55635 BETTER REGULATION FOR GROWTH GOVERNANCE FRAMEWORKS AND TOOLS FOR EFFECTIVE REGULATORY REFORM INSTITUTIONS FOR REGULATORY GOVERNANCE INVESTMENT CLIMATE ADVISORY SERVICES WORLD BANK GROUP WB202_IRG_i-40.indd i 5/17/10 3:45:00 PM ©2010 The World Bank Group 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to repro- duce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. About the Investment Climate Advisory Services of the World Bank Group The Investment Climate Advisory Services (IC) of the World Bank Group helps governments implement reforms to improve their business environment, and encourage and retain investment, thus fostering competitive markets, growth and job creation. Funding is provided by the World Bank Group (International Finance Corporation­IFC, the Multilateral Investment Guarantee Agency­ MIGA, and the World Bank) and over 15 donor partners working through the multi-donor FIAS platform. The findings, interpretations and conclusions included in this note are those of the author and do not necessarily reflect the view of the executive directors of the World Bank Group or the governments they represent. Better Regulation for Growth Program The Better Regulation for Growth (BRG) Program was launched in 2007 by the Dutch Ministry of Foreign Affairs, the UK Depart- ment for International Development (DFID) and the investment climate advisory services (IC) of the World Bank Group. The objective of the BRG Program is to review and synthesize experiences with regulatory governance initiatives in developing countries, and to develop and disseminate practical tools and guidance that will help developing countries design and implement effective regulatory reform programs. Reports and other documentation developed under the BRG Program are available at: www .ifc.org/brg WB202_IRG_i-40.indd ii 5/17/10 3:45:01 PM Table of Contents Acknowledgments .............................................................................. vi Executive Summary ........................................................................... vii Introduction ........................................................................................ 1 Regulatory Reform, Institutions, and Economic Growth: A Brief Overview of the Theoretical Debate...................................................... 3 Regulatory Governance Institutions: Main Tasks and Institutional Design ....................................................................... 6 Regulatory oversight bodies ................................................................................7 High-level committees for regulatory reform ...........................................................9 Advisory and advocacy bodies for regulatory reform ............................................11 Public sector advocacy bodies ............................................................................11 Private or public/private sector advisory bodies ...................................................13 Ad-hoc institutions for regulatory reform: Working committees, task forces, etc..........14 Building Institutions for Regulatory Reform in Developing Countries: Challenges and Emerging Lessons ...................................... 17 Key shared elements in institutional building for regulatory reform ...........................17 Divergent elements in institution building for regulatory reform ................................19 Emerging lessons on the development of institutions for regulatory governance in developing countries ....................................................................22 Setting up a regulatory reform unit: Structure and functions ....................................23 Structure ..........................................................................................................23 Functions..........................................................................................................24 Setting up an advocacy and/or advisory body for regulatory reform.......................25 Structure ..........................................................................................................25 Functions..........................................................................................................26 Conclusions ........................................................................................ 27 Bibliography ...................................................................................... 29 Appendix 1. Regulatory Governance Institutions in Selected Emerging and Developing Countries .................................. 32 Kenya ..............................................................................................................32 Korea ..............................................................................................................34 FYR of Macedonia ............................................................................................35 iii WB202_IRG_i-40.indd iii 5/17/10 3:45:01 PM Mexico ............................................................................................................37 Moldova ..........................................................................................................38 Serbia .............................................................................................................38 Uganda ...........................................................................................................39 Annex 1: Better Regulation for Growth Program ................................ 40 iv WB202_IRG_i-40.indd iv 5/17/10 3:45:02 PM List of Boxes and Chart Box 1: Regulatory Oversight Bodies in Selected Countries ........................................8 Box 2: High-Level Committees for Regulatory Reform .............................................10 Box 3: Public Sector Advocacy Bodies in Selected Countries: Main Features ............12 Box 4: Advisory Bodies in Developed Countries....................................................13 Box 5: Ad-hoc Institutions for Regulatory Reform ...................................................15 Box 6: Establishing Ad Hoc Institutions in East Africa .............................................23 Chart Chart 1: Proposed Structure of Regulatory Reforms in Macedonia ...........................36 v WB202_IRG_i-40.indd v 5/17/10 3:45:02 PM ACKNOWLEDGMENTS The report has been prepared by Delia Rodrigo, Andrea Renda, Claudio Radaelli, Colin Kirkpat- Investment Policy Officer, and Stephen Rimmer, rick, Delia Rodrigo, Edward Donelan, Esra Yil- Senior Regulatory Reform Expert at the Invest- maz, Eva Buitenkamp, Fabrizio de Francesco, Greg ment Climate Department of the World Bank Bounds, Jeroen Nijland, Josephine Kanyi, Ksenija Group. Vidulic, Lars Grava, Margo Thomas, Mustafizur Rahman, Nick Godfrey, Richard Sandall, Stephen An early draft of this document was discussed at Rimmer, Scott Jacobs and Ulrich Ernst. the Technical Meeting of the Advisory Panel of the Better Regulation for Growth Program held in Early and advanced drafts of the report benefited The Hague on November 13­14, 2008. Com- from additional comments from Alberto Criscuolo, ments to this draft were provided by participants Edward Donelan and Richard Sandall. Zai Fanai to this meeting: Andre Nijsen, Andreja Marusic, supported the publication of the report. vi WB202_IRG_i-40.indd vi 5/17/10 3:45:02 PM EXECUTIVE SUMMARY Around the world, countries have established a institutions have played a key role in many coun- diverse number of institutions that focus on facili- tries in the Organization for Economic Coopera- tating and supporting the operation of regulatory tion and Development (OECD) by promoting a systems, including their review and reform. The whole-of-government approach to regulatory most common tasks of such regulatory institu- review and reform, contributing to coordination tions include: inside the administration and in some cases work- ing as engines of reform. drafting new or amended rules and regula- tions (line ministries, regulatory authorities, This paper looks at the role and design of regula- specific institutions with regulatory powers); tory reform institutions in developing countries. The paper focuses specifically on documenting Regulating, and ensuring compliance and and describing institutions and drivers of reform enforcement of rules (inspection bodies, usually established at the center of government audit offices, judiciary); and with a clear mandate to lead or advocate for regu- latory reform. The objective is to explore if certain overseeing monitoring and reporting on the features of institutional design can be associated operation of regulatory processes, institu- with a higher degree of success in implementing tions, and systems (for example, on impacts regulatory reform. This work aims, in part, to of new regulations to assure quality of the provide a platform for further research, discussion regulatory flow, and on the review and reform and analysis. of the existing stock of regulations). The paper does not aim to provide a comprehen- This paper focuses on the third set of tasks that sive review or analysis of the very rich literature are within the responsibility of institutions that on this topic. Nor does it provide a comprehen- govern and oversee regulatory quality. These sive approach to mapping and measuring the vii WB202_IRG_i-40.indd vii 5/17/10 3:45:08 PM impact of regulatory reform institutions. Rather, that this is a relevant and feasible framework for the primary purpose is to provide policymakers, understanding similar developments in develop- experts and practitioners with an introductory ing countries. overview of the political economy, context and institutions of regulatory reforms. This includes Existing literature shows clearly that high-quality identifying key issues, options and practical regulatory institutions are correlated with higher aspects of building successful institutions for reg- incomes, investment and economic growth. ulatory reform in developing countries. This However, evidence that high- quality regulatory paper is supported by a suite of several other BRG institutions result in greater economic growth is papers that consider a wide range of related regu- more limited and often based on case studies. For latory issues, processes and tools. example, several countries such as Kenya and Korea have established new regulatory gover- Information and analyses provided in this paper nance institutions and these have contributed to are based on a review of available literature, infor- wide-ranging and successful regulatory reform mation provided by national governments (such programs that have generated additional eco- as the UK and Bangladesh), as well as observa- nomic activity and growth. tions about several ongoing regulatory reform programs in developing countries. Research and debate on these complex issues (typically involving academic researchers and Specifically, the paper looks at four different reg- think tanks) are important to practitioners, devel- ulatory reform institutions: oping country governments, donors and interna- tional organizations because they help identify i) Regulatory oversight bodies located within the importance of regulatory reform institutions the executive branch and charged with driv- and features of such institutions typically associ- ing and managing regulatory reform efforts ated with more successful reform programs and across government on a day-to-day basis; robust economic growth. It also helps to identify the importance of the political economy in pro- ii) High-level committees for regulatory reform viding an environment that is receptive to regula- charged with leading and guiding reforms at tory reforms and able to effectively implement the political level; such reforms. iii) Advisory and/or advocacy bodies charged Ultimately, all successful regulatory reform is with challenging and advising on the govern- based on aligning the incentives of various stake- ment's regulatory reform policy and pro- holders so that they work together to facilitate grams; and better regulatory and related outcomes. If incen- tives are not aligned, stakeholders are usually iv) Ad-hoc institutions established to spearhead unwilling and/or unable to cooperate. In almost specific tasks and regulatory review. all cases this results in a state of gridlock or paraly- sis, where effective regulatory reform is impossible The above typology is chosen as a framework for or extremely difficult. Political instability can also this report because it is well-known in the litera- slow successful reform efforts, as has been the case ture and often used to analyze similar regulatory recently in Kenya, Bangladesh and Madagascar. institutions in developed countries. That said, it is important to note that the distinctions between The research conducted in this paper is also sup- these institutions are often unclear and in prac- ported by the analysis of a limited number of tice their roles can and do overlap. The case stud- available cases in emerging and developing coun- ies reviewed as part of this paper also confirm tries focused on the institutional development for viii WB202_IRG_i-40.indd viii 5/17/10 3:45:09 PM regulatory reform, and in particular on certain being located at the center of government; variables that have strengthened or undermined institution building. This paper highlights the having a relatively high level of transparency similarities and differences in institution build- and independence from the executive arm of ing between developed and developing countries government; and to identify and better understand trends that potentially play a role in the way institutions are having staff with a wide range of public and set up and maintained. private sector backgrounds. Analysis of case studies from Kenya, Korea, Moreover, the paper provides a list of tentative Moldova, Mexico, Macedonia, Serbia and Uganda design parameters and criteria to be considered illustrate that many have employed similar insti- when establishing institutions for regulatory tutions and processes for regulatory management reform in developing countries. The paper argues and reform. These common elements, viewed that some of those criteria, which correspond to independently from the scope and the success of international good practices, should be estab- the reform process. These include use of small lished early in a reform program to make regula- reform bodies, often at the center of government tory institutions viable at an early stage and also to drive regulatory review and reform programs sustainable over time. In that sense, some features (Korea, Kenya, Mexico), high-level political of regulatory reform institutions in relatively suc- support (Korea, Mexico, Serbia), and support cessful developed countries can serve as a model from forums involved in public-private dialogue to follow, (e.g., place regulatory reform institu- and international partners. Such forums have tions at the center of government, back them with been implemented in many developing countries. high-level political support, staff them with skilled High-level committees for regulatory reform are people with different backgrounds, ensure a high also used in several countries, such as Kenya level of independence and accountability, etc). and Bangladesh, while other countries, such as Vietnam, have employed ad hoc high level advi- The paper highlights the important role donors sory bodies. can play in establishing regulatory reform institu- tions, but also notes that institution building is a However, the context, role, structure, purpose long-term process typically taking at least several and activities of regulatory reform institutions years. Therefore, donors should ensure that their are different in these countries. For example, the support results in sustainable and successful capac- degree of formalization and institutionalization ity and institution building in the long term and varies, along with the use of ad-hoc institutions that support is focused, targeted, and transparent. for regulatory reform. These countries have often Indeed, premature withdrawal of donor support sequenced reforms differently. can and does often result in the gains from insti- tution building being lost or partially reversed. The paper concludes that regulatory reform insti- tutions at the center of government have often Furthermore, there is a need to recognize that low played a key role in developing and facilitating capacity countries typically do not and cannot successful regulatory reform in developing coun- quickly achieve all the requirements and prereq- tries. A number of characteristics are typically uisites needed to establish and operate a complex associated with successful regulatory institutions, range of inter-related and successful institutions. including: Indeed, simply applying developed country mod- els to countries without the capacities to support having clearly defined functions and account- them is unlikely to be successful and may under- ability; mine other important reform efforts. ix WB202_IRG_i-40.indd ix 5/17/10 3:45:09 PM Therefore, some minimal criteria and priorities, paper show that institution building can make a in terms of functions and governance arrange- great contribution to regulatory reform if it is ments, need to be identified. Obstacles to their well designed, fit for purpose and meets expecta- effective establishment should be carefully