Regulatory Reform for a Better Business and Regulatory Reform for a Better Business and Investment ClimateInvestment Climate

– – AN OVERVIEW –AN OVERVIEW –

SIMON WHITESIMON WHITE

Strategies and Practices Toward a More Enabling Strategies and Practices Toward a More Enabling Business and Investment Climate in AfricaBusiness and Investment Climate in Africa

What role does regulation perform?What role does regulation perform? Burden of over-regulation and opportunities for corruptionBurden of over-regulation and opportunities for corruption Push for deregulation versus the importance of ‘good’ Push for deregulation versus the importance of ‘good’

regulationregulation Connection between good governance and an enabling Connection between good governance and an enabling

business and investment environmentbusiness and investment environment Regulatory best practiceRegulatory best practice

Flawed regulation can be a major Flawed regulation can be a major constraint on productivity and economic constraint on productivity and economic

growth.growth.

Excessive regulation is associated with Excessive regulation is associated with lower productivitylower productivity

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The quality of regulation affects the level The quality of regulation affects the level of informalityof informality

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OECD Definition of Regulatory Reform

Regulatory reform aims at improving regulatory quality, be it the revision of a single regulation; of regulatory institutions; or improved processes for

making regulations and managing reform.

Deregulation is a subset of regulatory reform and refers to complete or partial elimination of regulation in a sector to improve economic

performance.Summary Report on Regulatory Reform, OECD 2001, <http://www.oecd.org/dataoecd/25/39/1826394.doc>

Removing Barriers to Private Sector

Development

Cutting “Red Tapes” Deregulation Regulatory Reform

How Regulations Affect Business CostsHow Regulations Affect Business Costs

Regulation is a hidden tax: Businesses must incur compliance cost Deregulation will have the same effects as

tax cuts Regulation affects rate of return on investment

by raising costs High compliance cost is the real barrier to

investment, not the volume of paper work

How Regulations Affect Business RiskHow Regulations Affect Business Risk

Regulatory uncertainties raise business risks

Higher risks discourage investment Regulatory uncertainties come

from Poor enforcement of rules Low quality regulations

Low Quality Regulations are...Low Quality Regulations are...

Regulations with vague rules and

unpredictable results

Regulations with low compliance

Regulations that cause excessive social costs

Regulations that are unfair to honest people

Regulations that are redundant and

overlapping

Elements of Regulatory QualityElements of Regulatory Quality

Vague rules and procedures with wide

discretionary power of regulators are a source

of abuse and corruption as well as uncertainty Low compliance is the result of:

Loose enforcement Unrealistic standards or procedures

Regulations with low compliance are worse

than no regulation

Elements of Regulatory QualityElements of Regulatory Quality

Unfair to honest people Some regulations are based on “presumption of

guilt” that regulatees are unreliable and potential violators

Prohibition in principle, permission in exception

Redundant and overlapping regulations Different offices in the government require

redundant reports or similar inspections Multiple jurisdiction over the same activity

INSTITUTIONS

POLICY &

REGULATORY

FRAMEWORKADMINISTRATION

PROCESS

CONCEPTUAL FRAMEWORK FOR REGULATORY AND ADMINISTRATIVE BARRIERS REVIEW

Ten Principles of Regulatory Best PracticeTen Principles of Regulatory Best Practice

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(s) of government for this action?

6 Do the benefits of regulation justify the cost?

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?

Measuring the cost of regulatory Measuring the cost of regulatory

compliancecompliance

Regulatory impact assessmentsRegulatory impact assessments

One-stop-shopOne-stop-shop