RIA in Viet Nam: Why and key issues

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RIA in Viet Nam Why and key issues?

• .. pro-competitive regulatory reforms tend to
  increase both investment and multi-factor
  productivity and higher growth in GDP per
  capita (OECD 2005).
• Presentation by GTZ
• to the Ministry of Justice
• 21 December 2005

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Outline of presentation

• Introduction to RIA (Why)
• What RIA involves (What)
• Implementation issues (How)
• Next steps (Next)
• Brief look at Australian and other international
  approaches to reducing regulatory costs of doing
  business

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Why. What is Regulation

• Regulation are instruments by which governments
  set requirements on enterprises and citizens.
• Regulations include laws, formal and informal
  orders, and sub-ordinate rules issued by all
  levels of government
• Regulations include quasi-regulations. Rules,
  instruments and standards used to influence
  business behaviour, but not be reflected in
  official regulations (i.e., not published in Cong
  Bao).

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Why. What is Regulatory Reform?

• OECD defines regulatory reform as
• changes that improve regulatory quality, that
  is, enhance the performance, cost-effectiveness,
  or legal quality of regulations and related
  government formalities. Achieved through a mix
  of regulation, deregulation and re-regulation
• Implementing regulatory reform requires
• High level statement of principles/policies
• Institutions
• Incentives (at all levels)
• Tools (RIA, consultation, communication, periodic
  reviews etc.)

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Why? Procedural Complexity and Corruption
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Why. What is a Regulatory Impact Assessment (RIA)?

• A process to assess likely impacts of a policy
  change and the range of options to implement it.
  It can be used to assess
• All potential impacts social, environmental,
  financial and economic.
• All regulations formal legislation and quasi
  regulations (e.g. guidance or codes of practice,
  public awareness campaigns, etc.)
• Distribution of impacts to consumers, business,
  employees, rural-urban, or other groups.

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Why. Aim and Use of RIA?

• Better regulations gtmore competitive economy,
  and higher growth (OECD 2005 for evidence).
• RIAs gtbetter regulation gtmore equitable
  society.
• RIA recognized as a key element of good
  regulation (e.g. OECD). Now required in most OECD
  countries.
• Some developing and transition countries. (e.g.
  Hungary, Korea, and Peru) now require RIAS.
• Not a panacea. Also need political commitment to
  act (e.g. slow productivity growth in Netherlands

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Why. Less risk of policy mistakes

• Helps define objectives of proposed policy
  change.
• Assess full impact of the proposed change,
  including unintended impacts on non-target groups
• Identify and assess options for achieving policy
  objectives.
• Ensure consistency with other policy instruments
• Assess whether benefits exceed costs.
• Ensure a transparent efficient consultation
  process.
• Help ensure compliance with international
  agreements.

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Why? Ameliorating regulatory inflation

• Without accountability there is a tendency to
  over-regulate. Viet Nam still has a relatively
  complex and at times overlapping regulatory
  system. There may be value in establishing an
  independent office with responsibility for
  improving regulatory quality.
• Donors contribute to the problem with ad hoc new
  regulation frequently specified as project and
  program lending conditions. RIAs requires that
  everyone justify the need for regulations.

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What. RIA Statement (RIAS) Process

• RIAS is typically prepared in several stages
• An initial RIA is prepared when a proposal is
  first considered as a first step in deciding
  whether to proceed.
• A partial RIA should be prepared prior to formal
  consultations, and included with consultation
  papers.
• A full RIA will include more detailed analysis,
  and reflect the findings from the consultation
  process.
• Dont need to be overly complex documents

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What. Sorts of Questions asked in RIAS

• Nature of the problem.
• Regulation and regulatory failure.
• Alternative solutions to problem.
• Benefits of regulating.
• Cost of regulating.
• Public consultation.
• Support for regulation.
• Impact on competition.

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What. Who should prepare RIAs?

• The agency responsible for proposed policy change
  should be responsible for preparing the RIA (but
  may contract work to specialist organizations
  and/or firms).
• A separate agency can oversee compliance with RIA
  requirements and ensure the quality of RIAs.
  Integration of RIA into the decision-making
  processes will require sustained political,
  administrative and public support.

