3. Institutional framework and capacities for regulatory policy
This chapter examines the institutional framework for regulatory policy in Croatia. Regulatory management needs to find its place in a country’s institutional architecture, and capacities for promoting and implementing Better Regulation need to be built up.
Key institutions and regulatory policy oversight of the regulatory process in Croatia
The institutional set-up of regulatory policy matters. Regulatory management needs to find its place in a country’s institutional architecture and have support from all the relevant institutions. The institutional framework extends well beyond the executive centre of government, although this is the main starting point. The legislature and the judiciary, regulatory agencies and the sub-national levels of government also play critical roles in the development, implementation and enforcement of policies and regulations.
The 2012 OECD Recommendation on Regulatory Policy and Governance (OECD, 2012[1]) advises governments to “establish mechanisms and institutions to actively provide oversight of regulatory policy procedures and goals, support and implement regulatory policy, and thereby foster regulatory quality.”
Oversight is a critical aspect of regulatory policy. Without proper oversight, undue political influence or a lack of evidence-based reasoning can undermine the ultimate objectives of policy. Careful, thoughtful analysis of policy and an external check of policy development are required to ensure that governments meet their objectives and provide the greatest benefits at the lowest costs to citizens (see Box 3.1).
According to the 2012 OECD Recommendation of the Council on Regulatory Policy and Governance, oversight of regulatory procedures and goals should be promoted through:
A standing body charged with regulatory oversight should be established close to the centre of government, to ensure that regulation serves whole-of-government policy.
The specific institutional solution must be adapted to each system of governance. The authority of the regulatory oversight body should be set forth in mandate, such as statute or executive order. In the performance of its technical functions of assessing and advising on the quality of impact assessments, the oversight body should be independent from political influence.
The regulatory oversight body should be tasked with a variety of functions or tasks in order to promote high-quality evidence-based decision making. These tasks should include:
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Quality control through the review of the quality of impact assessments and returning proposed rules for which impact assessments are inadequate
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Examining the potential for regulation to be more effective including promoting the consideration of regulatory measures in areas of policy where regulation is likely to be necessary
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Contributing to the systematic improvement of the application of regulatory policy
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Co-ordinating ex post evaluation for policy revision and for refinement of ex ante methods
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Providing training and guidance on impact assessment and strategies for improving regulatory performance. The performance of the oversight body, including its review of impact assessments should be periodically assessed.
Source: (OECD, 2012[1]), Recommendation of the Council on Regulatory Policy and Governance, www.oecd.org/governance/regulatory-policy/2012-recommendation.htm.
Croatia does not have a single institution in charge of regulatory quality and an accompanying specific regulatory oversight role. The responsibility for regulatory management tools and policies is spread across ministries, divided between the Government Legislation Office, the Ministry of Economy, Entrepreneurship and Crafts, the Government Office for Co-operation with NGOs and the Information Commissioner.
In a majority of OECD countries, bodies with regulatory oversight functions responsible for the quality control of regulatory management tools (RIA, stakeholder engagement, ex post evaluation) are located at the centre of government (see Figure 3.1).
Government Legislation Office
The Government Legislation Office (GLO), located at the centre of government, is the central body co-ordinating the RIA process and promoting the application of RIA across government. Its primary function is the general oversight of law quality and of use of impact assessment when preparing legislation. The GLO reviews all preliminary assessments and full RIA reports, provides advice and issues a formal opinion on the quality of the RIA. The GLO does not have the power to stop a regulation from going forward if concerns with the analysis and evidence provided are not addressed, however it can request to postpone the regulation. In practice, administrators usually follow the GLO’s requests for improvement of RIA quality. As a government expert service, the GLO is responsible for ensuring the legal quality of regulations and for co-ordinating the drafting of the annual Legislative Activity Plan of the Government of the Republic of Croatia.
Ministry of Economy, Entrepreneurship and Crafts
All subordinate regulations, which in practice are the main source of administrative burdens in Croatia, have to undergo an SME-test under the authority and the supervision of the Ministry of Economy. This means that central administrative bodies have to assess the impacts of their subordinate regulations on SMEs and obtain the opinion of the Ministry of Economy, which performs its supervisory function through its Business Environment Improving Service. The ministry also co-ordinates the “Action Plan for Administrative Burden Reduction” and provides guidance and training to civil servants on the SME-test and the Standard Cost Model.
