Financial Times

Effectiveness of regulatory impact assessments
The Institute of Policy Studies (IPS) has developed a concept paper for policy makers on "Regulatory Impact Assessment - A Tool for Better Regulatory Governance in Sri Lanka" (www.ips.lk/percr/news.html).

The authors argue that regulations are necessary to avoid market failures due to natural monopolies, externalities and information inadequacies and to ensure social equity. They further argue that proper regulatory structure benefits consumers as well as investors, and that bad regulations impose unnecessary costs, hampers innovation and adversely affects FDI flows. They assess in the context of ministers being empowered to issue regulations and at times regulatory agencies being empowered that there is no effective systematic evaluation of alternatives and potential consequences, resulting in unintended adverse impacts causing unnecessary burden on society.

Quoting Norman Lee "that Regulatory Impact Assessments (RIA's ) assist those engaged in planning, approving and implementing improvements to regulatory systems," they conclude that benefits of RIA's outweigh costs and widespread consultations in the process assures equity and higher commitment to compliance. The IPS team draws international best practices from USA, OECD, Mexico and South Korea.

OECD suggests 10 questions that policymakers should ask about any regulations as ;

* Is the problem, to be addressed correctly defined?
* Is the government action justified to deal with this problem?
* Is regulation the best form of government action?
* Is there a legal basis for regulation?
* What is the appropriate level(s) of government for this action?
* Do the benefits of regulation justify costs?
* Is the distribution of effects across society transparent?
* Is the regulation clear, consistent, comprehensible and accessible to users?
* Have all interested parties had the opportunity to present their views?
* How will compliance be achieved?

The researchers have ascertained that 10 out of 40 developing and transition economies surveyed by CRC have RIA's as a part of the legal system.

They wish to assess whether the best option for building an effective regulatory management system in Sri Lanka with the highest level of political support is to identify a suitable ministry or agency to push the action strategy. They believe the Ministry of Finance, President's Office or the Cabinet Office to be the best options. They question whether the RIA should be a sunset unit or a continuing unit with skills of economics, law, engineering, environment, and sociology within a flexible organization structure and procedure insulated from political changes and entrenched by law for better decision making and regulatory governance.

The objectives of the process are summarized as, to clearly define rationale for government intervention, to identify groups affected by regulation, evaluate cost benefits and evaluate impact on small business and competition.

My question here is, why do so many researchers, consultants and policy makers commit the same mistake by beginning policy recommendations with international best practices, experiences in developed economies with high standards of governance where people are committed to demanding accountability? Why do they not begin the process with an assessment of the ground situation at home, past experiences of effectiveness of regulatory enforcement and a review of case studies of how best drafted regulations and structures have been cleverly frustrated and overpowered? Why do they have such short memories, to forget the events connected with the appointments to Bribery Commission and Elections Commission, changes and by passing of key officers of the judiciary, armed services, police, and director generals of regulatory authorities who failed to tow the line? They have forgotten the pressure exerted by thugs and the underworld on those responsible for effective enforcement? What happened to those who dared to question and expose regulatory issues and violations in the media?

In the context of the local realities, international best practices need to be brought in to action only via vehicles that can withstand opposition from those likely to bypass the regulatory framework.

For example, how can the regulating ministry control illicit sand mining when provincial big wigs and the police are on the pay of those committing the offence? How can corrupt officials and ineffective certification systems police effectiveness of imports and exports, within regulations?

Policymakers have to begin at the beginning and improve significantly awareness of, the rationale for and the commitment to regulations by all stakeholders of society (without age, gender or educational level related barriers).

The educational establishments, media and civil society groups must become actively engaged in this process, starting from the base village structure.

The society as a whole must care for effectiveness of regulations and commit to adherence and even be prepared to challenge persons breaking the rules irrespective of power and position.The society must publicly decry such actions imposing shame, ridicule and revulsion of society on wrong doers. Then only will regulations work, and not merely by conducting RIA's .

(The writer could be reached at - wo_owl@yahoo.co.uk).

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