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What. How to ensure RIA quality?

• A separate agency should be responsible for
  monitoring the quality of RIAs. In most countries
  this agency IS NOT directly involved in
  regulatory development and preparation of RIAs.
• Participatory approaches -- including ensuring
  that RIAs are easily accessible by the public
  (e.g., summaries in the press, full RIAs on the
  internet) -- can help increase pressure on
  government agencies to produce quality RIAs.

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How. Key Steps in the RIA process

• Identify/Assess Problem
• Prepare Partial RIA
• Stakeholder Consultations
• Data Collection Analysis
• Prepare Full RIA Statement
• RIA Approval

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How. Indicative Contents of a RIAS

• Introduction
• Purpose and Nature of Proposed Regulatory Change
• The Consultation Process
• Review Options for Resolving the Problem
• Benefits and Costs of Proposed Change
• Compliance, Enforcement and Monitoring
• Summary and Recommendations

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How. Assessing benefits and costs

• Assess benefits, costs and distributional impacts
  of each option -- including the doing nothing.
• Where feasible, major costs and benefits should
  be quantified. RIAs should include full economic
  costs and benefits (e.g. social, environmental,
  and health and safety ). Compliance levels need
  to be assessed in order to assess likely
  benefits.
• However, full quantification is not always
  possible, even in developed countries. (Full CBA
  often missing from RIAS in UK and Australia).

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How. Analytical problems with RIAs

• Alternative methodologies can be applied, but
  none is entirely satisfactory.
• Frequent limitations in the data.
• Those proposing reforms can be over-optimistic in
  evaluating reform benefits.
• RIA is not for fine-tuning policies. More for
  identifying good and bad options.

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How. Problems, but never mind the process itself
is useful

• Major benefits from RIA derive from adopting a
  process of structured thinking and consultation.
• Need to get processes right and focus analytical
  resources on the key issues.
• Limited resources should not be diverted to
  unnecessarily complex methodology.
• Particularly true in Viet Nam given limited
  resources in many national agencies.

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How. Summary Matrix for RIAS

• Problem/Objective of proposed change
• Proposed options
• Anticipated impacts of proposed changes
• Key intended benefits
• Costs
• Distribution of Impacts
• Summary of key concerns raised during
  consultations

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Next OECD best practices in implementing RIA

• Maximise political commitment to RIA
• Allocate responsibilities for RIA program
  elements carefully
• Train the regulators
• Use a consistent, but flexible analytical method
• Develop and implement data collection strategies
• Target RIA efforts
• Integrate RIA with the policy-making process
• Involve the public extensively
• Communicate the results

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Next. What might be needed for implementation?

• NA/Government adopt national principles of good
  regulation to guide regulators and inform the
  public.
• Government prepare and adopt guidelines on RIAS
  preparation. Require ministries (and provinces)
  to prepare RIAS for new laws, ordinance and
  decrees.
• Develop oversight agency reporting to government
  (or NA) to assist and direct ministries in RIA.
• Develop and implement a national training program
  on RIA.
• Work with private sector and media to improve
  consultations and accountability mechanisms

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Next. Possible Short Term Follow-up

• Organize workshops to present and discuss draft
  RIAS guidelines.
• Prepare pilot RIAS of topical issues at central
  and provincial levels.
• Use workshop feedback and pilot RIAS to improve
  draft RIAS guidelines.
• Consult with NA, government agencies and public
  to build support for RIA process

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• International context some Australian
  experiences

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Regulatory issues concern business everywhere
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Regulatory Reform What Tools?

