Metamorphoses of Government and Business | Lietuvos laisvosios rinkos institutas

LLRI

Metamorphoses of Government and Business

2000-04-30

If until now sunsets and sunrises have been discussed by naturalists, meteorologists, and romantics, today these words should turn into synonyms for improving business conditions and reducing state functions and bureaucracies. At long last the initiative of freeing business has sprung not from the business community, as it usually does, but from the government. The government has finally recognised that businesses in Lithuania are in an unbearable situation. The government has established a Sunset Commission whose aim is to eliminate unjustified and ineffective government agencies functions. Likewise, the Ministry of Finance has set up a Sunrise Commission that is formulating recommendations on how to ameliorate the existing rules in the areas of taxation, land acquisition, building, customs, employment, etc.

The government should have inventoried the conditions in which Lithuanian businesses operate so long. If it had, today it wouldn’t be so difficult for entrepreneurs to get along in the jungle of regulations. The business environment in Lithuania, indeed, abounds in regulations. There are between 60 and 80 institutions that regulate business practices in Lithuania, not to mention public organizations and business enterprises established by ministries, enterprises that do not advertise or otherwise publicise themselves. The reason they don’t advertise is because they don’t need to. They provide services either to a single customer – their founder, i.e. a ministry or another state institution, or to clients “provided” by their founders (for example, by introducing mandatory certification of goods and services). Nobody knows whether these services are really needed or whether there already exist private suppliers of the same services. Even the government itself does not know the exact number of such regulatory institutions and government-established enterprises. Inventorying them should have provided the basis for the sunset initiative.

All of these institutions devise tasks and functions for themselves, as well as arguments to justify them. They create and issue resolutions, decrees and regulations all of which simply cannot be detected and observed. People simply should follow the rule that every step they make – from picking mushrooms to grazing granny’s cattle – is minutely regulated by some government authority. They set a standard for the diameter of a mushroom cap, only for mushroom processors, but also for gatherers. They set a standard for the distance between a pasture and a road, not only for milk producers but also for consumers. By the way, this distance depends on how many cars drive that road.

These examples are not a joke. They are real, quoted from the official publication “Valstybės žinios.” For example, one issue alone contained regulations on: the mixture of textile fibres, footwear labelling, safety of children’s toys, fishing in the Kuršių Marios, mushrooming, the use of fruit-tree branches. All of them are riddled with absurd, unachievable provisions. For an economist, reading this publication is much more horrible than reading a crime chronicle in a newspaper. I wonder what ministers think about when they adopt such regulations. Do they lose elementary logic and common sense as they get bogged down in the role of regulators, inspectors and supervisors.

The Sunset Commission has been established to identify and eliminate government authorities that perform such useless undertakings. Inevitably, this must be done. The outcome would be the saving of public resources and the removal of business regulations and restrictions. Of course, everything cannot be done in one fell swoop. But consistency and persistence, coupled with a firm position not to make any opposite actions, would bring needed changes. Such are the optimistic hopes about the work of the Sunset Commission.

However, a strong resistance from the controlling institutions overshadows this optimism. The position of the government itself is not clear either. At times the government seems to merely imitate work. The work-plan endorsed by the government does not contain any specific measures that would help fulfil their proclaimed goals. No instructions have been issued for ministries, inspections or other government institutions to change their goals and attitudes and to submit proposals that would improve business conditions rather than impose new taxes, regulations, agencies or aid programs. These concerns make me think of two rather pessimistic scenarios.

According to one of them, some controlling institutions might be reorganised, merged, or split, their functions might be handed over to other institutions, one or two government agencies might be eliminated. The names, addresses, and personalities will change but government funding allocated to these institutions will not. In short, things will be changed so that “no one is harmed.” But no one will benefit either: neither the taxpayers whose money maintains legions of state officials, nor companies. Nothing will change, except that the Sunset Commission will become a permanent institution within the government and will be permanently furnished with work. This is what happened to sunset commissions in the United States.

The other scenario might be this: the Sunset Commission will lack the time needed to achieve its goals during the tenure of the current administration, and later it will be disbanded or its composition and name changed. And everything will again start from scratch.

Similar prospects await the Sunrise Commission. If things go well, the recommendations proposed by the Commission will be adopted and implemented. Business conditions would be improved, and business people would be able to cherish hopes that the right things can be done. If not, business conditions will deteriorate further according to a government-adopted plan. Of course, no one – the Sunrise and the Sunset Commissions included – wants their initiatives to end in a fiasco. If this happened, it would be extremely difficult to convince the people in Lithuania that the business environment could improve. So what should be done to make the sunset and sunrise initiatives successful?

First of all, no new business regulations should be adopted nor new government agencies established that could affect the business environment. This should be made a law. There may be some exceptions, of course, but every such exception must be authorised separately. This rule should be valid not only for the government, but for all other state institutions as well. The government should punish the heads of institutions that do not comply with this position and should nullify any new regulations adopted by them.

Ministries and state institutions of all tiers should be instructed to lift regulations and bureaucracies, and to improve business conditions on their own account. They should report on their activities to the government and announce publicly their reports on a monthly basis. Government authorities can do a whole lot to free business activities because most regulations are enacted not in laws, but by the decrees of ministers. The Sunset Commission, in that case, would focus on the institutions that do not intend to restructure themselves or do not know how to do it.

Naturally, everything depends on political will. If it is in place, things will proceed in the right direction. If not, it will be increasingly hard for people to work and to earn. But, it will be easy to vote.

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