Mexico links competitiveness to regulatory reform

Last week, Regulatory Reform was in the news in Mexico, where a very active agency (COFEMER) has been conducting work for a number of years. The third annual meeting of the national commission for regulatory reform held on 19 November was the opportunity to take stock of progress made, especially in e-gov procedures for citizens and business, and promote good regulatory practice. A federal level online one-stop-shop (ww.tuempresa.gov.mx) was recently upgraded for the registration of new companies.
Two traits characterize the Mexican approach to regulatory reform:
- Regulatory reform is considered a major contribution to national competitiveness, the point was again made by the ministerin charge, J. A.Torre at the event, as he highlighted the results of the implementation of the OECD guide on regulatory quality and competitiveness. Mexico is the only country to have organised an international conference linking the two themes (see OECD report);
- better regulation principles are applied not only a the federal, but also at the sub-national level (see OECD 2010 report). Compilation and promotion of good regulatory practices is key to the overall improvements. As part of the last week's conference proceedings, OECD published a report (in Spanish) on the 19 successful practices presented by A. Carballo, DG of COFEMER and compiled with OECD support (J. Pastor Garcia Villareal, from the regulatory policy division, who attended the conference)

UK peer criticises deregulation

A balanced view about the costs and benefits of regulation, and a comparison with Germany, was given by Lord Heseltine, a heavyweight Conservative politican, last night in a speech at the Whitehall and Industry group, according to a post today on a FT blog under the title "Lord Heseltine challenges Tory orthodoxy on red tape." "Regulations provide benefits and opportunities for business as well as adding to costs and workload," he said citing the example of crash helmets. What was needed was to concentrate on the red tape, not wholesale deregulation.

Announcement: conference on Smart Regulation and Sustainable Growth

The Korea Legislation Research Institute and the Administrative Research Centre at Paul Cézanne Aix-Marseille III University invite all smart regulation experts to a conference on "Challenges and Opportunities for the Future: European and Korean Perspectives on Sustainable Growth and Smart Regulation."
Date: November 30th (Wed), 2011 Venue: Hotel Marriott Rive Gauche Paris.
The invitation is online, as well as the conference book.
RSVP by e-mail to klri @ koconex. com

EU 2020 banks on social business

On 18 November, addressing a conference on social entrepreneurship, Internal Market Commissioner Michel Barnier developped regulatory aspects of his Social Business Initiative which proposes to promote a highly competitive social market economy, within the 'Europe 2020' strategy.
The social economy — cooperatives, foundations, associations or mutual societies — employs more than 11 million people in the EU, accounting for 6% of total employment. Social enterprises have been identified as a priority for funding under the EU's regional policy. About €90 million has been earmarked for a new social investment instrument to support debt and equity investments in 2014-2020. The Commission is set to propose a European regulatory framework for social investment funds before the end of 2011 to facilitate access to financial markets for social enterprises, seen as one of the major obstacles to boost the sector. Cutting red tape, especially on public procurement, will be an essential component of the plan. Very good article on Euractiv.
The simplification drive seems ever more necessary: the Commission Work Programme for 2012, presented last week, lists 129 EU laws and assorted non-binding strategy papers and recommendations to be developped in that year, including an Annual Growth Strategy, measures to put an end to tax havens and a "quick reaction mechanism" against VAT fraud, as well as laws to end fiddles in the disbursement of EU funds.

India: senior businessman calls for regulatory oversight body

Another well documented article dated 13 November completes the picture presented by a recent post. By the same author (a former chairman of the Telecoms authority) it calls for the establishment of an independent oversight body such as exists in the UK an other countries. This article summarizes the Indian RR approach and argues that the stock-taking of existing acts, which has been conducted in India in the past, should be viewed as only the first step of regulatory reforms. Now "it was expected that an institutional mechanism would be put in place towards producing high-quality regulations based on the touch-stone principles of legitimacy, efficacy, transparency and accountability. To accomplish this enormous task, an oversight body to provide structured directions to the regulatory regime of the country is needed. Such a body already exists in many developed countries.
In order for it to be effective, it should be located in the prime minister's office, vested with powers to independently coordinate, review and approve all regulatory policies and thus function as a focal point for quality regulation and good regulatory governance in the country. Such an oversight institution would provide a comprehensive regulatory management system through which regulations are developed, enforced and adjudicated, thus supporting the broader objectives of efficiency, transparency and accountability in governance.
Accountability of regulators cannot be addressed by a single piece of legislation. In the United Kingdom, there is a Committee of Parliamentarians which monitors the functioning of various regulators. Perhaps this can be experimented with in our country as the first immediate step for regulatory oversight."

