Report on the Implementation of the APEC-OECD Co-Operative Initiative on Regulatory Reform, 2000-2002

I. Introduction

The APEC-OECD Co-Operative Initiative on Regulatory Reform, a joint effort of the APEC Competition Policy and Deregulation Group and the OECD Programme on Regulatory Reform, was agreed by the CPDG in June 2000, and endorsed at the APEC Ministerial Meeting last November in Brunei.

The purpose of this initiative is to build-up domestic capacities needed for high-quality regulatory regimes through the organisation of different workshops on competition and regulatory issues. It aims also at promoting the implementation of the "APEC Principles to Enhance Competition and Regulatory Reform".

The implementation of the Initiative implies the organisation of an Opening Conference and three Workshops. Project CTI/16/2001T contained the activities to be held in 2001 only, which are the Opening Conference (already held in Singapore) and the first Workshop (to be held in China). We are presenting another project to CTI to request funding for activities to be held 2002.

In this document we report the results of the Opening Conference and the work plan for the upcoming events under this initiative.

II. Implementation of the Initiative during 2001

a) The Opening Conference: "Foundations for Sustainable Growth: Progress and Challenges in Regulatory Reform"

The Opening Conference of this Initiative was held in Singapore, February 22 -23. It brought together 32 economies, 19 of them were APEC economies, several international organisations attended the event, including the PECC and EC, and the private sector.

Through a series of panel discussions, a broad range of regulatory reform policy issues was addressed. Presentations from both OECD and APEC economies explored the progress and challenges in regulatory reform and its contribution to sustainable growth. It permitted to exchange views and experiences on regulatory reform, to improve the understanding of the APEC and OECD principles on regulatory reform, to discuss economy experiences and medium-term challenges while working to identify common interests in improving regulatory practices to support market functioning.

The main findings of this conference were the following:

• "No one size fits all", which means that in terms of regulatory reform, there is no unique recipe and that each economy circumstances should be taken into account when implementing regulatory policies.
• Transparency, meaning that a bigger effort for transparency brings better results from regulation. The government should have an active role in the promotion of regulatory reform, which goes beyond publishing and setting a deadline to receive comments. It should go ahead and gather interested parties, and promote discussion among them.
• Dissemination, which implies that a public discussion of each comment received on a proposal, is important in order to get more feedbacks from the citizenship. In addition, it was mentioned that when the proposal is modified, it is necessary to state where this modification is coming from, so the citizenship could realise how important, accepted and useful is their opinion in achieving a better regulation.
• Understanding, related to the need of using a more understandable and clear language on regulation as an important mean to get more participation from the citizenship. At least, the core part of a regulation should be communicated in a simple language, presenting the technical parts of it in the annexes.
• Regulatory Impact Assessment, each regulatory reform proposal should include: a) clear and specific objectives pursued by the reform; and b) studies on the regulatory impact not only in the sector involved, but also in some other economic indicators.
• Measurement, it is important to have a way to measure the impact of regulations, considering that what can not be measured, can not be improved. In fact, when the impact is not measured, it is difficult to have a clear idea on whether or not the objectives are being achieved.
• Accountability, meaning that it is necessary that regulators have clear responsibility within their domestic administrations for successes and failures in the implementation of regulations. This is a way to ensure that all regulatory reforms will be done with accountability and they will not answer only to particular contexts. The Mexican experience is very useful in this regard.
• Cost-benefit analysis of regulations, regarding this point it was concluded that before being adopted, each regulation should be analysed in terms of the costs and benefits of its enforcement. Only in cases where benefits are higher than costs the regulation should be adopted, otherwise, it should be dropped.
• All regulations should promote competition rather than restraining it in any way.

The meeting was also an opportunity to agreed on the lines of action for further APEC/OECD co-operation. China formally announced its sponsorship of the first workshop of the Initiative.

b) Implementation of First Workshop (China)

The Convenorship of the APEC CPD Group and the OECD Programme on Regulatory Reform, have been working on the definition of the topics and format for the upcoming workshops. The proposed organisation setting and preliminary agenda for the China workshop is described below:

Organisation: The two-day international workshop would take place in China. Chinese authorities (Ministry of Foreign Trade and Economic Cooperation) will provide logistical support for its organisation. The exact dates and place of the venue are still under review with Chinese authorities.

Format of the discussions: In each session a combination of policy and technical oriented discussions will be provided. Speakers will introduce the relevant topics based on the experience of an individual country and in a more broadly relevant approach. Following those introductions, discussions could be initiated which would allow for an open and frank exchange of views and experiences.

Participation: Participants should be officials from APEC and OECD economies and Secretariats, and representatives of the private sector as well as trade unions.

Preliminary agenda

First Day
Session I: introductory session

The session will provide the occasion to review some of the important messages from the Singapore Opening Conference.

Session II: Designing and sustaining a broad regulatory reform programme

Economies face three basic tasks in reforming their regulatory systems:

a) establish regulatory management capacities for promoting reform, initiating change and co-ordinating cross-cutting issues;
b) reform the processes for developing new regulations to ensure that regulation is used only when necessary and that the continuing stream of needed regulations meet high quality standards; and
c) upgrade the quality of the enormous inventories of rules and formalities that have survived without serious examination for years or even decades.

Deregulation in particular cases will be required. Practical issues that may be explored include:

• The building of institutions to manage regulatory reform: what are the mandate, objectives terms of reference of central institutions in charge of managing and reforming the regulatory system? What are the resources needed? How to deal with other stakeholders (ministries, sectoral regulators, competition authority, judiciary, parliamentary, subnational governments)
• The toolkit for managing regulations: how to develop a Regulatory Impact Analysis (RIA) programme, how to improve regulatory consultation, improving regulatory compliance.
• Reducing the stock of regulations: the launching of a review programme through key sectors, streamlining permits and licences.

Second day

Session III: Improving the Competition Policy Foundation for Regulatory Reform

Competition principles are important in all aspects of regulatory reform, including "large scale" privatisation and restructuring where the state is reducing its direct involvement in the economy and the "small scale" ongoing work of governments in regulating an economy. In all these areas, competition principles can act as a guide to reform that will yield dynamic and competitive markets that foster growth and economic welfare. The practical issues that would be explored include:

• Pro-competitive restructuring of public utilities, to create competitive markets of former government monopolies and to regulate residual natural monopoly elements with access regimes.
• The use of competition principles in Regulatory Impact Analysis (RIA) processes, to identify regulatory restrictions on competition and ensure that the benefits and costs of the restrictions on competition are appropriately balanced.
• The role of competition law and the competition authorities in structural reform, including the relationship between the competition authority and sectoral regulators.
• The use of competition principles to avoid regulatory reform failures, which can result from partial or internally inconsistent reform plans.

III. Implementation of the Initiative during 2002

The organisation of the third and fourth workshop under this Initiative is envisaged for the spring 2002 in Mexico and in the fall 2002 in Korea, respectively. The project proposal considering the budget and funding (US$ 170,700) for these two events next year, will be discussed in the next CTI meeting during SOM II, after being approved by the CPD.

Co-ordinations with Mexico and Korea are in an on-going process and at the end of the initiative (immediately after the last workshop in Korea), a publication containing the main findings of the initiative will be distributed among all economies.