is instrumental in

avoiding the “automation of chaos”. This also enables a 30-40% reduction of costs involved

in the creation of e-services.

In international and Russian practices several stages of “maturity” of e-services can be

identified. The first is the informing stage, i.e. placing detailed information on a public

service on a departmental web site. The second stage of “personal accessibility” allows the

applicants to independently prepare all the requisite papers for submission to a government

body. The third stage of partial interactivity enables initial application to the relevant


                                                    12
government body through the Internet followed by subsequent personal application if

necessary. On the fourth stage one can monitor how his (her) application is advancing. And

lastly the fifth stage of interactivity envisages the realization of a state function (rendering a

service) without personal participation of the party concerned.

The average level of correspondence of the first, informing stage of electronic interaction is

about 60%. On the whole the level of readiness of federal bodies for electronic interaction is

a little more than 30%. According to the Civil Service Act #210 all public services of federal

level will be ready for electronic interaction of individuals with government bodies till

October 2011.

The development of the Unified portal of public services is under way. This portal will

combine both electronic resources and services by various departments at federal and

regional levels. By the end of 2010 the Unified portal of public services encompass 575 of

the public services (functions) provided by 56 federal agencies. In May 2011 it was 782

public services (functions). Total number of services (functions) on the federal level is about

900.

One of the most acute problems involved in the creation of E-Government in Russia is to

build up joint information resources and draw up rules of interaction acceptable to the

government and all stakeholders.



Availability of Information and Participation
Monitoring of executive authorities provided by the Ministry of Economic Development of

the Russian Federation in 2010 reveals, that availability of information index is 53% of

required standards. It varies from region to region within the range of 9% to 72%. Since there

is no official confidential information list, departmental acts tend to impose various

restrictions and fees for provision of data from the governmental information resources.


                                                    13
The recipient often fails to understand public domain information as the latter is not properly

structured and not oriented towards target groups. Therefore, lawful requirements to promote

openness and availability of governmental information resources, plain writing are not

properly complied with.

There is a need for a more specific regulation of the data format and settings, to promote a

more ‘user-friendly interface’ (intuitive and logical placement, search, download, etc.). This

is to say, that the laws should regulate not only the contents but should also set specific

parameters for data presentation, taking into account the specific features and needs of certain

client groups. Information concerning each specific client should be provided in maximum

detail and in a most convenient manner.

It would seem reasonable that public authorities should use their own Websites to present

their plans and programs used as the basis for decisions of executive authorities, as well as

draft decisions, information and the appropriate analytical data. There should also be some

kind of a forum to discuss these draft decisions, which also necessitates a user-friendly

interface.

“Depositing” of problems, i.e. filing of the application, detailing the potential problem, and

the response of the appropriate official in the departmental database (open Website), may

prove to be an effective tool of enhancing of public participation and control. Analysis of

such applications and responses of officials allows for assessment of quality performance of

the departments and any individual specialists: if a forecast problem mentioned in the

application happens in reality, distribution of liability (at least moral) for not taking the

appropriate measures would be fairly transparent.

It seems reasonable to elaborate a list of departmental documents for which the public

councils should formulate its conclusion: the federal programs, strategic plans, regulatory

acts, etc.


                                                    14
Despite the numerous public councils, expert groups and commissions acting in Russian

governmental bodies, it is not infrequent that administrative decisions fail to take into account

the diverse interests and representative opinions. Consultative bodies and commissions are

often nothing but rubber stamps, which is fine with the departments reluctant to promote

interaction with civil society on an equitable basis.

It is generally known, that public participation would enhance creativity and reconcile

interests of various public groups at the stage of drafting and implementation of the

administrative decisions, which is vital for handling any conflicts of interests. Participation

system is particularly important in conditions when traditional democratic institutions are

underdeveloped, lack the necessary expert potential and are inferior to executive authorities

in terms of information access and analytical capabilities.

Public participation mechanisms should be sufficiently fast, ensure the detection of the entire

spectrum of new ideas and open discussion thereof, and be protected against monopolization

of public opinion by the most influential groups.

