1. An introduction to Regulatory Impact Analysis in OECD.
OECD – Israel Conference on Cutting Bureaucracy: Regulations and Services in Israel 28 – 30 June 2011
Gregory Bounds
Senior Policy Analyst
Regulatory Policy Division
OECD / Directorate for Public Governance and Territorial Development

2. Outline of the presentation
Presentation Outline
Outline of the presentation
Context for regulatory management and improving regulatory quality
The features and challenges of Regulatory Impact Analysis (RIA)
The role of supporting institutions.
OECD Best Practice approaches.

3. Why improve regulatory quality?
Improving Regulatory Quality: Rationale
Why improve regulatory quality?
Improve the effects of economic, social and distributional policies
Tight fiscal budgets present challenges for economic performance
Regulatory system plays a central role in improving both citizen and investor confidence
Engaging in regulatory reform to improve regulatory quality has proven a highly effective option for economic development
Most severe economic crisis in decades. Banking sector has now been stabilised and stimulus packages have had a significant impact…
… but have left countries with sizeable deficits - the OECD-wide budget deficit is projected to reach more than 8% of GDP in its highest level in 60 years. In the OECD as a whole, gross government debt is projected to exceed 100% of GDP in 2011, about 30 percentage points higher than in 2007
Countries need strategies such as regulatory reform that will stimulate sustainable growth without further increasing deficits
While regulatory reform should be maintained as continual and permanent process given ever-changing global economic conditions, it becomes a crucial strategy in a context where countries do not have much room left to stimulate the recovery through fiscal instruments

4. Regulatory management
Improving Regulatory Quality: the Regulatory System
Regulatory management
Institutional arrangements
Regulatory Policy
Multi-level governance
Stock of regulations
Flow of regulations
Regulatory reform
Burden reduction
Administrative simplification
Coordination
Regulatory Impact
Analysis (RIA)

5. The Regulatory Governance Cycle
Policy issues for government action
Develop policy roadmap
- choose the policy instrument(s)
The 4 Cs
Consultation
Co-ordination
Co-operation
Communication
Monitor and evaluate performance of regulation
REGULATION
OTHER
POLICY
TOOLS
Design new regulation
Check current regulation
Enforce regulation

6. RIA: Context
What is RIA?
Formal and systematic “policy tool” and “decision process” to examine and measure the likely benefits, costs and effects of new or existing regulation
In the OECD, used most often to manage the flow of regulation (US, Canada, UK, France, EU, Australia etc.)
Role in the development, review and reform of regulations emphasized by the 1995, 1997 and 2005 OECD guiding principles and recommendations for regulatory quality and performance

7. RIA: Context
Why is RIA important?
Control the quality of regulation – a step in improving competitiveness
Evidence-based policy making: Is regulation the best available means to address the policy objective?
Improves transparency – both within Government and Civil Society
Simple language can make it understandable for everyone and easily accessible

8. RIA: OECD Experience
Trend in RIA adoption by central governments across OECD countries ( )
As of 2008, all OECD countries require some form of Regulatory Impact Assessment (RIA). So now the question is not whether or not to adopt RIA, but how to improve RIA quality and better integrate RIA in the policy and regulatory planning process.

9. How does RIA work? The process of Regulatory Impact Analysis
RIA: Design and Process
How does RIA work?
The process of Regulatory Impact Analysis
Policy objectives
Definition
Identification
Regulatory non-regulatory Options
Assessment
Costs
Consultation
Involving Stakeholders
Design
Enforcement, Compliance and monitoring mechanisms
After RIA is prepared: DECISION MAKING
Policy context
Benefits
Selection
Best Option
Other impacts

10. How does RIA fit into the policy-making process?
RIA: Design and Process
How does RIA fit into the policy-making process?
POLICY MAKING PROCESS
Consultation
Analysis
Information
Discussion
Agreement
Policy Implementation
RIA

11. Common challenges Related to the tool:
RIA: Implementation
Common challenges
Related to the tool:
Problem identification, Consultation and data
Considering alternatives, “Proportionate analysis”
Quantification, Risk assessment
Related to the structure/process
Scope of application / selection of proposals
Quality control (oversight)
Presentation / Communication
Integrate RIA up-stream (early in decision-making)
Integrate RIA down-stream (“closing the loop”)
Training, Multi-level context

12. Primary or secondary legislation?
RIA: Scope
Primary or secondary legislation?
As it becomes widespread there is less divergence among OECD countries
Primary legislation usually has more far reaching impact
Secondary regulation (decrees, bylaws) may set technical standards, adoption usually not that transparent
It may be easier to apply to delegated regulatory authority

13. Apply to all proposals or only major ones?
RIA: Scope
Apply to all proposals or only major ones?
Many countries have linked RIA requirements to the magnitude of potential impacts of proposals
Difficult to identify suitable threshold
Quantitative vs. qualitative thresholds
USA – annual costs exceeding $100 mil.
Canada: $10 million or more
Australia: decisions likely to have a substantial regulatory impact.