ASEAN pursues regional regulatory dialogue

As reported in the international press (example Thailand), on 17 November 2011, ASEAN held its 19th ASEAN Summit in Bali, Indonesia, followed by a meeting with the ASEAN Business Advisory Council (ABAC). Key issues discussed at the Summit were ASEAN Community building by 2015 (see the Blueprint), the role of ASEAN in the global community and other regional and international issues of mutual interest.
At the end of the Summit, ASEAN Leaders signed a Bali Declaration on the ASEAN Community in the global community of nations and witnessed diverse technical agreements.
Regulatory reform remains high on the agenda to achieve regional integration, and is most visible in the third pillar, which calls for streamlining standards and technical barriers to trade including systems of standards, quality assurance, accreditation and measurement. Leaders called for the institutionalisation of the High-level Task Force on Regulatory Reform, whose first meeting was held in Jakarta on Aug. 3, 2011 (as reported on this blog.) For more on this event, see an article in Jakarta Post.

US Senate consider British RR experience

The British government’s experience with Better Regulation tools was presented this week to the Senate Budget Committee’s special task force on government performance, in support of a bipartisan initiative for regulatory reform. Differences in political cultures could limit the extent to which the UK approach could bridge the American ideological divide over the value of regulations. Jitinder Kohli, formerly in charge of the UK regulatory reform initiative, now a member of an American think tank, was gave a brief description of the origin and spirit of British regulatory reform policies, pointing out the difference between the European and American contexts:

"The context in the United Kingdom was similar to that in many European nations and did not suffer from the polarization around the issue of regulation that you appear to have in this country. There was broad consensus that regulation played an essential role in providing protections for our citizens and quality of life. No one argued that we did not need regulations to protect workers, or consumers, or provide clean air and water, and there was even agreement that regulation was needed to tackle emerging challenges such as climate change. And yet British business often claimed that there was too much regulation, and in many cases regulatory oversight felt like mere bureaucracy. As a result, they called on government to reduce the burden" said M. Kohli.

Serbia announces new regulatory reform strategy

The Serbian government announced yesterday that the new strategy of regulatory reform is in preparation, which will simplify administrative procedures and improve the competitiveness of enterprises in Serbia. Supported by the US Agency for International Development (USAID), the project aims to improve significantly the Doing Business ranking (currently 92nd, down 4 places since last year) A recent survey showed that the reform is urgent. In spite of the application of the regulatory guillotine, 83 percent of the respondent companies said the bureaucratic burden has not diminished in the last year.

How does smart regulation support competitiveness?

While we all agree that regulatory reform directly contributes to a better regulatory environment for business, we rarely stop to examine how effective this contribution can be, and how it combines with other policies to improve a country's economic performance relative to its competitors. Your blogger was invited by the Chinese Taipei ministry of finance to investigate this topic for a roundtable with the vice-minister and senior staff of the ministry last month. The resulting presentation published online examines various academic contributions and national approaches to competitiveness, to ascertain the place of regulatory reform: in short regulatory competitiveness is one one of the three pillars of economic competitiveness with competition policy and the infrastructure policy. The detailed Powerpoint takes stock of the various stages of regulatory reform from deregulation to smart regulation and examines current varieties practiced by countries and international groups.
A worldwide tour of economic performance in national and intergovernemental policies shows inter alia that approaches come under different banners corresponding to governement priorities. Supported by the economic research of the Global Competitiveness Forum, several countries have set up competitiveness bodies (the European Commission, Sweden, Ireland and many others), while others prefer the more economically mainstream concept of productivity (following in the Australian model, Hong Kong, Malaysia, Philippines and others). The US and India apply both concepts while Mauritius entrusts the two objectives to the same organisation. Other countries seem to believe that public policy should not interfere with the use of factors of production and prefer to seek growth and jobs primarily via other interventions: France and Germany favour making the administration more efficient, the UK emphasizes efficient markets with its Competition Commission. Most of the others closely watch the Doing Business index and make raising their ranking a national priority.

APEC promotes good regulatory practices

In complement to yesterday's post about the APEC ministerial, our network correspondent in Chinese Taipei, who was at the conference, draws our attention to the APEC Leaders' Honolulu Declaration ("Towards a seamless regional economy) published yesterday. Go to Annex D "Strengthening Implementation of Good Regulatory Practices" to see how member countries will try "to embed the concepts of non-discrimination, transparency, and accountability into the regulatory cultures of APEC economies", to help create jobs and promote economic growth. Experts will want to check the new formulation of principles of high-quality regulation contained in that document. Compared to the new OECD principles, which are now close to finalisation and publication, the APEC text provides a shorter and more general list of actions to be implemented by November 2013. On substance, there is little new in this document (except perhaps the notion of "incentives to review regulation") but we can hope that it will create some momentum for domestic reform in member countries.