Government Office for Co-operation with NGOs
The Government Office for Co-operation with NGOs co-ordinates the central consultation portal e-Savjetovanja and provides trainings to civil servants on the use of the portal together with the Information Commissioner. The Office also provides trainings to civil servants on preparing and conducting consultations on with the general public in the process of adopting laws, regulations and other acts.
Information Commissioner and his/her Office (OIC)
The Information Commissioner protects, monitors and promotes the right of access to information and reuse of the information provided by the Constitution of the Republic of Croatia and the Law on the Right to Access to Information. He/she is elected by the Parliament for a term of five years with the possibility of re-election.
The Commissioner and his/her office, as an independent body, oversee compliance with art. 11 of the Law on the Right to Access to Information (which requires public consultation to be conducted for all draft legal texts), act upon complaints of the public if the law was not respected and report on the implementation of the law to the Croatian parliament.
The OIC provides consultation guidelines to the bodies that are responsible for drafting laws and other acts and controls whether a report on the consultation process was produced and published on the e-consultation portal. The Office also conducts regular inspections of administration authorities on the implementation of the Law on the Right of Access to Information, which focus, inter alia, on individual public consultations and consultation plans of individual ministries.
Ministry of Finance
Line ministries are required to consult and obtain the opinion of the Ministry of Finance for all regulatory proposals. All government materials, submitted to the government, must include an assessment of the financial implications for the budget, reflecting whether the proposed regulation increases or reduces the revenues or expenditures of the budget.
The Ministry of Foreign Affairs and European Affairs
The Ministry of Foreign Affairs and European Affairs (MFEA) is the national body responsible for the transposition and implementation of the EU Acquis. All draft legislation has to be examined by the MFEA for compliance with EU regulations. It monitors and manages a database on transposition of EU directives and co-ordinates drafting of the Annual Government Program on implementation and transposition of the EU Acquis into Croatian legislative. The MFEA prepares weekly reports on the implementation of the EU Acquis and presents them to the permanent working bodies of the Government. MFEA also, as central contact point, officially notifies the EC on all the measures transposing Directives into Croatian legislation via the electronic EC database.
Ministry of Justice
All draft regulation prescribing misdemeanor provisions has to be submitted for opinion to the Ministry of Justice. The Ministry initiated the “eBulletin board and court networking” project in 2014, which established a single intranet and Internet network for judicial bodies, facilitating information exchange within the judiciary. The bulletin board is a free and public service that allows search of court decisions and other information published by all courts in the Republic of Croatia.
Ministry of Administration
If a draft regulation relates to administrative proceedings, the regulation is submitted to the Ministry of Administration for scrutiny.
Other institutions
Parliament
In accordance with the Standing Orders of the Croatian Parliament (Official Gazette 81/2013, 113/2016, 69/2017, 29/2018), laws are enacted under regular or urgent procedure. Regular procedure implies two readings in parliament while urgent procedure means that only one reading will take place. Legislation is usually passed through two readings in the Parliament.
In order to improve the quality of regulations, Article 174 of the Standing Orders stipulates that draft laws must contain:
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the constitutional grounds for the enactment of the law
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an assessment of the status and fundamental issues to be regulated by the law and the consequences that will follow from the enacted law
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an assessment and sources of necessary funds to implement the law
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the text of the draft law, with explanation
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the text of the provisions of the existing law being amended or supplemented, if it is a matter of amending a law
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a report on the conducted consultations with the interested public
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a statement on the regulatory impact assessment in line with a special regulation.
If a draft law does not contain the required elements, the Speaker of Parliament requests the adjustment of the draft act within a given period of time. In case the missing elements are not submitted 15 days after the request to do so, the draft law is not considered.
With the amendment of the Standing Orders in 2013 public consultations have been introduced to the parliamentary procedure. Consultations with the general public on bills introduced by Members of Parliament,1 working bodies of Parliament and political groups are conducted regularly through the central consultation portal.
Also, in accordance with the Act on the Co-operation of the Croatian Parliament and the Government of the Republic of Croatia in European Affairs, the parliamentary Committee on European Affairs is authorised to order the government to assess the impacts of the EU directive to be transposed.
