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Legal and Regulatory Reforms : Case Studies of Specific Reform Strategies and Their Relevance for Russia Scott Jacobs, Managing Director Jacobs and Associates

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Title: Legal and Regulatory Reforms : Case Studies of Specific Reform Strategies and Their Relevance for Russia Scott Jacobs, Managing Director Jacobs and Associates


1
Legal and Regulatory Reforms Case Studies of
Specific Reform Strategies and Their Relevance
for Russia Scott Jacobs, Managing
DirectorJacobs and Associates
Creating A Conducive Legal Regulatory Framework
for Small and Medium Enterprise Development in
Russia A Policy Dialogue Workshop, St.
Petersburg, Russia September 14-16, 2003
www.regulatoryreform.com
2
Three Stages of Regulatory Reform
  • Regulatory Management
  • Regulatory Quality
  • Deregulation

3
International good regulation practices are now
widely accepted
  • Lessons from 30 countries and 25 years of
    initiatives to improve the efficiency and
    effectiveness of regulation as a tool of
    government
  • Strategies to organize and sustain market-based
    regulatory reforms
  • Tools to Improve Regulatory Security
  • Tools to Improve Regulatory Quality
  • Tools to Improve Implementation of Regulations

4
1. Strategies to organize and sustain
market-based regulatory reforms
  • 1.a. Adopt, at highest political levels, a
    regulatory reform policy with explicit
    objectives, timetables, actions, and
    accountability
  • 1.b. Adopt government-wide principles of good
    regulation
  • 1.c. Create quality control procedures with
    central oversight unit

5
Strategies to organize and sustain
market-based regulatory reforms1.a Adopt, at
highest political levels, a regulatory reform
policy
  • Every OECD country with an organized and
    multiyear program of regulatory reform has
    established an explicit policy statement on
    reform at the highest levels of government.
  • The more complete the principles, and the more
    concrete and accountable the action program, the
    wider and more effective was reform.
  • OECD Report recommends that countries adopt at
    the political level broad programmes of
    regulatory reform that establish clear objectives
    and frameworks for implementation.

6
Year of adoption of government-wide regulatory
quality policies in selected countries
  • 1981 United States
  • 1985 United Kingdom
  • 1986 Canada
  • 1993-94 Denmark
  • 1994 Netherlands
  • 1995 Mexico
  • 1996 Hungary, Ireland, Finland
  • 1999 Italy
  • 1998 Japan, Korea
  • 2000 Czech Republic, Greece, Poland

7
Purposes of the regulatory reform policy
  • communicate the reasons for reform and build
    public support for change
  • signal the governments commitment to better
    regulation by making transparent the
    objectives/strategies of reform
  • set clear policy objectives and means for
    reaching them, to transform reform into a
    systematic and permanent process
  • establish accountability for state organs in
    their use of regulatory powers
  • reduce the power of vested interests to block
    reform
  • enhance effectiveness of co-ordination and
    co-operation efforts by establishing a general
    framework.

8
Goals adopted in reform policies
  • Increase social welfare by more effectively
    delivering social and economic policies.
  • Boost economic development and consumer welfare
    by encouraging market entry, innovation,
    competition, and competitiveness.
  • Improve productive efficiency by reducing
    unnecessary costs, particularly for SMEs.
  • Improve public sector efficiency, responsiveness,
    and effectiveness through better public
    management reforms.
  • Improve the rule of law and democracy through
    legal reforms, including improved access to
    regulation, reducing excessive discretion of
    regulators

9
Selected regulatory quality tools contained in
regulatory reform policies in 28 OECD countries
  • Regulatory impact analysis
  • Assessment of regulatory alternatives
  • Transparency/Consultation with affected parties
  • Plain language drafting
  • Evaluation of results of
  • regulations

10
Spectacular use of regulatory policies in
economies in transition
  • Czech Republic, Hungary and Poland transitions
    required massive programs of deregulation and
    re-regulation, complete rebuilding of
    institutional framework, and strong transparency
    and accountability measures.
  • This was possible by adoption of coherent
    regulatory policies with strategic and systemic
    approaches to building regulatory policies, tools
    and institutions.
  • In Hungary, regulatory reform.central to
    policies of democratisation, marketisation,
    public administration modernisation, devolution
    to local government and harmonisation with EU
    legislation.

11
Strategies to organize and sustain
market-based regulatory reforms1.b. Adopt
government-wide principles of good regulation
  • It is essential to explicitly define regulatory
    quality, especially in a transition country.
  • Most governments have issued instructions to
    regulators about the quality of their regulatory
    decisions.
  • These commonly take the form of checklists and
    decision criteria.
  • Regulators themselves must show that their
    regulations meet these quality standards.

