Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments   1 Regulatory Impact Assessment Regulatory Impact Assessment (RIA) is recognized by most major European Commission proposals are now supported developed countries as a key instrument to improve the by RIAs and more than 800 impact assessments have been quality of regulatory decision making. RIAs are widely used carried out since 2003.2 Today, following these initiatives, within the member countries of the Organisation for Eco- 92 of the 185 countries surveyed by the Global Indicators of nomic Co-operation and Development (OECD), and today an Regulatory Governance (GIRG) conduct an impact assess- increasing number of developing countries are implement- ment of proposed regulations. However, strong disparities ing new RIA procedures in their regulatory governance sys- exist across various income levels. tems. This case study analyzes a global unique data on RIA implementation worldwide, highlighting best practices and In the past two years, at least 13 countries as varied as Fin- identifying areas for improvement. land, Vietnam and Zambia either created or reformed RIA procedures. This increasingly universal, yet not new, interest “We need to tackle regulation with vigor to free businesses to com- is not coincidental. High-quality regulations allow for sus- pete and create jobs, and give people greater freedom and personal tainable growth, investments, innovation and market open- responsibility [. . .]. I want us to be the first Government in modern ness (OECD 2015a). Countries from all income levels need history to leave office having reduced the overall burden of regula- effective regulations to support the rule of law, as poor regu- tion, rather than increasing it.”1 These words were said by David latory governance harms citizens’ trust in institutions and Cameron, United Kingdom’s Prime Minister to all Cabinet encourages corruption in the public sphere (OECD 2015a). In Ministers in the midst of reforming the country’s RIA pro- this respect, RIA allows rule makers to improve regulatory cedures. The statement appears on the first page of the 2015 governance by developing a comprehensive framework in Better Regulation Framework Manual as a reminder to gov- which regulatory and policy options are assessed in an effec- ernment officials of the importance of conducting proper tive and transparent way. Even though introducing RIAs and thorough RIAs. from scratch is not an easy undertaking, many countries have had positive effects right after reforming their regu- RIA plays a crucial role in improving rule-making qual- latory frameworks. Moldova, for instance, found that new ity and promoting good governance. Its global impor- regulatory proposals decreased by 39 percent the year fol- tance increased significantly after RIA was introduced in lowing the introduction of compulsory RIA. Members of the the United States regulatory system in 1978. Over the past Moldovan RIA Secretariat believe that this downward trend 30  years, RIA has been heavily promoted by international resulted from a transformation of civil servants’ mindsets, organizations such as the World Bank, as this approach who began to understand the dire consequences of badly allows governments to ensure that the laws and regulations designed regulations and hence refrained from submitting they develop and implement are of high quality—efficient, poorly designed proposals (Ladus 2008). Similarly, in the transparent and accountable (Morrall 2001). RIA as a key ele- Republic of Korea, more than 25 percent of the draft regula- ment of the rule-making process has attracted the attention tions proposed within the year after the introduction of RIA of many international actors. Observation of RIA practices is were rejected by the Regulation Reform Committee (OECD part of the OECD Council’s official policy recommendations, 2000). and today 32 of the 35 OECD countries include RIA in their regulatory frameworks (Deighton-Smith, Erbacci and Kauff- RIA also has proven to be an effective tool for designing mann 2016). Similarly, in the case of the European Union, the cost-efficient regulations. For instance, the first proposal development of the Better or Smart Regulatory framework of the regulation concerning the Registration, Evaluation, has been a priority for many years. Particularly, the devel- Authorisation and Restriction of Chemicals (REACH)3 from opment and implementation of the European Commission’s the European Commission could have imposed a 10 billion RIA system has contributed to more efficiency and better euro cost on the European chemicals industry. However, use of evidence in the development of new regulations. All after conducting a thorough RIA and holding a public debate 1 2  Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments discussing various regulatory alternatives, the regulation was revised to make it more cost effective and less bur- Box 1 densome for the private sector, while preserving the major What are the key elements benefits of the proposal. The final cost to the industry was in a RIA process? reduced to two billion euros. The entire RIA was estimated to cost one million euros making a return on investment of 1. Defining a regulatory problem 10,000 to one (World Bank 2010b). This phase is the preliminary point of RIAs: identi- fying the regulatory or policy problem. Problems usually fall within 3 categories: market failure, I.  Defining RIA regulatory inefficiencies and new policy targets or The ultimate objective of RIA is to improve the quality of objectives. regulation. The abundant literature on the topic illustrates 2. Identifying different regulatory options that from a purely conceptual point of view, there is no generic definition of RIA. It is understood as an adminis- During this step, the need for regulatory interven- trative obligation or an instrument of public policy analysis tion identified in phase 1 has to be translated into concrete policy options. for identifying the costs of regulation on certain business sectors (Fischer, Miller and Sidney 2007; De Francesco, 3. Collecting data Radaelli and Troeger 2012). Usually, such analysis would be followed by a process aimed at reducing the regulatory This phase is crucial and the means to achieve it are diverse and vary greatly among countries. Relevant “burden” on the actors of a particular sector and would data for the RIA are collected from public consulta- thereby improve the countries’ competitiveness (Kirkpat- tions, telephone