The Standing Orders also stipulate that, when a regulatory proposal is initiated, the Parliament may set up working bodies to discuss the necessity and potential impacts of the draft regulation. The positions, opinions and proposals developed in this working body are then submitted to the sponsor of the regulation, who is obliged to take them into account.
State Audit Office
The State Audit Office comments on draft legislation that relates to matters of budget and audit and participates in working bodies responsible for drafting the legislation. If the Office identifies the need to regulate a certain area involving financial matters, it can order certain types of provisions to be adopted.
Judiciary
The Constitutional Court determines the legality and constitutionality of laws and regulations. The Constitutional Act on the Constitutional Court of the Republic of Croatia (Official Gazette 99/99, 29/02, 49/02) stipulates that the Court may abrogate laws that do not conform to the Constitution. Until a final decision is made, the Constitutional Court may also suspend the implementation of challenged regulations if their execution could result in serious and irreparable consequences.
As set out in Articles 83 – 88 of the Administrative Disputes Act (Official Gazette 20/10, 143/12, 152/14, 94/16, 29/17), the High Administrative Court assesses the legality of all other general acts (acts adopted by local and regional governments, legal persons with public authority and legal entities performing a public service). If the Court deems part of a regulation unconstitutional, it initiates a review of the regulation’s constitutionality and may suspend the execution of the disputed general act.
After the final decision of the administrative authority, the individual always has the right to judicial protection by bringing the case to the Administrative Court in accordance with the Administrative Disputes Act.
Local governments
Croatia has three levels of government: central, regional and local level. The powers of the governments are laid out in the Croatian constitution, which includes the constitutionally guaranteed rights and limits to local and regional self-government.
According to the Constitution, local and regional self-government units adopt general acts and regulations in all areas falling within their self-government scope as defined by law. They are responsible for the provision of services in all areas included in their self-government scope, as well as services in other areas when authorised by special regulations. For example, counties are responsible for secondary education, health care (including hospitals), housing and community planning, economic development, traffic and transport infrastructure, waste management, waste water, and social services (OECD, 2016[2]).
Ultimately, local governments are responsible for the quality of the regulations they adopt. The national government supervises the regulations and acts for the purpose of ensuring constitutionality, but it does not monitor their quality. The final quality check of local government regulations can only be conducted by the High Administrative Court of the Republic of Croatia through the review procedure to their general acts. For further information, see Chapter 8.
National Competitiveness Council (NCC)
The National Competitiveness Council was established in 2002 at the initiative of the Croatian business society and the Croatian Employers' Association based on a Government decision. The Council is an independent advisory body comprised of 24 members and four key interest groups – the business sector, government, trade unions, and the academic community – with the goal of creating dialogue, partnership and consensus on programs and policies that are critical to sustainable growth and development of the country. To achieve these objectives, the Council encourages policies for reform, recommends and creates guidelines for development policies, encourages dialogue between public and private sectors and monitors and evaluates reforms that have been implemented (OECD, forthcoming[3]).
Co-ordination of the Better Regulation policy across government
The Rules of Procedure of the Government of the Republic of Croatia provide for all proposals of laws, Government resolutions and other legal texts that are submitted to the Government to be consulted with ministries, government agencies, and other institutions and bodies within their respective competencies.
With respect to Better Regulation policies, no formal inter-ministerial co-ordination mechanism has been established, whether at the political or administrative level. This reflects the lack of a global approach to regulatory policy. Currently, the vice prime minister organises inter-ministerial exchanges.
Inter-ministerial co-ordination during the development of regulations
Central government bodies (ministries, central government offices and state administrative organisations) usually organise working groups for drafting laws and regulations. These working groups consist of civil servants from government bodies responsible for draft laws, but also civil servants from other bodies. External experts can be involved as well as representatives of the Government Legislation Office (GLO).
A public consultation is conducted on the draft regulation and the draft is revised accordingly. The regulation is then submitted for opinion to other central government bodies depending on the issue being regulated. It is mandatory to gather opinions from the Ministry of Foreign Affairs and European Affairs, the Ministry of Finance and the GLO. The Ministry of Foreign Affairs and European Affairs determines the compliance of regulations with EU regulations. The Ministry of Finance determines the financial effect of regulations. The GLO provides an opinion on the compliance of regulations with the constitution and the legal order of the Republic of Croatia, while respecting the legal system of the European Union. If a regulation relates to administrative proceedings, the regulation is submitted to the opinion of the Ministry of Administration. If the regulation prescribes misdemeanor provisions, it is submitted for opinion to the Ministry of Justice. For the purpose of carrying out a test on the impacts of the regulation on small and medium-sized enterprises, the regulation is submitted to the Ministry of Economy, Entrepreneurship and Crafts.
