RIA in Practice: The International Narrative

Dr. Malathy KnightResearch Associate, Verite Research

March 26th, 2015

• RIA: “What” and “Why”

• Unpacking the international narrative on RIA

• RIA in developing countries: issues and

challenges

• Getting to workable solutions

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Road map

• What is a “developing” country in this context?- Financial resources- Technical capacity (linked to some extent to financial

resources)- “Governance” per se not necessarily a part of this mix; BUT

under-developed institutional structures/processes can be a result of financial resource constraints

• No one-size fits all solutions/international “good” practice rather than “best” practice

• First-best solutions NOT possible in public policy/identify “workable” solutions: country/sector

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Some caveats

• Systematic, structured, evidence-based, consultative analysis of the prospective impacts of a proposed policy measure against possible alternatives (ex-ante)

• “..RIA’s most important contribution to the quality of decisions is not the precision of the calculations used, but the action of analyzing – questioning, understanding real-world impacts and exploring assumptions..” (OECD, 2002)

• NOT an end in itself; process matters (demonstration effects)

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RIA: “what” and “why”

• Sub-set of regulatory policy: effectiveness, transparency/accountability, proportionality, consistency, legitimacy – facilitating better governance structures and processes

• Two inter-linked elements: RIA process and RIA document

RIA: “what” and “why”

RIA: “what” and “why”

Fits policy cycle

Consistent analytical method

Iterative process

Public consultation

Stakeholder buy-in &

engagement

RIA: policy context

Policy Space

Policy identification

Policy formulation

Policy implementation

Policy evaluation

RIA: policy context

Setting agenda

Drafting rule/

regulation

Implementation

Monitoring

EnforcementEx-post

evaluation

Ex-ante appraisal

Final impact assessment

Implementation

Monitoring

RIA: incidence OECD (formal)

• Africa: e.g. Botswana, Egypt, Ghana, Nigeria, Tanzania (pilot projects to implement RIA); Uganda (RIA training, 2000-2003); Kenya (RIA proposals, 2007); South Africa (approved by Cabinet,2007/RIA Guidelines available from 2012)

• Latin America: e.g. Brazil, Chile, Columbia, Costa Rica, Ecuador (trying to introduce a more systematic use of RIA)

RIA: emerging/developing economies

• Europe & Central Asia: e.g. Bulgaria (think-tank initiative IME (1998-2002); Moldova (2008); Montenegro (RIA manual, 2011); Serbia (2004); Ukraine (2004); Uzbekistan (adoption of government decree on RIA, 2014)

• Asia: e.g. Cambodia, Lao PDR, Malaysia, Mongolia, Philippines, Vietnam (piloting RIA); Indonesia (via ADB project in Min of Trade,2002 & TAF training for LG)

• SOUTH ASIA?

RIA: emerging/developing economies

• Developing countries: empirical evidence sparse, patchy

• Why?-Other regulatory policy options for regulatory review?-Done but not documented (or informal)?-Done but not sustainably embedded (e.g. add-on to satisfy donor conditionality/not in sync with policy cycle, etc. )?

• GAP in research

RIA: unpacking the international narrative

• Knowledge gaps on RIA/alternatives to regulatory review in emerging/developing economies (based on review of existing literature)

• Important research questions digging deeper into what has/has not worked and why (political-economy and socio-cultural context); extent/limits of policy transfer/reinventing the wheel; specific stakeholder-level impact of regulatory review; positive & normative usefulness of RIA, etc.

• Case for meaningful in-depth research program: recall CUTS 7-Up Project on competition policy and law (empirical research, wide stakeholder consultation process, policy buy-in)

RIA: unpacking the international narrative

• Expected outcome (assumption): RIA driver of regulatory quality/better regulatory structures & processes for society as a whole

• These findings need to be tested/fine-tuned with more empirical research in emerging/developing economies

RIA: issues and challenges

RIA: issues and challenges

Process• Cohesive, systematic regulatory policy (within which RIA is

to be embedded); clear regulatory policy objectives/principles/expected outcomes

• Policy buy-in Political (highest levels of government) Administrative (bureaucrats) – sync with principal-agent dynamics Technocrats – often most resistant/ideology-driven interests Civil society (private sector, consumers, etc.) – regulatory capture,

rent-seeking, policy embedding/sustainability

RIA: issues and challenges

Process• Institutional arrangements One apex organization tasked with overseeing the different

stages (and sectors) of RIA; coordinating roles/responsibilities of the various technical and administrative actors in the process; quality-control; training; advocacy; and, problem-shooting

Best placed in an entity close to core Executive body of government

RIA: issues and challenges

Process• Skills and financial resources Technical know-how (nuts and bolts of RIA method) “Knowledge” (political-economic, socio-cultural costs/benefits and

outcomes) – country expertise over donor information transfer Adequate remuneration: “you pay peanuts, you get monkeys”!!