identi- tions. fied and addressed on a case-by-case basis. These include: In addition, as reforms gather momentum, they should gradually move on into more comprehen- Institutions have to be shaped integrating sive institutional approaches for regulatory gover- key governance features such as transparency, nance. For example, ad hoc institutions have been independence, and accountability. created in some countries, such as Kenya and Vietnam, for the purpose of launching reform They have to be built in response to regula- efforts. These institutions can and should over tory policy and effectively support clearly time be transformed into regulatory reform units articulated policy objectives. or bodies with more capacities, responsibilities and a strategic approach. Furthermore, regulatory They have to acquire expertise and skills over reform units should be supported by advocacy time, increase their responsibilities over time, and/or advisory institutions that can integrate the and have a capacity to adjust to changing stakeholders´ perspective, increase effective con- policy priorities. sultation, and advocate for reform efforts across society. They have to reflect the political support and make sure they are credible vis-à-vis other This Better Regulation for Growth (BRG) paper institutions inside the administration and is a joint initiative of the Dutch Ministry of For- with external stakeholders such as business, eign Affairs, the British Department for Interna- consumers and other parties. tional Development (DFID) and IC, the multi- donor investment climate advisory service of the These conditions can be difficult to meet in many World Bank Group.1 developing countries. However, the successful regulatory reform stories documented in this 1 See Annex 1 for a detailed description of the BRG Program. x WB202_IRG_i-40.indd x 5/17/10 3:45:10 PM INTRODUCTION The importance of regulation as an instrument important part of the development policy agenda to reach policy objectives has increased drastically and is discussed in more detail in related BRG in recent decades. However, knowledge and papers dealing with regulatory governance. understanding of the complex issues involved and how they interact with each other is incom- There are numerous institutions taking the regu- plete and still evolving. latory policy agenda forward. Their use varies enormously in different countries around the The emergence of the regulatory state2 has put a world. They include regulatory management and significant premium on governments' capacities to oversight bodies in the executive branch, within regulate effectively and efficiently. The importance administrations, and, in some cases, within Par- of high-quality regulation is reinforced by the liaments. They also include independent regula- transition of growth strategies from state-led to tors for sectoral economic activities, as well as market-led, which many developing countries are other key contributors to regulatory quality, such now undergoing. At the same time, radical mar- as specialist law drafting offices and advisory bod- ket liberalization in the absence of appropriate ies for regulatory reform. regulatory structures to promote and safeguard effective and healthy competition has led to sig- This paper focuses on a subset of these regulatory nificant policy failures. These trends have led to a institutions, specifically, those at the center of broad recognition of the need to better address government that can drive successful and wide- the regulatory environment as part of the world- ranging regulatory reform programs. These insti- wide shift to market-led economic development tutions are classified into four broad types: and growth. Better regulation has become an Regulatory reform units, commonly known 2 Majone, Giandomenico (1999), "The Regulatory State and Its Legitimacy Problems" in West European Politics, Vol. 22, in OECD countries as "oversight bodies for No. 1. regulatory reform." 1 WB202_IRG_i-40.indd 1 5/17/10 3:45:10 PM High-level committees for regulatory reform, administrative capacity. Therefore, the key objec- established in some countries to leverage sup- tive of this paper is to investigate to what extent port and take decisions at a high political the institutional designs and organizational driv- level. ers of regulatory institutions of high income countries are adaptable to developing country Advisory and/or advocacy bodies in charge of contexts, while at the same time avoiding the proposing improvements to the regulatory shortcomings of a simple transposition. system by strengthening coordination and consultation mechanisms and by promoting This paper is divided into the following sections: the regulatory reform agenda. Section 1 briefly reviews the theoretical Ad hoc institutions for regulatory reform, debate and literature about the role of insti- established to launch regulatory reform tutions in facilitating higher economic efforts and to work on a single defined task or growth, focusing in particular on regulatory activity. institutions and their relevance in developing countries. The distinctions between these institutions are often blurred and in practice their roles can overlap. Section 2 discusses the main features of regu- Nevertheless, country experiences from developed latory reform institutions at the center of high income economies and OECD members government, namely regulatory oversight show that a well-organized and managed process, bodies, high level committees, advocacy and/ driven by institutional "engines of reform" with or advisory bodies and ad-hoc institutions clear accountability for results, is important for for regulatory reform. achieving successful regulatory reform outcomes. Indeed, documented experience in high income Section 3 identifies the features of these countries illustrates that successful regulatory institutions that are considered to be best reform institutions typically have several common practice. Section 3 also identifies and dis- elements, including promoting regulatory reform cusses lessons learned and the implications through the allocation of specific responsibilities for establishing and operating such institu- and powers at the center of government to moni- tions in developing country contexts. tor, oversee, and promote successful and wide- ranging regulatory reform The Appendix provides a comparative analysis of institutional frameworks for regulatory reform in Very little is known about the adaptability of a selected number of developing and emerging such institutional models and approaches to the countries, including Kenya, Korea, Moldova, context of developing countries with limited Mexico, Macedonia, Serbia, and Uganda. 2 WB202_IRG_i-40.indd 2 5/17/10 3:45:12 PM REGULATORY REFORM, INSTITUTIONS, AND ECONOMIC GROWTH: A BRIEF OVERVIEW OF THE THEORETICAL DEBATE There is a broad consensus in economic and suggesting that one way in which better regulatory political science literature and studies that effec- governance can improve economic performance is tive regulatory institutions play a very important by improving the climate for investment.4 Other role in facilitating greater economic activity and studies find that productivity growth is higher growth. Much research and work has been done in countries with better institutions and quality to explain the factors influencing growth and of governance,5 and that the quality of regulation many of the successful economies have been ana- and governance is correlated to better economic lyzed to draw lessons (positive and negative) from outcomes.6 Overall, there is a broad consensus the experience of selected high-growth econo- in the literature that the ability of the state to mies. In general, this work has focused on the provide effective regulatory institutions is an overall policy environment and the institutional important determinant of how well its economy factors underpinning healthy and competitive performs. markets. Less attention has been paid in existing literature to the role of regulatory organizations, The mechanisms by which good regulatory processes and frameworks. institutions generate improved economic out- comes are not well understood. However, sev- Several studies have identified the causal effects eral studies have identified specific ways that of better regulatory governance on higher per such institutions can support the operation of capita incomes in the long run, using statistical healthy markets. For example, regulatory insti- tools and tests such as regressions on a cross- tutions play a key role in establishing and over- section of countries.3 For example, some studies seeing the "rules of the game" for businesses and find that the quality of governance and institutions other stakeholders ­ outlining what they can do is important in explaining the rate of investment, 4 World Bank, 2005. 3 Barro, 1997; Hall and Jones, 1999; Kauffman and Kraay, 5 Olson et al., 1998. 2002. 6 Kauffman and Kraay, 2002. 3 WB202_IRG_i-40.indd 3 5/17/10 3:45:13 PM and not do. Regulatory institutions also facili- In this respect, although there is widespread tate economic development7 by reducing mar- agreement that good governance is a critical fac- ket failures, such as information imperfections. tor in explaining the outstanding performance of They can also maximize economic incentives to fast-growing economies across the globe, there is increase productivity and trust, and to reduce less agreement regarding how top-performing transaction costs. countries equipped themselves with effective and better economic governance mechanisms and While there is broad agreement that regulatory institutions in the first place, or whether i the governance and institutions are two of the critical good governance institutions appeared as a func- factors explaining the divergence in performance tion of economic growth. Therefore, there is clear across developing countries, it is important to note evidence of the positive contribution of good that there are also differences in views regarding regulatory governance and effective regulatory the exact types of state institutional capacities management systems to the creation of a condu- needed to encourage better economic develop- cive business environment and ultimately to ment. For example, there is an important empirical economic growth. However, the institutional and theoretical controversy between liberal econo- framework, organizational models, and inter- mists who constitute the mainstream consensus on agency coordination mechanisms that led to the good regulatory governance, and statist and het- introduction and mainstreaming of good regula- erodox institutional economists who agree that tory management tools have not been fully governance is critical for economic development, understood and/or translated into operational but argue that theory and evidence show that the policy guidelines for reformers. As indicated governance capacities required for successful devel- above, while there is a clear correlation, the extent opment are substantially different from those iden- of the causality between some of these institu- tified from the good governance analysis.8 tions and economic growth remains unclear and is disputed by some.9 7 Rodrik et al., 2004 and World Bank, 2002, and North 1990. 8 On the one hand, economists in favor of good governance One of the key features of successful regulatory (market-enhancing governance) argue that the critical state systems is that there is a broad alignment in the capacities are those that maintain efficient markets and restrict the activities of states to the provision of necessary public incentives for institutions, policymakers, regula- goods to minimize rent seeking and government failure. The tors, business and other stakeholders. These relative failure of many developing country states are explained incentives include role clarity, clear rules, trans- by the attempts of their states to do too much, resulting in the unleashing of unproductive rent seeking activities and the parency and predictability, each party to a regula- crowding out of productive market ones. The empirical sup- tory transaction having an understanding of the port for this argument typically comes from cross-sectional data on governance in developing countries that shows that in objectives of other parties, good communication, general, countries with better governance defined in these and effective sanctions against improper or pro- terms performed better. On the other hand, heterodox insti- hibited conduct. If incentives are not aligned, tutional economists base their argument on case studies of rapid growth in the last fifty years and argue that such growth several perverse outcomes typically arise, such as was associated with governance systems that intervened more corruption, and regulations being made and directly in markets to sustain high rates of investment and to implement policies that encouraged the acquisition and learn- administered for the benefit of a few and at the ing of new technologies rapidly (growth-enhancing gover- expense of the broader community. nance). The institutions and strategies that achieved these varied from country to country, depending on their initial conditions and political constraints, but all successful states 9 In general, there is relatively strong evidence showing that had governance capacities that could achieve these functions. institutions--comprising economic, political, and legal This diversity in governance capacities in successful latecom- aspects--are essential for long-run economic development. ers, it is argued, means that it is not necessarily possible to But there is still much to be said about the process of under- identify simple patterns in the governance capacities of suc- standing how exactly specific aspects of institutions influence cessful states, but nevertheless, it is possible to identify broad economic outcomes. Acemoglu, Daron (2008), "Interactions patterns in the functions that successful states performed, and between Governance and Growth: What World Bank Econo- this can provide useful insights for the current "institution mists Need to Know" in: Governance, Growth, and Develop- building" efforts of developing and transition economies. ment Decision-Making, World Bank, Washington, p. 2. 4 WB202_IRG_i-40.indd 4 5/17/10 3:45:16 PM The empirical and theoretical issues involved in achieve these institutional arrangements. Devel- this debate clearly have critical policy implications oped countries have created conditions to sustain for reform efforts in developing countries, includ- growth rates over longer periods of time, supported ing how donors and international organizations by the institutionalization of open access societ- should engage and assist developing countries to ies.11 In these cases, regulation has often been used strengthen their regulatory institutions, systems as a tool for promoting more open economic and processes. opportunities, introducing effective competition into the system and supporting the provision of What is very clear is that effective regulatory services for all citizens. and economic policymaking institutions are both "market-enhancing" and "growth-enhancing." By contrast, in developing countries, regulation is Indeed, several low and middle income countries more frequently used as a vehicle by narrow inter- (such as Kenya and Korea) have established regula- ests to strengthen rent-seeking and unnecessary tory governance institutions that have played a key and very damaging control over key parts of the role in facilitating and overseeing wide-ranging economy. Therefore, one of the key questions for and successful regulatory reform programs (see reforms in developing countries is how can insti- Appendix 1 for further information about these tutionalization of regulatory arrangements help countries' regulatory governance and institutions). reverse successful rent-seeking and corruption. One of the changes in governance of the past two Little empirical evidence exists on this issue. decades has been the restructuring of the institu- While some developing countries have adopted tions and processes of government, in particular similar institutional arrangements for regulatory the delegation of authority from politicians and reform similar to those existing in developed ministries to technocrats and regulatory agen- countries, there is no clear correlation at this early cies.10 Some explanations to this trend can be stage between those institutions and the improve- found in the literature. One approach focuses on ment of the quality of regulation. For example, the dynamics of regulatory competition between Mexico has established regulatory governance countries and suggests that governments need to institutions and a wide ranging regulatory reform provide an attractive market environment and a program. While the results have been positive, stable regime for investment if they want to these reforms are ongoing. By contrast, reforms attract capital. The second school of thought appear to have generated only limited results in focuses on regional integration processes and sug- some countries, such as Uganda (see Appendix 1) gests that regulatory agencies and regulations in for further information on recent developments general are part of a new political, social and eco- in Kenya, Korea, Moldova, Mexico, Macedonia, nomic order characterized by processes of regional Serbia and Uganda). Therefore, evidence that integration. A third approach highlights the role measures the extent to which new institutional of policy learning and `knowledge' actors in the arrangements in developing countries clearly diffusion of policy reforms, stressing the role of contribute to improved economic growth remains professionals, mainly economists, that promote patchy and limited at this stage. the creation of autonomous regulatory agencies as an institutional resource that consolidates their 11 Following North et al definition, open access societies reg- ulate economic competition in a way that dissipates rents position in the policy process. and uses competition to order social relations. They oppose to natural states, which use the political system to regulate Even if these discussions reveal how particular economic competition and create economic rents; they then use those rents to order social relations, control vio- institutional arrangements can improve regulatory lence, and establish social cooperation. North, D. ­ Wallis, quality, there is still a need to explain how to John ­ Weingast, B. (2008): "Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History" in: Governance, Growth, and Develop- 10 Gilardi, Jordana, and Levi-Faur, 2006. ment Decision-Making, World Bank, Washington. 