Adviser, Ministry for State Reform, Lebanon Developing Regulatory Impact Assessment In Georgia Context and justification of a RIA scheme Tbilisi, 12 November 2014 Charles-Henri Montin, Smart Regulation Consultant Former Senior Regulatory Expert, Ministry of finance, France Adviser, Ministry for State Reform, Lebanon http://smartregulation.net C.H. Montin, Tbilisi 1

1994 2010 2004 2007 2014 15/11/2014 C.H. Montin, Tbilisi

How to act on regulatory quality POLICIES INSTITUTIONS TOOLS C.H. Montin, Tbilisi

The three ages of regulatory quality Regulatory management Due process Consistent legally Accessible Inform stakeholders Regulatory Reform (1995) Effective Efficient Competitive Consult stakeholders Regulatory governance (2010) Integrated objectives Cycle approach Incl. M&E Involve stakeholders GOOD BETTER SMART Why do we need regulatory reform and Regulatory Impact Analysis? (Delia Rodrigo) 1. Regulation is fundamental to governing complex, open and diverse societies and economies. Regulatory processes allow policy-makers to balance competing interests and have been critical to the development of democracy and the modern state. The growth of regulatory systems was unplanned for most of the 20th century, expanding into more areas in response to problems and the complexity of economic and social activities. The emergence of regulatory reform and deregulation in the 1970s constituted the first explicit and sustained attempt to understand the nature of regulation and its limits as a policy instrument. As more was learnt about the nature of the regulatory tool through the 1980s and the 1990s, deregulation gave way to regulatory reform, then to regulatory management and, more recently, to a forward-looking agenda to improve regulatory quality. 2. Regulatory reform reflects the profound economic and social transformations of the past few decades. In response to technological innovations, consumer demand for better services, the evolution from manufacturing towards service economies, and interdependencies in regional and global markets, governments have faced a transition to market-led growth to maintain economic performance. These shifts have necessitated supply-side reforms that stimulate competition and reduce regulatory inefficiency. Regulatory reform has become increasingly central to economic policy agendas. 3. To regulate better has become a crucial goal. Improving the quality of regulation has shifted in focus from identifying problem areas, advocating specific reforms and eliminating burdensome regulations, to a broader reform agenda that includes adopting a range of explicit, overarching policies, disciplines and tools. Explicit policy support for the regulatory reform agenda, targets and evaluation mechanisms is essential. Governments have had to adopt a consistent approach to the rule-making process and employ new policy tools, such as regulatory alternatives, consultation mechanisms and Regulatory Impact Analysis (RIA). 4. RIA is a clear example of the trend towards more empirically based regulation and decisionmaking. Policy makers increasingly value regulation that produces the desired results as cost-effectively as possible. Much government action involves trade-offs between different possible uses of resources to maximise the benefits to society. RIA furnishes empirical data that can be used to make wise regulatory decisions. 5. As part of a systematic approach towards regulatory policies, institutions and tools, RIA by itself is not a sufficient basis for decisions. Instead, it is best used as a tool with which to improve the quality of political and administrative decision-making, while also answering to increasing calls for openness, public involvement and accountability. 6. RIA has been used more and more over the last few years. By the end of 2000, 14 OECD countries had comprehensive RIA programmes in place, and another 6 were using RIA for at least some regulations (OECD, 2002b). By contrast, few studies have considered the potential for using RIA in developing countries (Kirkpatrick and Parker, 2003). Although some developing countries are beginning to apply some form of regulatory assessment, their methods are generally incomplete and not applied systematically across policy areas (Kirkpatrick, Parker and Zhang, 2003).3 7. Because RIA provides decision-makers with detailed information about the potential effects regulatory measures may have, it contributes to accountability, transparency and consistency, and can be useful in promoting economic and social welfare. While OECD publications provide a valuable resource in which a diversity of possible approaches to RIA are highlighted, it is important to stress that there is no “correct” model for RIA. The appropriate path to regulatory reform will depend on the political, cultural and social characteristics of the individual country concerned. BR ≠ Deregulation BR = dynamic LT process acting on policies, institutions and tools C.H. Montin, Tbilisi

RIA at the centre of regulatory policies United Kingdom Better Regulation Impact assessment Regulatory Policy Committee Publication One-in, two-out European Union Smart Regulation RIA Impact assessment Board France Regulatory Quality Evaluation préalable Conseil d’Etat Legistics Constitutional basis for RIA This slide offers options for seeking lessons learnt from best practice in economies having successfully implemented RIA C.H. Montin, Tbilisi

RIA supports better regulation: within regulatory governance C.H. Montin, Tbilisi

The OECD checklist for decision making This slide illustrates the advice for optimal decision making in the regulatory process. RIA supports this by organising the evidence necessary for enlightened decision making. C.H. Montin, Tbilisi

Trend in RIA adoption across OECD jurisdictions source: OECD website C.H. Montin, Tbilisi

The definition of RIA Definition: “RIA is a systematic policy tool used to examine and measure the likely benefits, costs and effects of new or existing regulation” Why is RIA important? It introduces the evidence base into the policy decision making It can help establish whether regulation is the best available means to address the policy objective It is a tool at the service of the general objectives of the national regulatory policy Another approach to RIA (ED) A process to improve the quality of policy decisions, typically to analyse: The real problem to be solved. The options (there is always more than one way to achieve an objective). The costs and benefits of alternative options. A means of holding structured consultations with those interested in the proposals. A final decision based on the best available evidence set out in a transparent and accessible manner. C.H. Montin, Tbilisi

