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REGULATORY REFORM REGULATORY REFORM & RIA IMPLEMENTATION & RIA IMPLEMENTATION

IN TURKEYIN TURKEY

By Dr.Recep KIZILCIKBy Dr.Recep KIZILCIKDirector of Better RegulationDirector of Better Regulation

Tunis,TunisiaTunis,Tunisia February 15 ,February 15 , 200 20077

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Outline Outline

PART IPART I 1-Regulatory Policy1-Regulatory Policy 2-Regulatory Risk2-Regulatory Risk 3-Why is it hard to make good regulatory decisions ?3-Why is it hard to make good regulatory decisions ? 4-Methods of making decision4-Methods of making decision 5- What is RIA?5- What is RIA? 6-Two Aspects of RIA System6-Two Aspects of RIA System 7-Consultation7-Consultation

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OutlineOutline

PART IIPART II 1-Regulatory Problems of Turkey1-Regulatory Problems of Turkey 2-Better Regulation for Turkey2-Better Regulation for Turkey 3-Simplification of regulations3-Simplification of regulations 4-Backgroud of RIA in Turkey4-Backgroud of RIA in Turkey 5-RIA Structure of Turkey5-RIA Structure of Turkey 6-RIA Guideline of Turkey6-RIA Guideline of Turkey 7-What Results in Turkey7-What Results in Turkey 8-Benefits and challenges of RIA8-Benefits and challenges of RIA

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Regulatory PolicyRegulatory Policy

Although governments historicaly used Although governments historicaly used traditional instruments such as current traditional instruments such as current spending, tax and investment to achive spending, tax and investment to achive objectives of improving social development, objectives of improving social development, better living standarts and quality of the life of better living standarts and quality of the life of citizens, especially following 2000s, OECD and citizens, especially following 2000s, OECD and EU Countries started to attach significant EU Countries started to attach significant importance to regulatory policy.importance to regulatory policy.

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Regulatory RiskRegulatory Risk

Regulatory risk reduces both the quantity of Regulatory risk reduces both the quantity of

investment and the value of investment.investment and the value of investment. The more uncertain and risky is the The more uncertain and risky is the regulatory regulatory

environment in which environment in which economic activity occurs, the economic activity occurs, the more likely it is more likely it is that aggressive rent seeking and short-that aggressive rent seeking and short-term term profit taking will replace longer-term profit taking will replace longer-term iinvestment in nvestment in a competitive climate. a competitive climate.

RIA can help reduce regulatory risk.RIA can help reduce regulatory risk.

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Failure to define the problem correctlyFailure to define the problem correctly.. Failure to understand other forces and Failure to understand other forces and incentives acting on the problemincentives acting on the problem.. Failure to predict changes in human Failure to predict changes in human behaviobehaviouurr.. Failure to see the full consequences of Failure to see the full consequences of government actionsgovernment actions..

Why is it hard to make good Why is it hard to make good

regulatory decisionsregulatory decisions(2)(2)

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Why is it hard to make good Why is it hard to make good

regulatory decisionsregulatory decisions(2)(2) Failure to understand domestic and Failure to understand domestic and international market forcesinternational market forces.. Failure to update to meet changing Failure to update to meet changing needs, technologies, and situationsneeds, technologies, and situations.. Failure to understand limits in Failure to understand limits in government capacitiesgovernment capacities.. Failure to oppose powerful interest Failure to oppose powerful interest groups and combat regulatory capturegroups and combat regulatory capture..

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Methods of Making Methods of Making DecisionDecision

Countries use several methods toCountries use several methods to make make regulatory decisionsregulatory decisions;;

ExpertExpert,, ConsensusConsensus,, PoliticalPolitical,, BenchmarkingBenchmarking,, Evidence-basedEvidence-based..

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What is RIA?What is RIA?

RIA is an evidence-based processRIA is an evidence-based process for making regulatory for making regulatory decisionsdecisions..

Structurally, RIA is a process of asking the right Structurally, RIA is a process of asking the right questions in a structured format to support a wider and questions in a structured format to support a wider and more transparent policy debate.more transparent policy debate.