5 WB202_IRG_i-40.indd 5 5/17/10 3:45:16 PM REGULATORY GOVERNANCE INSTITUTIONS: MAIN TASKS AND INSTITUTIONAL DESIGN Several countries have established institutions to regulatory reform, contributing to coordination that focus on facilitating and supporting the inside the administration and in some cases work- overall regulatory system, including its review ing as "engines of reform."12 It is also important to and reform. The most common tasks of such note that each country has approached the task institutions include: of reforming regulations and regulatory systems differently, according to its unique political econ- drafting rules and regulations (line ministries, omy, history, capacities, and objectives. regulatory authorities, specific institutions with regulatory powers); As a framework for analysis, the starting point of this paper is the institution-building design that regulating, and ensuring compliance and most OECD countries have followed. However, enforcement of rules (inspection bodies, the broad approach employed in most OECD audit offices, judiciary); and countries only partially matches the approach taken by many emerging and developing coun- overseeing, monitoring and reporting on the tries. For example, in emerging and developing operation of regulatory processes, institu- countries there is a clear trend to establishing reg- tions and systems (for example, on impacts ulatory governance institutions similar to those in of new regulation to assure quality of the OECD countries. But there is also greater varia- regulatory flow, and on the review and reform tion in the focus, role, capacities, resources and of the existing stock of regulations). skills of these institutions in developing country contexts. While there is a widespread understand- This section will focus on the third set of tasks ing that these institutions are essential to move within the responsibility of institutions that govern forward the regulatory agenda and correspond to and oversee regulatory quality. These institutions what is considered as good practice, there is little have played a key role in many OECD countries by promoting a "whole-of-government" approach 12 OECD, 2008 6 WB202_IRG_i-40.indd 6 5/17/10 3:45:16 PM empirical knowledge on the way developing Regulatory oversight bodies countries can establish similar institutions and processes that are commensurate with their Regulatory oversight bodies are the most wide- unique reform priorities, stage of development, spread and commonly employed institution respon- political challenges, and broader contexts. sible for regulatory management and reform. They are sometimes called a "Regulatory Reform Unit" The following subsections present a typology of or a "Commission" and are typically within gov- the most commonly found institutions for regu- ernment, operating as part of the machinery of latory reform, focusing on four different regula- government. These institutions are often employed tory reform institutions: in both presidential and parliamentarian systems of government, but in the former case they tend to 1. Regulatory oversight bodies located within have more extensive and formalized powers.13 The the executive branch and charged with driv- particular characteristics of these bodies are usually ing and managing regulatory reform efforts defined by the legal, economic, political and social across government on a day-to-day basis. conditions present in each country (see Box 1 for some examples of central oversight bodies). How- 2. High-level committees for regulatory reform ever, a review and analysis of regulatory governance charged with leading and guiding reforms and policymaking institutions in developed and from the political level. developing countries shows that there are also striking similarities in terms of key roles and func- 3. Advisory and/or advocacy bodies charged tions performed by them, including: with challenging and advising the govern- ment's regulatory reform policy. Leading or guiding reviews of the stock of existing regulation. The objectives of such 4. Ad-hoc institutions established to spearhead reviews typically include keeping the stock of specific tasks and regulatory review. regulations up-to-date and reflecting eco- nomic and social priorities; reducing regula- It is important to note that the distinctions tory and market risks and costs; encouraging between these institutions are often blurred and economic activity; and establishing a clear and their roles can also overlap. Therefore, these insti- transparent framework for regulations to make tutions defined broadly embrace a very wide it easier for businesses to comply with them. range of governance arrangements, roles, activi- ties, processes and outputs. Overseeing the quality of regulations through the "challenge function,"14 including reviewing The typology follows the analytical framework proposals for new regulations and compelling typically used in developed countries. However, the originating regulatory agencies, depart- it contains elements that are particularly relevant ments or ministries to revise and improve the to low-capacity country contexts. Thus, it incor- policy proposal to meet specified regulatory porates not only the "traditional" institutions quality standards. This function can include necessary for regulatory reform (regulatory over- power to veto draft legislation originated from sight bodies, high level committees for regulatory proposing ministries that does not conform to quality, advocacy and advisory bodies), but also the initial efforts of institutionalization through ad 13 US, Mexico and Korea, all of them presidential regimes, have regulatory reform units with extensive powers, even hoc bodies, such as committees, task forces, com- veto power to proposed regulation that does not comply missions, etc. The analysis focuses on functions with a high quality RIA. 14 The challenge function is the capacity the regulatory reform and arrangements of each one of the types of unit has to question the quality of a proposed regulation, institutions. even to veto it, through the RIA process. 7 WB202_IRG_i-40.indd 7 5/17/10 3:45:17 PM Box 1: Regulatory Oversight Bodies in Selected Countries In the UK, the Better Regulation Executive (BRE) is the institution responsible for regulatory reform issues across government. Located in the Department for Business, Enterprise and Regulatory Reform (BERR), it works with gov- ernment departments and regulators to scrutinize new policy proposals, achieve effective new regulations, make it easier to change or remove regulation where beneficial, to reduce existing regulatory burdens affecting busi- ness, the third sector and frontline staff in the public sector, improve transparency and accountability for regula- tion, effectively communicate regulatory changes and to drive forward the better regulation agenda in Europe. In Kenya, the government embarked on a comprehensive licensing reform whose results have led to strengthen- ing institutional capacities for regulatory reform. The government established in 2007 a Business Regulatory Reform Unit (BRRU) within the Ministry of Finance, in charge of coordinating the regulatory process. The main tasks of the BRRU since its inception have included: implementing licensing reform, setting up an electronic reg- istry, drafting a regulatory reform strategy for Kenya, introducing RIA, targeting reform at the sub-national level, targeting Doing Business-specific reforms. The adoption of the Business Regulation Bill will contribute to give a legal basis to this institution. In the U.S., the Office of Information and Regulatory Affairs (OIRA) is the oversight body for regulatory reform. As a federal office that Congress established in the 1980 Paperwork Reduction Act, it is part of the Office of Management and Budget, which is an agency within the Executive Office of the President. In addition to review- ing collections of information, OIRA reviews draft regulations and develops and oversees the implementation of government-wide policies in the areas of information technology, information policy, privacy, and statistical policy. OIRA reviews agency draft regulations before publication to ensure agency compliance. The review includes consideration of alternatives to the rulemaking and analysis of the rule's effects on society, both its ben- efits and costs. OIRA has more than 50 full-time professionals who work with agency professionals on specific issues and decisions. The majority of OIRA employees are career public servants. In Italy, the Better Regulation Unit (Unita per la Semplificazione) has been moved from the Legal Department of the Prime Minister's Office to the newly created (May 2008) Ministry of Simplification (Ministero della Sem- plificazione), under the Minister for Simplification. The Unit is in charge of cutting red tape, simplification mea- sures, very basic quantitative assessments linked to simplification and the implementation of the taglia-legge (guillotine law) at federal level. The Better Regulation Unit is composed of 30 experts nominated for three renew- able years, with proved expertise on legal, economic and organizational issues. Serbia created in April 2003 the Council for Regulatory Reform of the Economic System, whose mandate is to improve the business environment and foster entrepreneurship, to advocate initiatives and reforms for existing and proposed laws, regulations and other general measures and to provide opinions on draft laws, regulations and general measures, which the government then considers and eventually approves. The council is formed of high officials and private sector representatives. The minister of economy is the chair of the committee. Private sector representatives are also members and administrative support is provided by a small secretariat of econo- mists and lawyers. The Council reports periodically to the government. set standards for regulatory quality. The chal- Light' for Transition and Developing Coun- lenge function is usually formalized through tries," for further information and discussion. a standard obligation for the oversight body to inform the appropriate political decision- Ensuring policy advocacy, which can be seen making institution (i.e., Cabinet or Parlia- as an institutionalized process of pursuing ment) if it is in agreement with the analysis sustained improvements of both regulatory underpinning a regulatory proposal, often doc- and related economic policy in the long term, umented in a Regulatory Impact Assessment including policy and process change, and the (RIA) prepared by the proponent ministry. See development of new and improved policy- the related BRG paper, "Making it Work: `RIA making institutions, tools, and procedures. 8 WB202_IRG_i-40.indd 8 5/17/10 3:45:21 PM Providing advice and technical support in the issues with the business community and other regulatory process. This support can be given key stakeholders, such as a public-private dia- through guidance and training activities to logue etc. officials, and with manuals for officials, and "help desk" mechanisms to fill knowledge At this stage only a few developing countries have gaps and exploit expertise at the regulatory established a central oversight body. This is, in oversight body. part, because such bodies require high-level sup- port to be established and it also takes time to Monitoring and undertaking performance develop the capacities needed to be effective. assessments of the rest of public administra- That said, the experiences of countries such as tion on how regulatory policies are imple- Korea and Mexico that have established such mented, for example through the setting of units have been positive and encouraging. regulatory simplification targets, periodical reporting mechanisms, and monitoring and evaluation (M&E) reporting systems, pro- High-level committees for cesses and indicators. regulatory reform Commonalities of institutional objectives, roles, In some countries, high-level committees have arrangements, organizational structures, staffing been established through political decisions to strategies, as well as procedural and coordination provide information and guidance on regulatory mechanisms among regulatory policymaking problems, issues, priorities for reform and regula- institutions can be found in most developed and tory policy. In some cases, high-level committees developing countries. For example: can also make decisions about regulatory issues. Regulatory oversight bodies are commonly They are intended to leverage support for regula- placed within and at the center of govern- tory reform, collect relevant information and pro- ment, linked in the administrative hierarchy vide advice to decision makers (including at the to the Cabinet or President's office or to a political level) or make decisions about regulatory relevant ministry with strong economic and issues. They are usually supported by a small sec- society-wide focus. retariat. Alternatively, in some countries oversight bodies support the work of high-level committees Oversight bodies are staffed with a mix of by undertaking research and providing back- highly skilled technical experts on both eco- ground papers for consideration by the committee nomic and legal issues (economists and law- etc. (see Box 2 for examples of Committees for yers). Regulatory reform). The main functions of high- level committees include: Communication and cooperation between oversight bodies, line ministries and other providing very high-level support to regulatory regulatory agencies is effective, including reform and comprising high-level political, provision of clear guidance, collection of bureaucratic and/or business representatives; information about regulatory issues and impacts, disseminating knowledge and build- providing advice to governments and the ing capacities to undertake effective and broader community and/or making decisions timely regulatory review and reform. about the scope, design, orientation and implementation of regulatory reform. In some There are consultation systems and procedures to countries where oversight bodies do not per- engage in wide-ranging dialogue on regulatory form such roles, high-level committees do so; 9 WB202_IRG_i-40.indd 9 5/17/10 3:45:21 PM Box 2: High-Level Committees for Regulatory Reform In Denmark, the highest level coordinating body on regulatory reform is the Regulation Committee (depar- tementschefgruppen). Established in 1998 under the Prime Minister's Office, it comprises the Permanent Secretar- ies of the Prime Minister's Office and of the Ministries of Justice, Finance, and Economic and Business Affairs. Furthermore, other relevant ministries (Permanent Secretaries) participate when needed. The committee reports directly to the Prime Minister and is responsible for formulating and developing policy on legislative quality, and monitoring and ensuring its implementation in practice. The key mechanism for achieving the latter goal is its management of the legislative agenda for the coming year. The Regulation Committee is responsible for develop- ing policy on legislative quality as well as for vetting proposals for inclusion in the legislative program, based on criteria of necessity, feasibility and whether the proposals represent the most effective option. The Committee is supported by a Secretariat jointly operated by the Prime Minister's Office and the Ministry of Finance. When the Committee's recommendations regarding the legislative program are not accepted by ministers, the matter is discussed by the Economic Committee of the Cabinet or in other relevant Cabinet committees. In Canada, the Special Committee of Council (SCC) is responsible for the government's Federal Regulatory Pol- icy. This Committee is supported by the Regulatory Affairs Division which provides secretariat support to the SCC. This includes monitoring regulatory proposals and preparing briefing material for the weekly SCC meetings. The Regulatory Affairs Division also supports the development and implementation of the regulatory policy. Finally, it provides secretariat support to the