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Regulatory Reform

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Practice Advice in Regulatory Policy and Management

Regulatory Reform (OECD)

Description: The OECD advises that there are four sets of factors which are likely to promote regulatory reform. Moreover, it has underlined that successful, credible and sustainable reforms rely on the capacity to build wide coalitions, identify external drivers and pressures and bring them into the policy-making process. In this framework, regulatory policy can provide an important contribution. As a matter of fact, good regulatory practices put the basis for more open, evidence-based and accessible procedures which are more legitimate, less vulnerable to capture and more likely to generate high-quality information. This improves analysis of reform opportunities and policy options. At the same time, the integration into the policy-making process of appropriate practices of regulatory management allows governments to develop a more coherent approach to policy formulation. In particular, regulatory policy provides a framework for collaboration that favours the identification of potential synergies within and across government, and allows them to overcome the obstacles created by a traditional compartmentalisation of functions.

Commentary: 

The 1997 OECD article presents advice on how to reform regulatory policy:

  • Adopt at the political level broad programmes of regulatory reform that establish clear objectives and frameworks for implementation.
    • Establish principles of "good regulation" to guide reform, drawing on the 1995 OECD Recommendation on Improving the Quality of Government Regulation. Good regulation should: (i) be needed to serve clearly identified policy goals, and effective in achieving those goals; (ii) have a sound legal basis; (iii) produce benefits that justify costs, considering the distribution of effects across society; (iv) minimise costs and market distortions; (v) promote innovation through market incentives and goal based approaches; (vi) be clear, simple, and practical for users; (vii) be consistent with other regulations and policies; and (viii) be compatible as far as possible with competition, trade and investment facilitating principles at domestic and international levels.
    • Create effective and credible mechanisms inside the government for managing and co-ordinating regulation and its reform; avoid overlapping or duplicative responsibilities among regulatory authorities and levels of government.
    • Encourage reform at all levels of government and in private bodies such as standards setting organisations.
  • Review regulations systematically to ensure that they continue to meet their intended objectives efficiently and effectively.
    • Review regulations (economic, social, and administrative) against the principles of good regulation and from the point of view of the user rather than of the regulator.
    • Target reviews at regulations where change will yield the highest and most visible benefits, particularly regulations restricting competition and trade, and affecting enterprises, including SMEs.
    • Review proposals for new regulations, as well as existing regulations. 
    • Integrate regulatory impact analysis into the development, review, and reform of regulations.
    • Update regulations through automatic review methods, such as sunsetting.
  • Ensure that regulations and regulatory processes are transparent, non discriminatory and efficiently applied.
    • Ensure that reform goals and strategies are articulated clearly to the public.
    • Consult with affected parties, whether domestic or foreign, while developing or reviewing regulations, ensuring that the consultation itself is transparent.
    • Create and update on a continuing basis public registries of regulations and business formalities, or use other means of ensuring that domestic and foreign businesses can easily identify all requirements applicable to them.
    • Ensure that procedures for applying regulations are transparent, non discriminatory, contain an appeals process, and do not unduly delay business decisions.
  • Review and strengthen where necessary the scope, effectiveness and enforcement of competition policy.
    • Eliminate sectoral gaps in coverage of competition law, unless evidence suggests that compelling public interests cannot be served in better ways.
    • Enforce competition law vigorously where collusive behaviour, abuse of dominant position, or anticompetitive mergers risk frustrating reform.
    • Provide competition authorities with the authority and capacity to advocate reform.
  • 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.
    • Review as a high priority those aspects of economic regulations that restrict entry, exit, pricing, output, normal commercial practices, and forms of business organisation.
    • Promote efficiency and the transition to effective competition where economic regulations continue to be needed because of potential for abuse of market power. In particular: (i) separate potentially competitive activities from regulated utility networks, and otherwise restructure as needed to reduce the market power of incumbents; (ii) guarantee access to essential network facilities to all market entrants on a transparent and non discriminatory basis; (iii) use price caps and other mechanisms to encourage efficiency gains when price controls are needed during the transition to competition.
  • Eliminate unnecessary regulatory barriers to trade and investment by enhancing implementation of international agreements and strengthening international principles.
    • Implement, and work with other countries to strengthen, international rules and principles to liberalise trade and investment (such as transparency, non discrimination, avoidance of unnecessary trade restrictiveness, and attention to competition principles), as contained in WTO agreements, OECD recommendations and policy guidelines, and other agreements.
    • Reduce as a priority matter those regulatory barriers to trade and investment arising from divergent and duplicative requirements by countries.
    • Develop and use whenever possible internationally harmonised standards as a basis for domestic regulations, while collaborating with other countries to review and improve international standards to assure they continue to achieve the intended policy goals efficiently and effectively.
    • Expand recognition of other countries' conformity assessment procedures and results through, for example, mutual recognition agreements (MRAs) or other means.
  • Identify important linkages with other policy objectives and develop policies to achieve those objectives in ways that support reform.
    • Adapt as necessary prudential and other public policies in areas such as safety, health, consumer protection, and energy security so that they remain effective, and as efficient as possible within competitive market environments.
    • Review non regulatory policies, including subsidies, taxes, procurement policies, trade instruments such as tariffs, and other support policies, and reform them where they unnecessarily distort competition.
    • Ensure that programmes designed to ease the potential costs of regulatory reform are focused, transitional, and facilitate, rather than delay, reform.
    • Implement the full range of recommendations of the OECD Jobs Study to improve the capacity of workers and enterprises to adjust and take advantage of new job and business opportunities.

