Regulatory Reform for a Better Business and Investment Climate – AN OVERVIEW – SIMON WHITE Strategies and Practices Toward a More Enabling Business and Investment Climate in Africa

What role does regulation perform? Burden of over-regulation and opportunities for corruption Burden of over-regulation and opportunities for corruption Push for deregulation versus the importance of ‘good’ regulation Push for deregulation versus the importance of ‘good’ regulation Connection between good governance and an enabling business and investment environment Connection between good governance and an enabling business and investment environment Regulatory best practice Regulatory best practice

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

Excessive regulation is associated with lower productivity

The quality of regulation affects the level of informality

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,

Removing Barriers to Private Sector Development  Cutting “Red Tapes”  Deregulation  Regulatory Reform

How 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 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...  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 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 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 FRAMEWORK ADMINISTRATION PROCESS CONCEPTUAL FRAMEWORK FOR REGULATORY AND ADMINISTRATIVE BARRIERS REVIEW

Ten Principles of Regulatory Best Practice 1Is the problem correctly defined? 2Is government action justified? 3Is regulation the best form of government action? 4Is there a legal basis for regulation? 5What is the appropriate level(s) of government for this action?

6Do the benefits of regulation justify the cost? 7Is the distribution of effects across society transparent? 8Is the regulation clear, consistent, comprehensible and accessible to users? 9Have all interested parties had the opportunity to present their views? 10How will compliance be achieved?

Measuring the cost of regulatory compliance Measuring the cost of regulatory compliance Regulatory impact assessments Regulatory impact assessments One-stop-shop One-stop-shop