Deputy Ministers' Challenge Team on Law Making and Governance. The SCC is one of the Cabinet Committees and has nine members. The Treasury Board President is a member of the SCC. Four ministers must be present to have a quorum. In most federal acts, the regulation-making authority is the Governor in Council. In practice it is a Committee of Cabinet Ministers, the SCC, which acts as Governor in Council. The term "Governor in Council" means the Governor General, acting on the advice of the Privy Council (i.e. the Cabinet or one of its Committees, notably the SCC). SCC's responsibilities include consideration of all Orders in Council (OICs) and regulatory submissions that originate from departments and that require Governor in Council approval. When a regulation is to be made or approved by the Governor in Council, the SCC approves it for pre-publication in the Canada Gazette, Part I. Afterwards, the SCC approves it to be sent for signing by the Governor General and subsequent registration and publication in the Canada Gazette, Part II. When reviewing regulations, the SCC focuses on potential impacts on Canadians such as costs, benefits, fair- ness, policy or political implications and competitiveness. In Bangladesh a Regulatory Reform Commission (RRC) was established on October 30, 2007. The RRC Chair- man and Members have backgrounds working at the most senior levels of government or the private sector and are appointed by the government of Bangladesh, with the RRC served by a secretariat of skilled staff. The RRC under- takes research into regulatory issues and makes recommendations to the government about how the regulatory system could be improved. For example, the RRC reviews and reports on the stock of existing regulations, certain proposed new regulations, and regulatory reform programs and tools, such as RIA. The RRC also works closely with other stakeholders, such as the Bangladesh "Better Business Forum" and other business and community groups. resolving differences of opinion and adminis- tions made by regulatory reform units on the trative practice between different areas of quality of RIA, which provides greater credi- government on fundamental approaches for bility and weight to the use of this tool for regulatory management, finding solutions policy decision making. that create consensus and an agreed way for- ward; and In terms of their institutional arrangements, the following common elements can be found in the providing opinions about the quality of pro- high-level committees: posed regulations, often leveraging off a RIA process and/or public-private dialogue. High- They are composed of senior ministers and/ level committees for regulatory reform might or very senior officials representing the core exert the veto power based on recommenda- ministries dealing with regulatory reform, 10 WB202_IRG_i-40.indd 10 5/17/10 3:45:21 PM (e.g. Ministry of Finance, Ministry of Econ- decisions on regulatory policy and its implemen- omy, Ministry of Trade, Ministry of Planning, tation. Such bodies often comprise senior busi- etc). In some countries, such as Tajikistan, the ness and government representatives who are head of state chairs meetings of this group. well-respected opinion leaders. Support is usu- ally provided by a small secretariat. They usually meet on a regular basis. They also have a more permanent longer term role Both advocacy and advisory bodies for regulatory compared to ad hoc committees (which are reform have been key to supporting reform efforts discussed in detail below). in many developed and developing countries. They are created by a legal instrument or by A clear differentiation between advocacy and political decision of the executive, such as a advisory functions can be difficult to establish in President or Prime Minister. practice. Advocacy and advisory roles have a number of subtle but at times important differ- Many developing countries have recently estab- ences. For example, advisory bodies can some- lished high-level committees for regulatory reform. times comprise expert's in particular regulatory But it is still too early to ascertain how effective issues as well as senior opinion leaders. Advocacy such bodies are in driving better regulatory out- bodies are often very active in engaging in wide comes. However, early experiences in countries ranging dialogue with community stakeholders. such as Bangladesh, Vietnam, Kenya and Tajiki- That said, these roles can be provided effectively stan have been very encouraging. In these and either by one organization or by separate organi- many other low income countries, such bodies zations, as discussed below. have achieved considerable success in focusing the attention of governments and other stake- holders on the importance of good regulation in Public sector advocacy bodies facilitating greater economic development and prosperity. Many suggestions and ideas for regu- Public sector advocacy bodies essentially promote latory reforms have been recommended by such regulatory review and reform. They are usually bodies, which have in turn typically initiated financed by governments to support reform and robust and well-informed dialogue about how to help inform policy deliberations about regulatory improve regulatory systems and regulations. reform issues. Even if regulatory reform units are empowered with an advocacy role, in many devel- oped countries these units have had a rather lim- Advisory and advocacy bodies for ited impact deploying that function. That is why particular institutions have been created to deal regulatory reform with the advocacy function. Depending on In several countries, the regulatory reform pro- administrative traditions, some advocacy bodies cess has been supported by institutions with for regulatory reform have been even created by advisory and advocacy functions that incorpo- law, increasing the political commitment and rate the views of other interested parties, internal their independence. and external to the reform process. These institu- tions provide advice, facilitate coordination, and Advocacy bodies are conceived as a vehicle to col- advocate reform. They can operate either within lect information about regulatory issues (including government or outside government and usually the views of stakeholders), inform stakeholders have a relatively high level of independence. They and citizens about the benefits of regulatory typically have a clearly defined role, have a speci- reforms, and help to implement such reforms. fied focus and are advisory ­ they do not make Therefore, advocacy bodies are often supported 11 WB202_IRG_i-40.indd 11 5/17/10 3:45:22 PM by a secretariat and conduct research and per- generate reports, gather data or conduct sur- suade different stakeholders about the need for veys that can contribute to better policy deci- reforms in an independent manner. Membership sions. includes governmental and non-governmental personalities, which facilitates the inclusion of Contribute to a policy environment and businesses' and citizen's perspectives in challeng- community debate that is conducive to ing vested interests, as well as to overcome resis- reform. tance or bureaucratic inertia to reform the public sector. Box 3 describes the main characteristics of Support the identification of priorities and some Advocacy Bodies. sequence of reforms to reduce opposition, build coherence with other interventions and Some of the key functions of advocacy bodies for drive reform through and beyond the politi- regulatory reform are the following: cal cycle. Produce information that can help prepare Encourage the use of policy instruments and and reform regulations. Advocacy bodies can alternatives to regulation in order to advocate Box 3: Public Sector Advocacy Bodies in Selected Countries: Main Features Year (creation Name and country and existence) Membership Type of mandate Purpose and results Business Advisory 2006 10 business Permanent Strategic support by promoting reform and Council (BAC) ­ representa-tives reporting progress Croatia Operational and practical support by identifying missing regulations and being a link with business community, in particular SMEs External Advisory 2003­2004 10 business Ad hoc, it lasted Presented a final report with Committee on Smart representatives 15 months recommendations to improve the Regulation (EACSR) ­ Canadian regulatory system Canada Dutch Advisory Board 2000 3 business and Temporary It advises on proposed legislation and on on Administrative civil society cabinet plans, as well as on strategic Burden (ACTAL) ­ representatives subjects Netherlands Annual and ad hoc reports Better Regulation 1997­2007 15 (1 local Semi-permanent. It provided independent advice and Commission ­ UK government, It substituted the challenges to government on its manage- 6 businesses, Better Regulation ment and delivery of better regulation, as Today Risk and 8 civil society) Task Force well as independent scrutiny of departments' Regulatory Advisory plans for regulatory simplification. Council Annual and ad-hoc reports Productivity 1998 Chairman, Permanent Annual and ad hoc reports, research reports Commission ­ between 4­11 and commissioned studies Australia members Council for the 1994 15 members Renewed every Annual report and 3-year Action Plan Promotion of (7 business and 3 years under Regulatory Reform 8 civil society) different official (CPRR) ­ Japan names 12 WB202_IRG_i-40.indd 12 5/17/10 3:45:22 PM solutions that can break inertia in the Private or public/private sector approaches traditionally used by the admin- advisory bodies istration. Advisory bodies usually focus specifically on pro- Create and strengthen a constituency for viding advice to decision makers and the com- reform inside and outside the administration, munity about regulatory issues and how they can facilitating a forum for dialogue and cooper- be best managed. Advisory bodies for regulatory ation. reform can be from the private sector, a mix of public and private sectors, or include indepen- Advocacy bodies have been created in different dent regulatory experts drawn with academic and countries through a variety of mechanisms: other expert backgrounds. Furthermore, such bodies are typically appointed and endorsed by They have independence from the executive, governments. branch even if they are linked to the execu- tive authority. Such bodies are typically active in consultation with a wide range of stakeholders. These bodies They are integrated by members with various are important for consultation, data gathering, backgrounds and representing major stake- and feedback. But they do not have a specific holders in the regulatory process. mandate to independently drive their policy agenda and be proactive in their research and rec- Members are appointed for fixed terms in ommendations. Box 4 gives two examples of order to ensure continuity and political sup- advisory bodies in developed countries. port. Box 4: Advisory Bodies in Permanent or ad-hoc in nature, they are supported by a legal basis that varies accord- Developed Countries ing to contexts (law, decree, Cabinet deci- sion, etc.) In Italy, the Permanent Board for Simplification (Tavolo permanente per la semplificazione) was constituted in March 2007 as part of the efforts to These institutions are accountable through improve regulation and simplification policies, con- reports that are often made publicly avail- ceived as a consultative mechanism. The Board able. was created to study and review with interested parties and stakeholders the concrete measures to They report, in some cases, directly to a improve the regulatory system and reduce red senior minister and/or to the Parliament. tape. Meetings of the Board include representa- tives from government, business associations, con- sumer and users associations, regions, provinces At this stage developing countries usually do not and municipalities. use or rely on public sector advisory bodies. In the European Commission, the Group on Better Hence, experience with such bodies in develop- Regulation (Mandelkern Group) has provided ing country contexts is currently quite limited. It advice since 2002. Its main tasks included explor- is unclear whether establishing such bodies ing the systematic use of impact studies, how to should be a high priority for developing coun- increase transparency in the consultation process tries. Indeed, it may be better to focus, at least and the integration of simplification of adopted texts initially, on establishing high-level advisory com- and wide use of codification. The Mandelkern Group also concentrated on the type of structures mittees with senior public and private sector that would ensure new procedures to improve the representatives, along with private sector advo- quality of the regulation. cacy bodies. 13 WB202_IRG_i-40.indd 13 5/17/10 3:45:22 PM The functions of advisory bodies are the They can include private sector participation following: in various forms: as part of permanent repre- sentation or providing a forum for their par- Respond to government's requests to review ticipation. particular regulations, regulatory issues or government proposals, providing a focus for Such bodies currently operate effectively in a discussion and gathering opinions that can range of developing countries, such as Bangla- be transmitted to the government. desh, Tonga and Vietnam. In capacity-constrained countries where there is often limited dialogue Engage in regulatory policy dialogue and between the public and private sectors, such bod- debate. ies can provide a very effective way of initiating such dialogue, exchanging views, building trust Provide advice on alternatives to govern- and transparency, and developing agreement ment regulation to achieve government about desirable regulatory reforms. objectives and improve the regulatory environment. Strengthen consultation mechanisms, Ad-hoc institutions for regulatory including through engaging in direct con- reform: Working committees, task sultation with stakeholders about specific forces, etc. regulatory problems, issues and possible In an increased number of emerging and devel- ways forward. oping countries, some preliminary institutional arrangements are found to support initial regula- Advisory bodies have the following characteris- tory reforms. These institutions, ad-hoc in nature tics in terms of institutional arrangements: in most cases and with a narrow focus, are labeled in different ways. In some countries, they are They are established inside the administra- called committees or commissions, in others they tion, with members coming from different appear as task forces, sectors or initiatives. In many ministries and agencies relevant for regula- countries, these institutions have become, over tory decision. time, drivers of sector specific or issue specific regulatory reform. These institutions typically They are set up either on an ad-hoc or per- have the following functions: manent basis. Make specific recommendations on particu- They usually have a specific mandate to con- lar regulatory reform projects, issues or sider particular regulatory issues, problems or reforms to the government. possible solutions. Promote initial coordination among line Members meet to discuss and identify con- ministries, regulatory agencies and other crete measures to improve the regulatory sys- bodies with regulatory powers. tem and meet the mandate given to them by the government. Identify and create capacities for regulatory reform inside the administration. Their recommendations are not usually bind- ing, but they can provide inspiration for fur- Establish dialogue with the private sector by ther policy debate and action. promoting regulatory reform efforts, creating 14 WB202_IRG_i-40.indd 14 5/17/10 3:45:22 PM channels of communication and introducing country. This variation corresponds not only to consultation procedures with it. particularities of the context, but also to the nature and scope of the work they are assigned to conduct Launch specific parts of regulatory reform (see Box 5 for some examples). There are, however, projects or a single defined task or activity, such some common elements that can be identified: as programs on licenses, particular strategies for reducing administrative burdens, review of They are normally set up on an ad hoc basis. the stock of legislation, etc. These institutions are not designed to remain Lead and participate in the design, imple- in the institutional landscape of the country mentation and monitoring of projects on in the long term. They are established to be in regulatory reform. charge of particular efforts and programs. The governance arrangements and relationships There is no single model concerning their between these institutions differ from country to legal basis. They might be established either Box 5: Ad-hoc Institutions for Regulatory Reform In Mexico, the government set up in 1989 the Economic Deregulation Unit (UDE). This unit was created to implement the new policy process of regulatory reform. It was constituted by a small, high-level group of profes- sionals outside the traditional structures of the bureaucracy, ca. 15 economists and lawyers. It operated under the general purview of the powerful Ministry of Trade and was directly accountable to the trade minister. In 2000, the UDE became the Federal Regulatory Improvement Commission by the amendments introduced to the Federal Law of Administrative