improving the process of economic reform legislation...

IMPROVING THE PROCESS OF ECONOMIC REFORM LEGISLATION

IN FYR MACEDONIA

Slavica PenevMarjan Madzovski

EKONOMSKI INSTITUTECONOMICS INSTITUTE

INVESTMENT COMPACTFOR SOUTH EAST EUROPE

IMPROVING THE PROCESS OFECONOMIC REFORM LEGISLATION

IN FYR MACEDONIA


IMPROVING THE PROCESS OF ECONOMIC REFORMLEGISLATION IN FYR MACEDONIA

Published byInvestment Compact for South East Europe, GTZ and Economics Institute, Belgrade

For the PublishersRainer Geiger, OECD Co-chair, SEE Investment Compact,

Thomas Mayer, Fund manager, Open Regional Fund for SEE, Legal Reform, GTZ,Dobrosav Milovanovic, Director, Economics Institute, Belgrade

Reviewed byMargo Thomas,

Suzana Nikodijevic - Filipovska

Language editing byAntonela Arhin

Technical edition and Computer design byStudio Logo

Printed byGenex

Circulation400

ISBN 978-9989-2803-1-3Investment Compact for South East Europe, GTZ and Economics Institute,

Beograd,No part of this publication may be reproduced in any form without

written permission from the publisher.

CIP - Каталогизација во публикацијаНационална и универзитетска библиотека „Св. Климент Охридски“, Скопје

340.134.047.(497.7)

PENEV, SlavicaImproving the process of economic reform legislation in FYR Macedonia / Slavica Penev, Marjan Madzovski. - Skopje : GTZ, 2007. - 84 стр. ; 24 см

Библиографија: стр 81-82

ISBN 978-9989-2803-1-31. Маdzovski Marjan (автор)а) Законодавство - Реформи - МакедонијаCOBISS.MK-ID 71049482

IMPROVING THE PROCESS OFECONOMIC REFORM LEGISLATION

IN FYR MACEDONIA




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FOREWARD

Regulatory reform is one of the preconditions for the creation of a favorable legal and regulatory environment which is a critical element of the invest-ment climate. South East European countries (SEE) often have more bur-densome regulations and a less favorable investment climate not only in comparison with OECD countries, but also with more advanced transition countries that recently joined the EU. In the absence of regulatory reforms to promote a functioning market economy, there is a significant risk of cor-ruption in both public and private sectors, with an increase in the size of the informal economy, and reduced income and employment growth.

Parliaments have a key role to play in the process of economic reform. Their task is to enact or amend legislation which provides the legal framework of economic activities. Their challenge is to establish rules which are coherent, effective and stable. Investors require quality legislation, which provides le-gal certainty and stability and is favourable to the development of a market economy. It is therefore necessary to improve the legislative process from the early stages of drafting to final enactment of the text. For this purpose, it is necessary to identify and analyze existing legislative processes in the SEE countries and their main weaknesses, and to propose solutions for improve-ment.

These challenges were recognized at the Regional Parliamentary Confer-ence: “The Role of Parliaments in Economic Policy and Institutional and Legal Reforms in South East Europe” held in Dubrovnik (2004), organized by the Friedrich-Ebert Foundation, OECD and the Stability Pact/ Investment Com-pact for South East Europe. The idea to conduct a regional project focusing on the role of parliaments in the economic reform process was conceived during this Conference.

The main aim of this Project is to underscore the importance of the Par-liaments for regulatory reform aimed at promoting a favorable investment environment.

Similar projects have already been carried out for Serbia and Bosnia and Her-zegovina (How To Improve the Legislative Process in Serbia and Bosnia and Herzegovina - The path from Proposing a Law to Enacting it in Parliament) and for Montenegro (Improving the Process of Economic Reform Legislation in Montenegro).

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The Investment Compact for SEE together with GTZ commenced the re-alization of the project entitled “Improvement of the legislative process in FYR Macedonia” in July 2007. The first draft of the Project was presented at a workshop held in Skopje on 18 October 2007), which was hosted by the President of Assembly of R Macedonia. This workshop brought together MPs, members of Government, representatives of international organiza-tions, business society representatives, experts and other stakeholders.

The conclusions and recommendations from this workshop have been incor-porated in the final version of this Report. A project on Albania is planned to start by the end of 2007, and upon its finalization, another regional confer-ence will be organized, focusing on common elements for improving parlia-mentarian procedures in the field of economic reform legislation.

Rainer Geiger Thomas Meyer Dobrosav Milovanovic

Co-Chair, Fund manager, Director,Investment Open Regional Fund Economics InstituteCompact for SEE for SEE, GTZ

IMPROVING THE PROCESS OF ECONOMIC REFORM LEGISLATION IN FYR MACEDONIA

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ACKNOWLEDGEMENTS

This study is a mutual project of OECD Investment Compact for South East Europe, GTZ and Economics Institute, Belgrade.

The work has been structured by Rainer Geiger, Co-Chair of Investment Compact for South East Europe, Thomas Meyer, Fund manager, Open Re-gional Fund for South East Europe, Legal Reform, GTZ, and Slavica Penev, Senior Research Fellow, Economics Institute, Belgrade.

The research has been undertaken by Slavica Penev as a head of a team, and Marjan Madzovski (Assembly of R Macedonia), Verica Hadzi Vasileva – Mark-ovska (AAG, Skopje), Sanja Filipovic (Economics Institute, Belgrade), Miroslav Trajanovski (Lawyer, Skopje) and Vanco Uzunov (Faculty of Law, Skopje) as team members.

The research has benefited from the input and comments received from all relevant stakeholders at the workshop held in Skopje. Special thanks are due to Mr. Stojan Andov, Chairman of the Constitutional Committee, National Assembly of R Macedonia, for his contribution to this Project.

The study has been reviewed by Margo Thomas, Regional Program Coordi-nator, FIAS, IFC/World Bank and Suzana Nikodijevic - Filipovska, Head of the sector for policy analysis and coordination, Macedonian Government.

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SUMMARY 11CONCLUSIONS AND RECOMMENDATIONS 21Chapter I ENACTMENT OF NEW LAWS AND REVISION OF THE EXISTING REGULATIONS 27 1.1. Who proposes new legislation and revision of the existing one? 29 1.2. Who drafts laws? 30 1.3. Procedure for adopting Laws 31 1.3.1. Procedure for preparing draft legislation within the Government 32 1.3.2. Procedure of enactment of laws in the Assembly 36 1.3.3. The proposal for adoption of new Rules of Procedure of the National Assembly 39 1.4. Harmonization with European Union legal system 44Chapter II REGULATORY REFORM AND IMPLEMENTATION OF REGULATORY IMPACT ANALYSIS (RIA) 47 2.1. Needs for deregulation and regulatory reform 49 2.2. Regulatory reform 52 2.2.1. The regulations guillotine 52 2.2.2. Obligation to perform RIA 55 2.2.3. Public consultation and transparecy 58 2.2.4. Forward planning system of regulatory actions 60 2.2.5. The role of lobby groups 62 Chapter III IMPLEMENTATION OF LAWS 65 3.1. Parliamentary involvement in the implementation of laws 67 3.1.1. Secondary regulations 67 3.1.2. Monitoring independent state institutions and implementing agencies 67 3.1.3. Other forms of Parliamentary involvement in the implementation of laws 70 3.2. Examples of legislative changes to deal with implementation gaps 70Chapter IV PARLAMENTARY RESOURCES FOR DRAFTING AND MONITORING LAWS 73 4.1. Available resources for drafting laws 75 4.2. Parliamentary research staff 75

TABLE OF CONTENTS


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4.3. Control of quality and coherence of laws 76REFERENCES 81

LIST OF FIGURES

Figure 1: Procedure of enactment of laws proposed by the Government 35Figure 2: Procedure of enactment of laws in the Assembly proposed by the Government -Proposal of new Assembly Ruls of procedure 43

LIST OF BOXES

Box 1.1. Constitutional Court 38Box 2.1. What is regulation and regulatory reform? 49Box 2.2. OECD Guiding Principles for regulatory quality and performance 51Box 2.3. Regulatory Impact Analysis 55Box 2.4. Good practices in the design and implementation of RIA systems introducing effective RIA 57Box 2.5. The case for action of business community 59Box 2.6. Example of activities of lobby groups in law adoption 62Box 3.1. State Audit Office: example of an institution and its communication with the Assembly 68Box 3.2. Easing the process of starting a business 71

TABLE OF CONTENTS

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SUMMARY The legal system of FYR Macedonia, similarly to other former republics of Yu-goslavia, now independent states, is a continental legal system mostly based on German, Austro-Hungarian and French legal traditions, and specifically influenced by the legislation of former Yugoslavia.

FYR Macedonia became an independent state in 1991, but had not been internationally recognized until 1993. In spite of the fact that there were no ethnic and armed conflicts during the 1990s, the country strongly suf-fered from the conflicts in the region. High level of uncertainty, insufficient support from the international community, and abrupt breaking up with traditional markets, has negatively affected the overall transition and reform processes in the country.

In all the period since independence, the country has undergone an intensive process of institutional, administrative and legislative reform. Three separate phases can be observed in which the legal and regulatory environment in country’s transition to the market economy was developed: (i) 1991-1993: period when the country was not formally recognized and all regulatory ef-forts were made by the relatively modest home expertise, (ii) 1993-2001: period in which the International Financial Institutions, especially the IMF and the World Bank have significantly assisted in the legal and regulatory process creation, and (iii) 2001-2007: In addition to the agreements with IFIs and to a certain extent WTO agreement, the country’s legal reform became strongly affected by the EU accession process. Nowadays, the country’s administra-tive and regulatory processes are to a large extent EU driven. Similarly to other transition countries, the transition period was character-ized by enactment of numerous laws, some of which have for the first time been introduced into the legal setting of the country and many of which were adopted in a very rapid manner. This situation would typically not af-ford for proper time to make the needed analyses or to check their impact and coherence of new laws within the country’s legal system. Problems may then appear in the implementation phase, thus requiring frequent changes of legislation. As a result, many laws in Macedonia have been frequently changed and occasionally some laws have been challenged at the Constitu-tional Court for not being in compliance with the Constitution.

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In spite of the dense legislative activity, the legislative process is still not free from some deficiencies. A number of policy areas being important for invest-ment and businesses are still not adequately regulated and are suffering either from excessive or insufficient regulation. The legislative process lacks sufficient quality control and serious shortcomings in the implementation of the laws still exist, due to the lack or poor functioning of the institutions. The country will be going through further improvement of the process of proposing and enacting laws and other regulations, which is an important precondition for achieving high-quality laws and better implementation.

Regulatory reform is one of the key components of the Investment Reform Index (IRI) which has been developed by the South East Europe Investment Compact to provide a comparative benchmark for business environment re-form within the region. According to the first IRI report, countries have de-signed and implemented regulatory reform strategies and established regu-latory bodies but some of these bodies are understaffed and many lack the power to challenge draft laws. In the country regulatory reform is still at an early stage but has recently taken a leap forward with the guillotine proce-dure, which provides a comprehensive inventory for reviewing existing rules including legislation. With a central focus to design an institutional framework that would con-tain streamlined procedures to produce high quality business legislation, the Government initiated a regulatory reform in 2004/05, through the imple-mentation of the regulatory impact assessment concept (RIA). The regulatory reform was strengthened with the Decision for Introducing Regulations Guil-lotine in November 2006, as an institutional mechanism for the simplification of regulations and the removal of unduly cumbersome and outdated rules. The Reform is focused on repealing certain bureaucratic procedures which are a breeding ground for corruption and create obstacles to investment.

For the implementation of the Regulations guillotine program, the Govern-ment established the following institutional structure: (i) the Coordination Committee headed by the Deputy Prime Minister and providing political sup-port to the project; (ii) the Committee for Regulatory Reforms and (iii) vari-ous working groups of the ministries and state administrative bodies.

