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Regulatory Quality and Performance

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Practice Advice in Regulatory Policy and Management

Regulatory Quality and Performance (OECD) 

Summary AdviceThe OECD recommends governments to establish a process for systematic and periodic review of existing regulations.

Main Points: Good regulation policy should have clearly identified goals, and reinforce transparency and non-discrimination. It is important to avoid market distortions that result from overregulation, and all regulatory reforms need to be compatible with competition, trade and investment policy at the national and international levels.  The OECD presents the following regulatory decision-making guidelines:

  • Government intervention needs to be justified, therefore governments must regularly review existing regulations to make sure that rules are consistent with current needs.
  • If new regulations are introduced, regulators should examine whether older regulations should be repealed or amended to ensure legal consistency. Administrators of the regulations need to examine regulatory proposals for compliance with obligatory legal principles as certainty, proportionality, and equality before the law.
  • Regulations with larger effects on the industry follow a cost-benefit analysis which examines the effects on competition, international competitiveness and technological innovation.

The OECD also recommends that competition authorities advocate reform and enforce laws, especially in cases where anti-competitive practices such as cartel conduct, abuses of dominant positions and anti-competitive mergers take place. Regulations must be completely supportive of competitive neutrality, especially in specific sectors such as energy, utilities, transport and communications where limited applicability of competition laws are widespread due to their natural monopoly characteristics. Non-regulatory  instruments which can distort competition must also be reviewed, to ensure that subsidies, taxes, procurement policies, trade instruments such as tariffs and other support policies do not unnecessarily benefit SOEs (state owned enterprises). 

The OECD lists the following relevant principles and annotations for regulatory reform and "better" regulation:

  1. Adopt at the political level broad programmes of regulatory reform that establish clear objectives and frameworks for implementation. Good regulations must minimise costs and market distortions, and be compatible, as far as possible, with competition, trade, and investment-facilitating principles at domestic and international levels. Good regulations should serve clearly identified policy goals,  have a sound legal and empirical basis, produce benefits that justify the costs, minimise costs and market distortions, promote innovation through market incentives and goal-based approaches, be clear, simple and practical for users, be consistent with other regulations and policies.
  2. Review regulations systematically to ensure that they continue to meet their intended objectives efficiently and effectively in a changing and complex economic and social environment.
  3. Ensure that regulations and regulatory processes are transparent, non-discriminatory and efficiently applied.
  4. Review and strengthen where necessary the scope, effectiveness and enforcement of competition policy. Eliminate sectoral gaps in the coverage of competition laws, unless evidence suggests that compelling public interests cannot be served in better ways. Provide competition authorities with the power and capacity to advocate reform.
  5. Reform economic regulations in all sectors to stimulate competition, and eliminate them except where clear evidence demonstrates that they are the best way to serve broad public interests.
  6. Eliminate unnecessary regulatory barriers to trade and investment by enhancing implementation of international agreements and strengthening international principles.
  7. Identify important linkages with other policy objectives and develop policies to achieve those objectives in ways that support reform.  Assess the risk to the public and public policy in a changing environment as fully and transparently as possible, thereby contributing to a better understanding of the responsibilities of all stakeholders.

Better regulation should be encouraged at all levels of government, and coordination among regulatory authorities must be improved to avoid overlapping responsibilities.

Source: OECD (2012) "OECD Guiding Principles for Regulatory Quality and Performance" at http://www.oecd.org/fr/reformereg/34976533.pdf  (accessed February 18th, 2013).

Page Created By: Khilola B. Zakhidova on February 20th, 2013. The content presented on this page is drawn directly from the source(s) cited above, and consists of direct quotations or close paraphrases. This material does not necessarily reflect the official view of the publishing organization.

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