and face-to-face interviews, paper rick and Parker 2007). From the World Bank’s perspective, questionnaires, online surveys, focus groups, etc. RIA is a “tool that helps policy makers ask systematic ques- tions about the different policy options and consequences 4. Assessing alternative options of government interventions” (World Bank 2010b). The The central phase of RIAs most of the time results in a output of that process is an assessment report that pro- cost-benefit analysis but can also be a cost-­effectiveness vides high quality evidence for comparing different policy analysis or a risk analysis. Options assessed must options (World Bank 2010a). include the “no policy change” scenario. Over the past decades, the OECD has been spearheading 5. Identifying preferred regulatory option/s the promotion and implementation of RIAs. Based on scru- Once the different options have been identified and tiny of the experiences of member countries in implement- scrutinized (usually by comparing the costs and ing RIA since the 1980s, a number of OECD publications benefits), the comparison of the different assess- have tried to identify the key elements of RIA’s best prac- ment will lead to the identification of the most effi- tices.4 These studies argue strongly that a well-designed cient option. impact assessment system contains a number of inter- connected elements. This means that, with respect to effi- 6. Communicating results of the conducted RIA ciency and capacity to improve regulatory quality, best Once taken into consideration by the policy mak- practice RIA systems are those in which different elements ers, best practices suggest publication of the result are designed and implemented to be mutually supportive of the RIA. This allows further exchange with stake- (box 1). Today, most OECD countries include RIA in their holders and improves the general transparency of regulatory system but their experience also shows that the the regulatory process. best practice standards are difficult to achieve. Countries show a large degree of variation in their approach to doing Sources: OECD. 2008. Introductory Handbook for Undertaking impact assessments. In many countries, most of the OECD Regulatory Impact Analysis. Paris: OECD Publishing; International Telecommunication Union (ITU). 2014. ”Using best practice elements are not in place and RIA systems are Regulatory Impact Analysis to Improve Decision Making in the not fully operational (World Bank 2010a). The World Bank ICT Sector.” GSR14 Discussion Paper. Geneva: ITU. keeps a global database5 of documents related to RIA issued by or for national governments, or publications studying RIA as it is applied by governments worldwide. It allows observing the disparities in interpretation and implemen- integral instrument for designing public policy. Countries tation of RIAs worldwide. that have well-functioning and effective RIA structures have all used impact assessments to strengthen the exist- There is no single RIA definition, neither theoretical nor ing decision-making processes rather than to replace them practical, but there is, however, a unanimous agreement in (World Bank 2010a). RIAs clearly complement current regu- both literature and practice on the importance of RIAs as an latory and decision-making frameworks to make them more Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments   3 efficient and transparent, while at the same time increasing 5. A capacity building program, involving preparation regulators’ accountability. of guidelines, training of officials preparing RIA, and establishing monitoring, evaluation and reporting sys- Compared worldwide, assessments of the potential impact tems (World Bank 2010a). of regulatory changes on citizens, businesses and society at large are more highly concentrated in rich countries than The Global Indicators of Regulatory Governance provide poor ones. They also vary in scope and frequency. Impact many details and examples of the variety of practices that assessments are performed differently, if at all, depend- exist around the world. They show that today, over 90 coun- ing on legal obligations and agency capacity. In the United tries conduct RIA including all of the 33 OECD high-income States, for instance, under the Administrative Procedure Act ones. Europe and Central Asia is the region where the use and Executive Order 12866, individual regulatory agencies of RIAs is most widespread, with 23 out of 25  countries must conduct an initial cost-benefit analysis to identify eco- conducting at least some kind of impact assessment (fig- nomically significant regulatory changes. Then, in the case ure 1). However, there is an evident gap between the OECD where the proposed regulations meet that threshold, the high-income and Europe and Central Asian economies and agencies must prepare an impact assessment and submit the rest of the world. In Latin America and the Caribbean, their analysis for review to the Office of Information and for example, 43 percent of the countries conduct RIAs. In Regulatory Affairs within the Office of Management and East Asia and Pacific only 32 percent and in South Asia Budget. In Montenegro, all laws and other documents that 29  percent. In Sub-Saharan Africa and Middle East and get adopted by the government are subject to RIA. Should North Africa regions the regulatory assessment practice is a ministry believe that RIA is not needed, it would have to quite sporadic, with less than a quarter of countries doing explain the reasons and inform the government in writing. any type of impact assessments. In Lao PDR however, the criterion used for determining which proposed regulations receive RIA is less precise. Only A similar gap emerges when comparing impact assessments laws and regulations that have legal effect on the general across income regions: 46 out of 58 high-income economies public and business community are required to undertake conduct RIAs, compared to only 5 of 29 low-income ones. RIA, and the depth and scope of assessment of the proposed In developing economies however, the practice of RIA has law vary and will be recommended by the RIA center of the been steadily gaining prominence in the area of good gov- Ministry of Justice. Within the European Union, some of ernance. Vietnam, for instance, made RIA mandatory for the countries, including Germany, the Netherlands, Sweden all types of legal documents, including those issued by the and the United Kingdom, have conducted impact assess- local provincial