The reform is supposed to be performed in three phases: (i) drafting a list of regulations and assessing the justification of each regulation, (ii) reviewing the justification for regulations and reaching decisions on removing, amend-


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ing or preserving regulations and (iii) introducing an electronic register of regulations published on the Government web-site.

Regulatory impact analysis for draft legislation1

The obligation to perform Regulatory Impact Analysis (RIA) has not yet been officially introduced into the legislative system. But particular segments of this analysis are already in place to review legislative initiatives: (i) fiscal im-pact assessment, (ii) discussion of possible alternatives, and (iii) expected im-pacts the law may have on public opinion, tax payers, the economy, employ-ment, and environment.

Upon the completion of the Regulations guillotine program, the establish-ment of the electronic register of regulations and the conducting of several pilot RIAs, the obligation to perform RIA is expected to be introduced into the national legislative system.

Two sets of recommendations of the Regulations guillotine were approved by the Government in July and August 2007, and it is expected that the identification of several sets of recommended measures of the Regulations guillotine program and the establishment of the electronic register of regula-tions will be completed by the end of 2007. Several pilot RIAs are planned to test the new system.

Forward planning of legislation

Parliamentarians frequently complain that they are often overburdened at short notice with a flood of legislative proposals, some of them detailed and complex, so that they lack sufficient time to act on them properly. If this is the case parliamentary procedures turn into rubberstamp and lose their le-gitimacy. Legislative forward planning can help avoid such situations.

The forward planning system is relatively well developed and has been strongly influenced by the accession process to the European Union. The planning system is based on the medium-term Government Programme

SUMMARY

1 In order to simplify the text, the term “law proposal” will be used, which defines a proposal for passing a law and law proposal.

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(2006 – 2010), which contains elements of planning legislative activities, which are presented in a context of the planned reforms. Strategic planning is made operational through annual government programmes, which define the laws that need to be enacted in the respective year. The General Secre-tariat of the Government is the institution responsible for coordinating the process and reconciling the strategic plans of the ministries and other state bodies at all levels of the public administration with Government’s strategic priorities. Throughout the year the achievements of the programme are sys-tematically monitored.

Input by private sector and non governmental groups

There is no legal obligation for public debate on legislative proposals. It is for Assembly to decide whether it wishes to obtain input from outside bodies into the legislative process. Normally it will embark on a consultation process with interested groups if the proposed law touches upon important commu-nity interests or if it seeks to obtain evidence by those directly affected.

In practice, some forms of public debate often take place even if not required by law. According to the Government’s Rules of operation, professionals and some interested parties may be invited to work with government bodies during the preparation of laws, but this is not being implemented. Ministries and other government institutions may associate experts and representatives of business associations to the process of legislative drafting, e.g. by includ-ing them into working groups established within the relevant government bodies. Compared to previous experience there is now a trend to conduct consultations in a timely manner.

Lobby groups are not legally institutionalized, but the role of different forms of lobby groups is not an unknown phenomenon in the legislative process in the country. There are several groups of stakeholders which are interested in expressing their views on draft legislation: business associations, both domestic and foreign, trade unions, NGOs etc.

Quality control of draft legislation

Coherence is an important aspect for insuring quality control. Legislative acts should be consistent with each other and have to fit into the overall consti-


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tutional system and the legal traditions of the country. Compliance with the acquis communautaire is necessary to avoid future challenges arising from the accession process. The institutions involved in the control of coherence of legislation are: The Legislation Secretariat at the level of the Government, and The Legislative Committee at the level of the Assembly.

The Legislation Secretariat is competent for: securing the consistency of the legal system, compatibility of the law with the Constitution, EU legislation and international agreements ratified in accordance with the Constitution. It also performs an important function in: (i) securing the methodological consistency in the drafting of laws and (ii) technical fine tuning of the texts drafted by the Ministries and other state administration bodies.

In that manner, the Legislation Secretariat: (i) provides expert assistance to the state administration bodies and the administrative organizations and par-ticipates in the drafting legislations; (ii) studies fundamental legal issues and provides expert advice on these issues to the Government and (iii) ensures the publication of relevant legal acts of Ministers and state administration bodies and organizations in the “Official Gazette”.

The Legislative Committee is a permanent working body of the Assembly, which plays an important role in the process of controlling the coherence of legislation. It is in charge of considering questions regarding the: alignment of laws and other acts with the Constitution and the legal system, as well as their legal and technical drafting; requests for authentic interpretation and preparation of proposals for authentic interpretation of laws; determining the final text of the laws and other acts, if authorized by law.

Acquis communautaire

The strategic determination of the Government to seek EU Membership has created the need for monitoring of national legislation with respect to EU Legislation. For each legislative text approximation to EU standards is an im-portant consideration.

Institutions involved in controlling compliance with the acquis communau-taire are: the Legislation Secretariat and the Secretariat of European Affairs

SUMMARY

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at the level of the Government, and the Committee on European issues at the level of the Assembly.

The Parliamentary Committee on European issues considers the following: monitoring and promoting the harmonization process of the national legisla-tion with the European Union; proposes measures for harmonization, gives opinions and proposals for activities of the working bodies in the Assembly; reviews the quarterly reports prepared by the Secretariat for European Af-fairs in relation to the accomplishment of the legislative activities as defined by National Plan for Adoption of Acquis (NPAA). The Committee has an ac-tive role in providing feedback to the Government.

The Secretariat for European Affairs at the level of the Government plays an active role in the process of quality control and compliance with acquis communautaire. Its role in this process is: to monitor and support the pro-cess of approximation of the national legislation with the legislation of the European Union and to submit proposals to the Parliamentary Committee on European issues and other Parliamentary working bodies in relation to the EU accession.

The legislative process

There is scope for improvement at all stages of the legislative process rang-ing from drafting proposals, consideration by parliamentary committees and final procedures for enactment.

According to the Constitution the legislative initiative lies with every Member of Parliament, the Government or at least 10.000 voters. In fact almost all legislative proposals originate from the Government. A law can be drafted by: The Government (through the relevant Ministry), or other authorized proposers of law (every Member of Parliament, or at least 10,000 voters).

The Rules of Procedure of the Assembly prescribe a rather sophisticated sys-tem that is supposed to operate in two stages: (i) the proposal for passing a law and (ii) preparation of the draft articles of the law.

At the former stage, the need for adopting the proposal is examined. The Assembly then considers whether it wishes to move ahead with the project. If this is the case, the Government is requested to present a detailed law


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proposal for consideration and enactment.

In the process of Government’s consideration, both proposals for passing laws and the law proposal themselves need to be accompanied by the fol-lowing indications and documents: (i) Memorandum, as an informative doc-ument on the contents of the law proposal, providing key information neces-sary for the Government to deliberate on the proposal and on the basis of relevant information, to bring necessary conclusions and decisions, (ii) State-ment of compliance of the law with the acquis communautaire (legislation of the European Union), accompanied by Table of Concordance, which states the level the act’s harmonization with the EU legislation, the EU measures transposed, the data on the translation and the use of technical assistance and (iii) Financial Impact Assessment Form which states the fiscal implications of the law proposal on the Budget , based on the fiscal implications analysis, indicating the expected costs of the recommended option as well as the financial source.

Each Member of the Parliament, the relevant parliamentary committees, the Government and at least 10,000 voters, are eligible to submit amendments to a law proposal to the President of the Assembly in written form and ex-plained and signed by the initiator. If the amendment contains provisions that require financial means, the initiator is obliged to indicate the possible sources for providing those means. An amendment is submitted within 5 days prior to the day scheduled for convening the Assembly session. The initiator of the law proposal may submit amendments until the end of the review of the law proposal.

While the two stage procedure distinguishing between the proposal to pass a law and the consideration of the draft bill may give legislators an oppor-tunity to discuss fundamentals before dealing with details, in practice both stages are often consolidated. This means that the expose de motifs and the draft text are submitted at the same time and are treated under the same procedures.

The President of the Assembly, immediately after passing of the Law, submits the Law to the President of the Republic for signature and promulgation. The Law, other regulations and general acts are published in the official gazette prior to their entering into force.

SUMMARY

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Implementation

By definition, the Assembly is not involved with the development of second-ary regulations. Such regulations are adopted by the relevant government bodies, in accordance with the legislative provisions.

Probably the largest impact that the Assembly has in the implementation of laws is in the monitoring of the implementation agencies. The main mecha-nisms for such control is the review of the annual reports submitted by state institutions and implementing agencies, but also the nomination of the ex-ecutive and frequently non-executive management of these institutions and agencies. Most regulatory institutions and several important state institu-tions have the obligation to submit annual reports to the Assembly.

The Assembly can be involved in the implementation of laws by the way of some other forms of its operation. It can prepare strategies; make decisions, declarations, resolutions, recommendations and conclusions. Many of these can be related to various matters, including the implementation of laws.

The problems with the implementation of laws have been usually dealt by legislative changes. The process of enactment of laws, like in most of the other transition countries was proceeding rapidly , many solutions had to be found in very short periods, which left gaps and deficiencies to be addressed at a later stage through legislative amendments or even new legislation. In other instances there was a need for new legislative actions to introduce dif-ferent or stricter mechanisms to improve implementation.

Research capacities for improving legislation

The Assembly established a research department in the mid 1990s, with the purpose to provide reliable data and analyses for decision-makers in the Assembly. The idea was that this department would gradually be developed into an Institute of Parliamentary Law, similarly to the examples of the West-ern Europe Parliaments. However, still not enough funds were dedicated for this purpose that would provide for an appropriate human and technical re-source capacity of this unit. This research department usually works upon the request of the members of the Assembly or Parliamentary bodies. The de-partment provides the necessary information, databases, conducts research and prepares analyses, including preparation of certain comparative analyses


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of other countries on matters that the Assembly will be or is engaged with.

The research department conducts research and prepares analyses, informa-tion and opinions in the areas of the political and economic system on issues that are relevant to the activity of the Assembly.

In addition to the research department, the Assembly is availed with state councilors, experts for constitution and political systems, legislation, econo-my, public services and international cooperation.

The Assembly also has a department for documentation and a system for maintenance and filing of the documentation.

SUMMARY

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a) Forward planning system of legislative activities for new laws and regulations

Although the forward planning system of legislative activities for new laws and regulation is relatively well set up, the Government should continue its work on improving the system further, with special em-phasis towards stronger intra-governmental cooperation in the pro-cess. Ministries need to incorporate priorities in the Government’s planning process aiming to coordinate them with the working cycles of the National Assembly.

b) Public consultation and transparency

The work of the Assembly and that of its working bodies is available for viewing via the Assembly TV channel. Its activities are well vis-ible and transparent, giving an opportunity for the improvement of the public consultation process. In fact public hearings are frequently conducted and this process should be formalized and made manda-tory. Consultations with interested parties should be transparent and open to the public. Opportunities for dialogue with the public should commence at the initial stage of drafting legislation. For this purpose information should be shared, expertise mobilized and all those likely to be affected by the legislation invited to express their views.

c) Strengthening the capacity of the Secretariat for Legislation

The capacities of the Secretariat for Legislation should be strength-ened to enable it to play a key role in rationalizing and improving the drafting of legislation. This would require more human and financial resources, training and education of staff, establishment of IT basis, containing all legislation, draft legislation and related documentation, and links to relevant EU rules in order to speed up the approximation of the national legislation with EU regulations.

CONCLUSIONS AND RECOMMENDATIONS

On the basis of the findings of this Report the following conclusions and recommendations are put forward to improve the legal environment for eco-nomic activities and the process of reform legislation:

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d) Introducing Regulatory Impact Analysis (RIA) for draft legislation

The Government should make Regulatory Impact Analysis–RIA- mandatory for all important draft laws. This will provide decision makers the opportunity to obtain reliable information and to analyze in advance the anticipated impact on the economy, social and environmental aspects, the functioning of markets and competition, the cost effectiveness in terms of the pursued objectives and risks. For important legislation a reality check should be performed by reviewing periodically the impact, efficiency and cost of implementation.

e) Enhancing capacities of the ministries for implementing RIA

Each Ministry and independent agency should be exposed to sufficient expertise that would allow them to effectively integrate RIA into their own regulatory activities. Adequate resources and training programs should be made available and good use of technical assistance should be made as necessary.

