Notes from the DTI-IFC Regulatory Impact Analysis Workshops in Manila and Davao September 13 to 18, 2018 1. The Department of Trade and Industry (DTI) and International Finance Corporation (IFC) held back-to-back Regulatory Impact Analysis (RIA) workshops in Manila and Davao City on September 13-14, and 17-18, 2018, respectively. The objective of these workshops was to provide a template for the future Anti Red Tape Authority, not only for the conduct of regulatory impact analyses, but also for the validation and monitoring process to ensure that the analytics lead to significant process streamlining. 2. The Standard Cost Model (SCM), a RIA tool, was discussed and applied to some of DTI’s permit issuances and accreditation procedures1. The procedures and corresponding fees were identified, as well as those implicit steps and costs that a private sector firm go through and incur in the process of obtaining a DTI permit or accreditation. Inputs were generously shared by the participants from DTI, especially those from the FTEB, and BPS. Other public officials from NEDA, PCC, and DAP provided relevant contributions which helped build the model. After consolidating the inputs, the total costs that a regulated or private sector firm incurs to obtain a DTI permit or accreditation were estimated. These costs were then presented to members of the private sector, which in turn validated the estimated costs, in addition to contributing more information based on their personal experiences in dealing with the government. 3. To illustrate the conduct of the workshop, the following provides a description of the RIA conducted on the issuance of the ICC for cement. The procedures involved in the issuance of Importation of Commodity Clearance (ICC) for cement were analyzed in the exercise of applying the SCM. Table 1 presents the summarized compliance costs involved in the process of obtaining an ICC for cement. The results suggest that in Manila, it would cost an importer around PHP 3 million to bring in an average 500,000 bag shipment of cement. These costs are primarily driven by the need to transport the shipment to a separate warehouse after importation, as the shipper waits for the release of the ICC which generally takes at least one month. There are also significant costs related to the application process, the surety bond and the inspection process. 4. Most of the costs estimated by participants in Manila were validated by those in Mindanao, but the latter came up with a higher estimated cost amounting to Php 3.9 million. The higher cost and regional difference are driven mainly by the indirect costs involved in the testing of the samples and the release of the ICC. There are no Mindanao-based accredited testing facilities which necessitates the cement importers down south to bring their samples to Manila (where the only accredited testing facility is located), along with the physical copies of documentary requirements. The additional delays created by the need to transport samples and documents from Manila to 1 ICC for cement and steel, freight forwarding permits, accreditation of car repair shops, and domestic bidding permit. Davao and back increases the waiting time for the ICC release. The average waiting time for the entire ICC process is one month in Manila, and twice this much in Davao. Table 1. Standard Cost Model - ICC for Cement Cost Items Manila Davao 1. Direct Financial Costs Application, processing, and inspection fees 30,300 25,300 2. Compliance Cost: Administrative Burden Labor and transportation costs 556 856 Notarization and surety bond 20,200 20,200 3. Compliance Cost: Substantive Compliance Labor cost during inspection 4,560 4,560 Other inspection and sample testing costs (other than the inspection fee) 1,800 12,500 Testing fee, shipment of samples, transportation and warehousing of items while ICC is pending issuance 2,955,300 3,920,000 Total cost for importation of 500,000 bags of 3,012,716 3,983,416 cement (Php) Source: DTI-IFC RIA Workshop (September 2018) 5. Reforms to streamline the regulatory process were jointly ascertained by both public and private sector participants to help reduce the compliance costs. Among the suggested reforms were: a. A risk-based approach was proposed to identify specific importers who should undergo sample testing and provide an incentive to conforming firms. For instance, if a firm has consistently complied with the requirements in the past three or four shipments, testing could be waived if the imported items came from the same manufacturer and are of the same type or model as with the previously imported batches. b. Accreditation of more testing laboratories in the regions, especially in Mindanao. c. Elimination of paper-based documentation and the physical transmission of documents through the greater use of email. Authenticated email transactions and scanned copies of original documents should suffice in facilitating the quicker issuance of permits or accreditation. d. Regional issuance of ICC-stickers was put forward. Presently, the stickers can only be purchased in Manila which requires Mindanao-based importers to travel back to Manila after obtaining the ICC purchase order from their respective DTI regional office. e. Elimination of repetitive and costly documentation, including a reduction in the notarization of documents and waiving of the surety bond for compliant traders.