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Regulation and the Governance Agenda in the 21 st Century

Regulation and the Governance Agenda in the 21 st Century. Josef Konvitz, Public Governance Directorate. Context. The Crisis Is regulation necessary for globalisation ? Relations between regulations and the regulated. Crystallizing issues that are not new. Definitions/History.

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Regulation and the Governance Agenda in the 21 st Century

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  1. Regulation and the Governance Agenda in the 21st Century Josef Konvitz, Public Governance Directorate

  2. Context The Crisis Is regulation necessary for globalisation? Relations between regulations and the regulated. Crystallizing issues that are not new.

  3. Definitions/History Definitions • Regulation by rules • Regulation by other policy instruments • Command and control History • From local to national (to 1900) • By sectors

  4. OECD Regulatory Policy Concept • Deregulation where markets work better than governments • Re-regulation and new regulatory institutions where markets cannot work without governments • More efficient government and social regulations to achieve high standards of health, safety and environmental protection at lower economic cost Regulatory quality is the driving principle behind reform today

  5. 2005 OECD Recommendations for Regulatory Quality • Less focus on regulatory reform • Promote concept of dynamic, long-term, pro-active effort • Economic and social objectives are mutually supportive • Regulatory quality, competition and market openness are mutually supporting

  6. Main Elements of a Regulatory Policy • What is a “good” regulation? • The 1995 OECD Checklist for Regulatory Quality • The 1997 OECD Recommendations on Regulatory Reform • The 2005 OECD Principles for Regulatory Quality and Performance • Set a Regulatory Policy • Efficiency, transparency and accountability • Assure political support • Institution building • Set a strategy to drive the Policy • Capacity building for • Improving rule-making • Reviewing existing regulations • Implement the Policy

  7. Regulatory policies improve thefunctioning of markets • Boosts consumer benefits • Reducing prices for services and products such as electricity, transport, and health care, and by increasing choice and service quality. • Supports sustainable, non-inflationary growth • Improves competitiveness • Reducing the cost structure of exporting and upstream sectors in regional and global markets. • Fosters flexibility and innovation • Increases job creation • By creating new job opportunities, and by doing so reducing fiscal demands on social security, particularly important in ageing populations. • Reduces risk of crisis due to external shocks

  8. Gains from reform: 1998 to 2003 • Greater homogeneity across OECD countries for « good » regulation: • Quality regulation, not just de-regulation • Incentive-based regulation in place of command-and-control • Setting priorities on sectors where change will do the most good • The countries that have made the most progress had been the most restrictive • Reducing high degree of state control (price controls, legal restrictions) • Using multilateral agreements to open trade, investment • Removing barriers to entrepreneurship

  9. Lessons of experience • Leadership as most important ingredient for success • Crises as catalyst for change • Harmful effects of a short-term perspective • Role of central regulatory bodies to change administrative culture • Need for communication strategy to build constituency for reform • Getting the level of intervention right

  10. Administrative Burdens (Administrative compliance costs imposed by regulation) Public Sector (Regulation Inside Government) Private Sector = time is money • Businesses • Inspections • Reporting • Permits • Citizens • Inspections • Reporting • Permits Narrow focus: The administrative burden is not everything Other compliance costs Tools: one-stop shops, reduced reporting frequencies, benchmarking exemptions, unified data bases…

  11. Regulatory Quality Net welfare benefit of regulations Costs Benefits Legal certainty Compliance costs Reduced administrative burdens Enforcement Multilevel duplication, Gold plating Fewer negative externalities Better use of resources, take-up of innovations, More flexibility and choice Delays, lag Complexity, incoherence (contradicting rules) Social and environmental welfare (public service delivery) Displaced investment, protected markets and professions Competitiveness and entrepreneurship Responsible regulation • Capital • Administrative Burdens -public, private • Indirect Regulatory Capacity for integrated approach

  12. Towards the future: interface between the public and private sectors • Management of complexity of policy objectives, with often unexpected outcomes • Greater use of alternatives to regulation • Evaluation of regulations and of their social and economic impacts • Risk awareness • Extending coverage to public services such as education, health, environment

  13. The Crisis - I • Regulatory gaps, capture • Multi-level • Pressure on the process

  14. The Crisis - II • Housing and education • Entrepreneurship • Innovation and risk

  15. After the Crisis • Tools (RIA) • Policies (Ministers) • Institutions (core; agences) • Stronger role for the state but limits on what the state can do: • Collective security – cross-border • Quality of Life – cross-sectoral, regional

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