Capacity development for reviewing draft legislation and monitoring implementation will be particularly important for the Section on Eco-nomic and Regulatory Reforms in the General Secretariat, which has a key role for performing RIA at the center of government. The Network of Legal and Economic Officials who are expected to be in charge of preparing RIA and the inventory of rules under the Guillotine review process is another core group, which needs capacity building support. This network of officials should become a reliable source of informa-tion and analysis for assisting ministers and senior officials in prepar-ing policies and regulations.

f) Improving the enforcement of laws

It should become a regular practice, as part of the overall legislative process that Government and regulatory agencies assess the effec-tiveness of implementation procedures and take remedial action if and when problems are encountered. Periodical reviews of regulatory policies under the Investment Reform Index (IRI) of the SEE Investment Compact should be part of this exercise. The findings of the IRI assess-ments should be communicated to Assembly.


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g) Strengthening Parliamentary control over the executive authority

The Assembly should exercise more effective control over the execu-tive authority. One way of achieving this is through the monitoring of the implementation agencies. Although many regulatory institutions and several important state institutions already have the obligation to submit annual reports to the Assembly, there are still some institutions that do not have such obligation. This should be made mandatory for all regulatory and other agencies in the country, which will improve the transparency of their operation and the accountability of their management. The Assembly ( competent committees in any case) need to discuss the reports submitted by regulatory agencies and other important state institutions. Committees need to propose for the adoption by the Assembly recommendations to the Government in order to overcome any shortcomings that will have been identified. Should the findings of discussed reports indicate possible legal or po-litical responsibilities the Assembly needs to adress these matters.

In this respect, the State Audit Office and its reports are extremely important. It is not sufficient that the State Audit office submits these reports; the Assembly must supervise the findings and recommenda-tions by the Office as well as follow up on the activities of audited institutions.

h) Improving the governance of the Assembly

The mere submission of annual reports of regulatory and other state agencies is not sufficient for effective monitoring of their operation. It is also of utmost importance to improve the capacity of the Assembly to properly perform its governance role. Sufficient expertise should be made available to the Assembly administration to prepare adequate analysis. Providing better professional capacity to the Assembly would increase its capability to make informed decisions in relation to the institutions which are under its control including the decisions on the nomination of the chief executives of these institutions.

A special case in this respect is the State Audit Office. It is not sufficient that the State Audit Office submit its reports of the institutions that have been examined. The Assembly needs to follow up on the find-


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ings and the recommendations submitted by the State Audit Office and how they have been implemented by the audited institutions.

i) Strengthening parliamentary capacity for quality control and co-herence of legislation

The capacity of the Research Department within the Assembly should be strengthened, by equipping it with adequate personnel and techni-cal resources to collect data and to perform analysis to provide sup-port for Members of Parliament and Parliamentary Committees. It is recommended that the research capacity of the parliamentary staff and committees be upgraded and resources be provided for access to outside expertise. Twinning programs with parliaments from EU member States or the European Parliament should continue to be uti-lized as available.

Members of Parliament should be encouraged to take part in national and international discussions on the progress of economic reform and join inter-parliamentary networks that would enable exchange of knowledge and experience.

j) Improving budgetary, technical and IT equipment for MPs’ work

The Assembly needs to have sufficient budget, which should contain resources for drafting laws and analyzing draft legislation. The Parla-mentary Committee for Budget Financing should apply forecast and planning procedures for its own budget , in coordination with the planning of the overall state budget and in co-operation with the Min-istry of Finance, in order to obtain a functional coordination with the state budget projection. Sufficient office space should be available for MPs and parliamentary staff, including convenient access to IT equip-ment and internet.

k) Streamlining parliamentary procedures

While Assembly needs to have adequate time to examine proposed legislation and the right of individual MPs to put forward proposals, questions and amendments should be respected, the rules and pro-cedures for parliamentary debate should facilitate timely adoption of


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legislation under a well structured and rational procedure. This im-plies self-discipline, reasonable time limits for interventions and rules against abuse like the deposition of large numbers of unsubstantiated amendments designed to delay proceedings. The role of parliamenta-ry committees should be strengthened to ensure that plenary debates are adequately prepared. The powers of the President of the Assembly should be strengthened to allow for an efficient use of procedures.

The rules of procedure should clearly reflect the responsibility of the Assembly for the legislative process. Once a legislative proposal is ta-bled it should remain under consideration by Assembly until a final decision is taken.

l) The broader function of the Assembly should be enhanced

The Assembly should be better resourced to exercise more effectively its democratic functions and to expand its overall impact in the politi-cal process, especially debating strategies, decisions, declarations, res-olutions, recommendations and conclusions. The Assembly could also be given a greater role in the process of negotiation of international treaties. It could be involved by the Government in the discussion of fundamental options, which would ease the process of ratification once the Treaty has been concluded.

m) Donor institutions technical support

Donor institutions are encouraged to provide technical support to eco-nomic reform legislation in an efficient and well coordinated manner working through national institutions and counterparts and building on the existing network of MP offices in electorate districts. Particu-lar attention should be given to strengthening capacities within Gov-ernment and Assembly for drafting of legislation, regulatory impact analysis, work of parliamentary committees and staff and the imple-mentation of legislation.


Chapter I

ENACTMENT OF NEW LAWS ANDREVISION OF THE EXISTING REGULATIONS

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The legal system of FYR Macedonia, similarly to other former republics of Yu-goslavia, now independent states, is a continental legal system mostly based on German, Austro-Hungarian and French legal traditions, and specifically influenced by the legislation of former Yugoslavia.

FYR Macedonia became an independent state in 1991, but had not been internationally recognized until 1993. In spite of the fact that there were no ethnic and armed conflicts during the 1990s, the country strongly suf-fered from the conflicts in the region. High level of uncertainty, insufficient support from the international community, and abrupt breaking up with traditional markets have negatively effected the overall transition and reform processes in the country.

In all the period since independence, the country has undergone an inten-sive process of institutional, administrative and legislative reform. In the last few years, the legal reform became strongly affected by the EU accession process.

A huge number of laws were enacted, which was a prerequisite for a suc-cessful transition to a functioning market economy. The quality of the legis-lation was very uneven with the tendency to be increasingly improved over time.

In spite of the dense legislative activity, the legislative process is still not free from some deficiencies. A number of policy areas being important for invest-ment and businesses are still not adequately regulated and are suffering either from excessive or insufficient regulation. The legislative process lacks sufficient quality control and serious shortcomings in the implementation of the laws still exist, due to the lack or poor functioning of the institutions. The country will be going through further improvement of the process of proposing and enacting laws and other regulations, which is an important precondition for achieving high-quality laws and for better implementation.

1.1. Who proposes new legislation and revision of the existing one?

According to the Constitution, the National Assembly is a representative body of the citizens in which the legislative power of the country is vested.

The Assembly adopts and changes the Constitution, adopts laws and gives

Chapter I - ENACTMENT OF NEW LAWS AND REVISION OF THE EXISTING REGULATIONS

30

the authentic interpretation of laws.

The organization and functioning of the Assembly are regulated by the Con-stitution and by Rules of Procedure of the Assembly.

According to the Constitution and the Rules of Procedure, which regulate the organization and the work of the Assembly: - Every Member of Parliament, - The Government and - At least 10 000 voters have the right to make a proposal for passing a low and to propose law.

An initiative for passing a law can be given to the authorized proposers by: - Any citizen, - Group of citizens, - Institutions or - Associations.

1.2. Who drafts laws?

The proposal of law, which is to be submitted to the Assembly, is drafted in accordance with the Rules of Procedure of the Assembly.

A law can be drafted by: - The Government - Other authorized proposer

When the Government proposes the law, the drafting can be executed by relevant Ministry.

Along with the law proposal, the proposer is obliged to obtain the opinion on the law proposal from the following institutions: 1. The Secretariat of Legislation pertaining to the compliance of the law proposal with the Constitution, with the overall legal system of the coun-try and with appropriate regulations of the European Union; 2. The Ministry of Justice for matters pertaining to state administra-tion and penal provisions; 3. The Ministry of Finance on the fiscal impact of the law enforcement on the budget;


31


4. Other relevant Ministry2.

The law proposal should have: (i) a constitutional basis, (ii) reasons for pass-ing the law, (iii) basic principals of the law and (iv) contents of the law. The contents of the law should cover the basic relations that are to be regulated with the law and the proposed methods of regulation.

The law proposal has to be explained. The explanatory note shall cover: (i) estimation of the conditions in the field that is to be regulated with the law and estimation on the implementation of the existing provisions in that field; (ii) the aim that is to be achieved with the regulation of the relations in the proposed manner, as well as data on the effects that will come out from the proposed solutions and (iii) the amount of the financial means necessary for the implementation of the law and the sources for obtaining them, as well as data on whether the implementation of the law will impose financial obliga-tions for certain subjects.

If the law proposal is not prepared in accordance with the provisions of these Rules of Procedure, the President of the Assembly, before distributing it to the Members of Parliament, shall request the proposer to comply with the Rules of Procedure.

1.3. Procedure for adopting laws

The Rules of Procedure of the Assembly prescribe a rather sophisticated sys-tem that is supposed to operate in two stages: - The proposal for passing a law and - Preparation of the law proposal.

At the former stage, the need for the proposed law is examined. The As-sembly can then consider whether it wishes to move ahead with the project. If this is the case, the Government is requested to present a detailed law proposal for consideration and enactment.

2 The proposer is obliged to obtain the opinion on the law proposal from Ministry of Defense for laws relating to defense, Ministry of Environment and Spatial Planning for laws related to the environment and spatial planning and Ministry of Foreign Affairs for laws related to foreign affairs and foreign policy.

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While the two stage procedure distinguishing between the proposal to pass a law and the consideration of the law proposal may give legislators an op-portunity to discuss fundamentals before dealing with details, in practice both stages are often consolidated. This means that the expose de motifs and the text of the law proposal are submitted at the same time and are treated under the same procedures.

1.3.1. Procedure for preparing draft legislation within the Government

The procedures for preliminary legislative proposal and detailed draft legisla-tion are almost identical, and as mentioned above.

In accordance with the Rules of Procedure for Operation of the Government, the proposals for passing laws or the actual draft laws to be submitted by the Government to the Assembly for enactment, are prepared by the competent line ministries.

In practice, these line ministries can establish working groups consisting of members of different ministries or other state institutions; they may involve outside experts, citizens’ associations and they may use in the preparation technical assistance of foreign donors as available.

Proposals elaborated by line Ministries have to be distributed for advice to other Ministries or State Bodies that may be concerned. In most cases the Ministry of Finance, the Ministry of Justice and the Secretariat of Legislation have to give their advice.

The proposal is then submitted to the Government, together with the fol-lowing documentation: - An explanatory Memorandum which summarizes the contents of the proposal; - A statement of compliance of the law with the acquis commu-nataire (with legislation of the European Union), accompanied by a Table of Concordance, and the Financial Impact Assessment Form

The explanatory memorandum supplies key information necessary for the Government to deliberate on the proposal and to reach the necessary con-clusions and decisions. It represents an executive summary of the entire act and of the analysis made by the Ministries and other state bodies, including


33

i) the options considered (arguments for and against); (ii) the results of con-sultations with line ministries, other state bodies and organizations; (iii) com-patibility with the EU state aid provisions; (iv) a statement of compliance of the proposal with the acquis communaitaire; (v) compliance with obligations arising from ratified international agreements; (vi) fiscal implications; (vii) ex-pected impacts; (viii) the opinion given by the Secretariat for Legislation and (ix) key elements for informing the public.