• Access to information (e.g. RTI Bill in #LK) – transparency, accountability, credibility, legitimacy – broader stakeholder buy-in

RIA: issues and challenges

Methodology• Asking the right questions Scope: primary or secondary legislation? Scope: all regulations across the board or major ones (define major?)?• Choice of methodology Least-cost analysis Cost-effectiveness analysis Cost-benefit analysis Multi-criteria analysis• Some sticky issues Monetizing non-market impacts (revealed preference? ability to pay

versus willingness to pay? bounded rationality?) Mixing RIA in to long-term policy goals (e.g. quality of life)

RIA: peeling off the layers- #LK story

• Introspective: looking back at mistakes (2004-2005)

• What: “..process used to assess the likely consequences of proposed regulation, and the actual consequences of existing regulation, to assist those engaged in planning, approving and implementing improvements to regulatory systems..”

• Why: Objectives of a social market economy; market failure; effective,

workable regulatory policy/institutional structures and processes Embedded objectives of good governance: transparency,

accountability, consistency, participation

RIA: peeling off the layers- #LK story

• How:

Incremental approach to implementation: short-term (setting up RIA Unit, drawing up RIA Guidelines, RIA pilots, etc.); medium-long term (expand scope to require at least a partial RIA for all new regulation; enshrine RIA in an Act of Parliament)

RIA Unit – focal point for RIA process; located within President’s Office/Cabinet Office/Ministry of Finance; “lean” entity (outsourcing); sunset entity?; facilitate training

Scope: Central, Provincial and Local Government legislation; screen regulations w.r.t impacts (identify key stakeholders affected/numbers, identify positive/negative impacts on each key stakeholder group, score low-medium-high, when one/more impacts rated “high” or two/more impacts rated “medium” do an RIA

Public consultation

Pilot RIAs to be done for demonstration effects/learning: suggested price control on “specified goods” by CAA; CPP-based telco tariffs; price control formula on pharmaceuticals; Private Health Services Bill; Cess on vehicle imports; and, Amendments to VAT

RIA: peeling off the layers- #LK story

• What we did: Concept paper (rather than a White Paper/Action Plan)

Formed an informal working group (IPS, AG’s Dept, NGO, Private Sector, Media)

Resulted from 2-day RIA “concept/practice” advocacy workshop in #LK (funded by CRC) – attended by policy makers/other key stakeholders (significant press coverage on #LK regulatory challenges)

Set out “good” practices Developed consultatively (interim version published for comments in

media, roundtable discussion on interim version) Presented to Minister of Finance

RIA: peeling off the layers- #LK story

• Outcome: not implemented • Why? No policy buy-in (policy rhetoric vs. policy action) Conceptual/technical knowhow (local & international) : No cohesive regulatory policy to begin with (story of CP) Not sufficiently linked to formal policy making body from inception

(assumed that IPS link to Ministry of Finance necessary/sufficient condition; should have had Ministry reps in Working Group)

Resistance from regulators (should have brought regulator representatives into the Working Group)

Perceived as an “academic” group (despite composition of Working Group)

RIA in practice: key takeaways

• Is RIA useful? Depends….(caveats, policy context); need for more empirical foundation in developing economies

• Developing country narrative: very much work-in-progress (“helicopter” view…)

RIA in practice: key takeaways

• Solid understanding of policy context (political-economy, socio-cultural) and dynamics of policy cycle: e.g. is there a cohesive regulatory policy structure/processes (regulatory “culture”)?; is there a “political” window of opportunity?; principal-agent dynamics/diverging incentives of politicians and bureaucrats; other regulatory review practices (formal/informal)

• Solid understanding of stakeholder interests/vested interests: e.g. sector-specific public policy dynamics; rent-seeking opportunities that will be affected by RIA; civil society “voice” /champions of reform process/culture of right to information/transparency (general governance culture)

• Financial and technical resource/capacity constraints (RIA Light – World Bank, 2009) : incremental approach? small/core trained technical group? external funding at the inception? extent/limits of reinventing the wheel?

RIA in practice: some possible discussion questions

• Ex-post RIA (for existing legislation)? Goes with incremental approach/ data and information relatively easier to access/ demonstration effects from regulation IN EFFECT (versus potential)?

• RIA by law or government policy? (possibly frequent challenges in courts versus policy changes with political changes?)

• Does RIA have to be a specific/separate document or can RIA language be embedded in existing/forthcoming legislation (#LK PUSCL language that provisions have to be considered in terms of costs/benefits to main stakeholders)?

Thank you