Rules, Regulations and Transaction Costs in Transition Bulgaria

institutions involved in the licensing process.
Any delay, regardless of its nature and cause, increases both the costs of entering the business 29 and the benefits
lost. One possible way out of this situation is to start operating without a license but in this case there is always
the threat of sanctions or racketeering by the supervisory authorities. Another solution is to bribe an official in
order to accelerate the process of licensing and start legal operations as soon as possible. The choice depends on
the financial standing of the entrepreneur concerned and on his preparedness to run risks.
The question "Did you have an opportunity to operate before all required licenses, permits, etc. had been
issued?" was answered in the affirmative by 53% of the interviewees. 96% of those respondents actually used
that opportunity and worked without license for 2 months on average (72 months was the maximum and 0.5
month was the minimum). The longest period of operations without license was found in the service sector, while
the shortest was in the trade sector. The important difference between the arithmetical mean and the statistical
median reveals a huge dispersion in the answers. (See Table 10).
Table 10: Responses to the question “Did you avail yourself of the opportunity to work without a
license and, if yes, for how long?”
Months Total Production Trade Services
Arithmetical mean 6.55 5.77 6.63 7.57
Median 2 2 1 4
Minimum 0.5
Maximum 72
Valid cases 37 11 19 7
Sofia Large district
centre
Smaller town
Arithmetical mean 2.17 2.65 9.67
Median 1.5 1.5 2
Valid cases 6 10 21
Besides the costs of time, licensing requires financial expenditure.
The following table shows the total cost of preparing and lodging the documents required to issue a license, in
days and in Levs.
Table 11: Cost of preparing and lodging the documents for licensing
Total Production Trade Services
Without
intermediary
Days Levs Days Levs Days Levs Days Levs
Arithmetical mean 36.40 665.71 64.78 346.07 26.96 694.27 27.8 1078.75
Median 20 15 18.5 175 20 150 30 140
Valid cases 73 63 18 14 45 41 10 8
29 Regardless of the fact that the business operations have not started, the entrepreneur must:
— pay the rentals, as he has entered into a lease agreement (this is one of the main documents required by almost all
licensing institutions);
— carry out repairs (in order to bring the premises in line with the requirements of the Inspectorate of Hygiene and
Epidemiology and the National Fire Safety Service)
- etc.
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