The 2010 OECD article offers guidance on implementing an effective regulatory policy and the challenges that governments must tackle:

  • Leadership: experience from across OECD countries has illustrated that a more coherent approach to policy and regulatory formulation requires not only highlevel and cross-governmental support, but also the capacity to lead and develop a pro-active approach.
  • Embedding cultural change: an awareness of the importance of regulatory quality is needed throughout the public administration and among key private sector actors in order to promote deeper reforms, together with the establishment of a climate of trust and co-operation and the promotion of a regular exchange of information between the actors involved in the regulatory process.
  • Skills, competencies and training: the enhancement of a programme of continuous training and capacity building within the government continues to be the key for the development of an effective regulatory management. This kind of initiative not only improves the technical skills needed in certain processes, it also communicates the importance attached to the regulatory quality agenda by the administrative and political hierarchy and helps to embed cultural change.
  • Training and capacity-building programmes allow officials to meet and discuss the Better Regulation agenda, thus fostering a sense of ownership of reform initiatives and favouring communication within and beyond individual institutional settings.
  • Transparency and volume of regulation: ease of access to regulation, through printed or electronic means, is essential. From a business perspective, being able to readily access information on new regulations, as soon as they are approved, is key to ensuring compliance. Easier access to codified legislation also simplifies the process for those seeking to enter the market.
  • Availability of data: a challenge for many OECD countries is the availability of suitable, independent, ex ante data that can best inform the policy-making process. The availability of these data allow policy makers to develop appropriate indicators to measure the effectiveness and outcomes of regulation, without creating unnecessary burdens for citizens, business and the public service.

Source: OECD (1997). "The OECD Report on Regulatory Reform: Synthesis" at http://www.oecd.org/regreform/regulatory-policy/2391768.pdf. OECD (2010) "Making Reforms Happen: Lessons From OECD Countries" OECD at http://www.oecd.org/site/sgemrh/46159078.pdf (accessed 13 November, 2012).  

Page Created By:  Matthew Seddon on 13 November, 2012. Updated by Matthew Seddon on 28 February 2013. The content presented on this page is drawn directly from the source(s) named above, and consists of direct quotations or close paraphrases of material drawn from it. This material does not necessarily reflect the opinions of the creator of this page or the researchers associated with this project.  Further, the opinions expressed in the source and presented on this page do not necessarily reflect the official institutional positions of the organization responsible for the source’s publication.

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