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Key initiatives (Australia)

• Business licence reduction programs
• Improving access to information
• Regulation review process
• National reforms

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Reducing business licence (Australia)

• Taskforce/agency identified licences for
  rationalisation
• Reported impressive reductions in licence numbers
• Success difficult to measure

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Improving access to information (Australia)

• Business Entry Point
• Single internet entry point for businesses
  seeking information from any level of Government
• Business Licence Information Service
• a one-stop shop for all government business
  licensing
• National Business Information Service
• Provides information relating to all tiers of
  government

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Regulation review process (Australia)

• Tests the need for regulation
• Aims to improve the decision-making process and
  ensure more consistent, systematic and
  transparent process
• RIS sets out the problem, objectives, options,
  impacts, consultation, conclusion, implementation
  and review
• Must specifically address impacts on small
  business

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Managing Regulatory Reform

• Many countries established central agencies to
  facilitate Broad based regulatory reforms
  Belgium gt the Agency for Administrative
  Simplification (ASA) in 1988 France gt the
  Commission on Administrative Simplification
  (COSA) in 1998 Italy . the Regulatory
  Simplification Unit (Nucleo) in 1999.
• Securing national commitment to generalized
  administrative reforms can be time consuming, as
  demonstrated by experiences in Australia.

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Australia Office of Regulatory Review (ORR)

• ORR promotes best practice regulation making and
  vets agency compliance with (RIS). ORRs charter
  list the following principal activities
• advise on quality control for regulation making
  and review
• examine and advise on RISs prepared by central
  agencies
• provide training and guidance to officials
• report annually on compliance to Government
• advise Ministerial Councils and national
  standard-setting bodies on regulation
• lodge submissions and publish reports on
  regulatory issues
• monitoring regulatory reform developments at the
  state level, and in other countries .

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Coordinating Central-State reforms

• Cooperation obtained through Council of
  Australian Governments (COAG) and ministerial
  councils
• Business groups applied pressure
• Incentives for compliance. Some central-state
  fiscal transfers linked to RIS compliance.

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Netherlands 11 Determinants of Compliance

• Spontaneous compliance dimensions (factors that
  affect the incidence of voluntary compliance
  that is, compliance that would occur in the
  absence of enforcement)
• T1. Knowledge of rules Target group familiarity
  with laws and regulations, clarity of laws and
  regulations.
• T2. Cost-benefit considerations Material and
  non-material advantages and disadvantages
  resulting from violating or observing regulation.
• T3. Level of acceptance Extent to which the
  target group (generally) accepts policy, laws,
  and regulations.
• T4. Normative commitment Innate willingness or
  habit of target group to comply with laws and
  regulations.
• T5. Informal control Possibility that
  non-compliant behaviour of the target group will
  be detected and disapproved of by third parties
  and the possibility and severity of sanctions
  that might be imposed by third parties (for
  example, loss of customers/contractors, loss of
  reputation).

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Determinants of Compliance Netherlands

• Control dimensions (the influence of enforcement
  on compliance)
• T6. Informal report probability The possibility
  that an offence may come to light other than
  during an official investigation and may be
  officially reported (whistle blowing).
• T7. Control probability Likelihood of being
  subject to an administrative (paper) or
  substantive (physical) audit/inspection by
  official authorities.
• T8. Detection probability Possibility of
  detection of an offence during an administrative
  audit or substantive investigation by official
  authorities. (The probability of uncovering
  non-compliance behaviour when some kind of
  control is applied.)
• T9. Selectivity The (increased) chance of
  control and detection as a result of risk
  analysis and targeting firms, persons or areas
  (that is, extent to which inspectors succeed in
  checking offenders more often than those who
  abide by the law).

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Determinants of Compliance Netherlands

• Sanctions dimensions (the influence of sanctions
  on compliance)
• T10. Sanction probability Possibility of a
  sanction being imposed if an offence has been
  detected through controls and criminal
  investigation.
• T11. Sanction severity Severity and type of
  sanction and associated adverse effects caused by
  imposing sanctions (for example, loss of respect
  and reputation).

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Summary Conclusions for Sustaining Regulatory
Reform in VN

• Aim to avoid, minimize or simplify regulations.
  Where regulations are needed, regulate well.
• Be aware of the regulatory impact on business
  costs. Require regulators to include some formal
  assessment of regulatory benefits and costs, and
  of the distribution of costs and benefits, when
  submitting new regulations.
• Study closely practical issues relating to the
  costs and probability of compliance and
  enforcement.
• Build public understanding and support for
  regulatory reforms. It is difficult and often
  impossible to implement top-down reform.
• Develop national institutional capacity to
  implement an ongoing program of regulatory review
  and reform. Use new information technology