People’s committee adopted after July 2016.7 ments for years, while others have relatively recently inte- Similarly, in March of 2015, the Government of Morocco grated impact assessments into their rule-making processes adopted Organic Law on the organization and conduct of (De Francesco, Radaelli and Troeger 2012). On the European the government.8 Article 19 of this law introduced RIA into Commission level, every time it proposes new legislation, it Moroccan law, although the conditions and details of such needs to evaluate its possible economic, social and environ- assessments still need to be determined by future regula- mental impacts.6 tions. With the help of advisory services of the World Bank and the OECD, more and more regulators from different While a large amount of literature has been recently pro- regions understand the benefits of introducing RIAs into duced on the importance of RIAs in developing countries, their regulatory systems. there is little evidence as per the effective application of RIAs in settings of limited resources. When full RIAs are not feasible, it is possible to approximate the effects of the regu- lations through a “RIA light,” tailored to the requirements of II. The Benefits of RIA developing countries. It has five basic requirements: The use of regulation as a policy instrument has increased drastically and now is a key tool for governments to manage 1. Political commitment to establish and operate an effec- more complex and diverse societies. Regulations allow rule- tive and self-sustaining RIA process. makers to better manage and balance competing social and 2. A unit or group of regulatory reformers—preferably economic interests. Yet, many governments still experience based in a central area of government—which oversees, frequent regulatory failures that increase the costs and risks comments and reports on the quality of regulatory pro- of commercial activities (World Bank 2010b). Implement- posals before decisions are made about regulation. ing RIAs is an effective antidote although often confronted with obstacles such as weak institutional capacities, over- or 3. Clear and consistently applied criteria and rules under-regulation or poorly designed regulatory frameworks employed to screen regulatory proposals. (World Bank 2010b). 4. A transparent regulatory policy development process, Introduction of impact assessments certainly requires mod- which includes consultation with stakeholders. ifications to the existing regulatory frameworks. It can be 4  Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments Figure 1 RIAs are widely implemented in the OECD high-income economies and very limited in the Sub-Saharan Africa and Middle East and North Africa regions Source: GIRG database, http://rulemaking.worldbank.org a time-consuming exercise in itself, which often requires a particularly when the regulators use impact assessments shift in the behavior of government officials: from ­procedure to evaluate the coherence of proposed laws and regulations oriented to a more performance oriented, results-based with medium- to long-term policy goals (OECD 2015b). This mindset (ITU 2014). But benefits definitely outweigh the is the case in Ireland where RIAs are considered as an ongo- costs. The advantages of implementing an impact assess- ing process, and assessments are expected to be updated at ment system can be categorized into three areas: efficiency, different stages of the life cycles of proposed regulations. accountability, and transparency (Morrall 2001). Transparency Efficiency Efficiency and accountability can be enhanced by ensuring RIAs help regulators to decide in favor of more efficient that RIAs are conducted in a transparent manner (Morrall policy options, discarding less efficient alternatives. This 2001). Impact assessments already improve transparency is typically accomplished through a three-stage process: by obliging regulators to motivate their actions in writing, (i)  identifying the need for the proposed action, (ii) an to provide details of the proposed course of action and to examination of alternative approaches, and (iii) an analysis explain why the chosen option is more desirable than other of the benefits and costs of the identified alternatives (Mor- alternatives, including doing nothing. Transparency can be rall 2001). The cost-benefit analysis is often a guiding prin- further enhanced by making the results of impact assess- ciple for regulators. In Indonesia, for instance, the National ments publicly available. As GIRG data shows, today, only Development Plan 2015–2019 provides that all agencies are 74 countries out of 92 that conduct RIA reveal impact assess- encouraged to conduct a cost and benefit analysis as part of ments’ results to the public. the core rule-making process. This analysis is also recom- mended by the OECD guidelines (OECD 2008b). Georgia, Moldova and Japan, for instance, publish their impact assessments on a unified website, while in Costa Rica RIAs are communicated to stakeholders either through Accountability regular mail and e-mail. Improving transparency of regula- The use of RIAs promotes accountability of regulators, tory decisions tends to have a domino effect as it strength- especially policy makers’ responsibility for the outcomes ens public trust in regulatory institutions and policy makers, generated by proposed policies. Accountability increases reduces opportunities for corruption (e.g., deliberately pass- when governments commit to monitoring impacts of pro- ing bad regulations to offer preferential treatment to certain posed regulations as well as evaluating them over time, players) and increases consumer protection and protection Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments   5 Figure 2 High-income countries tend to conduct and communicate RIAs more than low- and middle-income countries High income Upper middle income Lower middle income Low income 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Share of economies (%) Conduct impact assessment Distribute impact assessment to the public Source: GIRG database, http://rulemaking.worldbank.org of citizens’ rights, especially those of vulnerable groups 3. The criteria used for determining which proposed regu- (OECD 2008a). lations are subject to an impact assessment, as well as the existence of guidelines and/or legal requirement. 4. The distribution of RIAs’ results to the public (figure 2). III.  