12
The OECD Checklist for Regulatory Quality
  • 1. Is the problem correctly defined?
  • 2. Is government action justified?
  • 3. Is regulation the best form of government
    action?
  • 4. Is there a legal basis for regulation?
  • 5. What is the appropriate level (or levels) of
    government for this action?
  • 6. Do the benefits of regulation justify the
    costs?
  • 7. Is the distribution of effects across society
    transparent?
  • 8. Is the regulation clear, consistent,
    comprehensible and accessible to users?
  • 9. Have all interested parties had the
    opportunity to present their views?
  • 10. How will compliance be achieved?

13
Strategies to organize and sustain market-based
regulatory reforms 1.c Create quality control
procedures with central oversight unit
  • A well-organized and monitored reform process,
    driven by engines of reform with clear
    accountability for results, is important for
    success.
  • This requires strong political oversight,
    strategic planning, and incentives for results.

14
Two levels of oversight Ministerial committee
and an expert Secretariat
  • A ministerial-level committee for regulatory
    reform and SME development is needed to oversee
    reforms at the political level and insist on
    ministerial action.
  • A dedicated and expert group is needed at the
    working level, usually as a Secretariat to the
    ministerial committee

15
Putting a minister in charge
16
with central oversight of regulatory reform
17
Oversight institutions for regulatory quality
  • Canada The Special Committee of Council, The
    Regulatory Affairs and Orders in Council
    Secretariat (RAOICS) (15 people)
  • US Office of Information and Regulatory Affairs,
    Office of the President, Annual reports to
    Congress on costs and benefits of regulation (35
    people)
  • UK Panel for Regulatory Accountability,
    Regulatory Impact Unit (RIU 57 people),
    Departmental Regulatory Impact Units, Regulatory
    Reform Ministers, Small Business Service
  • Netherlands Competition, Deregulation and
    Quality of Law (MDW) Committee, Helpdesk
    (Ministries of Economic Affairs, Justice and
    Environment), Ministry of Justice

18
Tools to Improve Regulatory Security The
Guillotine Method
  • GOAL establish a clear and accountable legal
    structure by creating a comprehensive and central
    regulatory registry with positive security.

19
How the guillotine works
  • The Government instructs all government agencies
    to establish lists of their rules in one year.
  • As they prepare the lists, they identify
    unnecessary rules, and rules that are unnecessary
    or outdated
  • At the end of a year, any regulation not on the
    list is automatically cancelled without further
    legal action.
  • All new regulations and changes are to be entered
    in the registry within one day of adoption.
  • The registry has legal security no regulation
    not in the registry can be enforced against a
    business.

20
3. Tools to Improve Regulatory Quality
  • 3.a. Use Regulatory Impact Analysis
  • 3.b. Improve public consultation and transparency
  • 3.c. Consider alternatives and better forms of
    regulation
  • 3.d. Exploit international pressures,
    benchmarking, and good practices to promote
    reforms

21
Tools to Improve Regulatory Quality 3.a. Use
Regulatory Impact Analysis (RIA)
  • RIA is a method of
  • systematically and consistently examining
    selected potential impacts arising from
    government action or non-action, and of
  • communicating the information to decision-makers
    and the public.

22
Good government goals of RIA
  • Analysis Calculating the costs and benefits of
    government action
  • Opening up decisions to a wider range of
    interests
  • Integrating multiple policy goals (social and
    economic policies)
  • Accountability for actions and results (within
    ministries, to the public)
  • Increasing social benefits of government action,
    finding lowest cost solutions, reducing failure
  • Transparency
  • Policy coherence in a complex world
  • Client-oriented and responsive government

23
Defining the problem and justifying government
action, OECD countries
24
Coverage of benefits and costs in RIA in 20 OECD
Countries (year 2000)
25
Methods of RIA in Selected Countries
  • Canada Benefit/cost analysis with the goal of
    maximizing welfare. Each regulatory proposal must
    maximize the net benefit to Canadians.
  • US Benefit-cost analysis, supplemented by
    examination of at least 3 alternative approaches
    Informational Measures, Market-Based Approaches,
    Performance Standards
  • UK Flexibility in analytical methods. Costs and
    benefits are expressed in monetary terms as far
    as possible, but there is no set formula for RIA.
    Benefit-cost tests are characterised by
    methodological diversity and a varying degree of
    quality.

26
Suggestions for Russia RIA
  • Russia should implement, step by step, a program
    of regulatory impact analysis within the
    ministries.
  • The first step should be an agreement by
    ministers to require an expanded justification
    statement for all new laws and other regulations.

27
Tools to Improve Regulatory Quality 3.b.
Improve public consultation and transparency
  • Five tools of Public consultation
  • Informal consultation.
  • Circulation of regulatory proposals for public
    comment.
  • Public notice-and-comment.
  • Hearings.
  • Advisory bodies.

