Regulatory Discretion contributes to Smart Regulation

Our thanks to friend Florentin Blanc, the acknowledged expert on the inspections reform, who has shared with us a summary of the international seminar on regulatory discretion that took place at the International Academy for Legislation on 5 December 2013. Here are some of the insights. "Discretion in implementation of regulations is not only unavoidable in practice (there can be no entirely “neutral” enforcement, there is no rule that does not require some degree of interpretation) – but necessary to ensure that implementation of regulations leads to the desired outcomes of regulation. Without discretion, there is a real risk that enforcement is done in a “tick box” way, with two potential downsides: missing the real threats and risks, and harming the economy without a real positive impact on what the regulation aims to achieve (e.g. safety). At the same time, it is essential to have safeguards, in particular accountability, as a counterpart to discretion."

"From an economic perspective, discretion is undeniably needed to ensure that costs and benefits of regulation are optimised. From a legal perspective, it is seen that (a) whether or not discretion is allowed (for regulators, for courts) depends on the context (country, legal tradition, fact-finding or deciding on sanction etc.) and (b) the evolution of laws and norms (transformations in wording where it is less and less “self evident” whether a given situation is or is not in violation), the complexification of economic activities etc. lead to a gradual slide towards more (explicit) discretion.

"At the same time, there are serious potential concerns with discretion. The first is lack of consistency in treatment, from one inspector or officer to the other. The second is what can happen in a situation where professionalism of public officials is low, ethics are in doubt, wrong incentives are present etc. so that corruption and abuse of power are a real possibility. In such situation, more discretion will lead to more corruption and worse outcomes at all levels. Discretion may also be abused by regulators not for personal gain, but for excessive demands for “ever more safety”. In such situations, “regulating regulators” may not be enough, and looking for alternative mechanisms to ensure compliance (e.g. insurance requirements rather than inspections) may be interesting."

3000 rules on business to be scrapped (UK)

The Coalition will have been the "first government in history to end its term in office leaving behind fewer regulations than existed when it came to power", said the British PM to the Federation of Small Businesses, in a conference well reported and discussed online. Watch David Cameron explain the policy and give some examples of existing "pointless" red tape which still need to be scapped on the BBC site. "More than 3,000 rules affecting business will be dropped or changed, saving more than £850m a year, he told the FSB. They include 640 pages of cattle movement guidance, 286 pages of hedgerow regulations and 380 pages of waste management rules."

China continues to reduced number of licenses

According to the Wall Street Journal (online) the Chinese government has renewed its commitment, already announced in December 2013 (see previous post) to reducing the number of license procedures that need state approval. The effort will be focused on areas like telecommunications, water, transport and online education, the State Council said in a statement after its first meeting of 2014. "Doing away with administrative snarls and giving a bigger role to market forces are priorities for Premier Li Keqiang. He pledged to cut by a third the things demanding state stamps of approval by the end of his first five years in power. The council will publish a list of things still needing an administrative OK from all government agencies, it said in a statement."

A December article in Reuters reported the sweeping reforms published in November 2013 by China's ruling Communist Party which promised to free up the market by simplifying administration and "restrict central government management of microeconomic issues to the greatest possible extent". "Sources have said the policy document is likely to pave the way for a long-anticipated restructuring of government departments next March, which could result in the creation of new energy and environment "superministries" and a scaling back of the roles and responsibilities of the National Development and Reform Commission (NDRC). The NDRC, a sprawling superministry with a huge swathe of duties ranging from cutting greenhouse gases to deciding energy prices, has long been under fire for resisting reform and for making heavy-handed interventions in the economy."

Red tape slows trade on Indian subcontinent

According to the Times of India, "Commerce ministers from Saarc countries who met recently spoke of increasing trade within the region but a study shows how the subregion in South Asia comprising India, Nepal, Bangladesh and Bhutan remains one of the toughest places to move goods due to archaic procedures. Sample this: it may take up to a month for pulses, juices and carpets to move within three countries, when the actual driving time is much less. 

The study done by Delhi-based thinktank Research and Information System for Developing Countries (RIS) for Asian Development Bank and UN Economic and Social Commission for Asia and the Pacific has detailed how trade through three key corridors in the four countries faces major delay because of tardy procedural clearances. For example, procedural approvals for both importers and exporters to transport pulses from Nepal to Bhutan via India takes at least 23 days."

EU Red tape denounced at Davos

According to the Daily Telegraph, the UK Prime Minister has renewed his attack against Brussels bureaucracy at the Davos summit: "The European Commission is so obsessed with red tape that it believes removing regulations which damage businesses is an "act of self harm". Speaking in Davos, Switzerland, Mr Cameron said that the "fight is not yet won" as he set out plans for further reforms of the European Union ahead of a proposed referendum in 2017. He said that some European Commission officials think that they are "not doing their job" if they are not producing new regulations. He added that the European Parliament is tempted to "gold plate" every piece of regulation. He said that the EU is putting a potential fracking revolution which could lead to lower energy bills at risk with "burdensome, unjustified and premature regulatory burdens". He said: "There are still people who think that the key to success is ever greater social protections and more regulations.