Benefits of RIA Analytical tool Provides a method to ask the right questions Employs CBA and other quantification techniques to check that proposed policy/regulation is Effective Efficient Communication tool Provides a means of informing decision makers of alternatives in a rational manner free of ideology or bias Enhances transparency, accountability, credibility, trust, legitimacy Learning tool Sets a base line for ex post facto evaluations Contributes to policy coherence Why is RIA needed (ED) A regulatory impact assessment is needed to ensure that any proposed regulation is: - Necessary - Aimed at the right target - In proportion to the problem or issue being addressed.  Regulatory impact assessment is particularly important whenever proposed regulations that impose costs on business. IAs have the potential to improve the overall quality of legislation by: • informing decision-makers about possible effects on the various aspects of sustainability so that policies are more evidence-based; • improving the transparency of decision-making processes through the analysis of policy proposals’ likely effects, so that contributions to sustainability are disclosed while the pursuit of particular interests is made more difficult; • increasing participation in the decision-making processes, in order to reflect a wide range of sustainability considerations; and • making clear how policy proposals contribute to the various priorities, goals, and indicators of sustainability strategies, thereby supporting achievement of goals. • contributing to a continuous learning process in policy development: IA identifies causalities which can feed into the ex-post evaluation of policies. (RIA and sustainable development) C.H. Montin, Tbilisi

RIA supports the policy-making process (context of RIA) C.H. Montin, Tbilisi

Common challenges in implementing RIA Related to the tool: Problem identification (not the same as the objectives) Availability of data “Proportionate analysis” (criteria, transparency) Quantification (costs, and especially benefits) Risk assessment Related to the structure/process Scope of application / selection of proposals Governance of RIA, Quality control (oversight) Presentation / Communication Integrate RIA up-stream (early in decision-making) Integrate RIA down-stream (“closing the loop”) Administrative capacity, Training Multi-level context Trade-off political decision vs technical expertise C.H. Montin, Tbilisi

Clear ministerial accountability OECD good practices (1) 1. Political commitment and endorsement at the highest levels Legal basis for RIA Clear ministerial accountability 2. Allocate responsibilities for the RIA programme Operational responsibilities with the services Inter-service coordination Central quality oversight C.H. Montin, Tbilisi 13

Scope of application / thresholds for when to do RIAs Sectoral impacts OECD good practices (2) 3. Target and prioritise RIA efforts Scope of application / thresholds for when to do RIAs Sectoral impacts 4. Develop comprehensive guidelines Mandatory Both on process and on technical aspects 5. Carry out sound analysis Strategies for data collection Consistent but flexible methodologies C.H. Montin, Tbilisi

6. Consultation / Transparency / Communication : publish RIAs OECD good practices (3) 6. Consultation / Transparency / Communication : publish RIAs 7. Training officials to build the right skills to produce RIAs 8. Apply RIA to both new and existing regulation C.H. Montin, Tbilisi

Developing RIA practice step-by-step The main steps for developing RIA practice: Define national methodology using foreign best practice Build capacities in regulating agencies Set up quality control mechanisms or structures Create training programme for RIA drafters Launch pilot studies Monitor for continuous improvement with practice. C.H. Montin, Tbilisi

Mapping out a RIA system based on international good practices PRELIMINARY CONSIDERATIONS for Introducing RIA Ensure political commitment Build an RIA team inside the administration Integrate RIA timely in the decision-making process DESIGNING the RIA Framework Co-ordination and management Targeting and prioritising RIA efforts Strategies for data collection Using a flexible analytical method Consultation, participation and transparency PREPARING RIA Implementation Developing guidelines Training the regulators Communication as a tool for RIA Delia Rodrigo PRELIMINARY CONSIDERATIONS for Introducing RIA Ensure political commitment Where to find political support Legal mandate for RIA Build an RIA team inside the administration Institutional setting for RIA Who should be conducting RIA Integrate RIA timely in the decision-making process PREPARING RIA Implementation Developing guidelines Training the regulators Communication as a tool for RIA Inside the administration – RIA network Communicating results C.H. Montin, Tbilisi

Critical success factors for RIA structure Clear objectives, legal basis, awareness Good process Training of RIA drafters Network of officials in ministries Review body for quality control Continuous learning (“learning by doing”, iterative process) C.H. Montin, Tbilisi

Conclusions Impact assessment has developed over the last 20 years and is now a widely used tool; UK and EU currently have best practice models It presents challenges to operate it meaningfully (integrate into decision making) but also a lot of knowledge has been shared and this can help build a national scheme. Policy-makers naturally address the costs and benefits of political choices. RIA offers rigour by adding the quantitative assessment of all options, including non-regulatory. C.H. Montin, Tbilisi

Relevance to Georgia Do you perceive advantages to developing RIA in your country? What could be the main obstacles to the introduction of RIA ? Who would be likely to support the development of RIA in Georgia? C.H. Montin, Tbilisi

To learn more about RIA (systemic issues)… OECD “text-books” “Building an institutional framework for RIA” “A tool for policy coherence” RIA governance (UK) BR framework UK Government RIA site ; RIA guidelines (EU) European Commission RIA site Guidelines France: “New RIA in France” (ppt) All presentations on http://montin.com/tbilisi C.H. Montin, Tbilisi