Regulatory OECD OECD Countries Analysis Impact

1 RegulatoryImpactAnalysisRegulatoryImpact AnalysisBest PracticesinOECD CountriesOECDREGULATORYIMPACT Analysis :BEST PRACTICESIN OECD COUNTRIESORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENTORGANISATION FOR ECONOMIC CO-OPERATIONAND DEVELOPMENTP ursuant to Article 1 of the Convention signed in Paris on 14th December 1960,and which came into force on 30th September 1961, the Organisation for EconomicCo-operation and Development (OECD) shall promote policies designed: to achieve the highest sustainable economic growth and employment and a risingstandard of living in Member Countries , while maintaining financial stability, andthus to contribute to the development of the world economy; to contribute to sound economic expansion in Member as well as non-membercountries in the process of economic development; and to contribute to the expansion of world trade on a multilateral, non-discriminatorybasis in accordance with international original Member Countries of the OECD are Austria, Belgium, Canada,Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, theNetherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, theUnited Kingdom and the United States.

2 The following Countries became Memberssubsequently through accession at the dates indicated hereafter: Japan (28th April 1964),Finland (28th January 1969), Australia (7th June 1971), New Zealand (29th May 1973),Mexico (18th May 1994), the Czech Republic (21st December 1995), Hungary(7th May 1996), Poland (22nd November 1996) and the Republic of Korea(12th December 1996). The Commission of the European Communities takes part in thework of the OECD (Article 13 of the OECD Convention).Publi e en fran cais sous le titre :L ANALYSE DE L Impact DE LA R EGLEMENTATION :MEILLEURES PRATIQUES DANS LES PAYS DE L OCDE OECD 1997 Permission to reproduce a portion of this work for non-commercial purposes or classroom useshould be obtained through the Centre fran cais d exploitation du droit de copie (CFC),20, rue des Grands-Augustins, 75006 Paris, France, Tel. (33-1) 44 07 47 70,Fax (33-1) 46 34 67 19, for every country except the United States.

3 In the United States permissionshould be obtained through the Copyright Clearance Center, Customer Service, (508)750-8400,222 Rosewood Drive, Danvers, MA 01923 USA, or CCC Online: All other applications for permission to reproduce or translate all orpart of this book should be made to OECD Publications, 2, rue Andr e-Pascal,75775 Paris Cedex 16, are seeking to improve the effectiveness, efficiency, and trans-parency of regulations. Regulations are a key instrument of government and willcontinue to be used to promote public interests, but it is increasingly apparentthat they must be carefully designed to minimise negative impacts on businesses particularly SMEs citizens, trade and investment, responsiveness to techno-logical change and the opportunities of global markets. In addition, the effective-ness of regulations in achieving policy objectives is often disappointing, raisingquestions about Regulatory design, content, and address these problems, OECD Countries are adopting broad-based pro-grammes of Regulatory reform aimed both at improving the quality and reducingthe costs of regulations that are necessary to protect the public, and eliminatingunnecessary regulation.

4 Such programmes embrace reform of Regulatory policies,processes, and March 1995, the Council of the OECD adopted a Recommendation onImproving the Quality of Government Regulation, which included a ten-pointchecklist. The systematic use of Regulatory Impact Analysis (RIA) is a key part ofthat checklist. Member country experiences show that a systematic analyticalapproach is essential to the development of high-quality regulation. MostMember Countries now have systems for RIA in place. On 27 May 1997, ministersof Member Countries endorsed the OECD Report on Regulatory Reform, whichrecommends that governments integrate Regulatory Impact Analysis into thedevelopment, review, and reform of regulations .There are, however, many questions about how to design and apply RIA sothat it is effective at improving Regulatory decisions taken within complex admin-istrative processes. This report examines the experiences of several OECD coun-tries to identify best practices in the design and implementation of a systemof report is based on work carried out by the Regulatory Management andReform Group under the work programme of the OECD s Public ManagementCommittee.

5 In May 1996, the OECD held a meeting on Regulatory Impact Analy-sis: Best practices in OECD Countries . The meeting brought together RIA3 FOREWORD practitioners and Regulatory policy officials from 25 Member Countries , indepen-dent experts, and business and trade union representatives. It was chaired bySally Katzen, Administrator of the Office of Information and Regulatory Affairs inthe Office of Management and Budget; Juhani Korhonen, Senior Advisor,Public Management Department in the Finnish Ministry of Finance; and BryanAvery, Deputy Director of the Deregulation Unit in the UK Cabinet report collects the expanded and revised meeting papers, and otherpapers written for the Public Management Service (PUMA) on various aspects ofRIA. It was prepared by Rex Deighton-Smith and Scott H. Jacobs of the PublicManagement Service. Technical assistance was provided by Jill Stobie and MartheWambaugh of the Public Management report is published on the responsibility of the Secretary-General ofthe OF CONTENTSE xecutive IIntroductionChapter overview of Regulatory Impact Analysis in OECD countriesby Scott H.

