GLOBAL TRENDS IN REGULATORY IMPROVEMENT AND THE CHALLENGES FOR EL SALVADOR Nick Malyshev Head of the Regulatory Policy Division OECD
San Salvador 23 February 2018
Broad objectives of regulatory improvement • Regulatory improvement seeks to improve public sector outcomes by changing the way governments design and deliver regulation. • Regulatory improvement focuses upstream (COG, Oversight bodies, Parliaments), downstream (regulators, inspectors, sub-national) and outside of government (civil society, private bodies) • Regulatory improvement is not a better business agenda. It’s about making markets work better • Regulatory improvement is responsible for some less tangible but equally critical public governance outcomes
But what is “better” regulation? • A sound rationale and clear objectives • Targets the main source of a problem • Proportionate to scale/risk • Avoids undue prescription • Complements other regulations • Understandable and consistent • Can be effectively administered and enforced • ( and remains ‘fit for purpose’)
And the obstacles to ‘better’ regulation • Technical complexity − assessing impacts can be difficult • Political and societal pressures − vocal interest groups can be hard to resist • Bureaucratic ‘inertia’
− appeal of controls and status quo
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OECD work on regulatory improvement • 2012 Recommendation of the Council of the OECD on Regulatory Policy and Governance • 2005 OECD Guiding Principles for Regulatory Quality and Performance • 2005 APEC-OECD Integrated Checklist on Regulatory Reform • 1997 1997 OECD Report to Ministers , which set up a comprehensive plan for action on Regulatory Reform • 1995 Recommendation of the Council on Improving the Quality of Government Regulation
The Regulatory Governance Cycle
The Elements of Regulatory Policy and Governance Strategic Approach
Institutions
Management Tools
Governance
Policy Statement
Oversight Body
Regulatory Impact Assessment
Whole of Government
Political Leadership
Ministries/ policy units
Stakeholder Engagement
International Regulatory Co-operation
Regulators/ inspectorates
Ex-post Evaluation
National/Subnational interface
Legislative bodies
Risked based enforcement
The Elements of Regulatory Policy and Governance Strategic Approach
Institutions
Management Tools
Governance
Policy Statement
Oversight Body
Regulatory Impact Assessment
Whole of Government
Political Leadership
Ministries/ policy units
Stakeholder Engagement
International Regulatory Co-operation
Regulators/ inspectorates
Ex-post Evaluation
National/Subnational interface
Legislative bodies
Risked based enforcement
The adoption of an explicit whole-ofgovernment policy 21
Minister / high level official accountable for promoting governmentwide progress on regulatory reform
29 28
Dedicated body responsible for promoting the regulatory policy as well as monitoring and reporting on regulatory reform and regulatory quality
25 32 32 29
Are there standard procedures by which the administration develops subordinate regulations?
34 31
2008/09 2014
30
Are there standard procedures by which the administration develops primary laws?
35 31 27
Explicit, published regulatory policy exists
31 31 0
5
10
15
20
Number of jurisdictions
25
30
2005
35
The Elements of Regulatory Policy and Governance Strategic Approach
Institutions
Management Tools
Governance
Policy Statement
Oversight Body
Regulatory Impact Assessment
Whole of Government
Political Leadership
Ministries/ policy units
Stakeholder Engagement
International Regulatory Co-operation
Regulators/ inspectorates
Ex-post Evaluation
National/Subnational interface
Legislative bodies
Risked based enforcement
The institutional framework for regulatory improvement Ministries – Generally responsible for the design of regulation – Active users of regulatory management tools – A networked approach to regulatory governance
Regulators – Responsible for the delivery side; – The governance of regulators – Enforcement and inspections reform
Oversight Body – – – –
Guidance and Training Gatekeeper Challenge and Prompt Advocacy
The Elements of Regulatory Policy and Governance Strategic Approach
Institutions
Management Tools
Governance
Policy Statement
Oversight Body
Regulatory Impact Assessment
Whole of Government
Political Leadership
Ministries/ policy units
Stakeholder Engagement
International Regulatory Co-operation
Regulators/ inspectorates
Ex-post Evaluation
National/Subnational interface
Legislative bodies
Risked based enforcement
The Elements of Regulatory Policy and Governance Strategic Approach
Institutions
Management Tools
Governance
Policy Statement
Oversight Body
Regulatory Impact Assessment
Whole of Government
Political Leadership
Ministries/ policy units
Stakeholder Engagement
International Regulatory Co-operation
Regulators/ inspectorates
Ex-post Evaluation
National/Subnational interface
Legislative bodies
Risked based enforcement
RIA: General Trends While specific systems vary, a well understood approach underpins RIA – – – – –
Problem definition Identification of alternative regulatory options Data collection Identification of the preferred policy option Provisions for monitoring and evaluation
The underlying motivation for the introduction of RIA has proven important for the design of the RIA system itself. – – – – –
Efficiency/burden reduction Transparency Accountability Controlling bureaucracies Effectiveness and policy coherence 14
Traditionally RIA covers an individual proposed regulatory measures but increasing system are looking at stock/flow linkages
Evidence-based policy
Policy-based evidence
Best Practice
Common Practice
Issue
Issue
Assessment Options Decision
Decision
Detailed design
Detailed design
Implementation
Implementation
Review
RIA: governance is essential • Successful RIA critically depends on the level of commitment expressed by political leaders… • ... coupled with adequate incentives for public officials. • Involving stakeholders is essential, especially through public consultation. • RIA must be seen as a key element of a broader “policy cycle”, which includes tools for the ex ante analysis and for the ex post evaluation. • Legal, administrative and cultural peculiarities and traditions must be taken into for RIA to work successfully.