Once the relevant ministries have stated their opinion on the draft proposal, the regulation is referred to the permanent working bodies of the Government for scrutiny. As laid out in Art. 9 of the Rules of Procedure of the Government of the Republic of Croatia, the government has 5 permanent working bodies with different areas of expertise: Coordination for Foreign and European Policies and Human Rights; Coordination for Homeland Security and War Veterans; Coordination for Economy and Structural Reforms; Coordination for Sectoral Policies and Coordination for State Property Management. The working bodies are responsible for checking compliance of legislative drafts with the Constitution and the legal system of the Republic of Croatia and the European Union. If the state administration body responsible for the draft regulation does not accept another bodies’ opinion, the reasons have to be explained and an agreement between the bodies has to be found.
The draft regulation is then sent to the government, which adopts regulations and other acts, and passes laws to the parliament for adoption. All subordinate regulations have to undergo the SME-test conducted by the MoE, to assess the burdens imposed by the draft regulation on small- and medium-sized enterprises (Ordinance OG 43/17). This means that all central administrative bodies have to assess the impacts of their draft regulations on SMEs and send their assessment to the MoE for their review via the Independent Business Environment Improving Service.
In Germany, the preparation of bills is mainly the prerogative of the line ministries (Ressortprinzip). Before a draft bill is submitted to the Federal Government for adoption, the lead ministry must involve other federal ministries and offices affected by the bill as well as the German body responsible for regulatory oversight, the National Regulatory Control Council, and the Federal Commissioner for Efficiency in Public Administration, at an early stage.
The Chancellery takes on an active role in the inter-ministerial co-ordination during the legislative process. The co-ordinator of the Federal government on Better Regulation (Minister of State to the Chancellor) has to be consulted and gives his opinion on each draft according to Section 21 of the joint rules of procedure (GGO). The Better Regulation Unit (BRU) is the responsible working unit, fulfilling this function on behalf of the Minister of State.
The work of the Federal government is based on the principle of consensus: If there are differences of opinion between the main federal ministries involved or between the ministries and the chancellery, “extensive or expensive preparations should not be started or instigated (…)” before the cabinet has agreed on the matter. This also means that ministries will likely address and resolve issues with the quality of the RIA accompanying the legislative draft.
When transmitting the Ministry draft, steps must be taken to ensure that those involved have sufficient time to examine and debate questions falling within their competence. The lead Federal Ministry is responsible for involving all parties, ensuring sufficient time for debate.
Source: (Federal Government of the Republic of Germany, 2011[4]), Indicators of Regulatory Policy and Governance Survey 2017, http://oe.cd/ireg.
Resources, training and guidance
Continuous training and capacity building within government, supported by adequate financial resources, contributes to the effective application of Better Regulation. Beyond the technical need for training in certain processes such as impact assessment or plain drafting, training communicates the message to administrators that this is an important issue, recognised as such by the administrative and political hierarchy. It can be seen as a measure of the political commitment to Better Regulation. It also fosters a sense of ownership for reform initiatives, and enhances co-ordination and regulatory coherence.
Resources
A small number of officials work directly on regulatory policy, as part of a unit dedicated to regulatory management issues in the Government Legislation Office, the Ministry of Economy and the Office for the Co-operation with NGOs. There are no RIA units in ministries and preliminary RIA is conducted by non-economists and untrained staff. However, there is a network of RIA co-ordinators in each line ministry.
Indirectly, a larger number of civil servants works on regulatory policy issues as part of their portfolio.
Training and guidance
The Government Legislation Office provides a “Public Policy” training programme to civil servants in the State School for Public Administration. In the scope of the programme, workshops are organised at beginner- and advanced levels to train civil servants on the principles for drafting regulations in accordance with the Uniform Methodological-Nomotechnical Rules for Drafting the Acts issued by the Croatian Parliament. From January 2017 to June 2018, 313 civil servants attended this training at the national and local level. In addition, workshops on the new legal framework for assessing the impacts of regulations have been conducted for a total of 70 civil servants.
