The OECD works to improve regulatory policy and governance through its regulatory policy division. Regulatory policy seeks to change how governments design and deliver regulation to improve outcomes. It focuses on improving regulatory processes upstream in government as well as downstream and outside of government. The OECD's recommendations include having a strategic regulatory policy, oversight bodies, impact assessments, reducing administrative burdens on business, and international cooperation on regulatory issues. Effective regulatory policy requires coordination between different levels of government.

1. OEDC WORK ON REGULATORY
POLICY AND GOVERNANCE
Nick Malyshev
Head of the Regulatory Policy Division
OECD
Red Tape Reduction Conference - Western Cape
Government South Africa
29 September 2014

2. • Regulation is one of the three core levers for government to
manage the economy (along with fiscal and monetary policy)
• Devising regulations is rarely straightforward
– technical complexities, uncertainties,
– political constraints,
– unintended consequences, collateral damage, excessive cost and
– not serve policy goals at all
• Governments have to be alert to the potential for things to go
wrong in their regulatory endeavours.
– Loss in economic performance or societal wellbeing
– Adverse political consequences for governments themselves
The importance of regulation
on business and society

3. • Lack of evidence to inform policy development.
• Use regulation to solve problems for which
regulation is not suited.
• Rent seeking behaviour on behalf of incumbents.
• Status quo bias of the administration –
a reluctance to review and reform policy areas.
• Misalignment between administrative portfolios and
regulatory problems.
Inherent risks to
good regulatory outcomes

4. The Regulatory Governance Cycle

5. • Regulatory policy seeks to improve public sector
outcomes by changing the way governments
design and deliver regulation.
• Regulatory policy focuses upstream (COG,
Oversight bodies, Parliaments), downstream
(regulators, inspectors, sub-national) and outside
of government (civil society, private bodies)
• Regulatory policy is not a better business agenda.
It’s about making markets work better
• Regulatory policy is responsible for some less
tangible but equally critical public governance
outcomes
Honing in on what regulatory policy
and governance means to the OECD

6. Strategic Approach Institutions Management Tools Governance
Policy Statement Oversight Body Regulatory Impact
Assessment
Whole of
Government
Designated Minister
Regulators Open Government/
Public Consultation
International
Regulatory
Co-operation
Parliaments Simplification and
Burden Reduction
National/Sub-national
interface
Ex-post Evaluation
OECD Recommendation on
Regulatory Policy and Governance

7. Multiple costs of regulation
Benefits foregone if
regulation is ineffective
 other perverse effects
 other ‘non - market’
distortions
Fees and charges a
Economic distortions
 dead weight losses
 lower investment
 lower innovation
Substantive compliance
costs
 investments in systems
training
 higher cost of investment
Administrative costs to
business
 paper work time
 reporting time
Administration cost to
regulators
B e n e f ti s n e e d e d t o j u s t i f y c o s t s
Compliance costs ‘Distortion’ costs
Costs to government Costs to business b
Costs to community
C o s t s t o c o m m u n i t y
7

8. • They can have effects on productivity through
the creation of barriers to entry for new firms
into markets.
• They can constrain the choice set of
entrepreneurs and lead to a misallocation of
resources
• They can influence the incentive to invest and
innovate
What is the impact of
regulation on business?

9. • Small vs. large businesses
– Small business bear a disproportionate share to the
burdens of regulation
• Changes in regulation
– Business perceive changes to existing regulations or
new regulations as particularly burdensome
– Stability in regulatory framework important as it
allows effect learning on how to comply
• Do business pass on the higher cost of regulation
in the form of higher prices?
Where does the burden of
regulation really lie?

10. What can subnational
governments do?
• Usually, central governments have made progress
on the Better Regulation agenda, which is not
always paralleled at the local level.
• High-quality regulation in one level of government
can be undermined by poor regulatory policies and
practices at other levels.
• …and the first window citizens/entrepreneurs
knock is the local one.
• How bold? Capacities and infrastructure (i.e., use
of ICTs) tend to be more limited at the local level.

11. What can Better Regulation
deliver at sub-national level?
• Facilitating market entry ► Pro-competitive
regulation.
• Reducing the costs of doing business ► Attract
investment.
• Avoiding informality ► Low productivity
businesses.
• Avoiding corruption (i.e, bribes, intermediaries).
• Facilitating the operations of SMEs.
• Developing synergies with other strategies (i.e,
clusters, entrepreneurship, innovation).

