1 POLICY FRAMEWORK FOR INVESTMENT USER'S TOOLKIT. Chapter 10. Public Governance Introductory note The PFI User's Toolkit responds to a need for specific and practical implementation guidance revealed from the experience of the countries that have already undertaken a PFI. assessment. Development of the Toolkit has involved government users, co-operation with other organisations, OECD Committees with specialised expertise in the policy areas covered by the PFI and interested stakeholders. This document offers guidance relating to the PFI Chapter on Public Governance . The PFI User's Toolkit is purposely structured in a way that is amenable to producing a web- based publication.
2 A web-based format allows: a flexible approach to providing updates and additions; PFI users to download the guidance only relevant to the specific PFI application being implemented; and a portal offering users more detailed resources and guidance on each PFI question. The website is accessible at OECD 2011. A publication of the Investment Division of the OECD Directorate for Financial and Enterprise Affairs. OECD freely authorises the use of this material for non-commercial purposes. All requests for commercial use or translation of this material should be submitted to This work is published on the responsibility of the Secretary-General of the OECD.
3 The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Public Governance Public Governance refers to the formal and informal arrangements that determine how Public decisions are made and how Public actions are carried out, from the perspective of maintaining a country's constitutional values when facing changing problems and environments.
4 The principal elements of good Governance refer to accountability, transparency, efficiency, effectiveness, responsiveness and rule of law. There are clear links between good Public Governance , investment and development. The greatest current challenge is to adapt Public Governance to social change in the global economy. Thus the evolving role of the State needs a flexible approach in the design and implementation of Public Governance . Public Governance is important for investors and their businesses. It helps build trust and provides rules and stability needed for planning investment in the medium and long term.
5 It facilitates a smooth and productive interaction between the State and the general Public , no longer based on rigid traditional control and command approaches, but on flexibility, guidance, communication and persuasion. Public Governance is currently more participative and transparent. Regulatory clarity and certainty are valued by businesses and citizens. Innovative mechanisms to monitor and evaluate Public management are commonly used to improve transparency and build credibility, important determinants of investment. This Chapter addresses two key dimensions of the Public Governance agenda relevant to investment and maximising its benefits: i) regulatory Governance and the rule of law; and ii) Public sector integrity, including the contribution of international co-operation.
6 These topics are linked to others in the PFI. This Chapter offers a more focused perspective on the core elements in the backdrop of performing Public Governance . From an OECD policy-experience perspective, the main goal is to support the assessment and analysis of policy making systems, capacities for fair compliance and their interaction with investors and economic agents. The challenge is to adapt these elements to some given policy specificities, resources availability and investment needs. The 9 key PFI questions on Public Governance relate to: Regulatory Governance and the rule of law: Regulatory reform framework Coordination across government Regulatory impact analysis (RIA).
7 Public consultation Simplifying the administrative burden 2. Public sector integrity: International standards and national legislation Application and enforcement Review mechanisms International initiatives 3. Regulatory reform framework Has the government established and implemented a coherent and comprehensive regulatory reform framework, consistent with its broader development and investment strategy? Rationale for the question Regulatory policy is about the process by which regulations are drafted, updated, implemented and enforced. Regulations which encourage market dynamism, innovation and competitiveness improve economic performance.
8 The aim of regulatory reform is to increase efficiency and effectiveness and to have a better balance in delivering social and economic policies over time. Regulations which are poorly designed or weakly applied can slow business responsiveness, divert resources away from productive investments, hamper entry into markets, reduce job creation and generally discourage entrepreneurship. Nothing contributes more to investor confidence about regulation than predictability and the recognition that rules achieve their objectives. The quality of Public services, which is shaped by regulation inside government as well as regulation for private sector providers, significantly influences the investment climate.
9 From an investor's perspective, regulatory policy should provide strong guidance and benchmarks for action by officials and set out what investors can expect from government regarding regulation. Related PFI questions: Question on an investment climate strategy Question on a regulatory framework for corporate Governance Key considerations Regulatory Governance is not a synonym for deregulation. It is about providing consistent and coherent rules for changing environments. Long-term planning in regulatory reform improves Public sector efficiency, responsiveness and effectiveness, but short- and medium-term programmes with concrete objectives can nevertheless drive the pace of reform, demonstrate results and maximise accountability.
10 No single model for regulatory reform exists: historical, political, legal and cultural factors all play a role. Three elements are nevertheless essential to set up a coherent and comprehensive regulatory framework: policies, institutions and tools. Design of a coherent, comprehensive, whole-of-government approach to regulatory reform. A regulatory reform agenda is a dynamic, long-term, multi- disciplinary process. It requires: clear timelines, targets and evaluation mechanisms;. 4. support at the highest political level to obtain the necessary impetus;. explicit and measurable regulatory quality standards.