Implementing RIA—Evidence from GIRG Data What Is Measured? RIA benefits and importance are well recognized in the lit- erature and by experts. Most experts agree that successful In countries that conduct RIAs, the impact assessments vary implementation of a RIA is a difficult process, administra- in scope. Aside from the impact of the proposed regulation tively and technically challenging. The GIRG cover the key on the public sector (for example, administrative costs) that aspects of a successful RIA implementation, which include: is covered in 95 percent of countries, practices vary greatly for other types of assessments (figure 3). The Kyrgyz Repub- 1. The spectrum of the impacts covered by RIA: lic, for instance, only measures impacts on the private sec- tor and on small- and medium-size enterprises. Twenty-five • Impact of the proposed regulation on the public sec- economies worldwide, including the European Union, the tor (for example, administrative costs) United Arab Emirates and Taiwan (China) measure all of • Impact on the private sector these impacts. This list, however, is not exhaustive. Twelve countries measure the impact on gender equality within • Expected benefits from the regulation their RIA frameworks. Similarly, 18 economies measure social impacts such as demographic impacts or social inclu- • Impact on international obligations or agreements sion. Estonia serves as a model example of conducting • Impact on the environment comprehensive impact assessments. According to Estonia’s guidelines, explanatory memorandum of the RIA shall con- • Impact on competitiveness and market openness tain9 the following presumable impacts: 1) social, including demographic impact; 2) impact on national security and • Impact on small- and medium-size enterprises international relations; 3) impact on the economy; 4) impact • Implementation of proposed regulations. on the living environment and natural environment; 5) impact on regional development; 6) impact on the organi- 2. The existence of a specialized government body tasked zation of state agencies and local government agencies; and with reviewing and monitoring regulatory impact 7) any other direct or indirect impact. assessments conducted by other individual agencies or government bodies. 6  Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments Figure 3 The impacts measured vary greatly in scope Public sector 95% Private sector 84% Benefits from the regulation 89% International obligations 60% Environment 75% Competitiveness and market openness 75% SMEs 59% Implementation 57% Source: GIRG database, http://rulemaking.worldbank.org Note: Calculated in percent of countries among those that conduct RIA. Who Conducts RIAs? responsibility of such entities is to provide guidance to experts conducting the assessments. They also frequently One of the key aspects of impact assessment measured by review and monitor regulatory impacts conducted in indi- GIRG is whether there is a specialized government body vidual ministries and inform the cabinet or ­ parliament/ tasked with reviewing and monitoring RIAs conducted by legislature about compliance with regulatory impact assess- other individual agencies or government bodies. Indeed, ment requirements. These specialized bodies, such as the RIA is best conducted by ministries or regulatory agen- Swedish Better Regulation Council (Regelrådet) or the U.S. cies, which draft new or amend existing regulations (World Office of Information and Regulatory Affairs, provide exper- Bank 2010a). Such agencies are responsible for specific areas tise on conducting high-quality assessments of the poten- of regulation and therefore are best versed to understand tial impacts of proposed regulations, while at the same time regulatory problems and offer possible solutions. Moreover, ensure that ministries are complying with impact assess- ministries or regulatory agencies typically have direct con- ment guidelines. In Canada, for instance, each department tacts with affected stakeholders and thus have a good under- and agency is responsible for completing their own RIAs. standing of the possible impact of proposed regulations on However, the Treasury Board Secretariat (TBS) reviews and all the third parties. monitors RIAs developed by other departments and agen- Conversely, these same regulatory agencies could have an cies. TBS reviews and comments on draft RIAs until they are entrenched conservative culture with little interest in develop- ready for consideration and approval by the Treasury Board ing new ideas or approaches to regulation. They could be “cap- for prepublication in Canada Gazette Part 1. tured” by the businesses they regulate and seek to benefit these stakeholders, regardless of either costs or benefits to society at How Are RIAs Conducted? large. Regulatory agencies could also benefit from particular regulatory reforms that expand their budget or allow them to Two key elements are measured as to how RIAs are con- maintain existing staff rosters. For these reasons, effective and ducted: the existence of specific guidelines to conduct RIAs transparent RIA processes are usually overseen by a special- and the existence of a legal requirement to do so. The impor- ized government body that can provide regulators with high tance of RIA guidelines goes beyond simply helping govern- quality, trusted and impartial advice about regulatory issues, ment officials follow the rules. They strengthen the entire as well as the quality of analysis contained in RIAs (Deighton- impact assessment process and increase the benefits result- Smith, Erbacci and Kauffmann 2016). ing from thorough RIAs. For instance, Thailand is partner- ing with the Asia-Pacific Economic Cooperation to create Notably, 53 countries in this sample have a specialized gov- a “RIA Guideline as an anticorruption tool.” Coherent deci- ernment body tasked with conducting, reviewing and com- sion making on regulatory matters can only be ensured if menting on impact assessments implemented by different a robust and consistent RIA methodology is followed. This agencies. Some of these specialized oversight organizations means that the guidelines should list the basic elements are responsible for determining which regulatory reforms of RIA methodology and approach. Globally, among the require impact assessment. However, the most common economies conducting RIA, 69 percent have specific RIA Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments   7 Figure 4 Most high-income countries conducting RIAs have specific guidelines on how to do so High income Upper middle