Procedures, which increased the responsibilities and scope of work. In Vietnam, the government set up in 1999 an Enterprise Enforcement Law Task Force, an institution responsible for overseeing the implementation of the Enterprise Law. In the first two years, the task force conducted work on licensing, recommending the abolishment of 160 business licenses that were deemed unnecessary out of a total of 335 that were in force. Lack of political commitment and vested interests reduced the effectiveness of the work done, and licenses increased by 2004. A new task force was recommended to conduct further work on licensing and its reform. The government of Vietnam recently launched Project 30, an ambitious public administrative reform initiative using the guillotine approach. The goals of Project 30 are to simplify and publicize all public administra- tive procedures concerning business and citizens, and to rationalize the process of issuing new procedures/ licenses. The Project is led directly by the Office of the Government (OOG). A Special Task Force and an Advisory Council consisting of 15 business associations, institutes and agencies team up with the Project at the central level. There is also one special task force for each ministry and each province nationwide. This is the first time that a Project has been designed with strong commitment from both the government and business associations. In 2004, the Minister for Finance of Kenya established a Licensing Committee composed of public and private sector representatives to review licenses. This committee worked from 2005 to 2007. The chairman of the com- mittee was a lawyer from the private sector, and other members came from government institutions. The joint secretaries were officers from the Ministry of Finance and the Ministry of Trade and Industry. During its two years of work, the committee prepared an inventory of 1,325 licenses imposed on businesses in Kenya. The commit- tee reviewed the licenses in accordance with specified criteria. The licensing reform served as a gateway for regulatory reform and opened up the possibility to address systemic problems. The government of Kenya decided to embrace a more comprehensive program, in addition to carrying on the licensing reform. To move forward on these tasks, the Ministry of Finance established a small unit, the Business Regulatory Reform Unit (BRRU) in 2007, composed of part-time junior level staff (with good technical skills and lots of enthusiasm) and led by a higher level officer with strong professional background, experience and networks, who had also served as a member of the Licensing Committee. Political support has also been critical for the success of the Unit, but its formalization has taken some time. 15 WB202_IRG_i-40.indd 15 5/17/10 3:45:22 PM by a legal document or by a decision of the such as the pace and sequence of the reform executive. program. They require political support from minis- Their creation is supported by donors. tries or parts of the center of government with a strong focus on economic and regula- Many developing countries now use public and tory issues and interested in enabling the private advisory bodies and private sector advo- business environment. cacy bodies. In many cases such bodies were estab- lished over the last few years, so it is too early to Membership depends on the role they have. draw definitive conclusions. However, the experi- Task forces, for instance, typically refer to ence to date has been broadly positive. In coun- intra-governmental groups without external tries such as Kenya such bodies have played a very representation. Committees, by contrast, important role in driving regulatory reforms. In often include private sector participation. others such as Bangladesh they have succeeded in raising the profile of regulatory issues among gov- They are chaired by a person with political ernments and other stakeholders. support and credibility, either from the pub- lic or the private sector. Regulatory experts Developing countries do not generally use a cen- often play a direct and active role. tral unit to oversee and facilitate regulatory reform. Nor do they employ public sector advi- They are usually small institutions supported sory bodies. While experience with these bodies by a secretariat and/or by staff with different is very limited, the establishment of a small over- backgrounds, usually economic and legal. sight unit to monitor, report and contribute to regulatory reform may be a useful low cost way of Their responsibilities can evolve and change strengthening regulatory institutions and pro- over time according to a range of factors, cesses in developing countries. 16 WB202_IRG_i-40.indd 16 5/17/10 3:45:23 PM BUILDING INSTITUTIONS FOR REGULATORY REFORM IN DEVELOPING COUNTRIES: CHALLENGES AND EMERGING LESSONS This section presents an analysis of common and viewed independently from the scope and the suc- diverse elements found in the case studies pre- cess of the reform process, are the following: sented in the Appendix, complemented by obser- vations and anecdotal evidence from ongoing Some form of centralized institutional arrange- programs. These key elements are fundamental ment by the government appears to be needed for establishing a strategy for building institu- to accompany the initial reform efforts (e.g., tions for regulatory reform. Kenya, Korea, Mexico, and Serbia). In all cases reviewed, initial reform efforts have been Based on those elements, a final section of this supported by an institutional arrangement, chapter will deal with some lessons learned that which can take the form of an ad hoc commit- can contribute to establishing some criteria in tee, a small unit in charge of targeting a spe- terms of functions and structure of institutions cific reform area, a group of experts in charge for regulatory management. of defining an action plan, or a task force in charge of a single defined activity. Institutional arrangements seem to be essential to take for- Key shared elements in institutional ward the reform agenda and to coordinate building for regulatory reform efforts inside the administration. They are also relevant to establish a counterpart for the The different case studies in the appendix, which private sector which might be included in include Kenya, Korea, Moldova, Mexico, Macedo- some of the arrangements. nia, Serbia and Uganda share many of the key ele- ments for the institutional setup for regulatory From the case studies reviewed there is a clear management and reform. These common elements, trend of governments establishing small rather 17 WB202_IRG_i-40.indd 17 5/17/10 3:45:28 PM than big institutions to launch regulatory a political will to implement reforms, which reform processes. This tendency can be in many cases supposes a confrontation with explained, in part, by regulatory reform often vested interests (inside and outside the being given a relatively low priority, at least administration). Lack of political support can initially. Once traction, momentum and lead to a delay in reform efforts, to with- stakeholder support for regulatory reform has drawal of formal backing and even to the developed, countries usually develop and extinction of the institution. This point is implement larger and more wide ranging reg- also illustrated in a few cases where the tech- ulatory review and reform programs. nical and preparatory work in support for a regulatory reform was fully in place. In the Technocratic and policy expertise is needed to case of Uganda, the Cabinet's reluctance/fail- undertake the tasks that institutions for regu- ure to endorse a RIA program led to wide latory governance are required to do. In devel- uncertainty about the credibility of the pro- oping country contexts, regulatory reform gram and lack of compliance with the con- institutions are normally staffed with a small tinued roll-out. number of professionals with outstanding skills and capacities. In some cases, different The center of government remains mostly backgrounds can also play an important role responsible for launching and driving regula- in consolidating teams that will have the capac- tory reform efforts. In most countries ana- ity to respond to different regulatory problems lyzed, the role of the executive branch, and in and challenges. Regulatory reform is not a sci- particular the Prime Minister's offices (Korea) ence, but it requires expertise and understand- and key ministries (e.g., Ministry of Finance ing of modalities, tools and approaches. One in Kenya, Ministry of Trade in Mexico), is key element in being successful at early stages fundamental in leading and kicking-off regu- of the reform process is to have the right peo- latory reform. This leads to the conclusion ple in place. Many of the cases revised show that any reform effort has to be championed that medium and lower level officials need to by the center of government--in fact, this have some initial expertise and capacities that corresponds to the nature of regulatory will be built over time. reform, a policy field that deals with core government functions and requires a change Political support is essential to ensure that the in the administrative culture. regulatory reform institution is seen by stake- holders, such as businesses, and the bureau- Advisory and advocacy bodies are key players cracy as a credible and influential body. in increasing awareness of the importance of According to the cases analyzed in this report, regulatory reform, in better reflecting private political support is fundamental to creating sector's interests and demands, and in estab- and maintaining successful regulatory reform lishing a communication and coordination institutions. Political support can be provided channel between the administration and by the appointment of members of the insti- external stakeholders. tution by very senior officials (President, Prime Minister, Minister), the institution In some cases, initial institutions for regula- being given a high level of independence and tory reform have been supported by interna- access to high level decision makers, the par- tional partners (international organizations, ticipation of senior officials in meetings and donors, consultants, etc.). Institutions for by endorsement of action plans and programs regulatory reform in emerging and develop- for regulatory reform. Political support also ing countries have been influenced by inter- means that behind the whole strategy there is national good practice models and tools that 18 WB202_IRG_i-40.indd 18 5/17/10 3:45:31 PM have been used by other countries. Success- reform institutions fail to achieve initial ful donor support is characterized by clear expectations. In such cases their roles will priorities and donors having a medium to usually evolve or change over time, as new long term focus needed to develop robust, issues or priorities emerge. Alternatively, sustainable and successful regulatory reform some regulatory reform institutions over institutions and processes. time gain traction, purpose and credibility. They usually improve their capacities and The role of donors has also an aspect related to ability to undertake a wider range of tasks the financing of these institutions. At early and focus on a wider range of issues. Stake- stages of their creation, these institutions are holders' support for regulatory institutions is often financed by donors. In very few cases central to their success or failure. In all cases, they are financed by the government budget. regulatory reform institutions change and This may occasionally have created perverse evolve over time and for those that achieve incentives for the remuneration of their staff success, it takes several years to establish a and very little incentives for long term institu- clear trajectory, gain credibility, clear direc- tionalization. Officials and local consultants tion and purpose. get attracted by working on ad hoc initiatives where resources are available and salaries can be higher than in the rest of the administration. However, if these institutions cannot be main- Divergent elements in institution tained over time in financial terms, there is a building for regulatory reform risk that key staff will move on when the highly remunerating ad-hoc structure is terminated. There is considerable variation in the context, role, structure, purpose and activities of regula- While donors play an important role in help- tory reform institutions. For example: ing to establish and finance regulatory reform institutions, one big challenge is that donor Although the "center of government" is organizations often have relatively short time broadly recognized as the best location for horizons ­ perhaps a year to two ­ while estab- the institution driving regulatory reform, lishing viable, successful and sustainable regu- the specific location within the executive for latory reform institutions usually takes several the regulatory oversight body varies from years. Therefore, in some cases donors have country to country. The decision where to helped to establish such institutions only to locate the oversight body has two main impli- withdraw support after a year or so and focus cations: on other activities. Paradoxically this short term focus on many donor organizations 1. The need to identify reform champions undermines the original objective of establish- inside the administration that will be in ing successful and sustainable regulatory a position to support the program, even reform institutions. confronting vested interest and resistance from other parts of the administration; Regulatory reform institutions in both devel- and oped and developing countries are not static and unchanging. Rather, they constantly 2. The need to build some sense of owner- evolve and change over time. Such institu- ship of the reform by certain institutions, tions take at least several months, usually which can later on reflect the way the longer, to be established and operational. As reform unit positions itself vis-à-vis other discussed above, in some cases regulatory institutions and external stakeholders. 19 WB202_IRG_i-40.indd 19 5/17/10 3:45:32 PM Regulatory oversight bodies and advisory and for regulatory reform and oversight bodies advocate bodies are set up with different legal may be confronted by interest groups which basis. The degrees of formalization of insti- oppose regulatory reform. For example, pri- tutions for regulatory reform are different vate sector interests sometimes oppose reforms across countries, which is certainly linked which may expose them to effective competi- to the specific legal and political environ- tion. In other cases powerful interests in the ment that exists in a particular country and bureaucracy oppose regulatory reforms because the legal underpinning that should back of perceived loss of power, status and influence. them. However, this fact might also be a con- Therefore, the sustainability or longevity of sequence of the degree of broader political such institutions may depend not only on its support backing the institution and a reflec- ability to conduct good focused reviews, but tion of the tensions that such an institution also on its ability to overcome powerful interest might create inside the administration. While groups lobbying to preserve the status quo. international practice suggests that units with legal bases tend to last longer, because that The way governments involve different stake- helps to isolate them from political turbu- holders in institution building varies from lence, some evidence shows that strong com- country to country. Even if external partici- mitment to reform and a good understanding pation seems to be a precondition for a more of the importance of regulatory reform inside successful reform, the level of involvement of the administration could help to keep them external stakeholders (mainly from the pri- even in the presence of a serious political crisis vate sector and academia) is different in each (e.g., Kenya in late 2008). What the cases country. In some cases, private sector repre- reviewed suggest is that it takes time to for- sentatives are part of the management and malize the framework to establish institutions decision level of advocacy/advisory bodies. for regulatory reform. They contribute by providing an external perspective that is useful to better define and Political leadership of the different institu- implement the strategy. tions for regulatory reform varies from coun- try to country. Political leadership can be The degree to which the unit responsible for linked to personalities, but it also refers to regulatory management and reform is able to the capacities that the unit develops to posi- integrate its own reform efforts into a tion itself inside the administration and national, broader reform process differs from against external institutions. This can cer- country to country. In the emerging and tainly have an impact on the policy formula- developing country cases reviewed for this tion and implementation of the reform. The paper, regulatory reform efforts are not cases reviewed show that different forms of isolated from a broader strategy to improve leadership are possible. In some cases, reforms the investment climate, to promote com- have been supported by particular individu- petition in the economy or to enable the als with strong commitment to reform, but business