SySystematically and consistently examining stematically and consistently examining selected potential impacts arising from selected potential impacts arising from government action or non-action, government action or non-action, CCommunicating the information toommunicating the information to decision-makers and decision-makers and

stakeholdersstakeholders..

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Objectives ofObjectives of RIARIA

Calculating the costs and benefits of Calculating the costs and benefits of

government actiongovernment action.. Opening up decisionsOpening up decisions to a wider range of to a wider range of

interestsinterests.. Improving regulatory qualitiesImproving regulatory qualities.. Changing the cultureChanging the culture of the regulatorof the regulators.s. Changing the viewsChanging the views about the role of about the role of ggovernmentovernment.. Shifting the role of government from Shifting the role of government from ““rowing”rowing” to to

“steering”“steering”..

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RIA should be part of wider RIA should be part of wider regulatory policyregulatory policy

RRIA should be based on government-IA should be based on government- wide principles of good regulationwide principles of good regulation

It is essential to explicitly define regulatory quality, It is essential to explicitly define regulatory quality, especially in a transition country, where especially in a transition country, where understanding of market needs is low.understanding of market needs is low. Most governments have issued instructions to Most governments have issued instructions to regulators about the quality of their regulatory regulators about the quality of their regulatory decisions. decisions. Regulators must show that their proposed regulations Regulators must show that their proposed regulations will meet these quality standards BEFORE they will meet these quality standards BEFORE they adopt them.adopt them.

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Critical Questions for RIACritical Questions for RIA

To To eenforce and nforce and ccomply ?omply ?

Are proposals enforceable? –e.g. resourcesAre proposals enforceable? –e.g. resources WhoWho will enforce them?will enforce them? HoHoww will consistency and accountability be ensured?will consistency and accountability be ensured? What are compliance targets?What are compliance targets? Do benefits justify compliance costs?Do benefits justify compliance costs?

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Important Important success factorssuccess factors

The hThe highighestest level political support level political support Support from Prime Minister’s Support from Prime Minister’s OfficeOffice Awareness-raising and trainingAwareness-raising and training Development of RIA network for sharing of Development of RIA network for sharing of experienceexperience and leading this process and leading this process Ongoing liaison with Ongoing liaison with OECD and OECD and EU colleaEU colleaggues ues

especially EU especially EU Directors of Better Regulation Directors of Better Regulation LearningLearning by doing by doing

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Two Two AAspects of a RIA spects of a RIA SSystemystem

An administrative processAn administrative process..

- - Conception and Development of RegulationConception and Development of Regulation.. -- Ministry Drafts Regulation & RIA Ministry Drafts Regulation & RIA in consultation with in consultation with

stakeholders.stakeholders. -- Inter Inter ministerial consultation, & Oversight Regulatoryministerial consultation, & Oversight Regulatory

Body.Body. - - Final Submission to CabinetFinal Submission to Cabinet..

A substantive decision-making reportA substantive decision-making report addressing content addressing content issuesissues..

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Phases of ECPhases of EC Impact Impact Assessment ReportAssessment Report

Executive summaryExecutive summary..

Section Section 1: Procedural issues and consultation1: Procedural issues and consultation..

Section 2: Problem definition Section 2: Problem definition ..

Section 3: ObjectivesSection 3: Objectives..

Section 4: Policy optionsSection 4: Policy options..

Section 5: Analysis of impacts Section 5: Analysis of impacts ..

Section 6: Comparing the optionsSection 6: Comparing the options..

Section 7: Monitoring and evaluationSection 7: Monitoring and evaluation..

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ConsultationConsultation

To assist the decision-makingTo assist the decision-making processprocess.. To contribute to evidence-based policymakingTo contribute to evidence-based policymaking.. To help identify possible alternativesTo help identify possible alternatives to to

regulationregulation.. To strengthen focus of policy makers on the To strengthen focus of policy makers on the

needs of the publicneeds of the public and end-consumerand end-consumer..