• Regulatory Oversight Bodies (ROBs) play a key role in coordinating and supervising the effective realisation of the policy cycle. • Different roles, mandates and instruments call for different degrees16 of independence of the ROB.
RIA: Methodological frameworks Undertaking RIA is a technically challenging exercise Practitioners must have clear and useful methodological guidance and support Relevant practical issues include: • • • • • •
the establishment of an appropriate threshold test the identification of impacts both direct and indirect the use of various qualitative and quantitative methods the application of risk assessment tools the emerging us of behavioural insights the next frontier of RIA – how to account innovation, employment, inclusion 17 17
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
Number of jurisdictions
RIA: Adoption across OECD countries
35
30
25
20
15
10
5
0
Implementation remains behind requirements
Source: 2015 Regulatory Policy Outlook .
Challenges of governance and methodology • The late timing of impact assessments is an issue. • Many countries are pondering issue of proportionality. • Most RIA processes are not integrated 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. • Overall, challenge function remains weak across OECD
The Elements of Regulatory Policy and Governance Strategic Approach
Institutions
Management Tools
Governance
Policy Statement
Oversight Body
Regulatory Impact Assessment
Whole of Government
Political Leadership
Ministries/ policy units
Stakeholder Engagement
International Regulatory Co-operation
Regulators/ inspectorates
Ex-post Evaluation
National/Subnational interface
Legislative bodies
Risked based enforcement
Stakeholder Engagement Broad International Trends • A process of communication, consultation and participation that informs the policy process • Both an instrumental and intrinsic policy tool • Both an administrative practice and a mind-set • Fundamental for understanding citizens’ and other stakeholders’ needs • A shift from ‘government’ to ‘governance’ • Ultimately it can improve trust in government
Requirements to consult
Requirement described in:
Requirement to conduct stakeholder engagement
29 30 6 6
Constitution
17
Law or statutory requirement
20
Subordinate regulations
8 9
Cabinet handbook
14 16
Mandatory guidelines 0
5
Primary laws
10 15 20 25 30 35 Number of jurisdictions
Types of consultations 2014 early stage
2008/09
2014 later stage
Advisory group or preparatory committee
25
31
26
Formal consultation with selected groups (e.g. social partners)
27
Informal consultation with selected groups
26
Broad circulation for comment
12
23 29
13
Public consultation conducted over the internet with invitation to comment
23
19
Physical public meetings
29 21
Virtual public meetings
14
Other
0
0
4
5
34
29 30
21
Posting on the internet without invitation to comment
28
22 22
15
8
10
15
20
Number of jurisdictions
25
30
Notes: Early stage refers to stakeholder engagement that occurs at an early stage, to inform officials about the nature of the problem and to inform discussions on possible solutions. Later stage consultation refers to stakeholder engagement where the preferred solution has been identified and/or a draft version of the regulation has been issued. Based on data from 34 countries and the European Commission. Source: 2014 Regulatory Indicators Survey results, www.oecd.org/gov/regulatory-policy/measuring-regulatory-performance.htm.