Greek bailout package includes RR measures

Implementation of the Oct. 27 bailout package brokered between former Prime Minister George Papandreou and other European leaders is key to the new government's access to international assistance. Among the austerity measures, experts will have noticed the mention of steps to raise Greek external competitiveness, relying mainly on reducing administative burdens. An investment expert, speaking in Beijing on 10 November, said the Athens has introduced a new investment law to create a business-friendly environment, including providing tax incentives and subsidies in such areas as renewable energy, logistics, tourism, food and beverages. A fast-track law has also been put in place to help cut red tape, fight bureaucracy and facilitate investment. Not much detail for the moment on public sources.

Ukraine needs to reform inspections (IFC)

A study by IFC published last week found that the system of permits, inspections, and technical regulations in Ukraine remains a burden for businesses, costing them nearly $900 million last year and hampering their efforts to grow and create jobs.
The IFC study, “Investment Climate in Ukraine as Seen by Private Businesses 2011,” surveyed approximately 2,000 businesses and found that 46 percent of them resorted to unofficial means to resolve issues with state officials. Ukrainian companies surveyed spent an average of 10 percent of company revenue in 2010 to comply with official regulations.
“Less regulation and a transparent economic environment will help promote growth and enable Ukrainian businesses to attract more investments,” said Elena Voloshina, IFC Head of Operations for Ukraine. “Ukraine has made some positive steps forward to ease the regulatory burden for private businesses over the past year. However, poor implementation and the slow pace of reforms remain among the key barriers to private sector growth.”
Since 2009, Ukraine has made some progress, particularly in the reform of technical regulations. However, the IFC study found that local entrepreneurs have not fully benefitted from the regulatory changes due to the low level of implementation, which significantly undermines the reform process.
The study also recommended steps to improve the investment climate. These steps include decreasing the number of permits and the number of businesses subject to licensing; extending the scope for self-certification; enforcing the use of inspections checklists; and streamlining norms and requirements.
IFC’s Ukraine Investment Climate Advisory Services Project is supported by the Canadian International Development Agency; the Dutch Agency for International Business and Cooperation; the Swedish International Development Cooperation Agency; and Switzerland’s State Secretariat for Economic Affairs, SECO.

APEC links RR with trade and green growth

There is a lot of conceptual material to be found in the proceedings of the 2011 APEC ministerial meeting held in Honolulu, Hawai, on 11 November and chaired by Ms Clinton. In a “Declaration of Honolulu – towards closer regional economic ties,” APEC Ministers committed to take action to strengthen economic integration and expand trade, promote green growth and advance regulatory convergence and cooperation, to achieve economic growth in the region. The statement published on the APEC site and the annex F on regulatory issues provide rich reading. Here are the main chapters (our unofficial summary):

• "Regulatory Cooperation on Emerging Standards and Regulatory Issues for green growth": the objective is to prevent unnecessary technical barriers to trade, support interoperable emerging standards for smart grids, green buildings, and solar technologies.
• Approval of a "Regulatory Cooperation Action Plan" to inter alia improve the efficiency and effectiveness of regulations, build public trust in regulations, improve consumer confidence in globally traded products and encourage implementation of the APEC-OECD Integrated Checklist on Regulatory Reform;
• Regulatory Convergence: streamlining approval procedures for Medical Products , harmonised classification of Chemicals, cataloguing regulations on Services, reducing unnecessary testing and streamlining paperwork on Wine certification and trade procedures, raising common Food Safety rules, including closer alignment on international standards (with APEC-World Bank collaboration).

In summary, a fine example of effective regional regulatory cooperation.

IMF boss renews call for RR

Regular readers of this blog must have noticed that we have up to now desisted from commenting on one of the major industries constantly under scrutiny and proposed for regulatory reform: the financial sector. This is a deliberate omission. Regulatory Reform as tackled in this blog is a horizontal set of institutions, policies and tools that can be applied in most sectors of the economy. It is up to regulators in each sector to make the best use of the principles. But to avoid leaving such a major gap in our coverage, we will henceforth report the most stimulating news in regulatory reform of the financial markets, starting with Monday's declarations by Christine Lagarde, the managing director of the IMF. "Better regulation of the financial sector remains critically important in the years ahead to make the financial sector safer and more stable, and to put the industry back in the service of the real economy," she said . Ms Lagarde cautioned against the inconsistency of implementation.

Indian RR: poor results

Though an impressively dynamic economy, India still does not offer a competitive business environment. According to the 2012 Doing Business ranking, though present in the 30 economies that improved the most over time, India still ranks low overall , with its rank improving marginally from 139 to 132 between the 2011 and 2012 reports. On the reform undertaken in India, the 2012 report said, “When India dismantled a strict licensing regime controlling business entry and production the benefits were greater in states that had more flexible labour regulations”.
These results point at insufficient results fromRegulatory Reform which, though on the books since the late 1990's seems to be slow in delivering, as reported on this blog.
Today, in awell documented article is published on India Express, a former chairman of Public Interest Foundation, gives figures about how the Indian legal corpus has been streamlined, but not sufficiently. Texts remain from the colonial days. He also calls for a framework to channel regulatory activities ("regulate the regulators.")

