Regulation and the Governance Agenda in the 21st Century

Josef Konvitz, Public Governance Directorate

Context

1. The Crisis2. Is regulation necessary for

globalisation?3. Relations between regulations and

the regulated.4. Crystallizing issues that are not

new.

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Definitions/History

DefinitionsRegulation by rulesRegulation by other policy

instrumentsCommand and controlHistoryFrom local to national (to 1900)By sectors

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OECD Regulatory Policy Concept

Regulatory quality is the driving principle behind reform today

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Deregulation where markets work better than governments

Re-regulation and new regulatory institutions where markets cannot work without governments

More efficient government and social regulations to achieve high standards of health, safety and environmental protection at lower economic cost

2005 OECD Recommendations for Regulatory Quality

Less focus on regulatory reform

Promote concept of dynamic, long-term, pro-active effort

Economic and social objectives are mutually supportive

Regulatory quality, competition and market openness are mutually supporting

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Main Elements of a Regulatory Policy

What is a “good” regulation? • The 1995 OECD Checklist for Regulatory Quality• The 1997 OECD Recommendations on Regulatory Reform• The 2005 OECD Principles for Regulatory Quality and

Performance Set a Regulatory Policy

• Efficiency, transparency and accountability Assure political support

• Institution building Set a strategy to drive the Policy

• Capacity building for • Improving rule-making• Reviewing existing regulations

Implement the Policy

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Regulatory policies improve thefunctioning of markets

Boosts consumer benefits• Reducing prices for services and products such as

electricity, transport, and health care, and by increasing choice and service quality.

Supports sustainable, non-inflationary growth Improves competitiveness

• Reducing the cost structure of exporting and upstream sectors in regional and global markets.

Fosters flexibility and innovation Increases job creation

• By creating new job opportunities, and by doing so reducing fiscal demands on social security, particularly important in ageing populations.

Reduces risk of crisis due to external shocks7

Gains from reform: 1998 to 2003 Greater homogeneity across OECD countries for

« good » regulation:• Quality regulation, not just de-regulation• Incentive-based regulation in place of command-and-

control

Setting priorities on sectors where change will do the most good

The countries that have made the most progress had been the most restrictive• Reducing high degree of state control (price controls,

legal restrictions)• Using multilateral agreements to open trade,

investment• Removing barriers to entrepreneurship 8

Lessons of experience

Leadership as most important ingredient for success

Crises as catalyst for change

Harmful effects of a short-term perspective

Role of central regulatory bodies to change administrative culture

Need for communication strategy to build constituency for reform

Getting the level of intervention right9

Narrow focus: The administrative burden is not everything

Administrative Burdens(Administrative compliance costs imposed by regulation)

Public Sector(Regulation Inside Government) Private Sector

Businesses• Inspections• Reporting• Permits

Citizens• Inspections• Reporting• Permits

= time ismoney

Tools: one-stop shops, reduced reporting frequencies, benchmarking exemptions, unified data bases…

Othercompliance costs

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Responsible regulation

•Capital•Administrative Burdens -public, private•Indirect

Regulatory Capacity for integrated approach 11

Towards the future: interface between the public and private sectors

Management of complexity of policy objectives, with often unexpected outcomes

Greater use of alternatives to regulation

Evaluation of regulations and of their social and economic impacts

Risk awareness

Extending coverage to public services such as education, health, environment

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The Crisis - I

Regulatory gaps, captureMulti-levelPressure on the process

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The Crisis - II

Housing and educationEntrepreneurshipInnovation and risk

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After the Crisis

Tools (RIA)Policies (Ministers)Institutions (core; agences)Stronger role for the state but limits

on what the state can do:• Collective security – cross-border• Quality of Life – cross-sectoral, regional

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