ISO/PASC Standards and Regulatory Stewardship Workshop, April 2019

Regulation Matters More as Economies Develop Pervasive in complex modern economies Economic development can be driven for a long time by creating and mobilising factors of production- more workers, better educated workers, building infrastructure Diminishing returns after a certain point As economies become more complex and actors more diverse and mobile, traditional approaches (personal relationships, buyer beware, local community expectations) become less effective

Regulation Matters More as Economies Develop (Cont) More businesses become subject to regulation as they move from the informal to the formal economy The services sector of the economy grows as productivity improves; in many parts of the service sector, product quality is harder to judge, competition may be constrained, and spillovers (“externalities”) -positive and negative- are significant: Financial Services, Health, Education, Environment Increasing international connections bring demands for consistent, or at least interoperable approaches across jurisdictions Quality of the regulatory environment becomes more important to international business: the rise of regulatory environment “beauty contests”- World Bank, OECD etc

What is a regulatory system?

What is a Regulatory System What is a Regulatory System? Building and Construction Regulation in New Zealand Buying and selling a house: geodetic system, cadastral survey system, land registration system, insurance law, EQC, fair trading legislation, multiple regulated occupations (builders, surveyors, architects, lawyers, real estate agents, engineers)

Construction Sector Regulatory landscape

Why Regulatory Stewardship? Lots of focus amongst OECD Governments over the last 30 years on fiscal disciplines. NZ a leader. Less focus, until relatively recently, on regulation, although government regulation pervasive in modern societies Concentration of effort on policy rather than implementation/maintenance, and ‘flow’ (new regulation) rather than ‘stock’ (existing regulation) Despite emphasis on good policy process, regular failures in NZ- leaky buildings, finance companies, health and safety at work- and overseas

We are all Grappling With the Same Issues

Greater Demands on Regulatory Design, Delivery and Practice “Be less intrusive- but more effective Be kinder and gentler- but don’t let the bastards get away with anything Focus your efforts- but be consistent Move fast- but be careful Be flexible and adapt to changing environments-but don’t stray outside your statutory authority Be more responsive to the regulated community- but don’t let anyone capture you” Paraphrased from Malcolm Sparrow (2000) The Regulatory Craft: Controlling Risks, Solving Problems and Managing Compliance. Brookings Press P17

So How Does the Idea of Stewardship Help? Actors in regulatory systems face strong incentives to: Focus on the short term, to meet political, media and community pressure for visible action Stay in the silo of their own regulatory system: vertical accountability to Ministers and Chief Executives prevails over linkages across different systems Restrict their attention to the particular part of the system they are in: policy-operations, design-delivery splits Focus KPIs that can be readily measured eg business registration how fast can you register a business? NZ #1 in the world for Ease of Doing Business (World bank 2019) . Now we are placing more emphasis on the integrity of what is being registered as well as ease of registration.

What does Stewardship Mean?

Regulatory Stewardship in New Zealand Added to s32 of NZ’s State Sector Act in 2013 Departmental Chief Executives must show “good stewardship” of the regulation they are responsible for Essentially, regulation needs to be (a)treated as an asset, and maintained and invested in over time (b) treated as a system, with attention given to all its component functions and institutions Productivity Commission, Regulatory Institutions and Practices, 2014

So a Stewardship Approach Changes Perspectives From vertical to horizontal From short term to longer term From current delivery to investment in capability From outputs to outcomes From single systems to mutiple systems

A New Zealand Example - The Petroleum and Minerals Regulatory System From this:

To this:

Regulatory Stewardship Issues from Here NZ MBIE staff have identified a range of issues, including: Whole System: A long-term system view: Clear definition of roles How we can think further ahead while keeping regulatory systems adaptable and responsive to change? Understanding of roles by all involved How do we distinguish ‘signal’ from ‘noise’ How we can understand data and information better, including how to share it? A cross-systems view: What is the complete toolkit for compliance and how do we identify and prioritise risks? How we can best evaluate our impact? Better understanding the interactions of multiple systems (see petroleum and minerals example) held Sept/Oct – 128 people from across MBIE – identified these 7 topics for future engagement