Paris – 12 January 2012

1. The annual Doing Business Report and its contribution to Regulatory Reform worldwide Paris – 12 January 2012 Charles-Henri Montin, Senior Regulatory Expert, Ministry of economy, finance and industry, Paris, France http://smartregulation.net

2. Contents • The Doing Business economic ranking • The controversy in France (in brief) • The underlying issue: how necessary is regulatory policy/ regulatory reform? “Where you stand depends on where you sit” (attr. N. Mandela)

3. Part one: The IFC Doing Business Index Main features Limits Contents of the reports

6. Main features Based on published academic research No professed ideology but “enabling growth” “ensuring that poor people can participate” Assumption: “economic activity requires good rules transparent and accessible “ Attuned to the needs of the WBG (development) and the reduction of informal economy A rare case of “naming & shaming” in an IO Constant enrichment of indicators (9th report contains twice the number of data series, (11), now analysing long term trends Focused on outcome of regulation; not perceptions

7. Summary description Measuring and benchmarking regulations affecting 10 areas in the life-cycle of business 183 “economies” 2 sets of data Strength of property rights and investor protection as measured by the treatment of a case scenario Time and motion indicators to measure cost and efficiency of regulatory processes Consolidation into a published ranking

8. The time and motion indicators The Doing Business index • Starting a business - Construction permits • Getting electricity - Registering property • Getting credit - Protecting investors • Paying taxes - Trading across borders • Enforcing contracts - Resolving insolvency Employing workers : studied but not included in report 117 countries carried out 216 reg reforms

9. DB limitations Indicated in the report itself Not all factors influencing business climate: macroeconomic conditions, market size, workforce skills, security Based on standardized case scenarios (ex: limited liability small company) Focused on the formal sector / major city Assumption that companies have full information

10. The use of DB Widely published and commented ranking By Case studies promote best practices to inspire policy. In 2012: Korea, FYROM, UK IFC and donors support business RR Regional champions (Mauritius, Colombia) 25 Governments set up RR committees to coordinate regulatory changes, using DB data APEC uses DB to identify potential areas for RR: “Ease of DB Action Plan” with -25% target by 2015

11. Main chapters of the annual report Methodological updates Ranking from Singapore (1) to Chad (183) RRs (245 in 2012) their nature, significance and their influence Messages: a global trend (163 economies do RR); importance of transparency Sharing Best practices to inspire reformers List of the years best reformers (Morocco, Moldova, FYROM, Burundi….) Detailed country fiches

17. How France ranks on DB topics Overall ranking: 29 (2012)

18. The Global Competitiveness index

19. Part 2The controversy in France around DB

20. The official position of the French government on DB mentions “a lack of scientific backing to the indicators”.

21. Main critical arguments Academics highlight a bias in favour of common law implicit in the DB index. Statisticians take issue with the quality of the underlying data and the capacity of the sub-indicators as they are defined to monitor and assess the general quality of regulation that they are supposed to represent (see Blanchet 2006). Lawyers in France dislike the World Bank’s “attempt to classify legal traditions according to their efficiency”, which according to them would be ideologically-driven and designed to prove that common law is superior to continental law.

22. Part 3Issues underlying Doing Business How can measuring the regulatory environment reflect the quality of the business climate How can regulatory reform support growth and competitiveness

23. Regulation and society • Regulation: written rules that mandate behaviour, in pursuit of policy objectives • Regulation, “one of three key levers of state power, with fiscal and monetary policy” (OECD) • One of the two ‘outputs’ of administration, with public services, hence need for quality and value approach (impacts); • Regulation pursues social outcomes, establishes and protects rights. Benefits of reg. must balanced against costs;

24. Regulation and the econonomy • Regulation in economic theory • Value of open free markets (Chicago school) • Market failures, asymmetric information, externalities not covered (Stiglitz) • Limits of the informal sector, the need for good regulation (Loayza) • The BR answer: CBA, AB, RIA (quantify) • Regulation after the crisis • Regulatory gaps – clear market failures • Regulations as preferred policy instrument in era of fiscal constraint • Low public trust requires more, not less, regulation

25. Drivers or competitiveness

26. National Competitiveness “policy clusters” Source: Weymouth and Feinberg

27. The main areas of regulation in support of competitiveness

28. How regulation can hamper competitiveness • Costs • direct /indirect; compliance /admin costs • SMEs and the economies of scale • Unintended microeconomic choices: interfering with optimal allocation of resources within the company to different business processes. Regulatory uncertainty causes risk of deferral of investment • Barriers to efficient market functioning