Canada's 5th annual Red Tape Awareness Week

According to a press release taken up by several media, the 5th edition of Canada's Red Tape Awareness Week™ (from 27 January) will continue to demonstrate " how real the red tape burden is for business owners and ordinary Canadians, and where we are in the effort to reduce that burden. " From a report card that grades individual governments on their own red tape reduction efforts to recognizing leadership that has made a difference in cutting it, the event will be worth following. See also this blog's post on last year's edition.

Gulf standardisation agencies study BR tools

(Photo: members of two of the three breakout groups at work under the supervision of Miriam Allam, OECD, in charge of the course. Click to enlarge) 

RIA experts know the importance of checking, at the early stages of analysis of new legislation, the potential of "alternatives to regulation" as another way to reach the substantive policy objectives that their agency or ministry is pursuing without increasing the rule book while improving stakeholder input. Among these alternatives, standards occupy a central position as they can greatly contribute to an efficient business regulatory environment. In this context, the initiative of the Gulf Standardisation Organisation (GSO) to hold a seminar for officials from all Gulf states opens great promise of better regulation in the Gulf region, through the use of better evidence-based and consulted technical standards. Under the title "Building a practical framework for RIA", the course covered all the stages of the RIA process, after which delegates addressed ways and means of making the most of the potential of RIA to improve standards in the region, using international best practice.

The success of the course owes a lot to the hospitality of the Bahrain Ministry of Trade and Commerce (Eng. Al-Moamen) and the supervision of Mr A. Benyaich, senior conformity assessment specialist at GSO. The course was supported by Miriam Allam from OECD (pictured) and your blogger CH Montin (France).

Report on RIA in Russian Federation

Regular contributor Daniel Tsygankov informs us of a milestone report issued on 20 January by the National Institute for systems studies of entrepreneurship (Moscow), entitled "Some results of RIA at the federal level in the 2nd half of 2013."

Daniel has also provided for upload on this blog a translation into English of the report along with a detailed presentation in 30 slides. These documents show, with lots of statistics concerning the scope and quality of RIAs conducted recently, how the assessment of new regulation has grealy improved recently in Russia (see slides 27-29 for key findings and proposals for further improvement, including ideas such as the development of a regulatory policy concept).

Impact assessment calculator

All RIA practicioners know that one of the most difficult steps in the exercise is the valuation of impacts, where statistics are not always available. That is why any help is welcome. One way of facilitating the production of figures is to support the calculations and the presentation of results, and such is the purpose of a new tool recently uploaded by the Department of Innovation and Business, the Impact Assessment Calculator, which is intended to "help policy officials to calculate the figures needed for their impact assessment. The calculator automatically generates the key figures needed for the impact assessment summary pages, using the profile of costs and benefits for each option." The Excell spreadsheet comes with instructions and a sheet for calculating each option; the figures are collected in an overview that can be copied into the RIA summary pages. The calculator also takes care of discounting and other financial operations. Though the currency quoted is the pound sterling, it seems the software could be used in any country, perhaps with a few adaptations.

Greek EU presidency vows to pursue smart regulation

Greece has taken over on 1 January the rotating presidency of the EU for six months. Its programme of action for this term covers all aspects of EU policies, and includes a short paragraph, page 37, concerning the immediate future of Smart Regulation, in the section devoted to competitiveness.

"The creation of the right regulatory framework and the reduction of administrative burden is particularly important in times of economic challenges. The overall regulatory burden, in particular for SMEs, should be reduced at both European and national levels. In this context the Presidency will seek to ensure that the implementation of Smart Regulation initiatives creates a favorable environment for the enterprises, in particular SMEs, by enhancing competitiveness and reducing compliance costs. Based on the experience gained when implementing the initial burden reduction program of 25% arising from European legislation, a new round of burden reduction will be pursued for all stakeholders both at European and national levels. " We welcome any indication from experts as to this "new round of burden reductions".

Simplification shock shifts to higher gear (France)

President Hollande is apparently ushering in a new economic policy, more business-friendly, if several New-Year announcements are to be believed. From Toulouse on 9 January (today) he is setting up a new "Council for simplification" headed by MP Mandon (see previous posts). New "tough decisions " will need to be taken this year to bolster the "simplification shock" launched last year. The "shock" is meant to strengthen the competitiveness of enterprises, and promote jobs by ensuring that the 201 simplification measures already announced are truly implemented, and to find other red tape cutting initiatives. The President is said to be impatient with the pace of truly perceived reduction to the regulatory burdens on companies, and clearly thinks the administration is too slow in coming up with solutions. For more, see article in the economic daily (Les Echos).

Meanwhile, Le Monde, an evening paper, analyses in its 8 January leader recent indications of government excessive haste in preparing legislation, leading to a spate of repeals of new acts (or parts of new acts) by the Constitutional Court. Under the title "too may poorly devised laws kill the law" (full content only for subscribers), it denounces excessive reliance on new primary legislation even when not legally indispensable, and poor quality of drafting excessively complex clauses, which are at the root of "legislative inflation". The number of pages in the Official Journal seems to double every ten years. Le Monde is not confident that the French administration will be able to improve its approach to policy making.