income Lower middle income Low income 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Share of economies (%) Conduct impact assessment Impact assessment guidelines Impact assessments required by law Source: GIRG database, http://rulemaking.worldbank.org guidelines. All OECD high-income countries with the excep- Thresholds are a) financial, b) if regulation has a substantial tion of Portugal have specific RIA guidelines, compared to connection to performance goals/outcomes in the federal only 3 in Sub-Saharan Africa (Uganda, South Africa and budget and c) if there are substantial impacts to be expected Zambia). Surprisingly, 26 countries that conduct impact (e.g., number of people from a certain social group affected, assessments do not have any specific guidelines for officials CO2 emitted, rise of bureaucratic costs for businesses). Simi- completing the assessments; ten of these are in Latin Amer- larly, in Kenya, according to the Statutory Instruments Act ica and the Caribbean. 2013, if a proposed statutory instrument is likely to impose significant costs on the community or a part of the com- Interestingly, 29 countries conduct RIA without having a munity, the regulatory authority shall, prior to making the legal obligation to do so, including some of the most well- statutory instrument, prepare a Regulatory Impact State- established RIA systems such as the United Kingdom, Aus- ment that will be communicated in the Kenya Gazette and in tralia and Canada. While the option of establishing legal RIA a newspaper likely to be read by people particularly affected requirements is not widely used in the OECD context (19 of by the proposed legislation. The Act also lists in details what the 33 OECD high-income countries do so), it appears to be must be included in the RIA. more common in developing countries (figure 4). In some countries, the legal requirements are used to enhance RIA’s authority and sometimes help to achieve better compliance. Communicating RIA Accordingly, within the surveyed countries that conduct A central aspect to RIAs’ transparency and regulators’ RIA, 70  percent of the lower- and upper-middle-income accountability is the communication of either draft or final countries have their RIAs required by law as compared to the impact assessment results to the public. Eighty percent 54 percent of high-income countries. (75 out of 93) of the countries conducting RIA communicate These laws are also used to establish with more details what the findings to their constituencies. Even though the means is the criterion or threshold used for determining which and scope of reporting back on results vary considerably, the proposed regulations receive RIA. In Austria for instance, most preferred method proves to be through direct interac- according to the Act on Federal Budget 2013 (“Bundeshaush- tion with stakeholders, with 58 percent of economies fol- altsgesetz 2013”) every regulation passed by the Parliament lowing this approach. As previously mentioned, publishing has to undergo an assessment of its effects. Particular crite- RIAs’ results allows for greater transparency and account- ria for the assessment process are set out in various regu- ability and strengthens the entire consultative process, lations (Verordnungen) with various thresholds. However, as citizens gain access to information on possible conse- below certain thresholds a “RIA light” might be conducted. quences of draft regulations. 8  Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments Figure 5 The most common means of communication across regions is through targeted outreach Through a unified website for all 51% proposed regulations Through the website of the relevant ministry or regulator 24% Through public meetings 29% Through targeted outreach to business associations, other stakeholder groups 58% or both Other 33% Source: GIRG database, http://rulemaking.worldbank.org Note: Calculated in percent of countries among those that publish RIA. Among countries communicating RIAs, the best practice— comprehensive program defining an integrated approach to posting the results on a unified website for all proposed regulatory management policy. Among the main features, regulations—is established and followed in 51 percent of a new RIA methodology was adopted by the Council of economies (figure 5). The use of a unified website facilitates Ministers and integrated in the Guidelines for Regulatory stakeholders’ and citizens’ access to impact assessments. Impact Assessment (World Bank 2010a). A small number However, not all regulators have the luxury of having a well of low-income countries are now also trying to introduce functional unified platform and not all economies have RIA processes, but little evidence has been compiled on the equal Internet penetration levels. The technology gap is results and impacts of such systems. The GIRG is the first clearly evident among regions. Out of the 27 countries in the dataset that offers a global overview across all income levels. OECD high-income group that publish the results of their It shows that RIAs are more and more enforced by countries RIAs, 22 do so on a unified website. On the contrary, none of from all income levels (table 1). economies in the Sub-Saharan Africa and Middle East and North Africa regions do so (figure 6). The quality of the com- In 93 of the 185 countries surveyed, local ministries or regu- munication can also be an issue. In Romania, according to latory agencies do not conduct RIA for proposed regula- the law, all regulations need to have explanatory notes, and tions. And survey results show that the scope and purpose RIAs are to be posted alongside the regulation when pro- of impact assessments encompass a wide range of practices posed regulations get published on a ministerial website or and methods. Only 12 high-income countries do not carry submitted for consultation. The problem is that, despite the out impact assessments: Brunei Darussalam, Antigua and legal requirements, the quality of the explanatory notes is Barbuda, The Bahamas, St. Kitts and Nevis, Trinidad and often criticized, defeating the purpose of transparency and Tobago, Argentina, Uruguay, Seychelles, Kuwait, Oman, accountability. Saudi Arabia and Qatar. In contrast, impact assessments are relatively infrequent in low- and middle-income countries. Only 18 percent of low-income countries surveyed conduct some form of impact assessment as compared to 79 percent IV.  