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Phases of the Consultation Phases of the Consultation ProcessProcess

PlanningPlanning ExecutionExecution Analysis & EvaluationAnalysis & Evaluation Consultation meansConsultation means;;

Structured public engagementwith those whose views are to be Structured public engagementwith those whose views are to be soughtsought

Providing informationto the key audienceon theProviding informationto the key audienceon the purpose and purpose and subject of the consultation–e.g. a policy initiative, a regulatory subject of the consultation–e.g. a policy initiative, a regulatory change, a legislative proposal or a service deliverychange, a legislative proposal or a service delivery

Seeking, receiving, analysing and responding to feedback from Seeking, receiving, analysing and responding to feedback from the key audiencethe key audience

It is important to differentiate between–Ongoing consultative It is important to differentiate between–Ongoing consultative mechanisms(involving standing committees, foraor groups) and mechanisms(involving standing committees, foraor groups) and Once-off consultationexercisesOnce-off consultationexercises

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Plan for ConsultationPlan for Consultation

Decide what is purposeDecide what is purpose of consultationof consultation What do you want to achieve What do you want to achieve Who to consult and timeWho to consult and timetabletable?? How to make stakeholders aware?How to make stakeholders aware? Are outside experts or consultants required?Are outside experts or consultants required? Compliance with legal obligationsCompliance with legal obligations

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Methods of ConsultationMethods of Consultation

Written ConsultationsWritten Consultations Questionnaire-based surveyQuestionnaire-based survey Internet and use of IT toolsInternet and use of IT tools Face-to-Face InterviewsFace-to-Face Interviews Public Public HearingsHearings

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RRegulatory Problems of egulatory Problems of TurkeyTurkey

High regulatory risksHigh regulatory risks that reduce investment and that reduce investment and competition.competition.

High transactions costsHigh transactions costs due to a complex, multi-layereddue to a complex, multi-layered.. often arbitrary rules that are vulnerable to corruption. often arbitrary rules that are vulnerable to corruption. Regulatory barriers to entry and competitionRegulatory barriers to entry and competition.. Too little market regulation, poor enforcement, and Too little market regulation, poor enforcement, and under-institutionalization in policy areas such as under-institutionalization in policy areas such as consumer and environmental protectionconsumer and environmental protection.. Turkey’s civil service needs new Turkey’s civil service needs new tools to move toward tools to move toward

norms of good regulationnorms of good regulation..

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Better Regulation for Better Regulation for Turkey(1)Turkey(1)

Good regulation, not deregulation,Good regulation, not deregulation, is the answer for is the answer for TurkeyTurkey..

Creating more private businesses is important. Creating more private businesses is important. But real aim of reform is to create competitive markets that But real aim of reform is to create competitive markets that

reward value, re-allocate resources, andreward value, re-allocate resources, and adapt to adapt to opportunities and risks. opportunities and risks.

Poor and inadequate regulatory structures permit abuses Poor and inadequate regulatory structures permit abuses and corruption to flourish in emerging and corruption to flourish in emerging markets, undermine markets, undermine investor and consumerinvestor and consumer confidence, and destroy rather confidence, and destroy rather than create economic value. than create economic value.

Private enterprises produce wealth within well-Private enterprises produce wealth within well- regulated markets.regulated markets.

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Better Regulation for Better Regulation for Turkey(2)Turkey(2)

Sustainable growth is based on the quality of governanceSustainable growth is based on the quality of governance..

The focus of development today is on the role of the state The focus of development today is on the role of the state and its effectiveness, that is, its quality. and its effectiveness, that is, its quality.

Turkey needs smart government. Institutional Turkey needs smart government. Institutional reforms must improve the capacities of its public reforms must improve the capacities of its public administration –skills, structures, transparency, administration –skills, structures, transparency, accountability for performance, relation with and accountability for performance, relation with and understanding of markets and consumer interests, understanding of markets and consumer interests, and styles of operation.and styles of operation.

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Simplification of Simplification of RegulationsRegulations

Number of Number of reviewed reviewed regulations regulations

Number of Number of regulations need to regulations need to be apdatedbe apdated

Regulations Regulations repealedrepealed

LawsLaws 920920 272272 118 118

DecreesDecrees 215215 7070 46 46

By-laws by By-laws by Councel of Councel of MinistersMinisters

286 286 116116 3939

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By- Laws By- Laws 1- 13.967 by-laws are reviwed and 1- 13.967 by-laws are reviwed and

consequently codified.In this way consequently codified.In this way number of that is reduced to 4.510.number of that is reduced to 4.510.