environment. In almost any case, in others leadership has been maintained by regulatory reform efforts have been under- having a capable, strong group of reformers. taken without considering that they are part In all cases, ongoing and sustained politi- of a broader strategy. cal support has been essential. In developing countries it has taken time to Experience in developed and developing coun- recognize that regulatory reform efforts play tries suggests that initial ad hoc institutions an essential role in changing the fundamentals 20 WB202_IRG_i-40.indd 20 5/17/10 3:45:32 PM of the regulatory system, and medium- and with the introduction and use of very spe- long term perspectives should be considered cific tools to simplify business procedures in the time frame of wins. Some countries and/or improve the regulatory stock, which have been more successful in placing the has been followed later on by an expansion regulatory reform efforts at the core of a of the scope of the regulatory reform. In broader strategy, which has an impact on the some other cases, regulatory reforms have way institutions can expand their responsibili- been ambitious since the beginning, trying ties (in particular the quality control role of to design a comprehensive policy, setting up draft regulations) and be seen as more author- regulatory institutions and introducing the itative when they advocate reform and win use of several tools to improve regulatory supporters. decision. The choice of using certain tools is relevant for sequencing, but in some cases it Regulatory oversight bodies tend to have is not done having in mind the different pos- increased responsibilities over time, but sibilities available. Successful stories and fail- the evolution of such bodies does not fol- ures can be found on both sides, but some low a uniform path. Increasing responsibili- evidence shows that starting at a small scale ties depends on different factors: the staff and increasing the scope of reforms gradu- capacities and skills available, the financial ally bring better outcomes. resources needed to increase the scope of the daily work, the political support that new The introduction and implementation of responsibilities could require and the extent RIA, as one of the main tools to improve to which the regulatory unit increases its regulatory decision, does not necessarily coordination power inside the administra- accompany the transformation of other tion, among others. A fundamental issue institutions dealing with regulatory reform. here, however, is to link responsibilities to Indeed, the establishment of RIA processes the reform process. For instance, at what and institutions has often been integrated at stage of the process can a regulatory reform different stages of broader regulatory institu- unit challenge the quality of a draft proposal? tion building. Some ad-hoc institutions for In other words, when is a regulatory reform regulatory governance seem to be in a posi- unit "mature" to do more and new things in tion to establish good grounds for RIA intro- expanding the scope of its work? Answers to duction, but others do not seem to have the these questions, as seen from the case studies capacity to do so successfully. This can be analyzed, can only be found in a combina- explained by different factors: tion of different factors and there is no evi- dence of a single way to do it. 1. It can be linked to the sequence of the reform process, in which RIA is seen as a Sequencing reform efforts is done in differ- medium-term goal. ent ways. Identifying proper sequencing in an appropriate manner is key to success- 2. It can also be linked to the scope of the ful implementation. In some of the cases, reform process, which might start with revised sequencing was shaped more as a the stock of regulation and the process consequence of specific contexts and con- does not move to the stage of tackling ditions than a broader predefined and the quality of the flow of regulation. predetermined strategy in which clear objectives and steps were proposed. In 3. It can be a response to the requirements some cases, regulatory reforms have started of donors, whose programs might be too 21 WB202_IRG_i-40.indd 21 5/17/10 3:45:32 PM ambitious and do not have sufficient Furthermore, it does not matter how brilliant tech- stakeholder support, or capacities to nical reforms are if the political economy is not properly implement. supportive and able to implement effective reforms. That said, many developing countries have estab- The institutions dealing with regulatory lished institutions responsible for regulatory reform reform issues tend to have different and (regulatory reform unit, committee, task force, etc) broader mandates than in developed coun- that start working on some aspects of a regulatory tries. In some cases, institutions for regula- reform program. The initial steps of the reform tory reform are also assigned with other program can include a licensing review and reform responsibilities or the staff is not only dedi- program, the use of certain tools for simplification cated to regulatory reform issues (e.g., Kenya). (such as the standard cost model to identify admin- This has important consequences in a posi- istrative burdens imposed on businesses by regula- tive and negative sense. While staff can have tory and taxation systems, etc). These focused a broader perspective and better understand- reforms will later on be expanded into a more com- ing of the roots and possible solutions of prehensive regulatory reform program, providing problems, these institutions can face prob- the initial institution with new and expanded lems in getting "reform attention" and get responsibilities. Specifically with regard to regula- sidetracked or distracted and focus on other tory oversight bodies that do not have wide-rang- issues and priorities. Long term sustainability ing powers and roles, ministerial committees can of these institutions varies in different coun- play a key role in making decisions on regulatory tries. Some institutions for regulatory gover- matters. Regulatory oversight bodies, at initial nance do not last long, some others are pre- stages of the reform process, are often supported served over time and even strengthened by by external partners, in particular donors that giving them a legal basis that isolates them provide consultants and support capacity-build- from political instability. Countries that have ing. The government can also establish an exter- made progress in preserving these institutions nal advisory or advocacy body that encourages over time probably foresaw a better institu- stakeholders´ participation and provides feedback tional design since their conception, paying for regulatory decisions. This watchdog institu- attention to organizational incentives, change tion creates additional transparency and a system management, human resources, accountabil- of checks and balances inside the administration ity issues and budgeting mechanisms. Politi- to improve the design and implementation of cal support also plays a determinant role in regulatory policy. their sustainability. Without it they tend to disappear and/or be replaced by other insti- Early in the evolution of a regulatory reform pro- tutional mechanisms that no longer have the gram, ad hoc institutions for regulatory reform power to move forward the reform agenda. have played an important role to kick-off initial reforms and generate traction and momentum for further ­ often more wide-ranging ­ reforms. The impact in generating reform momentum, Emerging lessons on the development however, depends in part on the extent to which of institutions for regulatory they contribute to the "institutionalization" of governance in developing countries regulatory reform. This institutionalization has to reflect the sequence of the reform process to make The institutional arrangement commonly found complementary the capacities of the institutions in emerging and developing countries has the fol- to the magnitude of the responsibilities they lowing structure. This does not correspond to a acquire over time (see Box 6 about the establish- recipe and variations exist in all countries. ment of Ad Hoc institutons in East Africa). 22 WB202_IRG_i-40.indd 22 5/17/10 3:45:32 PM First, they are at the core of the regulatory Box 6: Establishing Ad Hoc reform process and have the greatest respon- Institutions in East Africa sibilities in facilitating and/or conducting regulatory reform efforts. Five countries in East Africa (Uganda, Tanzania, Kenya, Rwanda and Zambia) that were part of Second, high-level committees' design depends country case studies conducted by IC continue to heavily on the particular governance and face challenges in building institutions for regula- reporting arrangements in a particular coun- tory reform. Kenya, Uganda and Tanzania have all established "Better Regulation Units" (BRUS), try, which makes it difficult to replicate in which have formally been given the responsibility other countries. for promoting better regulation procedures in gen- eral and for introducing regulatory impact assess- Third, ad hoc institutions tend to transform ment methodology in particular. There are propos- into units over time. als under consideration within the Rwandan and Zambian governments to do the same. These insti- The list presented below is not exhaustive. It tutional developments have been hampered by the fact that the BRUs have been given other just provides an initial categorization of mini- responsibilities, as in the case of Tanzania, or mal elements required to establish functioning have not been resourced at levels commensurate regulatory reform units or advisory/advocacy with their responsibilities, as in the case of Uganda. bodies for regulatory reform in countries with Perhaps, too much has been expected from these low capacities. units, given that they have not been supported by high-level regulatory councils that can continually reinforce the government's strategic commitment to reform. Setting up a regulatory reform unit: Structure and functions Successful institutionalization of regulatory In developing and emerging countries, regulatory reform institutions requires fundamental changes reform units are fundamental to design and to the incentives facing stakeholders, including implement regulatory reform. The establishment political decision makers, officials, business, the of these units has to be structured taking into media and other parties. If regulatory reform account the existing institutional framework in programs do not fundamentally change incen- the country and the specific legal, political and tives, the status quo will prevail and the regula- administrative contexts. tory reform program and associated institutions will not achieve their objectives of improving the Structure transparency, effectiveness and efficiency of regu- lations and regulatory systems. Some of the following elements are essential to define the structure of the unit in charge of regu- Based on the analysis conducted through the latory reform issues: review of some case studies as well as establishing some commonalities and differences found in The unit has to be placed at the center of institution building in those cases, some practical government, either under the Prime Minis- lessons can be drawn to structure and set up regu- ter's Office, Ministry of Finance, Ministry of latory governance institutions in developing Economy, Ministry of Planning or Ministry countries. This subsection concentrates only on of Trade. The actual location will depend on regulatory oversight bodies and advocacy/advi- which Ministry is capable and/or willing to sory bodies, for several reasons: provide certain institutional arrangements 23 WB202_IRG_i-40.indd 23 5/17/10 3:45:32 PM that will entrust the Unit with clear responsi- of practical organizational and management bilities, political leadership and accountable problems, such as salary differentials between mechanisms. foreign and local staff undermining the recruitment of top local experts. Foreign The unit has to be granted with a certain experts should also be accountable to the degree of independence that can help it to government, not only to donors funding exert its powers and take a lead in moving the their posts. Therefore, differences between regulatory reform agenda forward. Indepen- supervision controls, performance evaluation dence means in this sense having autonomy and remuneration should be avoided wher- in decisions, access to decision makers, allo- ever possible. cation of financial resources and technical capacity to make assessments with authority Functions and credibility. Some of the following functions are required for The unit has to report directly to the Minis- a regulatory reform unit to make its work rele- ter, Cabinet or other high level forum, which vant, credible and influential: will help minimize the risk of political inter- ference in the day-to-day work and advice of The unit needs to have coordination powers the unit. This will also provide the political inside the government so it can mobilize and support needed to perform its role well. incentivize ministries, regulatory agencies and their staff. Particular negotiations with some Even if a legal basis for the unit is not impor- line ministries can be useful to ensure their tant when the unit is first established, institu- participation in the reform process, along tionalizing its existence in a legal document with transparency mechanisms and the ability (law, Cabinet decree, ordinance, etc.) is advis- to report to decision makers where ministries able in the medium and long-term. or regulatory agencies are impeding the gov- ernment's regulatory reform program. The unit can be initially small. It can be staffed with a handful of skilled and moti- The functions of the unit depend, in part, on vated staff, increasing in size over time to the objective and scope of the work that typically between 5 to 20 staff members. A needs to be done. Functions should not be balance between different skills and back- too ambitious at the early stages so the unit grounds (economic and legal at least, but not has a clear and achievable objective and focus, only, experience in both public and private and can achieve results and build credibility. sectors, etc) helps ensure that the unit can Its functions should be well focused, strategic provide high-quality advice to decision mak- and consistent with broader policy objectives ers. Therefore, a key objective is to create the and developments. The main goal of the unit critical mass of qualified technical staff by should be to provide in a transparent manner concentrating key regulatory oversight func- high quality advice to decision makers about tions in the unit. regulatory issues, options and impacts, thus Units in developing and emerging countries improving the quality of new or amended are sometimes supported by donors who can regulations. provide foreign experts. This can provide the skills and insights needed to quickly establish At the early stages of its creation, the unit and focus the work of a regulatory reform itself has to establish and build the skills of its unit. However, this can also generate a range own staff and internal capacities, such as 24 WB202_IRG_i-40.indd 24 5/17/10 3:45:32 PM guidance manuals for officials etc. Donors can coordinate their contributions. The unit can provide critical support at this stage in help- help also align donor support to reduce trans- ing to build skills and capacities of the unit. action costs and duplications. Over time, the unit can itself provide targeted training and support to officials working on Monitoring and evaluation should be inte- regulatory policy issues and proposals. grated as part of the functions of regulatory institutions, including the regulatory reform They should develop minimal criteria and unit. M&E is an essential task to better rules for the introduction and implementa- understand developments in the process, tion of new or amended regulations. One identify gaps, and to review outcomes and way to do this is to employ RIA. The five key impacts of regulatory reform programs. elements of a RIA light system which have been developed by WBG for developing countries are: Setting up an advocacy and/or 1. Political commitment to establish and advisory body for regulatory reform operate an effective and self sustaining In emerging and developing countries, the estab- RIA process; lishment of some form of advocacy or advisory body for regulatory reform is also supported and 2. A unit or group of regulatory reformers recommended by WBG, to act as an external --preferably based in a central area of "watchdog," to give voice to the private sector government--which oversees, comments and other stakeholders. This institution can also and reports on the quality of regulatory contribute with an explicit advocacy role for proposals, before decisions about regula- making recommendations through consultations tion are made; inside and outside the government. 