The statement of compliance with the acquis communataire states the de-gree of compatibility of the proposal with EU legislation, in particular compli-ance with EU Directives, and the use of technical assistance.

The Financial Impact Assessment Form states the fiscal implications of the proposal, based on fiscal impact analysis, indicating the expected costs of the recommended options as well as the sources of funding.

After preparing the proposal, the line ministries submit it to the General Secretariat of the Government. The General Secretariat, as the expert body of the Government, verifies if the submitted material is prepared according to the Rules of Operation of the Government and forwards it to the Colle-gium of State Secretaries3 (the General Collegium). The General Collegium reviews the degree of preparedness of the proposal for the Government session, and makes a recommendation to the competent working body of the Government (basic committee). For the purpose of considering specific law proposals, the Secretary General may convene a thematic session of the General Collegium.

The Government has the following committees as its permanent working bodies: - The Policy Committee; - The Economic Committee; - The Committee on Human Resources and Sustainable Develop-ment.


3 The Rules of Procedure of the Government stipulate establishment of a Collegium of State Secretaries (General Collegium). The Collegium comprises the Secretary General, deputy Sec-retary General, the State Secretaries in Ministries, the State Secretary in the Secretariat for European Affairs and the Secretary of the Secretariat for Legislation and it is headed by the Secretary General.

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These Committees review the texts, prior to submission to a Cabinet session. The Committees submit a written report to the Government.

The Government has two expert councils, the Legal and Economic Council, as permanent advisory bodies. On request of the Government or upon their initiative, the expert councils review and give expert opinions on specific legal, economic and other issues.

The Government adopts the proposal, and submits it to the Assembly.

If the proposer of the law is not the Government, but some other authorized proposer, the draft law is submitted to the Government for its opinion be-fore being considered by the Assembly. The Government submits its opinion to the Assembly, and may advise the Assembly to reject the proposal or en-act it with or without amendments.


35


Figure 1: Procedure of enactment of laws proposed by the Government4

The Rules of Procedure of the Parliament provide a two stage approach: (i) The proposal for passing a law and (ii) submission of a law proposal. In practice these two procedures are consolidated, and the same rules for parliamentary review are applied.

4

Ministry obtains opinions on law

proposal

Other Relevant Ministry

Ministry of Financeon the fiscal impact of the law enforcement

on the budget

Secretariat ofLegislation

for harmonization of the law proposal with the Constitution and the

legal system in generaland harmonization ofthe law proposal with

Eu legislation

Ministry of Justicefor laws that regulate issues related to the state administration and penal provisions

MINISTRY SUBMITS PROPOSAL FOR PASSING LAW/ LAW PROPOSAL

Ministry submits law proposal to the General Secretariatof the Government

GOVERNMENT DEFINES

LAW PROPOSAL

Government submits law proposal to the

Assembly

Law proposalconsidered in total

Relevant Assembly Committee considers

law proposal and proposed amendments

ENACTMENT IN THE ASSEMBLY

President of theRepublic proclaims

adopted law

Adopted lawpublished in theofficial gazette

General collegium submits opinion on a

law proposal

Relevant Government Committee proposes adoption of the law

proposal

(second reading) proposed amendments

and discussion

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1.3.2. Procedure of enactment of laws in the Assembly

The Rules of Procedure of the Assembly distinguish two phases for delibera-tion: - Consideration of a preliminary legislative proposal and - Debate on a draft law.

The preliminary legislative proposal. The text of the proposal is distributed by the President of the Assembly to the Members of Parliament (MPs) and the competent Committees- no later than five days after submission to Par-liament. Prior to consideration of the proposal at the plenary session of the Assembly, the text is examined by parliamentary committees. Consideration by the following committees is mandatory: - The Legislative and Legal Committee; - The Committee which is competent for the subject matter of the proposed legislation.

The Legislative Committee reviews the justification of the proposal and its compatibility with the Constitution and submits a report to the Assembly with its opinions and suggestions.

The competent Committee reviews the basic elements of the proposal and the proposed methods of regulation. If the text contains elements falling within the competence of other committees the latter are consulted. If the proposal has financial implications it is submitted to the Committee of Fi-nance and Budget for opinion. The committees can have joint sessions in order to review issues of mutual interests or to coordinate their positions. А committee that is not competent but wishes to express its opinion has to address itself to the competent Committee, which is obliged to consider the opinion and inform the interested Committee of its decision in a timely fashion. Even though envisaged by the Rules of Procedure, such proceedings are rare in the parliamentary practice.

The report of the Legislative Committee has to be submitted to the other committees that have reviewed the proposal, within 24 hours after the ses-sion of the Committee. The competent committees need to take the views of the Legislative Committee into account when submitting the text to the Ple-nary session. The submission has to include all opinions received. The Presi-dent of the Assembly then distributes the Committee’s report to all Members


37


of Parliament at least five days before the Plenary session.At the beginning of the plenary debate the initiator of the proposal or its representative, can provide an oral explanation and is entitled to participate in the entire debate. A Government representative can participate in the entire debate on the proposal even if the proposal did not originate from the Government.

The Assembly passes a decision on the need for pursuing the proposal and if the decision is positive requests the initiator to prepare a detailed draft. If it considers that there is no need for passing the law, it rejects the proposal.

Draft legislation. If the decision on the preliminary proposal is positive the initiator is requested to submit a draft law, within 60 days. The procedures for preparing and considering the draft law are the same as for preliminary proposals. Draft laws are reviewed in committees and plenary sessions. Each Member of the Parliament, parliamentary commissions, the Government and at least 10,000 voters, are entitled to submit amendments Proposed amendments are submitted in writing to the President of the Assembly. If the amendments have budgetary implications, the initiator is obliged to indicate the possible sources for funding. An amendment is submitted within 5 days prior to the day scheduled for the plenary session.

Exceptionally, an amendment may be submitted during the review of the draft law if it consolidates the provisions in the text that have been changed due to the previous adoption of one or more amendments.

The initiator of the draft law may submit amendments until the end of the plenary debate.

Immediately upon receiving the amendment, the President of the Assembly submits it to the Members of the Parliament, the initiator of the Law and the Government, when it is not the initiator of a Law. He also submits the amendment to the Competent Committee and the Legislative Committee for opinion.

Proposed amendments are submitted to a vote prior to the provision of the draft law to which the amendment refers.

Reduction of the timeframes in the procedure for passing a Law. If the mat-ter under consideration does not raise complex issues the procedures for

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preliminary proposals and draft legislation and be consolidated. If the As-sembly agrees on the need for passing the legislation it can review the draft law at the same session. Even though Rules of Procedure envisage this as an exception, in practice, this procedure is implemented almost as a rule, espe-cially concerning laws prepared according to the National Plan for Adoption of the Acquis (NPAA).

Urgent procedure for passing a Law. Exceptionally, a Law can be passed under a procedure of urgency. Such a procedure can be followed if it is con-sidered that urgent action is needed to prevent or remedy economic emer-gencies, to protect national security interests or in case of natural disasters, epidemics or other situations of emergency. The initiator is obliged to justify the recourse to a procedure of urgency. This procedure always combines the preliminary proposal and the draft legislation.

Once enacted the law is submitted by the President of the Assembly to the President of the Republic for signature and promulgation. The President of the Republic may decide not to sign and promulgate. In this case the As-sembly reconsiders the law and can override the Presidential veto by a two thirds majority of its members.

The Law, other regulations and general acts are published in the official ga-zette prior to their entering into force.

Box 1.1. Constitutional Court.

The Constitution of Macedonia establishes the Constitutional Court of Macedonia as an organ of the country which protects the constitu-tionality and legality as well as fundamental freedoms and rights of the individual and citizen.

The Constitutional Court composed of nine judges decides on: (i) the conformity of laws with the Constitution; (ii) the conformity of collec-tive agreements and other regulations with the Constitution and laws; ers of legislative, executive and judicial offices; (iv) conflicts of compe-tency among state bodies and units of local self-government; (v) the responsibility of the President of the Republic; (vi) the constitutionality of the programmes and statutes of political parties and associations of


39

citizens; and other issues determined by the Constitution.

The Constitutional Court repeals or invalidates a law if it determines that the law does not conform to the Constitution and repeals or inval-idates a collective agreement, other regulation or enactment, statute or programme of a political party or association, if it determines that the same does not conform to the Constitution or law. The decisions of the Constitutional Court are final and executive.

Within the structure of matters submitted to the Constitutional Court of Macedonia, the majority of initiatives originate from individual citizens, far less from local self-government units, and almost insignificantly from the associations of citizens, political parties, enterprises, etc.


Following the adoption of the Amendments to the Constitution in Novem-ber 2001, Rules of Procedure of the National Assembly were adopted in July 2002. Since then a number of domestic and foreign expert advice has been obtained. Generally speaking, the Assembly’s work has an important role in the European integration efforts and, consequently, it is required to adjust its procedures. Such an adjustment would include formal and informal changes in its decision-making process as well as organizational changes.

The discussion on the proposal for adoption of the Assembly’s new Rules of Procedure has been disrupted in its first phase. During the debate as well as prior to it, the lack of political will and failure to reach consensus surfaced between the parliamentary majority and the oppositions, both on matters of principle and substance.

Bearing in mind the importance of the Rules of Procedure, the committee who worked on the text of the proposal for new Rules was replaced by a working group composed of members from all political parties represented in the Assembly. The following key points and conclusions emerged from the debate: - In the procedure of adoption of new Rules, a distinction was made between the points of dispute of purely political nature and those of proce-

1.3.3. The proposal for adoption of new Rules of Procedure of the National Assembly

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5

dural and technical nature. The working group recognized three issues: the use of language when chairing plenary and committee sessions, addoptioan of a number of laws according to the Badinter principle5, as well as the ques-tion of limitation of speaking time. The former two are subject to a heated political debate, requiring prior inter-party consensus. On the other hand, the question of speaking time limitation, in line with the standards in the Western European countries, is at the borderline between politics and effi-ciency concepts. It is possible to resolve this matter even within the Assembly as there is an attitude in favor of a reasonable limitation that would still be two or three times longer that in other parliaments, and would include two opportunities for each Member to register to speak. There is also an alterna-tive according to which speeches would be part of a time frame distributed to parliamentary groups that would depend on the number of Members they include. Generally speaking, the problem with unresolved political questions does not represent a sufficient reason for not adopting the new Rules in its procedural and technical aspects. The new Rules could be adopted with de-ferred application while an attempt is made to resolve the broader political issues. - The Rules of Procedure are not carved in stone. They are subject to periodical change and improvement, in light of experience – and this is in fact the practice of most parliaments. - Following the adoption of the new Rules, it is possible to introduce a transitory implementation time frame of at least six months. During this period, there could be a simulation using the new rules to test their useful-ness and eliminate any inconsistencies.

Based on the working group opinions and advice from the National Demo-cratic Institute, which provided assistance throughout the process, the fol-lowing principles could be incorporated into the new rules: - Application of the principle of division of powers, by which a law that goes through legislative procedure does not leave the parliament until a final decision is taken; - The Principle of independence of the Parliament from the Execu-tive, which entails autonomous power to adopt its own procedural provi-sions, determine its internal organization and order; - The Principle of rationalized legislation procedure comparable with

Double-majority “Badinter Principle”, is a principle by which the will of the parliamentary majority must be confirmed by the majority of the cumulative minority MPs.


41


the one in the Western European countries with a view to speeding up the harmonization of national law with EU legislation - The rational division of work between the Parliamentary commit-tees and plenary sessions, which requires strengthened role of the Commit-tees in the legislative process, in carrying out public debates (principles of participation and transparency), as well as in exercising control on the Execu-tive; - Rationalization of Committee debates while allowing the public a possibility to follow the debate thanks to the live coverage on the Assem-bly’s TV channel; - Better planning and organization of work; - Allowing effective and active participation of all Members of Par-liament in the legislative process; this entails the right to initiative, right to speech and amendment and right to ask questions to the Executive and exercise other forms of parliamentary control; - It is acceptable to regulate the parliamentary process in terms of amendments, questions of the length of speeches, if this is necessary to achieve a genuine balance between the efficiency of parliamentary activi-ties and the possibility for parliamentarians to defend the interest of their electorate. - Principle of equal treatment of the parliamentarians as individuals and members of parliamentary groups and political parties represented in the Assembly.

