REGULATORY POLICY AND GOVERNANCE FOR STRENGTHENING COMPETITIVENESS University of Economics, Prague   Daniel Trnka Regulatory Policy Division, Directorate for Public Governance and Territorial Development OECD 1 1

WHAT IS REGULATION? WHY REGULATORY POLICY?

How OECD defines regulation? Regulation concerns how governments intervene in the economy in pursuit of social, economic and environmental objectives through laws and other instruments. How governments try to influence the behavior of citizens, businesses, public sector, NGOs OECD putting emphasis on ensuring regulatory quality good regulation where needed to protect health, safety, and the environment, and to enhance the functioning of markets, deregulation where free markets work better. 3 3

Why focus on regulation? Regulation is one of the three key levers of formal state power (together with taxing and spending). Economic performance, public service efficiency, and service delivery to business and citizens depends on regulatory quality Countries with sound regulatory systems have more resilient economies and are better able to respond to shocks in a shorter timeframe 4 4

GDP per capita gains from broad regulatory reforms in 10-year horizon This means that if countries would align their regulatory regimes with the best performing OECD countries, this would be reflected in a GDP growth of between 3 and 19%. 5 5

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EVIDENCE-BASED REGULATION-MAKING

Developing new regulations Is regulation the best available means to address the policy objective? Different alternatives should be analysed Their costs and benefits should be estimated Benefits should always justify costs The process should be transparent and open to stakeholders 8 8

Regulatory Impact Assessment “RIA is a systematic policy tool used to examine and measure the likely benefits, costs and effects of new or existing regulation” A tool to control the quality of regulation A tool to ensure accountability: ruling for those who do the rules…. Evidence based policy tool *In USA, all potential benefits and costs of all draft regulations with significant impact must be quantified. 9 9

The process of Regulatory Impact Assessment Policy objectives Definition Identification (Non-)Regulatory Options Assessment Costs Consultation Involving Stakeholders Design Enforcement, Compliance and monitoring mechanisms After RIA is prepared: DECISION MAKING Policy context Benefits Selection Best Option Other impacts 10 10

Main challenges in implementing RIA Problem identification Availability of data, quantification of impacts RIA on every law? Quality control (oversight) Presentation / Communication Integrate RIA up-stream (early in decision- making) Integrate RIA down-stream (“closing the loop”) Training *In the UK, the independent Regulatory Policy Committee consisting of representatives of businesses, trade unions and other civil society organisations has a right to return a legislative proposal to the Ministry before it is sent to the Cabinet if the proposal does not contain a high quality impact assessment. A simila body exists in the Czech Republic – the RIA Board - http://www.vlada.cz/cz/ppov/lrv/ria/pracovni- komise/komise-pro-hodnoceni-dopadu-regulace-89151/ 11 11

OPENNESS, PUBLIC CONSULTATIONS AND STAKEHOLDER ENGAGEMENT

Transparency and Openness Stakeholders have a right to participate in the regulation-making process They have the right information on real- life effects of regulations May propose different solutions to the problem Increases a sense of ownership among stakeholders New ways of participation – social media 13 13

Identifying alternative solutions Assessing costs and benefits When to consult? Defining a problem Identifying alternative solutions Assessing costs and benefits Drafting regulations Evaluation 14 14

ADMINISTRATIVE SIMPLIFICATION REDUCING BUREAUCRACY CUTTING RED TAPE ADMINISTRATIVE SIMPLIFICATION

Rationalising existing regulations Large stock of regulation has accumulated over time Sometimes led to a “regulatory jungle”* May impede competition, employment, innovation** Pressures from both sides – to reduce regulatory burdens but at the same time to protect even more Need of systematic, periodic reviews and simplification to keep regulations “fit for purpose” * For example, a fitness centre in Greece needs 75 different licenses. Most of them have to be renewed annually. This makes the business of running a fitness centre significantly more costly (most of fitness centres in Greece have to employ one person to deal only with licensing). ** The administrative burdens in the Czech Republic were calculated in 2005 as 86 bln CZK. 17 17

Ways of reducing regulatory burden Dealing with the stock of regulation – review, consolidation and codification Streamlining of procedures, harmonising, one-stop shops Employing ICTs, data sharing Risk-based approaches (inspections) Measurement and reduction of administrative burden Common Commencement Dates, One-In X-Out 18 18

Administrative burden reduction Big momentum in the 90’s and 2000’s Difficult areas – employment, environment, tax administration, planning and licenses and permits Mostly focusing on businesses but also citizens and public administration Quantitative targets for reduction SCM and its modifications used across OECD Challenges – cutting dead wood, too much focus on numbers, communication with stakeholders Tendencies – more qualitative approach, focus on irritants, stakeholders’ involvement, widening on other costs 19 19

Standard Cost Model A tool to measure administrative costs and express them in monetary terms Advantages: SCM makes costs ‘visible’ Easy to measure, monitor & communicate Uniformity, transparency, reliability and comparability Commitment & awareness of policymakers Enables to set a target distribute it across administration Disadvantages: May be too costly Focus only on one part of costs, not benefits 20 20

The methodology for AC measurement The Standard Cost Model Possible to differentiate between particular regulations, ministries, sectors of regulation AS only as one of the solutions. Global problem – complex solutions 21 21

Compliance, enforcement and inspections Essential for achieving the objectives Is the level of compliance measured, analysed? Enforcement – role of inspections Risk-based methods, better targeting, more efficiency Providing advice, improved compliance Co-operation with policy-makers Role of regulators D 22 22

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THANK YOU! daniel.trnka@oecd.org www.oecd.org/regreform 24 24