3. Clear and consistently applied criteria and rules employed to screen regulatory Structure proposals; Some of the following elements are fundamental 4. The regulatory policy development pro- in terms of structuring an advocacy and/or an cess is transparent and includes consulta- advisory body: tion with stakeholders; and Advocacy and/or advisory bodies have to be 5. A capacity building program is in place, placed outside the direct oversight of a min- involving preparation of guidelines, train- istry or agency. In the case of an advisory ing of officials preparing RIA and facili- body, it has to reflect the incorporation of a tating the required cultural changes, and diversity of ministries and agencies, while an establishing monitoring, evaluation and advocacy body should be above in the admin- reporting systems. istrative hierarchy to exert responsibilities with independence and credibility. In most emerging and developing countries, donors play a key role in financing and sup- Advocacy and/or advisory bodies should porting regulatory reform efforts. The unit can incorporate representation from the private often provide a point of contact with donors, sector and experts such as academics to help since it typically has a "whole of government" guarantee that their voice is heard and their perspective and can help donors focus and concerns are taken into account. An advisory 25 WB202_IRG_i-40.indd 25 5/17/10 3:45:33 PM body can link directly with the private sector They have to be seen as a forum of discussion through open consultations. Advocacy bod- that encourages debate on regulatory reform ies should have as part of their membership issues. representatives from the private sector. Advisory bodies have to reflect in their dis- Members of an advisory body can be repre- cussions the concerns expressed by businesses sentatives from different ministries and agen- and other stakeholders. They can incorporate cies whose recommendations are typically new consultation mechanisms with stake- not be binding on the government or deci- holders to gather information and establish sion makers. Advocacy bodies for regulatory links to private sector and community orga- reform should be integrated by stakeholders nizations. from the private sector, academia, etc. that are appointed for fix terms, have a clear role, Advisory bodies have to make recommenda- and focus but also independence from the tions that result from consultation processes government in fulfilling its role. to the regulatory reform unit. A key function is to advise the unit on how to deal with cer- Advocacy bodies should be transparent and tain issues and how to improve regulatory accountable. They should make their reports policy. publicly available and report to audit offices or Parliament. Advisory bodies should also Advocacy bodies are established primarily to be accountable by making public the results advocate for reform. As discussed in previ- of their deliberations and consultation proce- ous sections of this paper, this can be done dures, as well as the recommendations they in different ways, but among them, advo- put forward to the regulatory reform unit or cacy bodies have to raise awareness of regu- other institutions. latory reform issues and contribute to place those issues at the center of the political Advisory bodies can be set up on an ad hoc debate, in order to increase constituency for basis. Advocacy bodies can be institutional- reform. ized on a more permanent basis. In both cases, high level and ongoing political sup- Advocacy bodies have to provide clear guid- port is required to give the body the credibil- ance on the way forward with regulatory ity and influence it needs to achieve its stated reform. objectives. Advocacy bodies can act as a watchdog in the regulatory process, in particular when a Functions RIA system is being set up. At initial stages Some of the following functions should be under- of the process and while ministries and regu- taken by an advisory or advocacy body to make latory agencies are developing capacities to its work relevant: conduct RIA, the regulatory reform unit can do RIAs. Over time, the advocacy body can Strengthening coordination and consultation play a role in reviewing the quality of the among institutions inside the administration RIA and guaranteeing that it is conducted in is a fundamental function of advisory bodies. the proper way. 26 WB202_IRG_i-40.indd 26 5/17/10 3:45:33 PM CONCLUSIONS Building better and stronger regulatory institu- decisions, low degree of stakeholders' participa- tions is a key component of regulatory reform tion, inefficient data collection, etc) can be more efforts in emerging and developing countries. acute and have a negative impact in the way insti- Even if little evidence exists so far to demonstrate tutions are set up and developed over time. Insti- the extent to which the setup of institutions has a tutions can neither be built at the speed they direct impact on improving economic growth, grow in developed countries nor acquire the adequate institutions with clear governance functions and responsibilities they have in those arrangements seem to be an integral part of the contexts. regulatory system and of the efforts that emerg- ing and developing countries are taking. Institu- This means that institutions for regulatory qual- tions have contributed to move forward the ity in emerging and developing countries have to reform agenda and to improve the regulatory evolve as the whole strategy matures: environment by setting new rules, increasing transparency and promoting a cultural change in Institutions have to be shaped integrating the administration. governance parameters such as transparency, independence, and accountability. The analysis of the small number of available cases shows, however, that transferability of insti- They have to be built in response to the scope tutional arrangements from developed to emerg- of the regulatory policy and to be effective ing and developing countries is not the best and for its purposes. only solution. In low capacity countries, a num- ber of factors with different sources of origin (lack They have to acquire expertise and skills over of resources and skills, polarization of regulatory time and increase their responsibilities once 27 WB202_IRG_i-40.indd 27 5/17/10 3:45:33 PM they have grown to move from one step to These conditions can certainly be difficult to the other in the agenda. meet, but successful stories documented in this paper show that institution building can make a They have to reflect the political support and great contribution to regulatory reform if it is make sure they are credible vis-à-vis other well-designed and meets expectations. institutions inside the administration and external stakeholders. 28 WB202_IRG_i-40.indd 28 5/17/10 3:45:35 PM BIBLIOGRAPHY Acemoglu, Daron (2008), "Interactions between De Francesco, Fabrizio (2006), Towards an Governance and Growth: What World Bank `Impact Assessment State' in Europe? 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REGULATORY GOVERNANCE INSTITUTIONS IN SELECTED EMERGING AND DEVELOPING COUNTRIES The following appendix presents a series of case environment in Kenya started with reforms tar- studies in which institutional frameworks for geting business licensing. regulatory governance have been set up to accom- pany different degrees of regulatory reform An IC study prepared in 2004 identified the efforts. Each case contains an analysis of relevant licensing regime as a major burden on business variables that help understanding the design, activity. The "guillotine" approach was recom- setup, lifecycle and some measurement of success mended as the most appropriate mechanism to or failures by these institutions. The case studies implement licensing reforms in a comprehensive, were constructed by a review of existing literature cross-cutting manner. To this end, the Minister and interviews with people directly involved in for Finance of Kenya set up a licensing committee them. composed of public and private sector representa- tives to review licenses. This committee worked Some of the variables incorporated in the case from 2005 to 2007. The chairman of the com- studies include: permanent or ad hoc (time- mittee was a lawyer from the private sector, and bound), established by law or decree/circular, other members came from government institu- mandate to review pre-defined types of laws/reg- tions. The joint secretaries were officers from the ulations or new regulations, mandate to explore Ministry of Finance and the Ministry of Trade regulatory issues on own initiative, advisory or and Industry. As is the practice in Kenya, com- executive role. mittee members received an allowance from the government for their participation. Kenya During its two years of work, the committee pre- Institutionalization of regulatory reform in Kenya pared an inventory of 1,325 licenses imposed on has gone through several phases. The current businesses in Kenya. The committee reviewed the regulatory reform efforts to improve the business licenses in accordance with specified criteria 32 WB202_IRG_i-40.indd 32 5/17/10 3:45:38 PM ("necessity," "legality" and "business friendliness"). efforts, played a coordinating role, and also helped Because of the energy of the chairman of the com- to highlight the important achievements in licens- mittee, as well as the high political priority placed ing and other reform areas that would impact on the review process, it was possible to sustain Kenya's Doing Business indicators. This contrib- the work over this period. At the end of its man- uted to the naming of Kenya as a "global top-10 date, the committee submitted recommendations reformer" in the DB Report of 2008. for each license: if a license met the criteria noted above, the license should be retained; if it met Political support has also been critical for the suc- only some criteria, it could be simplified; if it was cess of the unit. In his annual budget speeches of found that it did not meet the criteria, it was rec- 2006, 2007 and 2008, the Minister for Finance ommended to be eliminated. The committee pro- expressed the government's strong support for duced a final report with the overall findings, as licensing and regulatory reform. This has signifi- well as some recommendations on next steps, cantly bolstered the BRRU's work within the including implementation of the licensing reforms Ministry of Finance and across government. and the need to address underlying regulatory Another factor contributing to the credibility of reforms. Not all recommendations of the com- the unit is that the junior staff reflects diverse mittee to alleviate the burdens imposed by the geographic representation, a consideration that licenses survived the subsequent budget and proved to be critical as Kenya descended into political decision-making stages, but a good deal post-election crisis in early 2008. of reforms were adopted and implemented. The formalization of the BRRU has taken some The licensing reform served as a gateway for regula- time. During initial planning discussions, there tory reform and opened up the possibility to address were concerns that dedicating junior staff to spe- systemic problems. The government of Kenya cific activities would limit their professional decided to embrace a more comprehensive pro- growth opportunities. As a result, people partici- gram, in addition to carrying on the licensing pating in the unit have other tasks inside the reform. To move forward on these tasks, the Minis- administration that are not related to regulatory try of Finance established a small unit, the Business reform issues. This has made it difficult to ensure Regulatory Reform Unit (BRRU) in 2007, com- constant levels of commitment. posed of part-time junior level staff (with good technical skills and lots of enthusiasm) and led by a So far, the BRRU is not a completely institution- higher level officer with strong professional back- alized unit. Additionally, with the end of the ground, experience and networks, who had also work of the licensing committee in 2007, there is served as a member of the licensing committee. presently no institutionalized structure to provide expert oversight or direct private sector feedback The main tasks of the BRRU since its inception to the work of the BRRU. One solution for insti- have included: implementing licensing reform, tutionalizing the BRRU, as well as relevant super- setting up an electronic registry, drafting a regula- visory and advisory structures, is the adoption of tory reform strategy for Kenya, introducing RIA, a business regulation bill. However, this has faced targeting reform at the sub-national level, and some delays, possibly due to competing interests targeting Doing Business-specific reforms. Kenya's within government bodies, including the Minis- efforts in improving the Doing Business indica- try of Finance itself. tors served as an important catalyst and rallying point because they opened up channels of com- The unit still needs to strengthen its role as a forum munication inside the government. The BRRU, of discussion of regulatory reform efforts. It has in the first several years of DB-related reform not yet opened up its activities for stakeholders' 33 WB202_IRG_i-40.indd 33 5/17/10 3:45:39 PM review and suggestions. This is a task that might The RRC was created to lead government-wide take some time and could be done only when the reforms. It was set up as an official government BRRU increases its responsibilities and scope of its body directly accountable to the Korean presi- work, integrating the use of RIA and consolidating dent and co-chaired by the Prime Minister. The consultations when regulations are produced. This RRC is composed of 25 members, 18 of whom would lead BRRU to have more oversight and are from the private sector and 7 government advisory roles in the future, a step that is envisaged officials from various departments. This brought in the whole regulatory reform strategy for Kenya. important changes in the relationship with the bureaucracy. Since government officials and civil- The Kenya example of regulatory reform has ians are part of the RRC, the structure created a been successful for several reasons. There was an more even match between reformers and those overall understanding that licensing was a major opposed to reform, internalizing reform in a per- problem for the economy and something had to manent "challenge function" in the bureaucracy. be done. The initial licensing program ended up The political support given by the Prime Minis- with an inventorization of all licenses, which had ter has been important to avoid capture by a never been done before and was considered a resistant bureaucracy. The secretariat function great achievement. The implementation phase of supporting the RCC is undertaken by the Regu- the licensing reform has been completed. It was latory Reform Office which is located in the conducted by a core group of reformers that are Prime Minister's Office. This unit includes very knowledgeable and convinced about taking around 40 civil servants and 3 professional the reform forward. Most importantly, they have experts, under the direction of the Deputy Min- created a network inside the administration that ister for Regulatory Reform. supports them in their efforts. The RRC has wide-ranging responsibilities and Even if Kenya experienced a difficult political powers. Its functions include not only quality crisis at the end of 2007 and the beginning of control of individual regulations, which has been 2008, there has been a political will to continue done through implementation of RIA, but also to support the BRRU and its efforts. The institu- to define basic direction for regulatory reform in tionalization of the unit through the bill had the country through the preparation of annual been already submitted and vetted, and many report plans, consultation with stakeholders and important stakeholders have agreed to do it in the public, and the review of RIA documents principle. The international exposure of Kenya prepared by ministries. Article 24 of the Basic Act (top reformer of Doing Business Report for on Administrative Regulations (BAAR) identifies 2008) and IC support throughout the process seven functions to be undertaken by the RRC. It have been essential to continue the regulatory states that the RRC is responsible for deliberation reform efforts. and coordination of: the basic direction of regulation policy as well Korea as research and development of regulatory institutions; In 1997, the Korean government established the Regulatory Reform Committee (RRC), created by items that pertain to the review of establishing the Basic Act on Administrative Regulations. Sev- and reinforcing new or existing regulations; eral committees had preceded its creation, but those institutions had a more ad-hoc character and review of existing regulations, establishment functions as they were dealing with particular laws and implementation of a comprehensive plan and issues that were hindering economic growth. on regulatory improvement; 34 WB202_IRG_i-40.indd 34 5/17/10 3:45:41 PM registration and promulgation of regulations; to build the institutional capacity for a compre- hensive approach to business environment reform, gathering and processing opinions on regula- which takes care of reforming existing regulations tory upgrading; (reviewing the stock) and creating disciplines for new regulations (reviewing the flow). inspection and evaluation of progress made by administrative agencies on different levels The following chart presents the desired institu- in terms of regulation improvement; and tional structure of regulatory reform in Macedonia. The government established a Committee for other