In Bishkek, the Kyrgyz Republic,Chingiz Makeshov owns a jewelry-making business that employs about 80 people. He makes traditional jewelry, mostly the bracelets and earrings that women wear to get married and later pass on to their daughters. Over his eight years in business he has seen the number of government inspections – for fire, water, sanitation, etc. – fall sharply, and that’s a good thing.
“The number of inspections adds to the cost of doing business,” explains Makeshov, owner of Keldike Jewelry. “So with a drop in the number of inspections we cut our costs, and that helps our company, which has doubled its business since 2010.”
From Silver Rings to Steel Rods
No one disputes that business inspections are important. But the sheer number of such inspections in the Kyrgyz Republic has long been a barrier to doing business, says Mikhail Khakvhaliuk, who runs a construction company on the outskirts of Bishkek.
“Cutting inspections has a positive impact on the economy because the businesses will grow, and that’s what we need, to be left alone by the state, left alone to pay our taxes, grow, and create jobs,” says Khakvhaliuk, who owns Kyrgyzstan Construction. “That’s the way to build the economy.”
With support from IFC, part of the World Bank Group, the Kyrgyz Republic has cut its business inspections almost in half, from 21,000 in 2011 to 13,500 last year. “Over the past year and a half we have cut the number of inspections sharply, and we’ve reduced the duplication of inspections,” says Nurbashev Taalaibek, head of the Kyrgyz State Inspectorate. “As a result, we’ve increased the ease of doing business.”
Following the Rules
As a result of new laws, state agencies must now inform businesses of impending inspections 10 days in advance. Inspectors use a checklist, which sets out clear requirements. The checklist increases transparency and cuts down on corruption, officials say, because inspectors must adhere to it.
All inspection information and documents, including the checklists, are publicly available on a new website: www.proverka.kg. There’s also a schedule for all inspections; businesses at low risk to the health or well-being of the community are inspected not more than once every five years, while higher-risk businesses are inspected once every one to three years.
“We can see the positive impact,” says Temir Sariev, the Minister of Economy. “In 2012, the number of inspections decreased by 45 percent. Fewer inspections mean less corruption, which helps create a better environment for business.”
If time is indeed money, it’s worth a great deal to Chingiz Makeshov that the number of days he spends each year on inspections has fallen from 30 to five.
The IFC Investment Climate Program was made possible with financial support from the government of Switzerland and the United Kingdom’s Department for International Development (DFID).