The text of the new Rules of Procedure could be improved in technical terms so that it reflects the principle of division of power and independence of the Assembly in relation to the executive, such as: - The capacity of the parliamentarians and the Assembly in general to propose legislation should be strengthened. For this purpose, it is necessary to have an adequate parliamentary budget and sufficient staff to provide support to the legislative process. Establishing a separate budget commit-tee within the Assembly would be useful for preparing the budget of the Parliament in accordance with the budgetary projections for the country as a whole. - Considering the latest incidents in the Assembly, members of the working group recommended to have an internal parliamentary security ser-vice that would function in close coordination with the Ministry of Internal Affairs, but would be under the exclusive authority of the Assembly. - The Assembly should adopt its Parliamentary Code of Ethics. It should define the so-called “hate speech” and possible sanctions for its use.

42

The EU twinning project between the Macedonian and Slovenian Parliament reached the following conclusions as to the weaknesses in the work of the Macedonian Assembly: - lack of organization, the recourse to endless debates at the plenary that may disrupt the process of timely adoption of the legislation; - somewhat inefficient legislative procedure, especially with respect to the useless first reading; - inadequate role of the committees which should be in a position to take decisions on a large number of the issues being raised; - inefficient organization of the legislation and legal assistance, and lack of expert help in the parliamentary groups.

It was also recommended that the Rules of Procedure should not be used as a tool for blocking the legislative process. The possibilities to speak endlessly, to request to take part in the debate for an unlimited number of times, and to submit an enormous number of amendments to block a particular legisla-tive proposal must be restricted and placed in a more balanced framework.


43


Figure 2: Procedure of enactment of laws in the Assembly proposed by the Government

- Proposal of new Assembly Rules of procedure -

Law proposalconsidered at the

plenary session with the aim of making modifications to

the contents with amendments

(second reading)

Law proposalconsidered with the aim of eliminating

the possible inconsistencies(third reading)

ENACTMENT IN THE ASSEMBLY

President of theRepublic proclaims

adopted law

Adopted lawpublished in theofficial gazette

Law proposalconsidered in total at the plenary session in cases when it is

requested by certain number of MPs(first reading)

Public consultation if complex and extensive law

(upon Assembly’s decision) Relevant Assembly

Committees consider law proposal,

submit their own amendments,

accepted amendments are incorporated in the text of the law

proposal

Government submits law proposal to the

Assembly

GAVRNMENT DEFINESLAW PROPOSAL

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1.4. Harmonization with European Union legal system

In essence, the harmonization of the legislation with the EU legal system has become intertwined within the legal system of the country in such a way that its system has to a great extent become EU driven. The EU accession process is more and more proving to be instrumental in providing both guidance and enforcement mechanisms. In practical terms, this means that the harmoniza-tion of any new legislation with the one of the EU has become a de facto obligation for the Government and for the Assembly.

The need for harmonization of the national legislation of the country with the European acquis communautaire has been initially incorporated within the 2001 Stabilization and Association Agreement (SAA) between the Euro-pean Communities and Macedonia. In article 68 of this Agreement, Mace-donia: - Acknowledges the importance of the approximation of Macedo-nian laws towards those of the EU Community and - Obliges itself to gradually making its legislation compatible with the Community legislation.

The approximation of laws was supposed to be conducted in two stages: - Extending to certain fundamental elements of the Internal Mar-ket acquis and some other trade-related areas, competition law, intellectual property law, standards and certification law, public procurement law and data protection law; - Extending to the remaining elements of the acquis.

Gradually, the institutional infrastructure for the approximating of legislation has developed, and the introduction to the European Partnership provided foundations for clear medium-term goals for this process. Based on the Eu-ropean Partnership, the Stabilization and Association Agreement, gained momentum in 2006, when the National Plan for Adoption of Acquis (NPAA) has been adopted.

The harmonization of the legislation is understood not as a simple trans-position of the EU legislation into the national laws, it is not a complete equalization done all at once, but some specificities may remain for a certain period of time, so that a gradual approximation is achieved and differences are decreasing with the achieving of the membership status of the country in the EU.


45


Since the moment of defining its determination towards EU accession, the country has embraced the legal framework of the EU, both in its primary and secondary legal sources, as its reference point.

The commitment to the approximation of the national legislation to the EU has been incorporated in the following legislations: - The Law on the Government of Macedonia, - The Rules of Procedure for Operation of the Government.

The Law on the Government, in its 2003 amendments, has provided the Sec-retariat of Legislation with the role of ensuring the consistency of the legal system and provision of expert opinion on the harmonization of the propos-als of laws and other regulation with the EU legislation. This is an important provision, which enforces assessment of compliance at the level of propos-ing the laws by the Government, who is the dominant actor of proposing laws in the country. Along with changes to this law in 2005, the Sector for EU integrations in the General secretariat of the Government became the Secretariat for European affairs, which coordinates the state administration organs and institutions related to European integrations.

According to the latest amendments to the Rules of Procedure for the Oper-ation of the Government, the drafters of legal acts subject to harmonization with the acquis communautaire must submit a Statement on the Compliance of the Legislation with the acquis communautaire, which should contain the following information on compliance: - The relevant EU legal act, i.e. harmonization of the draft law with acquis communautaire (with primary, secondary and other sources of the EU regulation), - The level of harmonization of the draft law with relevant sources (harmonized, partly harmonized, not harmonized), - The degree of harmonization of the legal acts with the provisions of the Stabilization and Accession Agreement between the European Com-munities and their Member Sates and Macedonia, - The degree of harmonization of the legal acts with the EU legisla-tion (harmonized, partly harmonized, not harmonized) - Reasons for any lack of harmonization of regulations, - Framework and deadlines within which full harmonization is to be completed, - Whether translation of sources of the EU law and the legal act exist and

46

- Whether expert assistance was deployed including the source and the opinion.

The Statement of Compliance is accompanied by a Table of Concordance. The Table of Concordance is a form assisting in ensuring that the proposed changes are adequate and responding to the requirements of being corre-spondent to the respective EU legislation.

Prior to the submission the proposal of the new legislation, together with the Statement of Compliance and the Table of Concordance, the Secretariat of Legislation provides its opinion on the harmonization of the proposal of the law to the EU legislation.


REGULATORY REFORM ANDIMPLEMENTATION OF REGULATORY

IMPACT ANALYSIS (RIA)

Chapter II

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Box 2.1. What is regulation and regulatory reform?

There is no generally accepted definition of regulation applicable to the very different regulatory systems in OECD countries. In the OECD work, regulation refers to the diverse set of instruments by which gov-ernments set requirements on enterprises and citizens. Regulations include laws, formal and informal orders and subordinate rules issued by all levels of government, and rules issued by non-governmental or self-regulatory bodies to which governments have delegated regula-tory powers. Regulations fall into three categories: economic, social and administrative regulations.

Economic regulations intervene directly in market decisions such as pricing, competition, market entry, or exit. Reform aims to increase economic efficiency by reducing barriers to competition and innova-tion, often through deregulation and use of efficiency-promoting reg-ulation, and by improving regulatory frameworks for market function-ing and prudential oversight. Social regulations protect public interests such as health, safety, the environment, and social cohesion. The economic effects of social regu-lations may be secondary concerns or even unexpected, but can be substantial. Reform aims to verify that regulation is needed, and to design regulatory and other instruments, such as market incentives and goal-based approaches, that are more flexible, simpler, and more effective at lower cost.

Administrative regulations are paperwork and administrative formali-

Chapter II - REGULATORY REFORM AND IMPLEMENTATION OF REGULATORY IMPACT ANALYSIS (RIA)

2.1. Needs for deregulation and regulatory reform

Favorable legal and regulatory environment is one of the preconditions for the creation of business friendly environment and successful conducting of the transition process in former socialist countries.

A legal and regulatory environment which is conducive to investment implies the existence of: (i) high-quality, modern, market oriented laws and (ii) an adequate institutional infrastructure, necessary for implementation.

50

ties - so-called “red tape” - through which governments collect in-formation and intervene in individual economic decisions. They can have substantial impacts on private sector performance. Reform aims at eliminating those no longer needed, streamlining and simplifying those that are needed, and improving the transparency of applica-tion. Regulatory reform is used in the OECD work to refer to changes that improve regulatory quality, that is, enhance the performance, cost-effectiveness, or legal quality of regulations and related government formalities. Reform can mean revision of a single regulation, the scrap-ping and rebuilding of an entire regulatory regime and its institutions, or improvement of processes for making regulations and managing reform. Deregulation is a subset of regulatory reform and refers to complete or partial elimination of regulation in a sector to improve economic performance.

Source: OECD (1997), Report on Regulatory Reform.

Legal and regulatory environment that characterizes country’s transition to the market economy was developed in three separate phases: - 1991-1993: period when the country was not internationally rec-ognized and all regulatory efforts were made by the relatively modest home expertise, - 1993-2001: period in which the international financial institutions, especially the IMF and the World Bank have significantly assisted in the legal and regulatory process creation, - 2001-2007: In addition to the agreements with IFIs and to cer-tain extent the signed WTO agreement, Macedonian legal reform became strongly affected by the EU accession process.

These phases produced a period of intensive legislative activity in the coun-try in order to complete the process of reforms. Huge production of new regulations, lack of regulation in some areas, excessive regulation in other areas, including the obsolete laws inherited from the SFR Yugoslavia, which remained in force even after the dissolution of Former Yugoslavia, resulted in severe regulatory problems, which are not conductive for supporting a


51

Box 2.2. OECD Guiding Principles for regulatory quality and perfor-mance

OECD Guiding Principles for regulatory quality and performance, ad-opted by the OECD Council in April 2005 are: 1. Adopt at the political level broad programmes of regulatory reform that establish clear objectives and frameworks for implementa-tion. 2. Assess impacts and review regulations systematically to en-sure that they meet their intended objectives efficiently and effectively in a changing and complex economic and social environment. 3. Ensure that regulations, regulatory institutions charged with implementation, and regulatory processes are transparent and non-discriminatory.


FYR Macedonia is benefiting assistance of FIAS, World Bank and OECD in implementing this strategy.

6

modern market economy. In order to address these issues, which were seri-ous obstacles to the creation of favorable regulatory environment, the Gov-ernment recognized the necessity to change the item by item approach, into a systemic approach to a regulatory reform. The process of preparing for possible accession to the EU provides the impetus for introducing a more systematic approach.

In that sense an evolving strategy is implemented to strengthen the regula-tory framework, improve the quality of regulation and ultimately establish conditions for market economy and sustainable growth.

This chapter examines different aspects of this strategy and various tools that are being developed and applied for implementation.6

As the result of these processes, an appreciable improvement regarding the quality of laws has been achieved, but is still facing serious deficiencies in their implementation, due to the lack or poor functioning of the institu-tions.

52

4. Review and strengthen where necessary the scope, effective-ness and enforcement of competition policy. 5. Design economic regulations in all sectors to stimulate com-petition and efficiency, and eliminate them except where clear evidence demonstrates that they are the best way to serve broad public inter-ests. 6. Eliminate unnecessary regulatory barriers to trade and invest-ment through continued liberalization and enhance the consideration and better integration of market openness throughout the regulatory process, thus strengthening economic efficiency and competitiveness. 7. Identify important linkages with other policy objectives and develop policies to achieve those objectives in ways that support re-form.

Source: OECD (2005a), APEC-OECD Integrated Checklist on Regulatory Reform: Final Draft, OECD, Paris.