14. Institutional design factors
RIA: Implementation
Institutional design factors
Quality oversight and support required at the centre of Government
Dynamic process between the center and sectoral ministries and regulators
Need for expertise in sectoral ministries/regulators, division of tasks
Integrated with policy decision making
Variation in RIA systems necessarily reflects legal and administrative arrangements

15. Requirements of the RIA process
RIA Elements
Requirements of the RIA process
Clearly determine policy objectives
Case for regulation / Market failure / Policy goals
Consideration of full range of available alternatives
Regulatory / Non regulatory
Evaluate likely possibilities of success
Consider the role of government / characteristics of the sector
Discard unworkable proposals
Cost benefit analysis of alternatives
Identify the alternative with the highest net benefit

16. What is the problem? Is government action justified?
RIA Elements Problem definition
What is the problem? Is government action justified?
Many regulatory failures stem from an ill-defined or too narrow problem
Countries are increasingly seeking to justify government intervention
Problem / Objective setting is an essential step for effective performance measurement

17. Assessment of alternative policy instruments OECD countries, 2008
RIA Elements Alternatives
Assessment of alternative policy instruments OECD countries, 2008
Notes: Data presented for the 30 OECD member countries and the European Union.
Source: OECD Regulatory Management Systems’ Indicators Survey 2008,

18. Alternatives to what? Command and control regulation
RIA Elements Alternatives
Alternatives to what? Command and control regulation
Prescriptive Black letter law
May not promote good regulation
Efficiency reducing
Dynamic/ allocative/ technical
Prevents innovation
Can create market distortions/ barriers
Potentially Ineffective
Costly to business and the government
May not ensure compliance
A product of habit?

19. What alternatives to consider?
RIA Elements Alternatives
What alternatives to consider?
Regulatory alternatives
Performance based regulation / Co-regulation / Economic instruments - market incentives
Non regulatory alternatives
Voluntary codes / self regulation / information campaigns
Spectrum of regulatory instruments:

20. Some criteria for assessing alternatives
RIA Elements Alternatives
Some criteria for assessing alternatives
For all options, how does it rate on…
Effectiveness
Promote compliance and meet objectives?
Efficiency
Deliver a positive net benefit at lowest opportunity cost?
Equity and Fairness
Transparent, inclusive, promote competition?

21. No Recipe Books Case by case approach
RIA Elements 2. Alternatives
No Recipe Books
Case by case approach
Consideration of characteristics of industry sector
Clearly linked to policy objectives.
Will it achieve its policy aims?
Incentives and institutional issues.
Do the approaches ‘work with’ existing incentives?
Can they be effectively monitored and enforced?
Evaluation of risks.
Likelihood and consequences of regulatory failure
Possibility for return to status quo
Be creative
Adapt to human behaviour, new technology, new tricks, opportunity for policy learning

22. Consultation is central to RIA
RIA Elements 3. Consultation
Consultation is central to RIA
Form of quality assurance
Means of ensuring data fully gathered and refining methodologies
Gives affected parties the opportunity to identify and correct faulty assumptions and reasoning
People are more likely to accept and comply with policies they feel they have shaped
Regulatory oversight bodies need to play a role in enhancing and refining consultation practices
Consultation is a key pillar of good regulation, and mandated by the Regional Charter
RIA should always be integrated with public consultation as it provides better information to underpin the analysis and gives affected parties the opportunity to identify and correct faulty assumptions and reasoning.

23. Benefit-Cost Analysis (BCA)
RIA Elements Costs and Benefits
Benefit-Cost Analysis (BCA)
OECD recommends that BCA should be used where feasible in conducting RIA
BCA, when applied appropriately in the regulatory context, attempts to take account of the full range of impacts, including environmental and social impacts, as well as economic impacts.
Should serve as a basis for decision-making (choose the option that maximises net benefits)
Benefit-Cost Analysis is a general framework and process to weigh the total expected costs against the total expected benefits of one or more actions in order to choose the best option. In the regulatory context, this is the option that maximises net benefits.
Typically BCAs are published separately, and a summary is presented in the RIA. The same BCA can be conducted as an underpinning for a large number of regulatory initiatives, and updated as necessary.