items deemed by the head of the com- Implementation of Regulatory Reform, chaired mittee as requiring deliberation and coordi- by the Deputy Prime Minister for Economic nation of the committee. Affairs, to support the guillotine on regulations, introduced by a government decree on Novem- Even if the RRC has been essential in moving for- ber 2006. The institution that coordinates the ward the regulatory reform agenda, some policy guillotine process is a Sector for Regulatory areas remain out of its oversight and proposals of Reform, which consists of 34 working groups (14 law out of its scrutiny. In order to overcome this within ministries and 20 within other govern- gap, other committees and institutions have been ment bodies). The Sector for Regulatory Reform set up to continue efforts on regulatory reform. is responsible for introducing RIA (development The Regulatory Reform Task Force (RRTF) was of a RIA manual and RIA forms). established under the Prime Minister's Office in August 2004 to facilitate reform of "bundle regu- The roles of the different institutions are the fol- lations" that involve multiple ministries, rather lowing: than single regulations. The RRTF is under the responsibility of the Deputy Minister for Regula- The Steering Committee (SC). The objective tory Reform and comprises 26 public officials and of the SC would be to ensure the implementa- 24 experts from research institutes and businesses. tion of a comprehensive strategy for stimulat- This shows the government's strategy of fully ing economic growth through increased for- involving the private sector in the reform process. eign and domestic investment. Since improving the business environment constitutes a critical The work of the RRC and the RRTF are coordi- element of this strategy, the SC would be nated by the participation of the Prime Minister responsible for implementing a strategic in both the RRC and the Regulatory Reform approach to business environment reform and Ministerial Meeting, which oversees the work of for improving FYR Macedonia's attractiveness the RRTF. In addition, the deputy minister in as a location for investment. In addition, the charge of regulatory reform under the Prime SC will provide a forum for resolving cross- Minister is the administrative coordinator of the ministerial issues affecting the business envi- work of the RRC, RRTF and the Business Diffi- ronment. The SC should meet at least culties Resolution Center, which acts as a form of monthly. one-stop shop ombudsman to resolve regulatory issues faced by businesses. The Special Advisor to the Deputy Prime Minister for Economic Reforms on Busi- FYR of Macedonia ness Environment Issues. The role of the Special Advisor to the DPM would be to Macedonia has moved into regulatory reform support the work of the PM and the Deputy with the initial objective to improve the quality of PM for the Economic System with the SC. regulations affecting business activity. The goal is The Adviser's responsibilities will include the 35 WB202_IRG_i-40.indd 35 5/17/10 3:45:41 PM Chart 1: Proposed Structure of Regulatory Reforms in Macedonia Prime Minister Deputy Prime Minister for Economic Reforms (supported by a Special Advisor) Steering Committee for Regulatory Reforms Composition: Chair: Prime Minister General Secretariat: Sector Vice Chair: Minister of for Economic Reforms Economy. Members: relevant ministers involved Composition: in regulatory reforms 4 full-time dedicated officials Permanent Observers: include General Secretary for European integration Network of Legal and Business Advisory Group Economic Officials Composition: in Domestic/foreign businesses, small/large selected line ministries enterprises managers, representatives of National Entrepreneurship and Competitiveness Council, the Foreign Investors Association and Chamber of Commerce development of a strategic approach to improv- environment for conformity to RIA quality ing the country competitiveness, develop- standards. The responsibility for preparation ment and championing of the business envi- of the RIA for new regulations and policies ronment reform agenda, and monitoring of will rest with the relevant ministries. The business environment reforms. The Advisor head of the SER will report to the head of the will be supported by two full-time dedicated General Secretariat and the Deputy Prime officials who will: (i) prepare and/or commis- Minister for the Economic System. The SER sion background reports and analysis for SC will coordinate this task through the inter- deliberations; (ii) coordinate the agenda for ministerial network of legal and economic the SC; and (iii) provide logistical support to experts. The work of this sector will comple- the SC. ment that of the Policy Review Sector as well as the European Integration Sector of the The Sector for Economic Reforms in the General Secretariat. Therefore, organizational General Secretariat (SER). The role of this and functional synergies should be captured. sector will be to implement the regulatory The SER will also be responsible for moni- impact analysis function at the center of gov- toring and evaluation of progress made by ernment and to review proposed legislation. the government in improving the business Specifically, the SER will: (i) implement the environment (including monitoring the pace guillotine review of existing legislation in the and quality of regulatory reform), and infor- specifically targeted regimes ­ starting with mation dissemination among relevant stake- the two pilot regimes; and (ii) review new holders, including the business community policies and regulations affecting the business and civil society. 36 WB202_IRG_i-40.indd 36 5/17/10 3:45:41 PM The Business Advisory Group would pro- moved from a strategy of deregulation to a broader vide a critical link in the stakeholder consul- and more sustainable strategy of regulatory man- tation process by representing the business agement improvement. community and providing inputs for the National Strategy, and the SC's reform The new strategy was aimed at improving the agenda. The Business Advisory Group should regulatory environment for private sector activity include representatives of the National Entre- by creating appropriate market rules and institu- preneurship and Competitiveness Council, tions, and building more effective and efficient the Foreign Investors Association and Cham- governance. The UDE began to devote great ber of Commerce. It should meet with the efforts to horizontal regulatory reform that ben- SC at least on a quarterly basis. efited virtually all economic sectors. Once experi- ence was gained, the UDE developed tools for The Network of Legal and Economic Offi- regulatory governance, such as the control over cials would comprise high level officials of rel- the stock and the flow of regulations, imposing evant line ministries. They should be in charge minimum quality standards to ministries on new of preparing the RIAs and the submissions regulation. The UDE created a complete inven- under the Guillotine review process. In due tory of business formalities and required minis- time, the network of the officials should tries and agencies to submit a justification for become the grouping of key legal and eco- each one they wanted to impose. This process led nomic experts assisting ministers and senior to the elimination of 45 percent of business for- officials in preparing policies and regulations. malities by 1999. In 2000, the government moved to institutional- Mexico ize regulatory policy through a series of amend- Regulatory reform in Mexico started in the mid- ments that were introduced to the Federal 1980s, when the government opened up the Administrative Procedures Law. The UDE was economy after decades of protectionism and lib- transformed into the Federal Regulatory Improve- eralized a number of key economic sectors. From ment Commission (Cofemer), with an expanded the institutional perspective, the Mexican gov- mandate, legislative backing for many of the ernment assembled a small, high-level group of UDE's powers, and new enforcement powers. professionals outside the traditional structures of Cofemer was created mainly to impose quality the bureaucracy (15 people, mainly economists and transparency disciplines on the public sector. and lawyers). They formed the Economic Dereg- Cofemer quickly became a driving force for reg- ulation Unit (UDE), created in 1989, which ulatory reform in Mexico. With a budget of operated under the general purview of the power- approximately 5 million dollars per year, Cofe- ful Trade Ministry (SECOFI) and was directly mer is staffed by 69 employees, of which 60 are accountable to the Trade Minister. professionals (mostly economists, lawyers and industrial or computer engineers). It is headed At the beginning, the UDE directed much of its by a General Director, directly appointed by the efforts toward fostering efficiency in the provision Mexican President and who has the right to orga- of non-traded goods and services that were nize the structure and functioning of the Com- shielded from international market competition. mission. It used an opportunistic strategy, selecting eco- nomic sectors where deregulation could yield Cofemer's mandate is to ensure transparency in the large gains at little political cost. But later on, the drafting of federal regulations and to promote the UDE found that it could no longer address regu- development of cost effective regulations that pro- latory problems facing the economy unless it duce the greatest net benefit for society. Cofemer's 37 WB202_IRG_i-40.indd 37 5/17/10 3:45:41 PM approach to regulatory reform is based on its man- authorities, businesses and donors. It meets four date and encompasses four main activities: times a year to approve or contest the working group's decisions. The commission was in charge elimination and simplification of business of implementing the first Guillotine Law, which and citizen formalities; included a revision of more than 1500 official acts. The commission was also in charge of the transparent and analytical review of all draft registry of all official regulatory acts that affected regulations and their regulatory impact entrepreneurial activity, as well as of the coordina- assessments; tion in issuing certificates given by central admin- istrative bodies and subordinated institutions to diagnosis of and proposals to reform existing legal and natural persons to do businesses. laws and regulations in specific areas or eco- nomic sectors; and A second Guillotine Law was approved in 2006, and entered into force in 2008. This law intro- support for state and municipal regulatory duced basic principles for regulatory quality, improvement programs. such as predictability, transparency and the use of RIA. The law facilitated the set up of a spe- Cofemer is responsible for designing, coordinat- cial commission, adopted by Parliament deci- ing and implementing a Regulatory Improvement sion, which is in charge of linking between the Program, supported by the Federal Regulatory interdepartmental commission and the Parlia- Improvement Council, which was also strength- ment to improve the regulatory environment ened by the amendments to the Federal Adminis- for businesses. trative Procedures Law. This council is chaired by the Minister of Economy. Members come from different ministries, business sector representa- Serbia tives, academia, competition authority, consumer protection agency, etc. Serbia created in April 2003 the Council for Reg- ulatory Reform of the Economic System, whose The Mexican government has also set up a Coun- mandate is to: cil for Competitiveness to foster and consolidate competitiveness of the Mexican economy. This improve the business environment for private council allows private agents to liaise with differ- firms and foster entrepreneurship; ent ministries and other agents from economic sectors to analyze concrete structural and sector- advocate initiatives and reforms for existing focused strategies to increase competitiveness. and proposed laws, regulations and other general measures; and Moldova provide opinions on draft laws, regulations and general measures, which the government On February 2004, the government of Moldova then considers and eventually approves. introduced a decision to reform state regulation on entrepreneurial activity. To reach this objec- The council is formed of high officials and private tive, the government created an interdepartmental sector representatives. The Minister of Economy commission, as a political body with decisional is the Chair of the committee. Private sector repre- powers to coordinate the reform. A working group sentatives are also members and a small secretariat was attached to the commission, working as it of economists and lawyers assists the council's secretariat. The commission is composed of meetings. The council reports periodically to the 36 members, including representatives of public government. 38 WB202_IRG_i-40.indd 38 5/17/10 3:45:42 PM During the first year, the council's main activities This unit was in charge of designing a RIA system were to reform the registration of the business with input from the Cabinet Office. The program system, to prepare RIAs on targeted proposals, team that participated in that proposal was based and set up a registry of regulation with legal in MoFDEP, but it worked with relevant govern- security. ment agencies, including the Cabinet Office, the Ministry of Finance, the Ministry of Trade and Industry, the Uganda Management Institute and Uganda the Office of the Prime Minister. The Poverty Eradication Action Plan identified some of the constraints on private sector competi- In 2006, when the funding from donors stopped tiveness, and better regulation and RIA as tools and the Ministry of Finance ceased to be the that the government could use to achieve economic main ministry driving regulatory reform, the growth. In the framework of that plan, Uganda has Regulatory Best Practice Unit was transferred to worked since the late 1990s on establishing a pro- the Ministry of Tourism, Trade and Industry gram for regulatory reform that has covered differ- (MoTTI). The reasons for this institutional move ent aspects, the institutional included. are of a different nature, but the most important ones refer to the fact that the MoFDEP did The Regulatory Best Practice is aimed at improv- not show commitment and ownership of the ing the quality of Uganda's regulatory environ- project to maintain sustainability over time, while ment and investment climate. Two phases took the main focus of its work was on macro level place in the framework of that project: issues and the budget. The move to the MoTTI was appropriate as that Ministry was interested Phase 1, the Deregulation Program (2000­ and supportive to the project, but the timing 2003), was coordinated by the Ministry played against it. of Finance and Economic Development (MoFPED) and focused on piloting regulatory As a result, the Cabinet Secretariat in the Office of best practice, advising government on oppor- the President was entrusted with key responsibili- tunities for regulatory simplification, reform- ties in government policy monitoring, manage- ing specific legislation, capacity building, etc. ment and performance; and evaluation. It projected substantially increased levels of competence and Phase 2, the Regulatory Best Practice Pro- professionalism, and showed itself to be commit- gram (2004­2007), was given a wider focus ted to international best practice standards. The and aimed to institutionalize regulatory best RIA Unit was created and placed in that institu- practice and RIA in policy and lawmaking in tion. The main tasks of the RIA Unit were to the country. champion institutionalization of RIA process across government, to issue policy guidance on RIA and This second phase included the setting up of a to track progress with regard to the quality of draft Regulatory Best Practice Unit within the MoFDEP. policy submissions to Cabinet. 39 WB202_IRG_i-40.indd 39 5/17/10 3:45:42 PM ANNEX 1: BETTER REGULATION FOR GROWTH PROGRAM The Better Regulation for Growth (BRG) Pro- The BRG Program has resulted in preparation of gram was launched in 2007 by the Dutch Minis- eight thematic papers on regulatory governance try of Foreign Affairs, the UK Department for issues, covering a broad spectrum: from regula- International Development (DFID) and IC, the tory governance, links to competition policy, investment climate advisory service of the World regulatory institutions and tools to indicators for Bank Group. regulatory quality. It has also involved prepara- tion of five country case studies on regulatory The objective of the BRG is to improve the regu- capacities in selected African countries. latory and investment climate in developing countries, thereby stimulating private sector The web portal www.ifc.org/brg is part of the investment, economic growth and poverty reduc- BRG Program and contains key documents, tion. The BRG program aims to achieve this by including references extracted from a compre- developing and disseminating for the first time hensive compendium of resources on regulatory widely practical and operational guidance that management and reform and a newly developed will help developing countries design and imple- RIA database. ment effective regulatory reform programs. 40 WB202_IRG_i-40.indd 40 5/17/10 3:45:42 PM