Performing RIA—Global Trends in the high-income region. from GIRG Data Aside from OECD countries, RIAs are only widely imple- mented in the Europe and Central Asia region. In all other In order to enhance general regulatory quality, many coun- regions, less than 50 percent of countries conduct RIA. An tries have started to reform their governance frameworks encouraging finding however is that more than two-thirds to either introduce or improve RIA practices. A number of of countries that conduct impact assessments have stan- them, such as Mexico, the Republic of Korea, Poland and dardized impact assessment guidelines. Most countries the Czech Republic have set up RIA systems matching publish impact assessment guidelines on regulatory web- those of highly advanced OECD countries. Poland adopted sites but there are several other ways to make the guidelines in 2006 its Regulatory Reform Program, which was its first Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments   9 Figure 6 Most OECD high-income economies use a unified website to communicate the results of RIA 80 Share of economies (%) 60 40 20 0 Through a unified Through the website Through public Through targeted website for all of the relevant meetings outreach to business proposed regulations ministry or regulator associations, other stakeholder groups or both OECD high income Europe & Central Asia Latin America & Caribbean East Asia & Pacific Middle East & North Africa South Asia Sub-Saharan Africa Source: GIRG database, http://rulemaking.worldbank.org Note: Calculated in percent of countries among those that publish RIA. Table 1 Which countries improved their RIA practices and how did they do it? (January 2014 to July 2016) Colombia Kazakhstan In 2015, Colombia introduced a new framework on regu- In October 2015, Kazakhstan passed new requirements latory impact assessments for the trade sector (Decree for regulatory impact analyses in Chapter 13 of the Entre- 1595). preneurial Code (EC). The EC outlines the legal, economic and social environment and guarantees for doing busi- European Union ness. It also sets out the state regulation and support of Among numerous reforms undertaken in 2015/16, the business activities in Kazakhstan. European Commission adopted a Better Regulation Pack- Kosovo age. This package consolidates and further strengthens the Commission’s planning, consultation, evaluation and In 2014 and 2015, the government of Kosovo adopted impact assessment procedures. Specifically, a Regula- the Better Regulation Strategy 2014–2020. This strat- tory Scrutiny Board was established to examine and egy contains guidance for improving regulatory impact issue opinions on all Commission’s draft impact assess- assessments as part of the policy development process. ments, major evaluations and “fitness checks” of exist- The government also adopted Administrative Instruction ing legislation. It replaced the Impact Assessment Board No. 03/2015 on Budget Impact Assessment of New Gov- in July 2015 and is independent of the policy making ernment Initiatives requiring a detailed impact assess- departments. ment on the budget of the Republic of Kosovo before passage. Finland The Prime Minister’s Office established the Legislation Evaluation Council in February 2016 to evaluate the qual- ity of impact assessment in draft bills. (continued ) 10  Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments Table 1 Continued Lithuania United Kingdom The 2014 Law on the Basics of Legislation required all In the United Kingdom, the Small Business, Enterprise laws and acts applying the laws (decisions, resolutions and Employment Act 2015 converted a number of exist- and court rulings) to be registered and officially pub- ing rules for rule making within the UK’s better regulation lished in the Register of Legal Acts. It also establishes the framework into a legislative requirement. In addition, it right of all individuals to submit proposals for legislative also introduced some new requirements. Specifically, the initiatives and legislative projects, and requires impact legislation it put into law the requirement for an indepen- assessments for every new initiative to regulate nonreg- dent body to verify the costs and benefits of rules, and for ulated areas or when regulation is changed substantially. that body to verify all of the costs of measures that score toward the Business Impact Target. The existing body in Morocco the UK that scrutinizes impact assessments—the Regula- In March 2015, the Government of Morocco adopted tory Policy Committee—was designated as the verifica- Organic Law (No. 065-13) on the organization and con- tion body. duct of the government. Article 19 introduced regulatory Vietnam impact assessments into Moroccan law, although the conditions and details of such assessments will need to In Vietnam, a new Law on Laws came into force on July 1, be determined by future regulation. 2016 (No. 85/2015/QH1). It makes regulatory impact assessments mandatory for all types of legal documents, Romania including those issued by the local provincial People’s In Romania, three pilot impact assessment studies were committee. These assessments must be prepared in the conducted under the coordination of Prime Minister’s early stages of the proposed rule making. Chancellery in order to test the new regulatory impact Zambia guidelines developed in 2015. In Zambia, the Enactment of the Business Regulatory Act South Africa No. 3 of 2014 established the Business Regulatory Review In South Africa, since the Cabinet resolution of October Committee and the Business Regulatory Review Agency 1, 2015, it is now compulsory to subject any proposed (BRRA).The Act introduced a set of principles, procedures regulation to socioeconomic impact assessment (SEIAS). and minimum requirements for the introduction of new regulatory measures. Specifically, the new law provides Spain that a public body shall only submit to the Cabinet for In 2015, Spain adopted a new law (Law 40) governing the approval a policy or proposed law to regulate business formation of new regulations. Law 40 requires annual activity if the policy or proposed law has the prior approval forward regulatory plans and the evaluation reports of of the BRRA.The regulating body must also conduct a reg- approved regulations to be made publicly available. ulatory impact assessment on the proposed intervention It also establishes a wider scope of regulatory impact which is submitted to the BRRA for review and approval. assessments to include competitiveness, market unity and SMEs analyses. And