28
Public consultation methods in OECD countries
  • Number of OECD countries using the method
  • Informal consultation
  • with affected groups
  • Circulation of proposals
  • for comment
  • Public notice and
  • comment
  • Public meeting
  • Internet
  • Advisory groups
  • Preparatory public
  • committees

29
Consultation practices in selected countries
  • Denmark places the results of its business impact
    assessments on an Internet site
  • United States publishes its regulations in the
    national gazette twice at draft and final stages
  • Australia uses two methods targeted consultation
    when developing the rule, followed by public
    notice and comment on the draft regulation.

30
Tools to Improve Regulatory Quality 3.c.
Consider alternatives and better forms of
regulation
  • Virtually all countries are increasing their use
    of a range of alternatives to traditional forms
    of regulation.
  • Instruments to be considered include a wide range
    of non-regulatory instruments, as well as a
    number of distinctly different forms of
    regulation.
  • Innovation often involves complementing
    traditional regulation with other instruments,
    rather than replacing traditional regulation
    completely.

31
Forms of alternative instruments
  • Information disclosure to empower citizens and
    consumers to make informed choices
  • Performance-based regulation that specifies
    outcomes, rather than the means by which
    businesess must comply
  • Process regulation that requires businesses to
    develop processes that ensure a systematic
    approach to controlling and minimizing risks
  • Market based instruments that harness market
    incentives, such as tradable permits, insurance
    schemes, taxes and subsidies
  • Voluntary commitments, self-regulation, codes of
    practice, and co-operative approaches

32
(No Transcript)
33
Tools to Improve Regulatory Quality3.d.
Exploit international pressures and benchmarking
to promote reform
  • WTO (TBT Agreement)
  • OECD (good regulatory practices)
  • EU (systematic overhaul)
  • APEC (regulatory principles)

34
4. Tools to Improve Implementation of
Regulations
  • Regulators must apply and enforce regulations
    systematically and fairly, and regulated groups
    must have access to administrative and judicial
    review of the actions of the regulator through
  • 4.a. Administrative procedure acts
  • 4.b. Independent administrative appeals
  • 4.c. Methods of improving compliance

35
4.a. Administrative procedures (1)
  • Administrative procedures can assure quality
    regulation and preserve the rights and interests
    of citizens by mandating
  • Consultation requirements
  • Preparation of regulatory impact assessments
  • Consideration of alternative instruments
  • Publication requirements for new regulations
  • Duration (including automatic sunsetting)
  • Accessibility of regulations
  • Rules on incorporated material such as
    international standards

36
4.a. Administrative procedures (2)
  • (List continued from previous page)
  • General rules on extent and exercise of
    administrative discretions, including publication
    of objective criteria for judging applications
  • Time-limits for decision-making
  • Requirements to give reasons for rejecting
    applications
  • Application of general procedural rules to
    amendments of existing regulation, rules on
    updating of incorporated material
  • Hearing procedures before disciplinary actions
    for regulatory violations
  • Rights of regulated entities in appealing rules
  • Administrative actions such as enforcement and
    sanctions.

37
4.b. Independent appeals
  • Opportunity for a complaint to be heard by an
    administrative body other than that responsible
    for making the initial decision.
  • Judicial review of administrative decisions is
    the ultimate guarantor of transparency and
    accountability

38
Independent appeals in Hungary
  • Judiciary. Poor efficiency, but National Judicial
    Council is improving judiciary through better
    selection, training and skills of judges with
    skills to work in a market economy
  • Public Prosecutors Office is entitled to examine
    the legality of an agencys decisions and may
    initiate a formal motion to review the decision.
  • Ombudsmen are concerned with violations of
    constitutional rights, and can act independently
    in their designated fields.
  • Constitutional Court has played an outstanding
    role since the change of regime. As in most
    countries, a specific procedure permits
    individuals to directly appeal to the
    Constitutional Court against alleged violations
    of their rights by a law or regulation.

39
4.c. Methods of improving compliance
  • Communicate. Improve public knowledge and
    understanding of rules.
  • Simplify rules. For SMEs in particular, the
    burden of assimilating and complying with many
    complex and technical rules can be unreasonable.
  • Compliance assessment. Regulations must be backed
    by sufficient budgetary and administrative
    resources for effective implementation and
    enforcement.
  • Measure compliance rates ex poste.

40
Conclusions for Russia
  • Regulatory quality policies are essential
    elements of broader government policy and
    structural reform programs. Regulatory reform
    must be integrated with competition, trade and
    consumer policies.
  • A relentless focus on results in the market is
    necessary. Flexibility and redirection will be
    necessary to continually improve the reform
    program.
  • Invest in institutions. Success depends on
    coordination, management and direction from the
    center
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