Is regulation working?

Regulatory Impact Assessment

State regulation needs to be effective if it is to benefit developing countries by removing market failure and promoting sustainable development. Regulatory Impact Assessment (RIA) offers a method for improving regulation by systematically assessing potential or actual costs, benefits and impacts of new or existing regulatory measures. What guidelines are available to regulators in developing countries?

Despite the emphasis that donors and multilateral agencies have put on privatisation and market liberalisation, RIA has not been actively promoted in developing countries. Where RIA is being used, the methods employed are partial in their application and are not being applied systematically across the range of regulatory policies.

There is therefore a need to support and encourage the adoption and improvement of RIA in developing countries. There are some challenges to be met here: RIA in developing countries needs to address the twin development goals of economic growth and poverty reduction. It also needs to reflect the level of expertise, resources, political climate and information available in a country. Further, institutional weaknesses might mean that there is a lack of long-term commitment to RIA within government, especially if it is imposed by donor agencies. Taking careful account of these challenges, researchers at the Centre on Regulation and Competition have developed the following guidelines for establishing an RIA framework in developing countries. The guidelines focus on three key steps required in building more effective and efficient regulation within government:

Step one: build an effective regulatory management system

• adopt regulatory reform policy at the highest political levels
• establish explicit standards for regulatory quality and principles for regulatory decision-making within government
• introduce effective training schemes in regulation theory and practice
• introduce effective data collection processes
• institute systems to monitor regulatory implementation.

Step two: improve the quality of new regulations

• ensure that RIA is built into the earliest possible stage in the design of new regulations
• ensure public input into regulatory decision making
• assess alternative regulatory options, including not regulating
• establish systems to improve regulatory co-ordination within government.

Step three: upgrade the quality of existing regulations

• review and update existing regulations
• apply the benefit/cost principle to a regulation through both qualitative and quantitative analyses.

Although these guidelines are intended to facilitate and speed up the use of methods to assess the impact of regulations, the assimilation of RIA into government decision-making is likely to be gradual, as it has been in developed countries. There will also need to be flexibility in implementation to reflect local needs and institutional capacity. Nevertheless, by developing RIA according to the framework of principles set out above, the result should be more effective and efficient regulation.

Colin Kirkpatrick and David Parker
Centre on Regulation and Competition
IDPM
University of Manchester
M13 9GH
UK

Colin.kirkpatrick@man.ac.uk

See also

Kirkpatrick and Parker (2003) ‘Regulatory Impact Assessment: Developing its Potential for Use in Developing Countries’, CRC Working Paper no. 56
http://idpm.man.ac.uk/crc/wpdl5099/wp56.pdf (PDF)

Views expressed on these pages are not necessarily those of DFID, IDS, id21 or other contributing institutions. Copyright remains with the original authors but (unless stated otherwise) articles may be copied or quoted without restriction, provided id21 and originating author(s) and institution(s) are acknowledged. Copyright © 2005 id21. All rights reserved.