6 IIA description of some RIA programmes in selected Member countriesChapter reform through Regulatory Impact Analysis : The Canadianexperienceby Apogee compliance cost assessment: UK experienceby The Better Regulation assessment of the US Regulatory Impact Analysis programby John F. Morrall existing regulations: Australia s national legislative reviewby Sue Holmes and Steven IIIC omparative analyses of RIA programmes and methodologiesChapter approaches to Regulatory Analysis : Designs from sevenOECD countriesby Thomas D. 123 Chapter approaches to Regulatory Analysis : Descriptionand assessmentby Thomas D. 143 Chapter the analytical basis for Regulatory decision-makingby W. Kip 175 Part IVSynthesisChapter Impact Analysis : Best practices in OECD Countriesby Rex 2115 Regulatory Impact Analysis : BEST practices IN OECD COUNTRIESPart VData strategies for RIA and for Regulatory reformChapter and using data for Regulatory decision-makingby Ivy E.

7 Broder and John F. Morrall 245 Chapter general indicators of Regulatory costsby Thomas D. 2636 EXECUTIVE SUMMARYREGULATORY Impact Analysis :BEST practices IN OECD COUNTRIESR egulatory Impact Analysis (RIA) encompasses a range of methods aimed atsystematically assessing the negative and positive impacts of proposed andexisting regulations. The development of RIA is part of a general trend in Membercountries toward Regulatory management , aimed at improving how governmentsuse their Regulatory in OECD Countries shows that, properly designed and applied,RIA can improve the effectiveness and efficiency of governments and can helpaddress broader issues of competitiveness and economic performance in innova-tive and globalising economies. RIA by itself is not a sufficient basis for decisions;instead, RIA is best used as a guide to improve the quality of political andadministrative decision-making, while also serving important political values ofopenness, public involvement and OECD Countries now use some form of RIA in Regulatory decisions, andOECD Countries have agreed to expand its use.

8 In May 1997, for example, minis-ters of OECD Countries endorsed the recommendations in the OECD Report onRegulatory Reform, which include a recommendation that governments integrateRIA into the development, review, and reform of regulations. This report describes RIA systems used in a range of Member Countries andtheir historical development (Chapters 1-5). It compares the elements of thosesystems and their practical implementation (Chapters 6-7). Based on countryexperiences, it identifies current best practice in RIA (Chapter 9). The ten ele-ments of best practice are:1. maximise political commitment to RIA;2. allocate responsibilities for RIA programme elements carefully;3. train the regulators;4. use a consistent but flexible analytical method;5. develop and implement data collection strategies;7 Regulatory Impact Analysis : BEST practices IN OECD COUNTRIES6. target RIA efforts.;7. integrate RIA with the policy-making process, beginning as early aspossible;8.

9 Communicate the results;9. involve the public extensively;10. apply RIA to existing as well as new significant gains from a RIA programme can be seen early, achievingthe full benefit of the best practices requires major cultural change among regula-tors, politicians, and interest groups. Full integration of RIA into decisionprocesses is a long-term task requiring sustained political and AND QUALITY CONTROLOne of the goals of RIA is to ensure that the benefits of government actionjustify the costs, and that the option chosen maximises benefits and minimisescosts. This principle, at the core of benefit-cost Analysis (BCA), is already widelyaccepted in Member Countries , and should be the central principle of an RIAprogramme. This does not mean that full-fledged benefit-cost Analysis is alwaysfeasible nor appropriate. While RIA programmes should apply the BCA principleto all Regulatory decisions, the form of Analysis used should be based on practicaljudgements about feasibility and analytical approaches other than BCA are currently used in Membercountries.

10 Chapter 8 discusses their relative merits. A basic conclusion is that allare essentially partial BCAs. Thus, all can provide relevant input to decisionsmade under the BCA principle. Governments may wish to improve their RIAprogrammes gradually so as better to support the BCA decision key to good RIA is the quality of the data. Data problems are significantand can be costly to resolve. To reduce data problems, many governments haveadopted analytical methods that are less data-intensive. Chapter 10 discussesstrategies for collecting and analysing ISSUESA dopting best practice in RIA is not a one-off task. Several emerging issueshave major implications for the conduct of RIA and will require new responses asunderstanding and abilities improve. Replacement of traditional command-and-control regulation with more flexible, performance-based regulation poses diffi-cult issues of cost estimation.