The OECD Experience of Regulatory Policy

1. The OECD experience of Regulatory Policy Hsin Chu, August 2012 Charles-Henri Montin, Senior Regulatory Expert, Ministry of economy and finance, Paris http://smartregulation.net C.H. Montin, Hsin Chu, August 2012 1

2. Regulatory reform as a factor in structural reform: objectives • Unblock structural change hampered by norms • Combat entrenched monopolistic interests and limited market entry • Modernize bureaucracies lacking a service attitude, defending status quo • Prevent interference with search for optimum productivity of factors of production • Give a voice to stakeholders, end regulatory capture C.H. Montin, Hsin Chu, August 2012

3. Regulatory reform as a factor instructural reform: barriers • Ignorance about regulatory practices in competing jurisdictions • Political incentives favour short term interests over long term social policy goals • Regulators may not be equipped, or have incentives, to assess the cost of regulation and whether regulation is the right solution • Heavy volume of outdated and obsolete regulations (changing environments) • Regulation is exercised by many levels of government and may be duplicative or excessive; low capacity at sub-national level • High levels of non-compliance • Ineffective appeals process C.H. Montin, Hsin Chu, August 2012

4. Effective reform requires organised procedures with sustained political backing and adequate resources Policies have two main elements: improving rule making and keeping regulations up to date The emphasis varies but the main objectives of regulatory policies tend to be: Increasing social welfare through more effective social and economic policy Controlling regulatory costs for business development Improving public sector efficiency and performance Reducing regulatory discretion and opportunities for corruption, and improving access to regulation Objectives of Regulatory Policies C.H. Montin, Hsin Chu, August 2012

5. OECD Regulatory Policy Concept • Regulatory quality is the driving principle behind reform today • Deregulation where markets work better than governments • Re-regulation and new regulatory institutions where markets cannot work without governments • More efficient government and social regulations to achieve high standards of health, safety and environmental protection at lower economic cost • Boost economic development by encouraging market entry and competitiveness • Control of regulatory costs to improve productive efficiency, particularly for small to medium sized enterprises • Improve the rule of law , transparency and participative democracy C.H. Montin, Hsin Chu, August 2012

6. The OECD promotes Regulatory Reform as a dynamic long term process applying across government. Economic and social objectives are mutually supportive Regulatory quality, competition and market openness are mutually supporting OECD considers that a successful approach to regulatory governance focuses on: regulatory policies regulatory tools regulatory institutions OECD Guiding Principles for Regulatory Quality and Performance (2005) C.H. Montin, Hsin Chu, August 2012

7. 2012 Recommendation on Regulatory Policy and Governance (1) • Commit to an explicit whole-of-government policy for regulatory quality. • Apply principles of open government, including transparency and participation in the regulatory process (consultation) • Create mechanisms and institutions to actively provide oversight of regulatory policy procedures and goals, to foster regulatory quality. • Integrate RIA into the early stages of the policy process for new regulatory proposals. Clearly identify policy goals, and evaluate if regulation is necessary, effective and efficient in achieving those goals. Consider alternatives to regulation • Conduct systematic programme reviews of the stock of significant regulation against policy goals, including costs and benefits, to ensure that regulations remain effective, up to date, cost justified, cost effective and consistent. • Publish reports on the performance of regulatory policy and reform programmes and on the public authorities applying the regulations, including information on how RIA, public consultations and reviews. C.H. Montin, Hsin Chu, August 2012

8. 2012 Recommendation on Regulatory Policy and Governance (2) • Supervise regulatory agencies in order to ensure objective, impartial and consistent decision making, • Provide effective review mechanism accessible to citizens and businesses at reasonable cost for challenging the legality and procedural fairness of regulations. Timely decisions. • Adopt Risk-based design and implementation of regulations to ensure that regulation is targeted and effective. Responsive implementation and enforcement strategies. • Where appropriate apply co-ordination mechanisms between the supranational, the national and sub-national levels of government to promote coherence and avoid duplication or conflict of regs. • Foster the development of regulatory management capacity and performance at sub-national levels of government. • Give consideration to all relevant international standards and frameworks for co-operation in the same field and, where appropriate, their likely effects on parties outside the jurisdiction. C.H. Montin, Hsin Chu, August 2012

9. The systematic use of tools is needed to promote regulatory quality, efficiency and effectiveness. These include: Regulatory Impact Analysis (RIA) to improve the evidence basis for regulatory decisions Public consultation strategies to promote transparency, accountability and improve regulatory design The evaluation of alternatives to regulation to best address the policy problem Red tape reduction programs to reduce administrative and compliance costs Tools to Improve Regulatory Design C.H. Montin, Hsin Chu, August 2012

10. Regulatory oversight bodies with whole of government responsibility Advocate benefits of reform Perform a gatekeeper role on quality of RIA Provide training and clear guidance to regulators Ministerial /regulators’accountability for regulatory policy Integration of competition and market openness principles in regulatory policy Greater coherence across levels of government Measureable programs to reduce administrative burdens Careful design of independent regulators Institutions to drive Regulatory Policies C.H. Montin, Hsin Chu, August 2012

11. Lessons of experience • Leadership as most important ingredient for success • Crises as catalyst for change • Harmful effects of a short-term perspective • Role of central regulatory bodies to change administrative culture • Need for communication strategy to build constituency for reform • Getting the level of intervention right C.H. Montin, Hsin Chu, August 2012

12. Conclusion Engines of reform NO ONE SIZE FITS ALL MODEL • Each system decides its own institutional setting. The goal is to satisfy common needs: • Co-ordination • High Regulatory Quality • Regulatory Innovation and Improvement • Technical capacities within Government C.H. Montin, Hsin Chu, August 2012

13. To continue the study… • OECD Brochure “Regulatory policy and the road to sustainable growth” • OECD “the 2012 recommendation on regulatory policy and governance” • This presentation is online at: http://montin.com/hsinchu/oecd.ppt Further questions contact: • charles-henri.montin @ finances.gouv.fr C.H. Montin, Hsin Chu, August 2012 13 13