12. How to implement Better Regulation:
An explicit Regulatory Policy
• Formalise regulatory policy into legislation (i.e.,
laws, decrees, executive orders).
• This helps to ensure continuity despite changes
in political agendas.
– BC: Cabinet Directive from the Executive.
– Piemonte: Regional laws 7/2005, 13/2005, 7/2007,
15/2007, 15/2008.
– Catalonia: Decrees 324/2001, 93/2008, 106/2008,
56/2009, 1/2011, 325/2011, and Law 26/2010.
– Mexico: 25 out of 32 federal entities have a state law
on regulatory reform. 5 others have laws on economic
development with a section on regulatory reform.

13. How to implement Better Regulation:
An institutions responsible for regulatory quality
• Establish the institutional setting for better regulation (i.e., a
body responsible of overseeing its implementation).
• Functions: Co-ordinating, challenging, facilitating, and
advocating.
• Illustrates and materialises political leadership.
– BC: Straightforward BC (Ministry of Small Business, Technology,
and Economic Development).
– Piemonte: Ministry for Federalism, Decentralisation, Relations with
Local Authorities, Legal Affairs, and Relations with the Regional
Council.
– Catalonia: Department for Better Regulation (Ministry of
Government).
– Mexico: 23 states have assigned the Better Regulation agenda to a
ministry, 7 to a commission, and 2 to an alternative form.
– Victoria: Victorian Competition and Efficiency Commission.

14. How to implement Better Regulation:
Engage citizens and business
• Create institutional mechanisms to allow
business and citizen participation in the
guidance, management, and evaluation of
regulatory reform policies.
– BC: Red Tape Task Force, BC Competition
Council.
– Piemonte: Administrative Reform Observatory.
– Catalonia: Labour, Economic, and Social Council.
– Mexico: 22 federal states have established a
citizen council on regulatory reform.

15. How to implement Better Regulation:
Which regulatory management tools?
• Simplification strategies are usually a good way to
start (i.e., One-stop shops).
• Leverage ICTs (i.e., data-sharing, electronic
transactions).
• Advance regulatory transparency (i.e., centralized
registries).
• Adopt a “regulatory governance” approach ►
Consultation, RIA, ex post evaluation, etc.
• Adapt tools to capacities (i.e., Regulatory Criteria
Checklist instead of a full-fledged RIA).

16. 16
Regulatory Impact Analysis –
Broad international trends
 RIA is seen as a useful tool in support of more efficient, effective, transparent and
accountable policymaking
 Well understood methodology (sponsored by OECD and others) and currently
adopted nearly all OECD countries and at EU level, within broader regulatory
reform programmes
 The focus and depth of analysis change remarkably from country to country
 RIA has been broadly more successful in Common Law jurisdictions but less
successful in many Civil Law countries.
 Some very good examples of RIA at the subnational level – Australia, Canada,
Mexico
 But there have been some notable failures!
– Many jurisdictions enacted laws to oblige officials to prepare impact assessments for all new legislation.
– These laws were rarely underpinned by adequate methodologies or institutional arrangements to oversee
the quality of assessments.
– As a result, the potential benefits from the use of this tool were lost. 16

17. RIA: governance might maters
more than methodology
• Line ministries are generally responsible for RIA…but the late
timing of impact assessments is a widespread issue.
• Many countries are pondering issue of proportionality.
• Most RIA processes are not integrated (to give an overall
picture of the cost and benefits) but fragmented covering a
range of issues.
• The systematic quantification or monetisation of cost and
benefits is not widespread.
• Requirement to consult on RIA is widespread but, in practice,
ministries go their own way.
• Requirements to publish full RIA are rare.
• The framework of central oversight varies considerably.
Setting up central oversight is the central challenge

18. RIA: governance maters more
than methodology
• Line ministries are generally responsible for RIA (as they
should.) A minority have set up dedicated RIA unit.
• The framework of central oversight varies considerably.
Setting up central oversight unit has been a challenge in many
countries.
• Overall central challenge function remains weak.
• Emergence of a “ networked approach” to BR and
independent watchdog is very positive.
• Independent agencies – especially economic regulators –
have their own (superior?) arrangements.
• Parliaments are taking an increasing interest in impact
assessment

19. How to implement Better Regulation:
The links to national regulation and institutions
• Establish institutional mechanisms for multi-level co-ordination
and dialogue.
• Agree on an agenda to be pursued by all levels of government
(if possible, provide incentives/benchmarks and, above all,
evaluation).
• Entities facilitating co-ordination, covenants/agreements,
laws, etc.
– Australia: Council of Australian Governments (COAG).
– Canada: Federal-Provincial-Territorial Committee + Mutually
recognised licenses.
– Italy: Conference system.
– Spain: Sectorial conferences.
– Mexico: Governors’ Conference + Multi-level agreements.

20. THANK YOU!
Nick Malyshev, Head of the Regulatory Policy Division
nikolai.malyshev@oecd.org