The Ministry of Economy provides guidance and training to civil servants on the SME-test and the Standard Cost Model. In 2018, over 200 civil servants were trained on how to assess correctly the impacts of draft legislation on SMEs.
In the scope of the two twinning projects with the United Kingdom and Estonia, a set of workshops on RIA methodology have been conducted. These workshops provided training to civil servants on the basics of RIA methodology (identifying of issues, setting objectives, identifying potential policy solutions incl. alternatives to regulation, and assessing impacts to businesses and citizens). Approximately 400 civil servants participated in the trainings. In addition, a “train the trainers” seminar had been organised for 20 civil servants with the intention to make a good practice of impact assessments in ministries more sustainable.
Guidance on how to conduct impact assessments for all draft laws has been issued by the Government Legislation Office and last updated in 2017. The guidance document includes technical guidance on cost-benefit analysis, cost effectiveness analysis, and milestones for monitoring and evaluating a legislative proposal.
The Government Office for Co-operation with NGOs conducted a training programme for consultation co-ordinators within state bodies and government offices during the EU-funded IPA 2009 project. In accordance with the Code of Practice on Consultation with the Public in the process of adopting laws, other regulations and policies, consultation co-ordinators were appointed as permanent contact points for both public stakeholders and the body drafting the legislation. Corresponding guidelines were published in 2010.
The Government Office for Cooperation with NGOs and the Information Commissioner also provide trainings to civil servants on preparing and conducting consultations with the general public and the use of the central consultation portal e-Savjetovanja through the State School for Public Administration. The number of officials trained is approximately 150 annually.
The Information Commissioner provides online webinars on public consultations to approximately 50 civil servants per year on national level and to 150 civil servants on the local level.
In co-operation with the Government Office for Co-operation with NGOs, the Information Commissioner prepared and published a handbook on public consultation on the local level as well as a leaflet for citizens explaining why and how they should participate in the policy making process. Detailed guidelines for the implementation of art. 11 of the Law on Access to Information has been distributed to all public bodies that have the relevant obligations.
A number of guiding documents have been issued on law drafting, administrative simplification and drafting instruments for the alignment of the legislation of the Republic of Croatia with the acquis (OG 44/2017 Annexes I, II and III).
Assessment and recommendations
Within the Croatian government, the competencies for supporting regulatory quality are distributed between several key ministries and institutions. The Government Legislation Office has responsibility for the general overview of law quality and use of impact assessment when preparing legislation and prepares the Annual Legislative Activities Plan. The Ministry of Economy, Entrepreneurship and Crafts leads the administrative burden reduction programme and reviews burdens for businesses stemming from regulation. Other key actors include the Information Commissioner, the Government Office for Co-operation with NGOs, the Ministry of Finance and the Ministry of Foreign Affairs and European Affairs. Overall, there is a small network of officials who work on the development of regulatory management policies and tools and there is room for improvement in terms of co-ordination and coherence of such efforts.
While the current institutional framework is well set up, stronger political support and leadership from the centre is required to move forward. A clear mandate consolidating Better Regulation and oversight responsibilities at the core of government would help promoting and implementing regulatory management policies through effective monitoring. Currently, the GLO can review the quality of regulatory management tools (impact assessments, consultations as part of RIA) for primary laws. It is however not doing so for subordinate regulations due to its role as a government expert service. Oversight responsibilities are shared with the Ministry of Economy, which reviews impact assessments for subordinate regulations on SMEs; and the Information Commissioner, which oversees consultation processes. Consolidating at least some of these powers in one unit close to the centre of government specifically in charge of regulatory management could improve co-ordination between existing ministries and agencies and would help ensure that regulatory quality principles are successfully applied.
A lack of analytical capacities for regulatory quality in GLO and line ministries compromises the quality of regulatory management tools. Currently, few civil servants work directly on regulatory policy issues and a majority of employees does not have an economic background, including those in the GLO who oversee RIA for primary legislation. Units in charge of regulatory oversight would require sufficient analytical capacities and staff with diverse educational backgrounds, in particular public policy specialists and/or economists. Like many other administrations, the public sector in Croatia faces budgetary restrictions that hamper its ability to provide conditions that attract qualified staff and keep them long-term. Efforts to invest in training of existing staff proved partly ineffective because of the high employee turnover. In addition, ministries rely on the State School for Public Administration to provide training and guidance, as they do not have sufficient skilled staff internally to act as contact points.