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Challenges in ensuring effective results • Low participation literacy – insufficient information on how to take part in the policy-making process
• Information overload – confusing intrinsic and instrumental objectives
• Lack of awareness - the evidence does not seem to show an increased participation
• Consultation capture - smaller players and individuals do not see a real chance to influence the decisions
• Bad experience due to past record - many stakeholders do not see the real impact of the consultation process on the final product
Stakeholder engagement in developing subordinate regulations 2015 Indicators of Regulatory Policy and Governance (iREG): Stakeholder engagement in developing subordinate regulations Methodology
Systematic adoption
Oversight and quality control
OECD average
Transparency
4 3.5 3 2.5 2 1.5
1 0.5 0
Note: The vertical axis represents the total aggregate score across the four separate categories of the composite indicators. The maximum score for each category is one, and the maximum aggregate score for the composite indicator is four. Source: OECD (2015), OECD Regulatory Policy Outlook 2015, http://www.oecd.org/gov/regulatory-policy/indicators-regulatory-policy-and-governance.htm.
The Elements of Regulatory Policy and Governance Strategic Approach
Institutions
Management Tools
Governance
Policy Statement
Oversight Body
Regulatory Impact Assessment
Whole of Government
Political Leadership
Ministries/ policy units
Stakeholder Engagement
International Regulatory Co-operation
Designated Minister
Regulators/ inspectorates
Ex-post Evaluation
National/Subnational interface
Legislative bodies
Risked based approaches
Why review existing regulations?
All regulations are ‘experiments’ • Many will not have been done well • Others will have passed their ‘use by date’ • Regulation is dynamic
The ‘stock’ of regulation is much greater than the flow Ex post reviews can also provide learnings for future reforms Evaluations can build trust and help sustain political support
Ex post evaluation the forgotten child of better regulation
What review approaches are there?
Stock management reviews • Stock-flow rules • Budgets • In-Out/Offsets • Red tape reduction targets
Ongoing
Programmed mechanisms • Sun-setting • Embedded in statue • Post implementation reviews At a set time
Ad-hoc/special purpose reviews • Public Stocktakes • Principles-based • Benchmarking • In-depth reviews
As needed
Criteria, methodologies & tools
Appropriate? (Still a valid rationale?) Effective? (Achieved the intended outcome?) Efficient? (Unnecessary costs or unintended impacts?) A better alternative?
Prioritisation – what, when & how How to prioritise and structure ex post reviews • Proportionality principle • Payoff principle • Indicators or regulatory problems • Portfolio approach • What about the less significant regulation
Governance, systems and institutions
• The need for a formal policy • The need for oversight to evaluate the quality of the reviews • The synergies associated between ex ante and ex post • Who carries out the review, who owns the review • Capacity develop is central to effective review • Ex post ruction most effective when supported by political and administrative leadership
Ex post evaluation for subordinate regulations 2015 Indicators of Regulatory Policy and Governance (iREG): Ex post evaluation for subordinate regulations Methodology
Systematic adoption
Oversight and quality control
OECD average
Transparency
4 3.5 3 2.5 2 1.5
1 0.5 0
Note: The vertical axis represents the total aggregate score across the four separate categories of the composite indicators. The maximum score for each category is one, and the maximum aggregate score for the composite indicator is four. Source: OECD (2015), OECD Regulatory Policy Outlook 2015, http://www.oecd.org/gov/regulatory-policy/indicators-regulatory-policy-and-governance.htm.
The Elements of Regulatory Policy and Governance Strategic Approach
Institutions
Management Tools
Governance
Policy Statement
Oversight Body
Regulatory Impact Assessment
Whole of Government
Political Leadership
Ministries/ policy units
Stakeholder Engagement
International Regulatory Co-operation
Designated Minister
Regulators/ inspectorates
Ex-post Evaluation
National/Subnational interface
Legislative bodies
Risked based enforcement
Implementing regulatory improvement • Leadership is critical. Virtually all OECD research point to the importance of strong leadership – whether by an individual policy maker or an institution charged with carrying out the reform. • Take a system wide approach. The size and complexities of the regulatory system are not always understood or appreciated. • The context matters. Regulatory reform is highly contextual, and should be tailored to suit existing government structures.
Implementing regulatory improvement (2) • Successful regulatory policy take time. The more successful reforms generally took several years to prepare and adopt, and often took longer to implement. • Successful reforms take several attempts. Many of the biggest reform successes followed earlier setbacks. • Focus on implementation. Implementation of even well-designed reforms remains a continual challenge. • Early and continuous assessment of results. Development of the regulatory reform agenda is hampered by a lack of focus on monitoring and evaluation.
Thank you nick.malyshev@oecd.org
@OECDgov http://www.oecd.org/gov/