Ability of public representatives to participate in the process of recruiting for public service,

anti-corruption arrangements, etc. should be a prerequisite of transparency for governmental

bodies. The legislative acts of the Russian Federation regulating the civil service make

provisions for such capabilities by including independent experts in tender committees,

personnel review boards and conflict settlement commissions. However, all this entails a vast

number of problems.

Firstly, there are no proper procedures for the selection of experts. Specifically, there are no

provisions ensuring that the experts are independent from the governmental bodies requesting

their services. Secondly, independent experts participation in commissions is treated as a

social assignment, no compensation is provided. This limits the choice within expert

community. Thirdly, and most importantly, procedures established for the operation of


                                                    15
commissions are developed in such a way that the representatives of a governmental body

may approve a decision even if the experts disagree. The ability of an expert to effect the

decision in the event of any disputes is really slim.

Effective procedures for involvement of public representatives in the tender committees,

personnel review boards and the conflict settlement commissions should be established.

Terms and procedures regulating the participation of the public and business community

(including the industry-specific community) in the discussion of draft decisions (including

regulatory legal acts, programs, etc.) of the authorities, registration of initiatives in the course

of policy shaping and normative regulation should be more explicitly stated (probably in the

form of Federal Law). To this effect, it would be reasonable to make more detailed and

imperative regulations applicable to professional deliberations and public hearings of draft

regulatory legal acts applicable to the relevant sphere of public relations. One should approve

specific procedures for the relevant public hearings and the registration of conclusions made

on the basis of such hearings. Specifically, there should be provisions for the organization of

hearings of the governmental programs that will serve as the basis for budget funding.

The Civil Code of the Russian Federation should be modified so as to expand the right of

nongovernment organizations to protect the interests of citizens and organizations in the

judicial procedures, including protection through the review of lawfulness of regulatory acts.

Provision of this opportunity will be all the more feasible, because occasionally (especially

on the regional and local level) business entities making a stand for their interests and

appealing against decisions of administrative bodies find themselves in a difficult situation.



Effective contract with bureaucrat
Despite the reforms going on since 2003, the Civil Service still leaves much to be desired.

The search for features of the effective contract with bureaucracy is still underway. There is


                                                    16
no transparent and readily available career development ‘roadmaps’ for public servants.

Consequently, ‘negative selection’ is still in place. Young professionals do not link their life

strategy with the public service, seeing it rather as a temporary shelter where they may get

some individual benefits. Quit often the skill level of civil servants is inadequate for complex

administration and regulatory tasks. As a result the civil society is increasingly distrustful of

the bureaucratic corps, its ability to effectively solve problems of social and economic

development. Public service still operates the outdated HR technologies that fail to recruit

qualified personnel according to the scope and complexity of executive authorities’ functions

and prove to be demotivating for the incumbent public officers in terms of career

development.

One of the most acute problems of staffing in Civil Service consists in inadequate

compensation package (first of all - level and structure of pay). The pay system of public

officers is often inconsistent with the labor market and does not encourage any strive for

results or professional development. It evolved into something unique for international

practices: base salary of a Russian public officer accounts for 20%-35% of the total

remuneration. Many bonuses and supplementary payments vastly overshadow the base salary

and are not linked with individual performance. This is vastly discouraging to public officers

who sometimes use it as an excuse for poor performance or even corruption, regarding the

latter as the ‘underpayment rent’. Prompt revision of the public officers’ remuneration

structure should make sure that the base salary includes all compensatory payments except

merit-based bonuses for best performance.

Another problem comes from the profound difference between the comparatively low level of

pay at the territorial bodies of federal executive authorities and higher remuneration at

regional and sometimes at local governments. As a result, the principle “equal pay for equal




                                                    17
work and responsibility” is not fulfilled. Consequently, ‘negative selection’ is detrimental to

the federal territorial bodies in Russian regions.

To solve these problems, it would be feasible to focus on the establishment of a more flexible

and graded pay system, consistent with the labor markets. To this effect, it would be

necessary to introduce comprehensive and regular monitoring of remuneration by categories

of employees including public officers of all levels of government.




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