Croatia could consider establishing a high-level conference to facilitate inter-ministerial co-ordination. While there is already good horizontal co-ordination between ministries at an operational and higher level in place, involvement of other line ministries in the working groups happens on a voluntary basis and no body has the vertical authority to facilitate inter-ministerial co-ordination. Increased horizontal co-ordination and co-operation across the administration would allow for a whole-of-government approach to regulatory policy to help identify strategic priorities for Better Regulation and solve potential conflicts early on. This body should include ministers or deputy ministers from line ministries and could take the form of a ministerial steering committee led by the vice prime minister meeting bi-annually to discuss legislative proposals.
Promoting regulatory oversight to strengthen quality control of both primary and secondary legislation will be necessary. Currently, responsibilities for quality checks of regulatory management tools are shared between different bodies and the quality of regulatory policy tools for subordinate regulations is reviewed only concerning administrative burdens to businesses with the SME-test. The MoE could consider extending the scope of its scrutiny to other regulatory costs to address the substantial burdens stemming from secondary legislation. A strengthened inter-ministerial process would give ministries the opportunity to comment on impacts of secondary legislation. Generally, extending the scope of activities of the MoE would require a clearer definition of responsibilities between the different oversight bodies to ensure mutual understanding of the respective roles. Alternatively, it could be envisaged to move regulatory oversight functions to the GLO to consolidate oversight functions in one body at the centre of government. The GLO would conduct quality control of regulatory management tools for both primary laws and subordinate regulations. As the central oversight body it could serve as an advocate for regulatory reform, as a co-ordinator, as expert and as a source of practical and technical support for the use of regulatory tools.
To promote analytical capacity, analytical centres with “RIA champions” should be created in key ministries. These centres could combat the lack of analytical capacity in ministries and therefore improve problematic quality of regulatory management tools. They would act as “knowledge centres” staff from other ministries could turn to for guidance on regulatory policy tools. The champions would receive special training on regulatory impact assessment and could share experiences in overcoming challenges through bi-annual or quarterly meetings. An alternative or complementary strategy to support analytical capacities could be to consult external analysts. It is crucial that these external consultants work hand in hand with the ministry and that their analysis informs the processes and not vice versa.
There is a need to further invest in training of already employed staff and to hire additional staff, in particular public policy specialists and/or economists. Croatia already invests in staff trainings, e.g. on the SCM and SME-test, but a high employee turnover means some of these efforts are lost. Targeted training of GLO staff, which in turn would provide training and guidance to line ministries, could help establish a more change-resilient knowledge infrastructure. In addition, there is a need for in-depth trainings on methods of cost benefit analysis. However, further training could potentially be expensive and resource intensive. A more cost efficient solution could be the MoE helping ministries who already implement good regulatory policy practices to share their experiences with other ministries, encouraging good practice across government. The MoE could also provide easy access to publically available tools from other countries and, if necessary, could have them translated. Furthermore, Croatia could take advantage of examples, guides, and trainings that are available publically from other countries. For example, it could be envisaged to provide a “Better Regulation toolbox” in the form of short practical guidance to staff responsible for conducting RIA, following the example of the European Commission.
References
[4] Federal Government of the Republic of Germany (2011), Gemeinsame Geschäftsordnung der Bundesministerien, http://www.verwaltung-innovativ.de (accessed on 20 March 2019).
[2] OECD (2016), Regional policy: Croatia country profile, https://www.oecd.org/regional/regional-policy/profile-Croatia.pdf (accessed on 29 January 2019).
[1] OECD (2012), Recommendation of the Council on Regulatory Policy and Governance, OECD, http://www.oecd.org/gov/regulatory-policy/2012-recommendation.htm (accessed on 7 November 2018).
[3] OECD (forthcoming), Croatia: Review for Adherence to the OECD Declaration on International Investment and Multinational Enterprises. Draft Investment Policy Review Report.
Note
← 1. Nine per cent of all primary laws in Croatia are initiated by the legislative, see OECD (2019), Better Regulation Practices across the European Union, https://doi.org/10.1787/9789264311732-en.