2- 292 By-Law is annuled. 2- 292 By-Law is annuled.

3- Codified and redesigned by-laws in 3- Codified and redesigned by-laws in total 2956 are made public in web page total 2956 are made public in web page of Pirime Ministry without charge and of Pirime Ministry without charge and around the clock.around the clock.

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Why TurkeyWhy Turkey adopted RIA ? adopted RIA ?

To clarify justificationTo clarify justification for Regulationfor Regulation.. To aTo analysenalyse alternatives alternatives (taxes, grants or fines) (taxes, grants or fines) .. To To determinedetermine all costs and benefits all costs and benefits.. To To improveimprove quality quality of regulations of regulations To To streghtenstreghten governance systems governance systems.. To improve public service outputsTo improve public service outputs.. To To change the way of doing business.change the way of doing business. To To ensure consistincy of regulations.ensure consistincy of regulations.

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Background Background of RIA in of RIA in TurkeyTurkey

Influence of OECD and EU on RIA in Influence of OECD and EU on RIA in Turkey.Turkey.

OECD, Regulatory Reform in OECD, Regulatory Reform in TurkeyTurkey, 2001, 2001..

Action Plan of the Government.Action Plan of the Government.

““Setting up Better Regulation Unit in Prime Ministry in 2004’’Setting up Better Regulation Unit in Prime Ministry in 2004’’

By- law on principles of draft laws, decree laws and by laws entered By- law on principles of draft laws, decree laws and by laws entered into force on February 17, 2006.into force on February 17, 2006.

By that Regulation By that Regulation Government committed to Government committed to doing doing RIA RIA of all draft laws of all draft laws and decree laws whose costs exceed 10 million New Turkish Lira and decree laws whose costs exceed 10 million New Turkish Lira following February 17, 2007.following February 17, 2007.

Pilot ProjectPilot Project;; the one funded by the EU and about to be completedthe one funded by the EU and about to be completed

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RIA RIA sstructuretructure of Turkey of Turkey

Oversight body in the Office of Prime Minister.Oversight body in the Office of Prime Minister.

Main functions of this unit is;Main functions of this unit is; To develop and enhance capacity of public administration on RİA,To develop and enhance capacity of public administration on RİA, To help carry out RIA by line ministries,To help carry out RIA by line ministries, To do rTo do reality checks on eality checks on the qualitythe quality of RIAs of RIAs undertaken undertaken To tTo train and technical advicerain and technical advice..

Better Regulation or RIA units at all line ministries and Better Regulation or RIA units at all line ministries and regulatory bodies.regulatory bodies.

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How RIA is done in How RIA is done in Turkey ?Turkey ?

Two phased approach:Two phased approach:

PartialPartial RIA RIA, a, applied to all primary legislation involving pplied to all primary legislation involving changes to regulatory frameworkchanges to regulatory framework and and secondary secondary regulation identified by prime ministry.regulation identified by prime ministry.

Full RIAFull RIA, o, only conducted where nly conducted where partialpartial RIA suggests RIA suggests significant impacts or significant costs significant impacts or significant costs ((initial cost of 10 initial cost of 10 million million New Turkish Lira)New Turkish Lira)

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RIA Guideline of TurkeyRIA Guideline of Turkey

Problem definition.Problem definition. Objectives.Objectives. Alternatives.Alternatives. Assessment of alternatives.Assessment of alternatives. Consultation.Consultation. Comparison of alternatives.Comparison of alternatives. Implementation , monitoring and evaluation.Implementation , monitoring and evaluation.

