Better Regulatory Outcomes

Transcription

1 2011/SOM1/SCSC/CON1/019 Session 1 Better Regulatory Outcomes Submitted by: Jacobs & Associates 6 th Conference on Good Regulatory Practice Washington, D.C., United States 1-2 March 2011

2 Better Regulatory Outcomes Scott Jacobs Managing Director, Jacobs and Associates APEC Subcommittee on Standards and Conformance 6 th Conference on Good Regulatory Practice Washington, DC, United States March 1, Many governments have lost control of their regulatory functions Regulatory systems are fragmented, decentralized, captured and resistant to change Who regulates? How much? No accounting of overall costs or benefits of regulation anywhere United States: over 50 regulatory bodies with over 800 separate departments and offices operating on different statutes European Union: more than 2,000 regulatory bodies at national levels Kenya: Est. 300 licenses in 2005 found 1,500 in 2006, amidst 178 regulatory bodies. Moldova: Est business regulations then found 1,300 Croatia: Identified 300 procedures then found almost 1,500 among almost 70 regulatory bodies 2 1

3 How businesses see the chaotic regulatory environment 3 Regulatory quality is difficult everywhere 4 2

4 Regaining control of the regulatory system requires systemic solutions Reforms aimed at single rules will never catch up with the productive capacities of governments to create regulations. Regulatory reform is a systemic issue. Regulatory reform. 5 The OECD Agenda for Low-Cost, Low-Risk Regulation I. Build a regulatory management system Strategic medium-term regulatory reform policy (5 years) Engines of reform at the center of government II. Build the institutions to carry out good regulation One stop shops Inspections reforms Due process III. Improve the quality of new regulations (flow) RIA Stakeholder consultation Central quality controls IV. Upgrade quality of existing regulations (stock) Targeted deregulation, simplification, codification (Doing Business, Standard Cost Model) Broad-based reforms (Regulatory Guillotine ) 6 3

5 Parallel Unit in Parliament President/ PM/ Council of Ministers The Jacobs and Associates functional map of regulatory quality capacities Review the Stock of Regulations (Ministries/ public/private) RIA Legal controls Central Unit For regulatory quality Public Consultation Build capacities in Ministries Quality in Flow Of New Regulations (Ministries) Stakeholder Advisory Council Build Institutions For Better Regulations Copyright Jacobs and Associates No reproduction without permission Regulatory guillotine Doing Business agenda Sectoral reviews & reengineering WTO convergence strategy Clear quality standards for new regulations (efficiency, economic standard, etc) Central review & quality control Regulatory Impact Analysis Stakeholder consultation Checks for WTO conformity Monitor Results, Adapt Rules Electronic regulatory registry Rationalize inspectorates Silence is consent One stop shops Due process What does better regulatory outcomes mean? Democracy and accountability More efficient governance Better program outcomes More efficient allocation of national resources, boosting national wealth Economic growth boosted by lower costs and risks in the commercial environment for business 8 4

6 When quality is low, regulatory systems breed corruption and abuse We built a world of bureaucracy and lust for power. A world of corruption, of small and big privileges and interests for anyone who could take advantage of other people. -- Greek Prime Minister George Papandreou, 11 September 2010, announcing a deregulation program 9 Cass Sunstein: CBA is a pro-democratic reform There are democratic advantages... interest groups often manipulate policy in their preferred directions, sometimes by exaggerating risks, sometimes by minimizing them, sometimes by utilizing heuristics and biases strategically so as to mobilize public sentiment in their preferred directions. An effort to produce a fair accounting of actual dangers should help to diminish the danger of interest group manipulation. 10 5

7 Cutting unneeded regulation lets government focus on real services Implementing rules is costly. In the United States, the budget for regulatory programs was $53 billion in 2010, up from $25 billion since Netherlands health sector: After paperwork was cut, 24,000 people are now taking care of patients, instead of completing paperwork South Korea: Regulatory Guillotine of 1998 cut 5,000 business regulations, and reduced the cost of government by trillion won (4.4% of GDP). There was no effect on public protection. 11 Regulatory rigidity can be self-defeating The United States adopted over 500 federal nursing home standards, supplemented by state standards that tripled the volume of regulation. Australia adopted only 31 broad resultsoriented standards. For example, a myriad of US rules about treatments, dressings, and recording of pain problems in care plans are replaced by a single freedom from pain standard. The broad Australian standards are more reliably rated by inspector teams than the narrow and specific US rules. Agreed corrective action plans were overwhelmingly implemented in Australia. The pursuit of reliability in US regulations produced so much complexity and detail that they reduced the performance of the whole. Source: Braithwaite, J. & Braithwaite, V. (1995), The politics of legalism: Rules versus standards in nursing home regulation, Four Social & Legal Studies, pp

8 Safer cars, more choices Europe - New Car Assessment Programme (Euro NCAP) evolves with developing technology quickly. The original 3-star rating system was extended 5-stars to reflect new features like airbags and separate ratings were introduced for child and pedestrian protection. US Five star safety ratings: These rating systems encourage manufacturers to develop technology to improve safety and to compete with each other to raise standards US EPA: Cap-and-trade system for SO2 emissions SO2 trading system has significantly reduced emissions at a relatively low cost. Resulted in savings of over $1 billion per year as compared to command-and-control alternatives. 14 7

9 Searching for efficiency: RIA OECD report on RIA in Vietnam (2010): Each full RIA is estimated t to cost approximately $500, but the introduction ti of RIA is expected to save the private sector times that amount through a reduced or more efficient regulatory regime. Pre-RIA would cost the Government over $ annually, but likely save it around USD in terms of less (unnecessary) legislation drafted and the reduced time needed for drafting. 15 Increasing competition is more important than cutting regulatory costs Reducing the costs of regulation, while holding benefits equal, is a good idea, since the resources released can be used for productive investments, higher wages, higher profits, higher quality, or lower prices. but more important than lower cost is competition. Evidence is mounting that reducing regulatory and administrative barriers to competition and trade has important economy-wide effects, including accelerating multifactor productivity growth, reducing the cost of capital, boosting innovation, and contributing to poverty reduction. 16 8

10 Product market regulation and total economy labour. productivity acceleration Labour productivity growth acceleration vs The scale of the indicators is 0-6 from least to most restrictive Greece United States Australia Canada New Zealand Norway Switzerland Netherlands Denmark Germany Ireland United Kingdom Sweden Austria Belgium correlation coefficient = t-statistic = without Greece: correlation coefficient = t-statistic = -3.1 Japan Finland Spain Portugal France Italy Average regulation in seven non-manufacturing industries Source: OECD Productivity Database and OECD International regulation database 17 9