2.2. Regulatory reform

The regulatory reform has been initiated in 2004-05 with a central focus on designing an institutional framework aimed at strengthening regulatory gov-ernance in order to improve the quality of business environment legislation and the rule making process through the implementation of tools to review the stock of existing regulations as well as the flow of new regulations. The Government has committed itself to implementing a regulatory framework aimed at improving the quality and consistency of administrative regulations affecting the startup and operation of businesses.

2.2.1. The regulations guillotine

In the Program of the Government (2006 – 2010), the regulation level of Macedonian economy has been recognized as too broad and unsuitable for a modern and dynamic economy. Therefore the Government plans to imple-ment two-pronged strategy utilizing tools such as (i) regulations guillotine, to review the stock of regulations and (ii) regulatory impact assessment (RIA) to review the flow of regulations. This discussion focuses on the ongoing regu-lations guillotine, since the proposed reforms are still being designed.


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Aiming to create a favorable legal and regulatory environment, this Program anticipates implementation of a process of massive deregulation and reform of the regulatory institutions through: (i) regulatory guillotine: revoking hun-dreds of unnecessary licenses and regulations which prevent companies’ normal operation; (ii) processing certain types of licenses within a strictly determined time framework; (iii) enabling the ownership registration to be conducted as an administrative, and not a court procedure; (iv) shortening time and procedures of property registration from the actual 6-8 procedures which approximately take 75 days to two procedures within 10 days; (v) providing for unified payment for ownership registration carried out in the register; (vi) accelerating the property registration procedure through com-puterization: verifying ownership on the Internet, executing and registering the transaction; (vii) simplifying procedures for issuing building licenses for individuals and for commercial construction: the period for issuing permis-sions will be limited to 45 days; (viii) introduction of multiple inspections: inspectors will inspect construction sites in stages; (ix) providing fair competi-tion and equal conditions for businesses (de-monopolization).

The Government officially embarked upon regulatory reform with the Deci-sion for Introducing Regulations guillotine in November 2006 as an institu-tional mechanism for reassessment of the regulations and their simplifica-tion. The Reform is focused on repealing certain bureaucratic procedures for reducing corruptive actions and enhancing the business climate, encompass-ing the following groups of regulations: 1. Licenses and permits. Specifically: consent for location conditions for a construction, approval for construction, license for tourism business; entry into the phytosanitary Administration Register and decision for condi-tions for planning of the location. The “silence is consent” tool will be ap-plied to ensure decisions within the timeframe. 2. Fees of the state institutions: Cadastre, Customs Administration, Metrology Bureau, Accreditation Institute, Official Gazette and Central Reg-istry. The fees are scheduled to be decreased by 50% to 100%. 3. Administrative procedures including: procedures related to con-struction approvals, explaining better documents for public procurement and restriction of certain discretions rights, and removing double procedures while registering direct foreign investment. 4. Agriculture and agribusiness procedures: easing the registration of farmers, decreasing the number of documents for the application for subsi-dies by one third, and changing the timeframes for issuing the phytosanitary Administration documents.

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5. Speeding up the processing and simplifying the procedures related to personnel and travel documents. 6. Abolishing 363 regulations of the period when Macedonia was part of the SFRY. In order to implement of the Regulations guillotine program, the Govern-ment established the following institutional structure: 1. Coordinative Committee headed by the Deputy Prime Minister of the Government for economic affairs, Sector for Economic policies and Reg-ulatory Reform, providing political support to the project; 2. Committee for Regulatory Reforms, comprising representatives of the Sector for Economic System Current and Development Policies and heads of the ministries’ working groups (including the representatives of the Secretariat of the Legislation). It is made sure that the high level of adminis-tration is present in the Committee. 3. Working groups of the ministries and state administrative bodies provide for the presence of the operative level of the administration.

The reform is supposed to be performed in three phases: 1. Drafting a list of regulations and assessment of the justification of each regulation. During this phase the working groups in the institutions are supposed to prepare lists of existing regulation under their jurisdiction and they are supposed to consider the justification of each individual regulation. 2. Reassessment of the justification of regulations and making opinion on amending, annulment, or not amending the regulation. In this phase the Committee for Regulatory Reform, in consultancy with the business sector, the civil sector, other stakeholders, legal and economic experts, is supposed to review the recommendations submitted by the working groups. 3. Introducing unique electronic register of regulations published on the Government web-site. This electronic register of regulations will be ac-cessible to the public via the Government’s website.

The regulatory reform is expected to release the companies and citizens from the unnecessary regulatory and administrative burden, and to save them time and resources. The legal certainty in the system should be more firmly established and it will be made known to the businesses and to the citizens in a transparent and all-encompassing manner, which they will need to ad-here to.

The regulatory reform is supposed to be conducted on a sustained basis with continuous adjustments of the regulatory framework to the new experi-


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Box 2.3. Regulatory Impact Analysis

Regulatory Impact Analysis (RIA) helps: (i) properly define the problem which should be overcome by adopting the regulation; (ii) perceive the effect of the regulation proposed; (iii) identify alternative options for achieving the desired aim; (iv) assess potential regulatory and deregu-latory options; (v) improve transparency by participating in the debate of all interested parties; (vi) determine whether the benefits justify the costs; (vii) determine whether particular sectors are disproportionately affected; and (viii) ensure that implementation issues are taken into consideration early in the process.


ence, to the evolving needs and to best practices.The first recommendations of the Regulations guillotine were approved by the Government in July 2007 and a package of around 50 measures was adopted, by which cutting of bureaucratic procedures, fees, deadlines and documentations and regulation was achieved. This package indicated the start of the principle: silence means approval.

In August 2007, the Government announced the start of the second regula-tory guillotine, which should provide for further shortening of the adminis-trative procedures and number of the needed documents in front of several institutions, which have already been provided with Government recommen-dation to simplify procedures.

It is expected that the identification of several sets of recommended mea-sures of the Regulations guillotine program and the establishment of the electronic register of regulations will be completed by the end of 2007.

2.2.2. Obligation to perform RIA

In the effort to improve the quality of the regulatory environment, the policy makers in OECD countries are increasingly using the Regulatory Impact Anal-ysis (RIA). This method for analyzing and informing in advance of the impact of the proposed laws related to the potential costs, benefits and risks of the proposed legislation has started to be deployed in a number of non-OECD countries, including the transition countries.

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The obligation to perform Regulatory Impact Analysis (RIA) is not yet officially introduced into the legislative system. However, particular segments of this analysis are carried out as an integral part of the contents of the law pro-posal. They are prescribed by the Rules of operation of the Government and encompass the following: - Fiscal impact assessment - Recommended solution - Expected impacts.

Obligation to perform the fiscal impact assessment has been introduced in 2003, with the amendments to the Rules of operation of the Government. According to the Rules, along with the law proposal, the proposer of the law is obliged to submit the assessment of fiscal impact, which the enforcement of that regulation has on the budget, based on which the opinion of the Finance Ministry is required.

With the same amendments to the Rules of operation of the Government has been introduced an obligation for the proposer of legislation, together with the law proposal to submit a Memorandum, as an informative docu-ment on the contents of the law proposal. Among other relevant informa-tion related to the law proposal, Memorandum provides information on rec-ommended solutions among possible alternatives, and expected impacts of the proposed law.

Expected impacts should indicate expected impact this law may have on public opinion, taxpayers, the economy, employment, environment, drawing on the analysis and available quantitative research results.

Even though these segments contain some elements of the Regulatory impact analysis, the first serious attempt to implement RIA as an integral part of the regulatory reform framework has been by the Government in 2004/2005. In close cooperation with FIAS/World Bank, the Government agreed that: - A Sector for Economic Reforms in the General Secretariat should be established. - A Network of Legal and Economic Officials should be instituted, and - The RIA mechanism would be applied to review the stock of exist-ing regulation and the flow of new regulations that have to be enacted.

Government continued the regulatory reform process with the introduction


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of Regulations guillotine in November 2006, commenced the regulatory re-form as an institutional mechanism for reassessment of the regulations and their simplification.

A Sector for Economic and Regulatory Reforms in the General Secretariat and the Network of Legal and Economic Officials has been established with a key role in the Regulations guillotine program.

Upon the completion of the third phase of the Regulations guillotine pro-gram and the establishment of the electronic register of regulations and the conducting of several pilot RIAs, the obligation to perform RIA is expected to be introduced into the national legislative system.

In the forthcoming phase of the regulatory reform process the Sector for Economic and Regulatory Reforms in the General Secretariat will have the role to implement the regulatory impact analysis function at the center of government and to review proposed legislation.

The Network of Legal and Economic Officials in the forthcoming period should be in charge of preparing the RIAs and the submissions under the Guillotine review process. In due time, the network of the officials should become the grouping of key legal and economic experts assisting ministers and senior officials in preparing policies and regulations.

Box 2.4. Good practices in the design and implementation of RIA sys-tems introducing effective RIA

The following key elements are based on good practices identified in OECD countries: - Maximize political commitment to RIA; - Allocate responsibilities for RIA programme elements carefully; - Train the regulators; - Use a consistent but flexible analytical method; - Develop and implement data collection strategies; - Target RIA efforts; - Integrate RIA with the policymaking process, beginning as early as possible;

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- Communicate the results; - Involve the public extensively; - Apply RIA to existing as well as new regulation.

Source: OECD (1997), Regulatory Impact Analysis: Best Practice in OECD Countries, Paris.

2.2.3. Public consultation and transparency

There is no obligation defined by law for public debate in all cases. The As-sembly can decide to embark on a public debate in the case when there is a law regulating broader interests of the community, and this is in the phase of passing the draft law.

If the Assembly decides to use the mechanism of public debate for a particu-lar draft law, then it will establish one or more working bodies that would be in charge of certain activities in relation to the debate, such as: making the draft law available to citizens, organizations, institutions public associations, civil associations, political parties, trade unions and other entities that might be interested in the matters regulated by the subject law; following the pub-lic debate; gathering the opinions and suggestions generated; and preparing the report with the results from the open debate. The draft Law that was designated for a public debate is usually published in a daily newspaper. The public is asked for opinions and suggestions in a certain timeframe. Once the opinions and suggestions arrive to the working group, the report on the results will be prepared together with the explanations and positions of the initiator of the law regarding the opinions and suggestions presented.

In practice, a form of public debate is in fact more present than what is re-quired by law. It is pursuant to the Rules of Procedures of the Government that professionals and some interested parties may be invited to the work of the government bodies. In addition to the ministries and other government institutions, experts and representatives of business associations are often in-cluded in the process of preparation of the law, participating in the working groups in ministries. At the onset, the texts of the laws were sent relatively


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The representatives of business community are less satisfied than their business associations, when it comes to their involvement in the law enactment undertaking. They would appreci-ate a change of the legal regulation in order to provide for a more transparent involvement of the private sector and to involve more public discussion into the process, by the way of involving equitably all stakeholders in the law enactment. Under the current state of affairs, they are sometimes put in a position to react to laws already enacted and to take initiatives for their amending, or even challenging them in front of the Constitutional Court.

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Box 2.5. The case for action of business community

An illustrative case for a reactive action of business community was the recent challenging of the Law on Water, which contained a provision, which was, according to the producers of water and beverages unfair, inequitable and unconstitutional. They organized themselves against this provision once the Law was enacted and through their associa-tion within the Chamber of Commerce, they challenged the provision in front of the Constitutional Court and are currently waiting for its decision.


late to the business associations and this has now turned to be supplied in a more timely manner7.

The Rules of Procedure of the Assembly are more concerned with publicity rather than the public consultation process. In this respect, they regulate that the Assembly sessions and sessions of the Committees are open to the pub-lic, if not decided otherwise. The President of Assembly may invite represen-tatives of other bodies and organizations to Assembly sessions when the As-sembly considers issues of their competence and interest. This is the case also with the sessions of the Committees , which can easily invite professionals, representatives of trade unions, business and other citizens’ associations and other interested persons. The Assembly regulation has paid enough atten-tion to the publicity and openness in the work of the Committees. One form of being open to the public is the regular TV transmission of Assembly ses-sions, the existence of the Assembly Channel on TV, the proper maintenance of the Assembly web site and similar mechanisms of allowing to the citizens to be informed about the work of the Assembly and its working bodies.