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The RIA ProcessThe RIA Process

Regulatory ProposalRegulatory Proposal;; Screening RIAScreening RIA,,

• Informal ConsultationInformal Consultation Significant impacts?Significant impacts? or over 10 million New Turkish Lira or over 10 million New Turkish Lira

• NoNo//YesYes

Full RIAFull RIA Formal ConsultationFormal Consultation

PartialPartial RIA to Government with RIA to Government with draft regulationdraft regulation

Full RIA to Government with Full RIA to Government with draft regulationdraft regulation

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Scope ofScope of PartialPartial RIA RIA

SettingSetting of policy context, objectives of policy context, objectives and and policy policy options options Identification of cost, benefitsIdentification of cost, benefits and other impacts of and other impacts of optionsoptions.. Informal consultationInformal consultation including including ministriesministries, consumer and , consumer and

other interestother interest groups. groups. ExpressionExpression of how enforcement and compliance of how enforcement and compliance will will be achievedbe achieved.. Review–how will performance of regulations be Review–how will performance of regulations be assessedassessed??

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How to How to conduct fconduct full RIA ?ull RIA ?

Full RIAFull RIA only conducted where Screening RIA only conducted where Screening RIA

suggests:suggests:

––SignificantSignificant impacts. impacts.

––Significant costsSignificant costs (initial cost of (initial cost of 110 million0 million New Turkish New Turkish Lira).Lira).

International experience suggests Full RIA in International experience suggests Full RIA in

10-15%of cases10-15%of cases..

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Full RIA Full RIA coverscovers

More detailed analysis of More detailed analysis of developed developed optionsoptions.. More in-depth analysis of More in-depth analysis of possible possible impactsimpacts . . Monetarization of likely impactsMonetarization of likely impacts Formal consultationFormal consultation.. Summary of pros and cons of each Summary of pros and cons of each

optionoption and and determinationdetermination of a of a rerecommended commended option option ifif deemed deemed appropriateappropriate..

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Results in Results in TurkeyTurkey

This pilotThis pilot undertaken in cooperation with the EU undertaken in cooperation with the EU has given the first resultshas given the first results:: RIA modelRIA model developed in 200developed in 2007.7. Due to execution of pilot RIA a good enough capacity Due to execution of pilot RIA a good enough capacity

is built up in public administration especialy at is built up in public administration especialy at participating ministries.participating ministries.

Quite large number of personnel are trained in RIA Quite large number of personnel are trained in RIA who are to carry out RİAs at their departments after who are to carry out RİAs at their departments after February 17 , 2007.February 17 , 2007.

Developed a action plan with the aim of improving Developed a action plan with the aim of improving the newly established RIA system in coming years.the newly established RIA system in coming years.

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Lessons Lessons llearned earned

MMany RIA lessons any RIA lessons areare learned: learned: More structured and explicit focus on the objectives More structured and explicit focus on the objectives

behind regulations–with identification of behind regulations–with identification of problems being addressedproblems being addressed.. IIdentification and analysis of alternative options for dentification and analysis of alternative options for

achieving policy achieving policy objectives.objectives. Recognition of difficultiesRecognition of difficulties of of assessingassessing and and particularly particularly

quantifying the costs associated with regulationsquantifying the costs associated with regulations.. Need of changing the way of doing business.Need of changing the way of doing business. Need of continous training. Need of continous training.

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Benefits of RIABenefits of RIA

With RIA, the Public Sector caWith RIA, the Public Sector can;n; Have a more structured and explicit examination of Have a more structured and explicit examination of likely likely

costs and benefits of costs and benefits of proposed proposed regulationregulation,, Have important consultation with stakeholdersHave important consultation with stakeholders,, Have an earlier focus on enforcement and Have an earlier focus on enforcement and compliance compliance

issues who will enforce the issues who will enforce the r regulations, what are the egulations, what are the compliance targets?compliance targets?,,

HHighlightighlight the introduction of performance indicators for the introduction of performance indicators for regulations, so that they can show if the regulations regulations, so that they can show if the regulations are are working wellworking well..

Improve ligitimacy of regulations Improve ligitimacy of regulations

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Challenges of RIAChallenges of RIA

Key players will feel some discomfortKey players will feel some discomfort.. So,tSo,traditional waysraditional ways will be challengedwill be challenged And yet if RIA is well explained there can be real And yet if RIA is well explained there can be real

benefitsbenefits f for the main players and in theor the main players and in the public public interestinterest

Institutional resistance to change including Institutional resistance to change including bruacracybruacracy

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Thank you for your attentionThank you for your attention