24. RIA Elements Costs and Benefits: OECD
RIA Requirements: Analysis of Costs, Benefits and Public Accessibility in OECD countries (2005 and 2008)
While a majority of OECD countries require that the benefits and costs of new regulation be identified in regulatory impact assessments, a much lower proportion require that these costs and benefits be quantified and publicly released.
There is scope for improvement in this area and the importance of effectively communicating the benefits of reform should not be overlooked. Effective communication requires broad efforts towards advocacy, clearly highlighting the rationale for reform strategies, and engaging in the public debate to win constituencies and stakeholders.
New initiatives for open government and web-based consultation and communication are also likely to transform the relationship between the regulators and the regulated, making regulation user-centred.
Note: This figure is based on country responses to the OECD Survey of regulatory management systems conducted in 2005 and Each column is the sum of country responses “always” and “for major regulations only”. Source: OECD Regulatory Management Systems’ Indicators Survey 1998, 2005 and 2008,

25. Compliance and enforcement
RIA Elements Compliance and Enforcement
Compliance and enforcement
OECD 2005 principles: regulations should be efficiently applied with non-discriminatory and transparent procedures for enforcing regulations and with fair appeal processes
Achieving a high level of compliance is a key factor in the effectiveness of regulations.
How to influence the awareness, willingness and ability of regulated groups to comply?
One way in which countries have promoted the rigour of regulatory quality initiatives is to allow for regulations to be challenged if requirements with respect to RIA or consultation are not met.
To illustrate, the Spanish Supreme Court has established that if consultation procedures have not been met, the law/royal decree can be invalidated.
In the United States the Administrative Procedure Act (APA) of also provides such a possibility: it requires that agencies go through a notice and comment process open to all members of the public. The information in the public record, including the RIA, and agencies‟ use of this information are used by the courts in settling any challenges to regulation brought by the public. In
In Luxembourg, if a professional chamber has not been consulted according to process requirements for subordinate legislation, the regulation is considered invalid.

26. Compliance and enforcement issues, 2005 and 2008
RIA Elements Compliance and Enforcement: OECD
Compliance and enforcement issues, 2005 and 2008
Requirements for compliance and enforcement issues were specifically required to be considered when developing new regulations in more than two thirds of the countries in 2008, an increase over the last years
About half of the OECD countries now have specific policies on compliance friendly regulation and have produced written guidance on compliance and enforcement issues for use by regulators
While most countries have some form of a requirement to consider compliance and enforcement issues when developing new regulation, guidelines in this area and policies on risk based enforcement are less common, though growing in number
This may be partly explained by the fact that those responsible for designing regulatory policies are not themselves regulators, and therefore may be more preoccupied by designing regulations and defining regulatory options than enforcing them. Enforcement tends to be left to individual departments and Ministries, and methods vary. This is an area that needs to be reinforced; after all, what good can a perfectly designed regulation do if it is not properly enforced?
Notes: Data for 2005 and 2008 are presented for the 30 OECD member countries and the European Union.
(*) No data are available prior to 2008.
Source: OECD Regulatory Management Systems’ Indicators Survey 2005 and

27. RIA: Implementation
OECD good practices (1)
1. Political commitment and endorsement at the highest levels
Legal basis for RIA
Clear ministerial accountability
2. Allocate responsibilities for the RIA programme
Operational responsibilities with the services
Inter-service coordination
Central quality oversight

28. OECD good practices (2) 3. Target and prioritise RIA efforts
RIA: Implementation
OECD good practices (2)
3. Target and prioritise RIA efforts
Scope of application / thresholds for when to do RIAs
Sectoral impacts
4. Develop comprehensive guidelines
Mandatory
Both on process and on technical aspects
5. Carry out sound analysis
Strategies for data collection
Consistent but flexible methodologies

29. OECD good practices (3) 6. Consultation / Transparency / Communication
RIA: Implementation
OECD good practices (3)
6. Consultation / Transparency / Communication
7. Training, training, training
8. Apply RIA to both new and existing regulation

30. For more information: Reading List
OECD country reviews on regulatory reform are available at
OECD (2002), Regulatory Policies in OECD Countries: From Interventionism to Regulatory Governance
OECD (2006), Alternatives to Traditional Regulation
OECD (2008), Building an Institutional Framework for Regulatory Impact Analysis (RIA): Guidance for Policy Makers
OECD (2009), Better Regulation in Europe: An Assessment of Regulatory Capacity in 15 Member States of the European Union
OECD (2009), Regulatory Impact Analysis: A Tool for Policy Coherence

31. Thank you for your attention.
Gregory Bounds
Senior Policy Analyst
Regulatory Policy Division
OECD / Directorate for Public Governance and Territorial Development