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2.2.4. Forward planning system of regulatory actions

The forward planning system is relatively well developed. The planning sys-tem is based on the medium-term Government Programme (2006 – 2010), which contains elements of planning legislative activities, and they are pre-sented in a context of the planned reforms. This programme is operation-alized in annual government programmes, which go in more details and define the laws that need to be enacted in the respective year.

Legally, the forward planning system is founded in the Law on Budgets, as a general framework, which obliges the budget users to prepare three-annual strategic plan, containing the programmes and activities for achieving their and the Government’s strategic priorities.

The General Secretariat of the Government is the institution responsible for coordination of the process and for reconciliation of the strategic plans of the ministries and other state bodies within all levels of the public adminis-tration. The Ministry of Finance, through the budget and fiscal strategy is also responsible to take active part in the coordination and reconciliation process.

The strategic planning process started in 2003. The Rules of Procedures of the Government provide for an obligation of the Government to make a decision on strategic priorities in accordance with the Methodology for Stra-tegic Planning and Preparation of the Annual Work Programme of the Gov-ernment. This Methodology was adopted in 2004.

Decisions on mid-term priorities are being made each year and they are made operational in the strategic plans of the ministries and in the annual work plans, which contains laws and by-laws that need to be enacted in the next year, together with explanation on the reasons why they need to be prepared. The work plan contains activities of the Decision of the Strategic priorities of the Government, National Plan for Adoption of Acquis (NPAA), obligations taken in front of the international community.

During the year, there is an elaborate process of permanent follow-up and monitoring of the achievement law adoption process within the annual work programme, National Plan for Adoption of Acquis, Fiscal strategy and the Budget.


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The quality of the strategic planning process is being improved every year; additional tools are gradually being involved in the process, including perfor-mance measurement and performance valuation.

The forward planning system of regulatory actions has been strongly in-fluenced by the EU accession process. In this respect several programming documents have been prepared.

They are aimed at creating a framework for planning, enactment of laws and other regulation and reviewing of the whole process of approximation of the national legislation with the EU legislation.

The main institution for this process is the Secretariat for European Integra-tion, which is responsible for horizontal coordination and monitoring of the process, although practically all-state institutions are involved in its prepara-tion and implementation. Since 2003, the Programmes have included activi-ties planned both on an annual and on a medium term basis.

The focus of the approximation process has shifted towards secondary legis-lation, and, increasingly, attention was more being paid to the essence of EU measures in individual chapters of the acquis communautaire.

The National Programme for the Adoption of the acquis communautaire (NPAA), which it drafted in 2006, and amended and enacted it in 2007 integrates most of these documents and presents the approximation of leg-islation.

The NPAA and its annexes and matrices become a very convenient tool for monitoring of the legislative activities, including IT aided monitoring process and, based on which the preparation of weekly and monthly reports on implementation of the Programme are prepared, which are reviewed by the Government.

Quarterly reports are being prepared and submitted to the European Com-mission and to the Parliamentary Committee for European Affairs. A SEP representative represents the Report in front of the Committee. The NPAA is scheduled to be revised and upgraded annually.

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Box 2.6. Example of activities of lobby groups in law adoption

Adoption of the Labour Law. The Macedonian Chambers of Com-merce were very vocal at the adoption of the Labor Law, prior to its

2.2.5. The role of lobby groups

The lobby groups are not legally institutionalized, however the role of differ-ent forms of lobby groups is not an unknown phenomenon in the legislation adoption process in the country.

In essence there are several large groups that are, or that are interested to be active in expressing their interests in the laws enactment process: - Business associations, both domestic and foreign, - Political parties, - Trade unions and - NGOs etc.

There are several business associations in the country who try to raise their voice in the law enactment process: the Economic Chamber of Commerce, the Macedonian Chambers of Commerce, European Business Association (EBA), International Council of Investors (ICI), and a number of bilateral busi-ness associations.

The second social partner to the Government in the policy making architec-ture are the Trade Unions. Several trade unions are registered. The right of employees to associate in trade unions is dealt with in the 2005 Labor Law. The same article of the Labor Law provides for the right of employers to as-sociate in an Association of Employers.

NGOs are demonstrating an increasing capacity to provide a significant in-put in specific advocacy and law enactment and enforcement debates. The role of the NGO has become better understood and the Government has responded adequately to the need to be open to their requests. The Govern-ment created a Government Unit for Cooperation with the NGO Sector, and in January 2007 adopted the Strategy of Government cooperation with the civil sector. In the Parliamentary level, its committees are often inviting NGO representative to provide their opinion and expertise.


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enactment in July 2005. It provided a list of improvements to the Law, together with the possible impacts of their implementation. Some of the areas for which they were proponents were the following: (i) big-ger flexibility of the employment status, (ii) decreasing the costs of salaries by the way of fragmenting it into basic and variable part and (iii) by amending the system of social contributions, (iv) decreasing of the maternity leave, having the state take over larger part of the sick leave costs, (v) aligning the management contracts with the Company Law, (vi) increasing the responsibility of employees towards employers and towards their own professional development etc. Although many of these requirements were not incorporated in the Law, they had a notable impact in the debate and in some of the final solutions. The Trade unions were active counter-discussant to the Chambers of Commerce, asking for more rights for the employees. The active public debate between the two social partners and the effort of the govern-ment as the third one to come up with a sensible solution out of these often opposing requirements outlined the milieu in which the Labor Law was enacted.

Collective agreement in the education and culture. Trade unions are often involved in the public debate for some laws that they find in-teresting for their members. Such was the new trade unions SONK was very vocal in its pressure to the government to sign the collective agreement in the education and culture.

Specific business environment aspects. Many of the bilateral business associations had concerted voices of their members for certain specific aspect of the business environment. Such was: - The case with AmCham, which was very vocal in the require-ment to ease the employment and immigration rules of foreign busi-ness persons in the country, or - ICI that produced a White Book of the kind of environment that they would consider friendly for doing business in the country etc.

NGO activities. The most illustrative example of a NGO activity in the law enactment process was the activity of the Polio Plus Group, by

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organizing an advocacy and lobbying campaign and gathering 18,000 signatures for the Law for Protection of Rights and Dignity of People with Disabilities.Other successful NGO initiatives were the following: - The lobby of the women’s NGOs in the political parties to increase the women’s participation in party structures, - The lobbying of the Farmers’ Association to decrease the VAT for some agricultural inputs, - The lobby of a NGO passes legislation to make the Macedo-nian domestic violence law compliant with international standards, - The assistance of the Consumers’ Union to the municipalities in the implementation of the new Law on Consumer Protection, espe-cially in the creation of the Consumer Protection Councils.


IMPLEMENTATION OF LAWS

Chapter III

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Chapter III - IMPLEMENTATION OF LAWS

Similarly to other transition countries, the country’s transition period was characterized by enactment of numerous laws, some of which have for the first time been introduced into the legal setting of the country. Many laws were adopted in a very rapid manner. Additionally, the adopted laws were greatly driven by the cooperation with and assistance from the international financial institutions, WTO and, as of recently even more intensively, the European Union. This situation produced a number of shortcomings, such as insufficient time for necessary analyses or verifying their compliance with other regulations, problems in their implementation phase, etc.

3.1. Parliamentary involvement in the implementation of laws

3.1.1. Secondary regulations

By definition, the Assembly is not involved with the development of second-ary regulations. Such regulations are adopted by the relevant government bodies, in accordance with the legislative provisions. The Macedonian consti-tutional system allows for parliamentary involvement in the implementation of laws in a different way.

3.1.2. Monitoring independent state institutions and implementing agencies

The greatest impact that the Assembly has in the implementation of laws is in the monitoring of the implementation agencies. This is performed via annual reports that numerous state institutions and implementing agencies submit, but also via nominating the executive, and frequently non-executive, directors of these institutions and agencies. Most regulatory institutions have the obligation to submit annual reports to the Assembly, such as the State Audit Office, Regulatory Commission of Energy, Agency for Electronic Com-munications, Commission for Protection of Competition, Agency for State Administration, Commission for Protection of the Right for Free Access to Data of Public Character, State Anti-Corruption Commission etc. The man-agement of these institutions or agencies is nominated and can be replaced by the Assembly. Their annual reports are submitted to the competent Par-liamentary Committees. If the Committee detects any problems in the work of the respective agency, institution or organization and that certain legal regulation needs to be amended, it proposes that these issues along with the reports be discussed at the plenary session.

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Box 3.1. State Audit Office: example of an institution and its commu-nication with the Assembly

The external auditor for the Government and state institutions and organizations is the State Audit Office (SAO). This institution was es-tablished and mandated by the Law on State Audit in 1997 and its amendments thereof. Due to the importance of this institution for the effective, transparent and accountable public financial manage-ment of the country, it has frequently been subject to performance evaluation, technical assistance and monitoring and its capacity were

A very special legal link has been established with the supreme monetary and financial supervisory institution - the Macedonian National Bank. Not only that the Assembly nominates and can dismiss the members of Council and the President of the Council of the Central Bank, but the Central Bank is obliged to submit three semi-annual reports on the on the operations, the supervision and the handling with state reserves. Similarly to the Central Bank, the recently established Agency for Supervision of Insurance is under the authority of the Assembly and it provides two reports to the Assembly: on its operation and on the situation and movement on the insurance mar-ket.

Some institutions have the obligation to semi-annually report primarily to the Government, or to the Government and some line Ministry. Nevertheless, they also submit an annual report to the Assembly. This is the case with the Privatization Agency and the Bank Rehabilitation Agency, the Assets Man-agement Agency and the Agency for Supervision of the Capital Financed Pension Insurance. The Assembly or Parliament Committees may decide on whether they would deal on specific matters concerning these institutions and the reports they have submitted.

Agencies such as the Agency for Foreign Investments, Agency for Promotion of Entrepreneurship, Agency for Energy, Agency for Promotion of Develop-ment of Agriculture, Agency for Financial Support of Agriculture and Rural Development, Bureau for Public Procurement, Agency for Civil Aviation etc., are under the authority of the Government and are subject to the monitoring of a respective line Ministry and the Government.


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continuously improving. In the 2000s the outside assessments of the effectiveness of the state audit were the following: there was no co-operation with the Internal Audit directorate in MOF; completed audits were presented to the Assembly in the SAO annual report and usually no further discussion or follow-up was performed; the SAO was not allowed to publish the completed audit reports; there was no indepen-dent, external audit of SAO; the independence of SAO needed to be enhanced; the SAO needed to deploy a more risk based approach to its audits, rather then rely on the legal mandatory requirements; etc. Most of these observations have been addressed and are no longer an issue, especially with the amendments to the Law on State Audit of May 2006, which is considered to be generally consistent with inter-national standards and the Lima declaration. The independence of the SAO has been largely increased.

Nonetheless, the major remaining areas for improvement are those pertaining to the relation of SAO with the Assembly. Presently, the annual report of the SAO is submitted to the Assembly by September 30. One of the major concerns is the limited follow-up of SAO reports by Assembly. SAO publishes all performed audit reports and submits them to the Assembly. While the Budget Committee of Parliament may discuss external audit annual reports, Assembly and the execu-tive branch do not systematically follow-up on its findings and rec-ommendations. SAO tracks responses and follow-up actions taken by the entities audited in its annual report, but this is not sufficient for a systematic follow-up activity. These deficiencies have been assessed by the latest EU Commission Progress Report as a serious handicap to the effective functioning of the external audit8.