OSCE-supported 'regulatory guillotine' (Armenia)

An Armenian radio bulletin announces the launch of a legal simplification programme to be conducted over the next 2 years, using the "regulatory guillotine" approach. The project will involve reviewing and streamlining the national regulatory frameworks affecting business activity and the daily lives of citizens. Throughout the duration of the project, a Joint Dialogue Forum will be facilitate the exchange of information and further discussions between stakeholders. Other donors are contributing: the Austrian Development Agency , USAID, the World Bank and UNDP. For more, see previous posts about Armenia.

A circular to boost "the quality of the law" (France)

The French Prime Minister issued in July a new circular (non legally binding instruction to ministers) upgrading procedures for better "legal security and predictability, and simplification of ill-adapted or obsolete rules" and also to improve the attractiveness of the French legal model. The text primarily deals with organisational issues: annex I offers ways to enhance the regulatory management process (with better planning and monitoring of the legal production); annex II suggests improved documentation of new regulations, including early planning of subordinate legislation and RIAs and the drafting of short presentation note stating the public(s) concerned and new legal content (akin to the EU "citizen's summary"). In spite of the mention of "attractiveness" in the first paragraph, the circular consolidates the traditional legal approach to law drafting.

New definition of smart regulation (US FDA)

Under the title " FDA official urges smart regulation" a short article in the Philadelphia Inquirer online edition uses smart regulation to sum up a necessary new paradigm for Health law. "Caught between wary patients who want safe artificial hips and demanding medical-device manufacturers who want their potentially lucrative gizmos approved yesterday, the top device official at the U.S. Food and Drug Administration told skeptical industry executives gathered Monday at the Convention Center that he was trying to institute a paradigm shift to help all parties.
'It's not safety or innovation, Dr. Jeffrey Shuren said. It's safety and innovation.
'We needed to move away from this construct that safety and effectiveness and facilitating innovation are incompatible," Shuren, director of the FDA's Center for Devices and Radiological Health, said at the Biotech 2011 conference, "They are both sides of our mission."

Extra red tape on rule making? The new RAA (US)

An interesting discussion in the US, on the same theme as the previous post (accountability of regulators) is provided by a recent post on "the Hill" (US Congress Blog) under the polemic title: "Regulatory reform good for multinationals, yet bad for you."
The Regulatory Accountability Act of 2011 (RAA), a bipartisan bill introduced in the House and Senate, updates rules on how Federal agencies analyze costs and benefits, with detailed procedures for agencies promulgating regulations that are projected to have a minimum effect of at least $100 million on the United States economy.
The vice-chair of the American Sustainable Business Council questions the proposed legislation. It "will likely dramatically drive up the cost of almost every rule-making process and budget of a federal agency. Second, federally elected officials will be stripped of their ability to responsibly lead our country. And third, the RAA is a highway to never-ending lawsuits by special interests against the federal government.
The RAA is designed to micromanage every federal agency in its efforts to create rules necessary to carry out legislation passed by Congress.
By doing so, it turns over 60 years of effective regulation promulgation under the Administration Procedures Act into a protracted process that will stretch the time needed for rule-making into decades. Federal agency budgets will need to be expanded by hundreds of billions of dollars to comply with the RAA and perform their usual functions of protecting the public and small businesses from unsafe products and practices."
A similarly critical view is taken by OMB Watch, a nonprofit research and advocacy organization.
For a more balanced view, see RegBlog post reporting the most recent hearing in the House (Judiciary Committee).

BR by better regulators (UK)

Regulating the regulators to enhance the quality of regulation. OECD papers regularly call for greater accountability by regulators toward government for delivering on stated policies, with results to be obtained by a change of culture including greater evidence base for regulation, and effective consultation, with appropriate oversight arrangements (see for example new Recommendation on Regulatory Policy and Governance section 7).
Yesterday the UK fleshed out these principles in a new formulation for the British context. The Business and Enterprise Minister made a number of proposals for improving the regulatory landscape, based on "a more mature relationship between business and regulators" (see BIS press release) including :

• More use of co-regulation, where business shares a degree of regulatory responsibility, for example through industry bodies setting professional and working standards
• Greater 'earned recognition' – where regulators recognise business activities that support compliance and reduce intervention, creating a stronger incentive for private sector led compliance
• A role for Local Enterprise Partnerships (LEPs) to improve the transparency and accountability of local regulation – bringing business and regulators together to look for ways to reduce unnecessary burdens
• Clearer, more straightforward guidance – so that businesses, particularly SMEs, have greater access to clear guidance on what they need to do to comply.