29. How regulation can support competitiveness (UK approach) • Reduce regulation that raises the cost of doing business • Assure basic legal guarantees (land law, contracts, dispute resolution, etc) and corporate governance FW • Preserve level playing field for markets: competition policy and law, financial markets supervision, • remove impediments to entry to markets and discriminations (regs or taxes) or protecting incumbents against competitors • Seek out anticompetitive behavior, to avoid rents, for lower prices • Enforce standards to disseminate major technologies

30. Regulatory reform goes beyond C. • Not to be confused with regulatory competition • RR pursues multiple objectives (growth, social cohesion, risk management, protection), competitiveness not the only objective. • RR aims at making the best use of regulation in support of the full range of public policies, including non-business reforms • Competitiveness requires more than RR, but RR may be the most elusive but also the most cost-efficient policy

31. Part 3Varieties of regulatory reform The emergence of regulatory policy Principles of quality regulation Three ages, three approaches

32. From regulation to regulatory policy From Jacobs & Associates

33. Early sets of principles OECD 1995-97: 7 recommendations to governments UK 1998: 5 principles transparency, accountability, targeting, consistency, proportionality Maturity Mandelkern report (EU) (2001): six dimensions OECD “performance” 2005 :Broad programmes, impacts, transparency, competitiveness test, liberalisation, policy linkages Current trends National sets: Australia (2007) “best practice regulation,” Ireland, Finland… OECD review of 2005 principles (2011): post-crisis adaptations The battle for “Principles” of regulatory quality

34. Lack of coordination and planning capacities Vested interests may block reform; political incentives favour short term interests over long term societal policy goals Rapidly changing environments (obsolescence) Too many levels of government: duplicative or excessive reg. (e.g. gold-plating of EU law) Over-reliance on regulation, regardless of cost and alternatives Risk aversion, poor risk management in reg. Challenges to Delivering High Quality Regulation

35. The three ages of regulatory quality Regulatory Reform (1995) Effective Efficient Competitive Consult stakeholders Regulatory governance (2010) Integrated objectives Cycle approach Incl. M&E Involve stakeholders GOOD BETTER SMART BR ≠ Deregulation BR = dynamic LT process acting on policies, institutions and tools Regulatory management Command & Control Due process Consistent legally Accessible Inform stakeholders

36. One objective, three approaches OECD Regulatory policy Think tank Best practice forum Market orientation Public management European Union Better/Smart Regulation Supranational Manage ‘Acquis communautaire’ Subsidiarity Transposition Process-oriented Inter-institutional World Bank Group Business climate Doing Business (outcomes) Development technical assistance One stop shops Licensing Reg. guillotine

37. OECD Thematic work • Institutions for regulatory oversight • Building capacities and introducing tools • Preventing regulatory capture • Ensuring policy sustainability • Contributing to green growth • Addressing risk in regulation making • Coordinating multi-level regulation • International regulatory co-operation

38. ‘Regulatory Governance Cycle’ OECD Policy issues for government action Develop policy roadmap - choose the policy instrument(s) The 4 Cs Consultation Co-ordination Co-operation Communication Monitor and evaluate performance of regulation REGULATION OTHER POLICY TOOLS • Design new regulation • Check current regulation Enforce regulation

39. E.U. European Better Regulation Mandelkern (2000) Predominantly legal Simplification Consultation standards 2002 Barroso I (2005) VP Verheugen Competitiveness test Admin Burden Reduction Progr. 2007-12 SME test Stoiber Group Barroso II (2010) Smart Regulation Fitness checks Cycle approach Integration of evaluation, infringements, complaints

40. E.U. Better Regulatory Design (Mandelkern) Alternatives Consultation RIA FLOW Stakeholders The economy The Economy The Administration Admin burdens STOCK Access Simplification + Tools for ensure efficient implementation (including information, government forms, BPR, OSS, inspections)

41. Increase social welfare through more effective social and economic policies Boost economic development by encouraging market entry and competitiveness Control regulatory costs and improve productive efficiency, particularly for SMEs Improve the rule of law , transparency and participative democracy world bank Goals of Regulatory Reform

42. world bank Dimensions of the business environment

43. The many guises of regulatory reform

44. Country best practices

45. A menu for regulatory reform

46. Conclusion: DB in the overall picture A precious tool to track changes all over the world; good interaction between bureaucrats and academe No serious theoretical challenge Good illustration of benefits of RR Friendly emulation; frame for donors RR = a quality/ efficiency approach that respects each economy’s specific policies, no ideological assumptions

47. To continue the study… • This presentation is online • http://montin.com/documents/bercy.pps • Updates on current events and trends: • http://smartregulation.net • Contact: • montin @ smartregulation.net • charles-henri.montin @ finances.gouv.fr