finally, Law 40 sets in place a new process for pre-consultation with the public on regu- latory initiatives. Source: GIRG database, http://rulemaking.worldbank.org. public. In Hungary, for example, impact assessment guide- assessments, the results of the assessments are distrib- lines are not published online but are part of the Decree of uted online or through targeted outreach to business asso- the Minister of Justice and Public Administration 24/201. ciations, other stakeholder groups or both. Furthermore, in Conversely, 26 countries have not developed any guidelines 57 percent of countries that perform impact assessments, the to conduct such assessments. Interestingly, these countries results of assessments are distributed together with the text fall across all income groups and regions. A few examples of the proposed regulation. By providing the analysis under- include Costa Rica, Hong Kong (SAR, China) and Portugal. pinning the shape and content of the proposed regulation for comment from stakeholders, governments open their Making impact assessments publicly available and open motivation and reasoning behind the regulatory change to for scrutiny forms part of the consultation process in many scrutiny and input. In Kazakhstan, for instance, the RIA may countries. In 66 percent of economies conducting impact be issued at any time upon request by any qualified expert. Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments   11 Figure 7 RIAs are widely implemented among OECD high-income and Europe and Central Asian economies 100% 80% Share of economies (%) 60% 40% 20% 0% OECD Europe & Latin America East Asia South Asia Sub-Saharan Middle East & high income Central Asia & Caribbean & Pacific Africa North Africa Source: GIRG database, http://rulemaking.worldbank.org In the United Kingdom, the RIA is published at each stage receive impact assessment. In Switzerland, RIA will be of the policy development. It is meant to act as a tool for the deemed necessary when at least 3 of the 10 following condi- policy development of a new regulation and not just as a tions are met (or when the consequences described therein document that justifies or defends the need for a regulation. are undetermined): (1) broad economic consequences, (2) at least three economic groups are concerned, (3) more than 10.000 companies are affected, (4)  administrative burden, Best Practices of Implementing regulatory costs, (5) competition, (6) degree of international Impact Assessments opening, (7) effect on the attractiveness of the business field, (8) environmental sustainability, (9) social sustainability, and Twenty-five countries worldwide follow two key require- (10)  energy consumption, CO2 emissions. Japan and Malta ments for successful RIA: having RIAs publicly available also use specific monetary thresholds. The policy of the on a unified website for all proposed regulations, and hav- United States is that all “significant rules” include an assess- ing a specialized government body tasked with reviewing ment of the costs and benefits of the regulatory action. In and monitoring RIAs conducted by other individual agen- addition, a more extensive assessment is conducted for all cies or government bodies. For almost all of them (24), the “economically significant” regulations. An “economically sig- RIA guidelines are also easily available online to the gen- nificant” regulation is defined as one that is likely to result in eral public. In Canada, several guides are available on the a regulation that may have an annual effect on the economy same unified website, including the RIAs Writer’s Guide, of $100 million or more or adversely affect in a material way the RIAs Low-Impact Template and the RIAs Medium- and the economy, a sector of the economy, productivity, competi- High-Impact Template (box 2). The RIA procedures of these tion, jobs, the environment, public health or safety, or state, economies also generally cover more impacts than other local, or tribal governments or communities.10 economies. The United Kingdom, Czech Republic and the European Union have the widest range of analysis covering Among the 186 economies (185 countries and the Euro- all 8 items measured by GIRG (see figure 3) and additional pean Union) covered by the GIRG, only 39 have an exist- ones such as social impacts on inclusion, innovation and ing requirement for their regulations to be periodically digital, poverty or gender equality. reviewed to see whether they are still needed or should be revised. Among them, 32 conduct RIA and 27 do it thor- Most of these economies (18) also have explicit criteria or oughly. In the Republic of Korea for instance, when the head thresholds used for determining which proposed regulations 12  Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments Box 2 Canada has precise criteria and thresholds for its RIA system The Cabinet Directive on Regulatory Management pro- Also, when there is an immediate and serious risk to the vides overall guidance for proportionality. It states that health and safety of Canadians, their security, the envi- departments and agencies are responsible for assessing ronment, or the economy, the Triage Statement may be the effectiveness and appropriateness of regulatory and omitted and an expedited RIA process may be allowed. In non-regulatory instruments in achieving policy objectives. these cases, departments and agencies work with the Trea- Specifically, departments and agencies are to demonstrate sury Board Secretariat to proceed in a manner that most that the regulatory response is proportional to the degree effectively protects the public interest. Departments and and type of risk. agencies are still required to complete a RIA, but it moves through the internal government review and approval pro- The Triage Statement is a preliminary assessment of the cess more quickly and on accelerated timelines. expected impacts of regulatory proposals and helps deter- mine where approval processes can be streamlined and As per the Cabinet Directive on Regulatory Management, where analytical resources should be focused. It is com- departments and agencies have to regularly assess the pleted by departments and agencies at the earliest stages results of performance measurement and evaluation to of regulatory design and a draft Statement is shared with identify regulatory frameworks in need of review. Once the Treasury Board Secretariat. identified, departments and agencies are to examine the regulation with a focus on: The Triage