1 Hsin Chu, August 2012 Regulatory Impact Assessment Charles-Henri Montin, Senior Regulatory Expert, Ministry of economy and finance, Paris

C.H. Montin, Hsin Chu, August Contents –The elements of the policy-making cycle and how regulatory impact assessment fits into that cycle  The origins of regulatory impact assessment  How and why it has developed  The potential relevance of this to ERRADA  The relevance of it to Egypt  The potential positive externalities of the work of ERRADA

C.H. Montin, Hsin Chu, August The policy cycle

C.H. Montin, Hsin Chu, August How RIA contributes to the policy cycle POLICY MAKING PROCESS Consultation Analysis Information Discussion Agreement Policy Implementation RIA

C.H. Montin, Hsin Chu, August What is impact assessment? Examines and measures the likely benefits, costs and effects of new and changed regulation –A key decision making tool for governments –Underpins regulatory reform –Used in most OECD countries –No single model fits all situations

C.H. Montin, Hsin Chu, August Purpose of Regulatory Impact Assessment  Systematically and consistently examine selected potential impacts arising from proposed government regulations  Promote balanced decisions that trade off problems against wider economic and social goals  Communicate the information to decision makers

C.H. Montin, Hsin Chu, August Benefits of RIA  Furnishes empirical data to make appropriate regulatory decisions  Exposes impacts and linkages among policies and gives decision makers a capacity to weigh trade offs  Provides a public accounting of each regulation  Provides a clear explanation of the regulation, its purpose, the analysis substantiating it and expected impacts  Enables policy makers to understand and take personal responsibility for regulatory decisions

C.H. Montin, Hsin Chu, August Components 1. Description: outlines the regulations, defines the problem and shows why action is necessary 2. Alternatives: lists options beside regulation and other types of regulation 3. Benefits & Costs: quantifies the impact 4. Consultation: shows who was conferred with and the results 5. Compliance and enforcement: explains the policy on conformity to the regulations and tools to ensure it is respected

C.H. Montin, Hsin Chu, August Benefits and Costs Quantifies the impact of different options  Address direct and indirect benefits and costs and impacts on environment, government, business, workers, consumers, etc.  Address impacts on sustainable development and balance societal and economic goals  Analysis of regulatory burden required on all alternatives  Specific effects on small business required through the business impact test  Recommended solutions must impose least costly information and administration burden  Verification system ensures that all elements have been fully considered

C.H. Montin, Hsin Chu, August Typical methodology 1.Identify problem to be solved by proposed regulation or regulation already made 2.Identify alternatives i.Consult with stakeholders ii.Research how has problem been handled elsewhere 3.Assess costs and benefits of alternatives 4.Take decision based on information received 5.Act

C.H. Montin, Hsin Chu, August Benefits of RIA Analytical tool  Develops an “instinct ” to ask the right question  Cost-Benefits-  Effectiveness  Efficiency Communication tool  Provides a means of informing decision makers of alternatives in a rational manner free of ideology or bias  Enhances transparency, accountability, credibility, trust, legitimacy Learning tool  Sets a base line for ex post facto evaluations  Contributes to policy coherence

C.H. Montin, Hsin Chu, August Common challenges for RIA Related to the tool  Problem identification (≠ objectives)  Availability of data (collection, validation, use)  “Proportionate analysis” (criteria, transparency)  Quantification (benefits)  Risk assessment  “Complex costs”

C.H. Montin, Hsin Chu, August More challenges Related to the structure / process Scope of application / selection of proposals Comprehensive or “light- RIA” Governance of RIA, Quality control (oversight) Presentation / Communication Up-stream integration of RIA (early in decision-making) Down-stream integration of RIA (“closing the loop”) Administrative capacity Multi-level context Trade-off political discretion vs. technical expertise

C.H. Montin, Hsin Chu, August Conclusions 1.Impact assessment has developed over the last 20 years and is now a widely used tool. 2.It started in the US and spread by the OECD; UK and EU currently have best practice models 3.It presents many challenges to operate it meaningfully (influence on decision making). 4.Good policy-makers naturally address the costs and benefits of political choices. 5.Impact assessment brings a degree of intellectual rigour to an activity that is much too influenced by intuition rather than rational analysis.

C.H. Montin, Hsin Chu, August Relevance to ERRADA 1.There will be cases where hard choices have to be made – some form of impact assessment or analysis will help inform the decision making process. 2.Egypt can not afford poor policy choices and needs to apply the highest standards to its policy analysis whether in the case of new regulations or the review of existing ones. 3.Impact assessment is a tool whose use is growing rapidly in the OECD and EU countries, therefore, all policy-makers need to have a basic understanding of its application. 4.The success factors for the development of impact are well known and what is required is: 1.A methodology 2.A training programme 3.Pilot studies 4.Its application to the flow of new regulations as well as to the stock.