In order to strengthen the follow-up activity, the Government amended its Rules of Proce-dure establishing Audit Committee, as permanent expert body of the Government to review and to comment on the measures that the ministries and other state administrative bodies were supposed to undertake for dealing with irregularities identified in the State audit office reports. The bigger involvement of the Parliament remains advisable.

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3.1.3. Other forms of Parliamentary involvement in the implementa-tion of laws

The Assembly can be involved in the implementation of laws by preparing strategies, making decisions, declarations, resolutions, recommendations and conclusions. Many of these can be related to various matters, including the implementation of laws.

The Parliamentary Committee for EU affairs plays an active role as to laws enactment and implementation. Its main tasks and activities are the follow-ing: (i) reviewing matters related to the “National Strategy for Integration of Macedonia in European Union” and regularly informing the Assembly about its accomplishment, (ii) monitoring of the obligations deriving from the agreements between the country and the European Union are accom-plished and what is the dynamics and quality of the programmes agreed and the financial assistance, (iii) following and supporting the process of approximation of the national legislation with the legislation of the Euro-pean Union and proposing activities to other Parliament working bodies in relation to the EU accession, (iv) following the activities of the Government and government institutions and organizations related to the EU integration, (v) analyzing consequences of the accession to the EU, (vi) informing the As-sembly about EU related issues and it devises activities to inform the public on EU integration processes, and (vii) cooperating with similar committees from other countries and drawing on their experience in its work.

The control function of the Assembly is realized mainly via confidence in the Government, the interpellation of public function organs, posing parlia-mentary questions and via ad hoc questionnaire committees as per certain issues.

3.2. Examples of legislative changes to deal with implementation gaps

The implementation of laws issues have been usually resolved via legisla-tive changes. The process of enactment of laws, similar to other transition countries, required many issues to be resolved in very short periods, which implied later amendments. Amendments normally included changes to the laws or the introduction of new laws in the system. The Law of Privatization, for example, required many lateral laws. Conversely, at times, the law needs to introduce different and stricter mechanisms for better implementation, regulation or self-regulation.


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Box 3.2. Easing the process of starting a business

The country had been criticized for having rather awkward procedures for registering new businesses. Although there was an established pro-cess in place, defined in the Company Law, it was quite lengthy and more cumbersome than in other regional countries. As of 1st Janu-ary 2006, a one-stop shop registration system was established within the Central Register of Macedonia, which resulted in a change in the procedure and dramatically eased the process of starting up a busi-ness process. This was enabled by the Law on One-Stop-Shop System and Maintaining a Trade Register and Other Legal Entities Register, enacted in October 2005. The Law transferred the competence for registration of companies from the courts to the Central Register. The registration and entry of data into the trade register for companies is conducted electronically and the register is a part of the central infor-mation base of the Central Register. Ten regional registration offices were established. According to this Law, the Central Register is obliged to register the well-prepared application in five days upon submission. With the assistance of automatization of the process of exchanging of data in September 2007, the time needed to register a company is only 4 hours.

The IBRD and IFC Doing Business publications have immediately re-corded this achievement in their countries’ indicators. The decrease of the number of procedures by 3 and the number of days by 30 was viewed as a serious reformist step in facilitating the process of setting up a business and the rank, according to this group of indicators, went up by incredible 53 places. It should be noted that the procedure was further streamlined by the new amendment of the Law on Central Register in February 2007, according to which the obligation of the Central Register to register a company was decreased to three days only. In the meantime almost 11 thousand new companies were es-tablished in 2006.


Chapter IV

PARLIAMENTARY RESOURCES FORDRAFTING AND MONITORING LAWS

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Chapter IV - PARLAMENTARY RESOURCES FOR DRAFTING AND MONITORING LAWS

4.1. Available resources for drafting laws

In accordance with the Constitution, the Assembly and its MPs are empow-ered to propose laws even though this is rarely the case in practice. As a rule, the enactment of laws is usually proposed by the Government and the draft-ing is financed from the Government Budget.

The Assembly has only a limited budget, for this purpose.

4.2. Parliamentary research staff

Many Parliaments in the world have provided support to its legislative role by specialized research departments. These departments have been established with the purpose to provide reliable data and analyses for decision-makers in the Parliament. Based on the diverse and profound databases and informa-tion, these research departments would conduct research of specific subject matters and / or obtain relevant information that would facilitate the work of members of the parliament and parliamentary committees.

The National Assembly, within Assembly’s service, established a research department in the mid 1990s, with the purpose of providing reliable data and analyses for decision-makers in the Assembly. The idea was that this department would gradually be developed into an Institute of Parliamentary Law, similarly to the examples of the Western Europe Parliaments. However, still not enough funds were dedicated for this purpose that would provide for an appropriate human and technical resource capacity of this unit. This research department usually works upon the request of the members of the Assembly or Parliamentary bodies. The department provides the necessary information, databases, conducts research and prepares analyses, including preparation of certain comparative analyses of other countries on matters that the Assembly will be or is engaged with.

The research department performs research and prepares analyses, infor-mation and opinions in the areas of the political, economic system, public services on issues that are relevant to the activity of the Assembly.

In addition to the research department, the Assembly is availed with state councilors, experts for constitution and political system, legislation, econom-ic system, public services and international cooperation.

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The Assembly also has a department for documentation, library and informa-tion, dealing with maintenance and treasuring of the documentation, func-tioning of the information system of the Assembly and with publishing and public relations matters.

4.3. Control of quality and coherence of laws

Coherence is an important aspect for insuring quality control. Legislative acts should be consistent with each other and should fit into the overall consti-tutional system and the legal traditions of the country. Compliance with the acquis communautaire is necessary to avoid future challenges arising from the accession process.

Control of quality and coherence of laws has to be considered from the aspect of control of coherence of legislation in general and from the aspect of quality control of legislation and the compliance with acquis communau-taire.

The institutions involved in the control of coherence of legislation are: - The Legislation Secretariat at the level of the Government, and - The Legislative Committee at the level of the Assembly.

Legislation Secretariat. The Legislation Secretariat was established by the Law on the Government as an independent expert service. In accordance with the Law on Government, the Legislation Secretariat is competent for: - Securing the consistency of the legal system, - Harmonization of the laws and the other regulations with the Con-stitution of Macedonia and - International agreements ratified in accordance with the Constitu-tion.

In addition, the Legislation Secretariat performs its function in: (i) securing the methodological unity in the drafting of laws and other regulations and (ii) technical shaping of the texts of laws and other regulations drafted by the Ministries and other state administration bodies by providing expert legal opinions to them.

In that manner, the Legislation Secretariat: (i) provides expert assistance to the state administration bodies and the administrative organizations and par-


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Chapter IV - PARLAMENTARY RESOURCES FOR DRAFTING AND MONITORING LAWS

ticipates in the drafting of the laws and other regulations; (ii) studies issues from the field of the legal system and provides expert opinions and proposals to the Government regarding those issues and (iii) ensures the publication of the regulations and other acts of the Ministers and the officials running other state administration bodies and organizations in the official gazette. Legislative Committee. According to the Rules of Procedure of the Assembly the Legislative Committee, is a permanent working body of the Assembly. The Committee plays an important role in the process of controlling the co-herence of legislation. It is competent to consider questions regarding the: - Alignment of laws and other acts with the Constitution and the legal system, as well as their legal and technical drafting; - Requests for authentic interpretation and preparation of proposals for authentic interpretation of laws; - Determining the final text of the laws and other acts, if authorized by law or other act; - Corrigenda to published texts of laws or other acts on the basis of the authentic text of the adopted law, or other act of the Assembly and - Other issues referring to the legislative activity and the legal system enhancement in the country.

The strategic determination of Macedonia to seek EU Membership created the need for monitoring of national legislation with respect to EU Legisla-tion. Approximation to EU standards is an important consideration for each legislative text.

Institutions involved in quality control of legislation and the compliance with acquis communautaire are: - Legislation Secretariat at the level of the Government - Committee on European issues at the level of the Assembly - The Secretariat for European Affairs at the level of the Govern-ment.

Legislation Secretariat. Changes and amendments to the Law on the Gov-ernment of Macedonia from 2003, introduced the competency of the Legis-lation Secretariat to provide expert opinions regarding the approximation of the national legislation with that of the EU. In the process of approximation of the national legislation with that of the EU, the role of the Legislation Secretariat is consisted of:

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- Analyzing the existing national laws, - Analyzing of adequate Regulations, Directives, Decisions and other regulations of the EU, - Providing opinion regarding the indispensable changes or amend-ments of the laws or adopting new laws that have been adequately harmo-nized and - Providing opinions about the possible manners of implementation of new laws, i.e. the amended legislation.

The Parliamentary Committee on European issues considers the following: - Monitoring and facilitation of the harmonization process of the na-tional legislation with the one of the European Union; - Proposes measures for promotion of harmonization procedures, gives opinions and proposals for activities of the working bodies in the As-sembly and focuses their attention on issues related to the accession to the European Union; - Reviews the quarterly reports prepared by the Secretariat for Euro-pean Affairs on relation to the accomplishment of the legislative activities as defined by NPAA. The Committee has an active role in providing feedback to the Government, which is considered by the Government.


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REFERENCES

IBRD, IFC (2007), Country Partnership Strategy, for the Former Yugoslav Republic of Macedonia for the period 2007 - 10.

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OECD (1997a), Regulatory Impact Analysis: Best Practices in OECD Countries, OECD, Paris.

OECD (1997b), OECD Report on Regulatory Reform, OECD, Paris.

OECD (2002), Regulatory Policies in OECD Countries: From Interventionism to Regulatory Governance, OECD, Paris.

OECD (2004a), Regulatory Performance: Ex-Post Evaluation of Regulatory Tools and Institutions, OECD, Paris.

OECD (2005a), APEC-OECD Integrated Checklist on Regulatory Reform: Final Draft, OECD, Paris.

OECD (2005b), OECD Guiding Principles for Regulatory Quality and Performance, OECD, Paris.

OECD (2006), Cutting Red Tape - National Strategies for Administrative Simplification, OECD, Paris.

OECD, Stability Pact, Investment Compact for SEE (2006), Investment Reform Index – Progress in Policy Reforms to improve the Investment Climate in SEE, OECD, Paris.

Penev, S. (2005), „Institutional and Legal Reforms in SEE countries – The Role of Parliaments“, Industrija 1/2005, Belgrade.

Penev, S. (2006), How to Improve the Legislation Process in Serbia and Bosnia and Herzegovina: the path form proposing a law to enacting it in

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the Parliament, Investment Compact for South East Europe and Economics Institute, Belgrade.

Penev, S., Filipovic, S, (2007), Improving the Process of Economic Reform Legislation in Montenegro, OECD, GTZ, Economics Institute, Belgrade.

Radaelli C. M. (2005), What Does Regulatory Impact Assessment Mean in Europe? Related Publication 05-02, AEI-Brooking Center for Regulatory Studies, Washington, DC.

Rules of Procedure for Operation of the Government of Macedonia, Official Gazette 38/01, 98/02, 9/03, 47/03, 64/03, 67/03, 51/06, 5/07, 15/07, 26/07, 30/07, 58/07, 105/07, 116/07 and 129/07.

Rules of Procedure of the Parliament of Macedonia, Official Gazette, 60/02.

The Constitution of Macedonia, Official Gazette 52/91, 01/92, 31/98, 91/01, 84/03 and 107/05.

The General Secretariat of the Government of Macedonia (2007), Policy Development Handbook, Skopje.

WB (2001), Former Yugoslav Republic of Macedonia - Transitional Support Strategy, Washington, DC.

WB, IFC (2003), Doing Business in 2004 - Understanding Regulations, Washington, DC.

WB, IFC (2005), Doing Business in 2006 - Creating Jobs, Washington, DC.

WB, IFC (2006), Doing Business in 2007 - How to Reform, Washington, DC.


IMPROVING THE PROCESS OF ECONOMIC REFORM LEGISLATION

IN FYR MACEDONIA




improving the process of economic reform legislation...

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