System underscores the Cabinet Directive on Regulatory Management’s principle of proportionally 1. The effectiveness of the current regulation in meeting aimed at focusing the analysis where it is most needed. the policy objective; The development of a Triage Statement early in the devel- opment of the regulatory proposal determines whether 2. The current instrument selection, level of intervention, the proposal will require a full or expedited RIA, based on and degree of prescriptiveness; costs and other factors: 3. The clarity and accessibility of the regulation to users; • Low impact: costs less than CAD 10 million present and value over a 10-year period or less than CAD 1 million annually; 4. The overall impact on competitiveness, including trade, investment, and innovation. • Medium impact: costs CAD 10 million to CAD 100 mil- lion present value or CAD 1 million to CAD 10 million annually; • High impact: costs greater than CAD 100 million pres- ent value or greater than CAD 10 million annually. Source: GIRG database, http://rulemaking.worldbank.org of a central administrative agency intends to establish a new dominate as to where RIAs are conducted with consistency, regulation or reinforce existing regulations, he/she shall especially within OECD countries. In all the other income stipulate in the relevant Acts and subordinate statutes the groups—upper-middle, lower-middle and low-income—less effective period or review period of regulations which have than half of countries conduct RIAs. Regulatory governance no evident grounds to remain in force. The effective period improvements will be expected within these groups of coun- or review period for which the regulation remains in force tries by merely introducing RIA procedures. shall be set as no longer than what is required to achieve the objectives of the regulation and the period shall not exceed More broadly, within the different components of regula- five years. tory governance, countries have usually less performant RIA processes than consultation procedures. Room for improve- ment is then global and present at all income levels as to the quality of RIA that remains globally fairly poor outside of a V. Conclusion limited number of exceptions. It seems, however, that more The GIRG show that even if assessments of the potential and more regulators from different regions understand the impact of regulatory changes are more highly concentrated benefits of introducing RIAs into their regulatory systems. in richer countries than poor, quality RIA can be achieved In the past two years, at least 13 countries across all regions at all income levels. High-income economies, however, still created or reformed RIA procedures. Global Indicators of Regulatory Governance: Worldwide Practices of Regulatory Impact Assessments   13 Endnotes Fischer, F., Miller, G., and Sidney, M. 2007. Handbook of Pub- lic Policy Analysis Theory, Politics and Methods. Boca Raton: CRC 1. United Kingdom’s Prime Minister’s letter to all Cabinet Press. Ministers, 6 April 2011. International Telecommunication Union (ITU). 2014. “Using 2. See the full list at: http://ec.europa.eu/smart-regulation/ Regulatory Impact Analysis to Improve Decision Making in impact/ia_carried_out/cia_2016_en.htm the ICT Sector.” GSR14 Discussion Paper. Geneva: ITU. 3. European Parliament and Council Regulation (EC) No Kirkpatrick, C., and Parker, D. 2007. Regulatory Impact Assess- 1907/2006 (Corrigendum 29 May 2007) and Directive ment: An Overview. Cheltenham: Edward Elgar Publishing. 2006/121/EC (Corrigendum 29 May 2007) concerning the Registration, Evaluation, Authorisation and Restric- Ladus, R. 2008. “The Challenges of RIA in the Context of the tion of Chemicals (REACH). Soviet Heritage: The Case of Moldova.” ENBR Working Paper No. 19/2008. 4. See, for example, Regulatory Impact Analysis—Best Practices in OECD Countries (1997); Ten Good Practices Morrall, J., III. 2001. “Regulatory Impact Analysis: Efficiency, in the Design and Implementation of RIA (1997); Build- Accountability, and Transparency.” Speech delivered in Sin- ing an Institutional Framework for Regulatory Impact gapore. U.S. Office of Management and Budget, Washing- Analysis: Guidance for Policy Makers (2008); and Pro- ton, DC. moting Inclusive Growth through Better Regulation: Organisation for Economic Co-operation and Development The Role of Regulatory Impact Assessment (2016). (OECD). 2000. Regulatory Reform in Korea: Government Capaci- 5. Available at: http://rulemaking.worldbank.org/ria- ties to Assure High-Quality Regulation. Paris: OECD Publishing. documents OECD. 2008a. Building an Institutional Framework for Regula- 6. For more information see: http://ec.europa.eu/smart- tory Impact Analysis (RIA): Guidance for Policy Makers. Paris: regulation/guidelines/ug_chap3_en.htm OECD Publishing. 7. Law on Laws 2015, no. 85/2015/QH1. OECD. 2008b. Introductory Handbook for Undertaking Regula- tory Impact Analysis. Paris: OECD Publishing. 8. Organic Law, no. 065-13. OECD. 2015a. OECD Regulatory Policy Outlook 2015. Paris: OECD 9. Rules for Good Legislative Practice and Legislative Publishing. Drafting § 46 (Impacts of Act). OECD. 2015b. Regulatory Policy in Perspective: A Reader’s Com- 10. Section 3(f) of the Presidential Executive Order of the panion to the OECD Regulatory Policy Outlook 2015. Paris: OECD United States 12866, 58 Fed. Reg. 51735 (Sept. 30, 1993). Publishing. World Bank Group, Investment Climate Advisory Services. 2010a. Making It Work: ‘RIA Light’ for Developing Countries, Better References Regulation for Growth. Washington, DC: World Bank Group. De Francesco, F., C. Radaelli, and V. Troeger. 2012. “Imple- World Bank Group, Investment Climate Advisory Services. menting Regulatory Innovations in Europe: The Case of 2010b. Regulatory Governance in Developing Countries. Wash- Impact Assessment.”  Journal of European Public Policy 19 (4): ington, DC: World Bank Group. 491–511. doi:10.1080/13501763.2011.607342 Deighton-Smith, R., Erbacci, A., and Kauffmann, C. 2016. “Promoting inclusive growth through better regulation: The role of regulatory impact assessment.” OECD Regulatory Policy Working Papers No. 3. Paris: OECD Publishing. This case study was written by Joseph Lemoine; the data was collected by the GIRG team under the general supervision of Melissa Johns and Valentina Saltane. All the data used for this case study are available on the GIRG website: rulemaking.worldbank.org. For further queries, please contact the GIRG team at rulemaking@worldbank.org.