Price controls have been largely removed since the first phase of transition (Kaminski, 2006), although Bulgaria still score well above the OECD and EU (Figure 19)<sup>17</sup> . In addition, reliance on prescriptive regulation is much more pronounced than in all comparator groups, although it is similar to Poland’s and the MICs 2003 average and should certainly represent a high priority for the reform efforts of policymakers.

# **Box 2 What the PMR survey means by “command and control” regulation**

The contrasting use of “command-and-control” and “incentive-based” regulation appear to have been brought into common usage by Schultze who wrote in a 1977 lecture about economic efficiency: “We tend to see only one way of intervening – namely removing a set of decision from the decentralized and incentive-oriented private market and transferring them to the command-and-control techniques of government bureaucracy” (page 6) In this context, the PMR attempts to measure the extent to which the cost of new regulation is assessed, and whether alternatives are considered before implementing new regulations. About half of the indicator weights are allocated to the following two questions (the full make-up of the indicator is provided in Annex table A2.5):

# **Regulators are required to assess alternative policy instruments (regulatory and non-regulatory) before adopting new regulation. (Current answer: no).**

**Explanation.** The use of a wide range of mechanisms for meeting policy goals, not just traditional regulatory controls, helps to ensure that the most efficient and effective approaches are used. Approaches may include green taxes and subsidies, voluntary agreements, information programs such as eco labeling, self-regulation, permit-trading schemes, and performance-based regulation (where a sector or industry must comply with a standard but can broadly choose how to meet it).  Note that the question only refers to whether the obligation exists as a specific provision in a specific legislative act, not whether the spirit of it is in fact respected.   A positive answer to the question would require the existence of a normative act explicitly ruling out regulation as the default option

# **Guidance has been issued on using alternatives to traditional regulation. (Current answer: no).**

**Explanation.** The regulatory process is governed by a standard procedure, outlining the steps to be taken to issue new regulation. For instance, the procedure may include binding ex ante regulatory impact assessment (RIA).  Box 2 offers a discussion of alternatives to traditional regulation.

A detailed look at the make-up of this indicator shows that Bulgaria’s very high (poor) score is almost entirely driven by the fact that regulators are not required to consider alternative instruments before issuing new regulations, and no guidance has been issued concerning the use of alternatives to traditional (Box 2).

Bulgaria performs very well on the other components of this indicator, which measure the use of prescriptive regulation in the specific sectors included in the PMR approach (air travel, road freight, railways and retail distribution). Universal service requirement for

> 17 By the time the report was finalized, prices of tobacco have already been liberalized.  Since August 2006, prices of all tobacco products, including cigarettes, are subject only to registration regime.

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