Paying the Price for Bad Policy in Bulgaria

How much thought do you think governments put into their policy decisions, decisions that can go on to impact every single person in their country? You might imagine mountains of paperwork and complicated, boring bureaucracy. What would you say if two pages of roughly sketched out goals was the total formal assessment a government put into a major policy decision? In Bulgaria, citizens are paying the price for exactly this kind of closed and ineffective approach to political decision-making. There are ways to prevent this from happening again.

When Bulgarians took to the streets in mid-February it seemed to some outsiders like another wave of Europe’s anti-austerity demonstrations. The government was particularly keen to encourage this interpretation. This is unsurprising. In 2011, the Bulgarian government made a monumentally bad policy decision fixing high purchase prices for all green energy produced for at least 15 years. The decision benefited everyone except the consumer. Bulgaria remains the poorest country within the EU; the average salary in 2012 was around €420 (for those who still have a job) and the average pension was €140. In February 2013, the citizens of Bulgaria decided enough was enough.

In 2011 the government had decided to stimulate the green energy production in the line with the Europe 2020 goals and adopted the Bill on Renewable Energy. It fixed high purchase prices for all green energy produced for at least 15 years ahead. The measures worked and in two years the newly built “green energy” production facilities (water, wind, biomass, and solar) had grown extensively. Unfortunately these high prices had to be paid by someone: the consumer. Bulgarians already consume more energy than the average European due to inefficiencies; added to this are rising unemployment in the country and a growing struggle by many to make ends meet.

The result? The government has resigned due to public protests just four months before the end of its term and the president has appointed a caretaker government. Energy prices have been lowered by the government energy agency but only for a month so as to calm the protests. The protests are also against the three major energy companies in Bulgaria including threats for the revocation of their licenses. Uncertainty over the next Parliamentary elections in May 2013 is high, negatively affecting economic growth, foreign investment, and job creation.

So how was this disastrous green energy policy decision, bringing Bulgaria and its government to its knees, ever made?

Firstly, “green” companies lobbied for high fixed purchasing prices. The government prepared no assessment on the costs and benefits of the policy and so was unable to foresee the effects it would have on citizens. Public consultations were short and with no real effect on the draft proposals. This think tank, (Institute for Market Economics) submitted a statement during a Parliamentary hearing on the then proposed legislation outlining the exact negative effects that later transpired. This was duly ignored.

Since the European economic crisis began, Bulgaria is often given as an example of prudent fiscal policy. It has very low government debt and a small budget deficit. How then with this appearance of cautious policy making did events come to this? Firstly, while important macroeconomic fiscal stability is maintained, basic reforms that were supposed to increase people’s income have stalled. There are many explanations why this happened—from misjudged reform plans, populist politicians that never intended to change anything in the first place, to legislation governing lobbying.

The common denominator in all of this is an inefficient process of lawmaking that makes it possible for bad or lobbyist influenced laws to be voted on by the Parliament without any preliminary assessment of the costs and benefits. In other words—without preliminary assessment of the impact any regulation will have.

We have observed that more than 90 percent of the bills introduced and considered by the Bulgarian Parliament are accompanied by only a page or two briefly describing the goals of the legislation. No additional information to convince stakeholders or decision makers of the merits of the legislation and the need for its implementation is provided. This situation confirms the impression that draft legislation is often prepared without a clear knowledge of the real effects of the proposal; with no estimation of the costs for the state, business and citizens; with no active public consultation with stakeholders to improve or amend the draft proposals; with no information on whether the proposals can actually be implemented and monitored by the administration.

For most citizens in Bulgaria, the process of legislation making is still unclear and vague. For most journalists the process is hard to follow and report. For most stakeholders—that is anyone outside politics who is working on or connected to the issue—the process is difficult to pursue. For most Members of Parliament in Bulgaria the process is conveniently unclear enough for many to get their ideas turned into law without having to bother with explanations or justification. This situation throws into doubt the foundations of democracy and open society in Bulgaria.

Concerned citizens in Bulgaria cannot actively participate in the decision-making process, the media does not and usually cannot report what is happening in the Parliament and interested parties see lobbying as the only way to influence draft policies. Public consultations on forthcoming legislation happen rarely if at all as a result of this.

The end result? Bad policies, huge and unsustainable costs for citizens and companies in Bulgaria, continued levels of low income and delayed chances for any prosperity.

This situation, where decisions of huge consequence are made on the recommendation of lobbyists and with no real consultation, need not and should not continue.

The Institute for Market Economics is an active participant in the public consultations organized by the administration and can easily react on short notice when important policies are debated.

Based on 20 years of work and experience in regulation impact assessment we offer the following recommendations to NGOs:

1. The administration in Bulgaria is usually very reluctant to conduct broad and meaningful public consultations. This should not be an impediment for any organization—NGO, or any public or private organization—who has analysis or reaction to offer to do so. Concerned parties can present officially to the administration, go via the media or by another organization who has been officially invited to participate.
2. The administration often claims that it has no capacity to prepare impact assessments when drafting public policies. This statement by itself is nonsense as it implies that the administration has not thought about the problem and the possible solutions. The reality is that there is always some justification of a government policy. An NGO should insist on seeing this and ask questions on the justification itself.
3. It is the duty of NGOs to participate in public consultations when they are held. Not every consultation will match the NGO’s mission exactly but this should not stop them from participating. NGOs can demonstrate to government how important these consultations are and build trust with different actors by consistently taking part.
4.  NGOs and other interested parties can prepare their own impact assessments to promote reforms. You cannot expect the administration to do impact assessments on draft policies and for your organization to only give general recommendations and criticize someone else’s work. The best way to promote your ideas is to support them with assessment on who is going to pay, where the money should come from, who will benefit and why this policy change is needed now. This way, the discussion with the administration will be on specific facts and calculations and if you are convincing enough it will be very easy for government clerks to use your analysis when promoting your idea.