Regulatory impact assessment as a decision making tool

28 September, Transport Services Workshop

2

Introduction

• Good policy takes into account the facts on the ground, and the evidence on the likely impact of interventions

• Regulatory impact assessments: a tool for feeding evidence into policy formation and legislative drafting

• Contents:– The theory and practice of RIA– Illustrative case studies– Thoughts on the potential of the methodology

Tools for better policy and regulatory design

The theory and practice of RIA

4

Assessing impact

• RIA is based on the principle that the goal of policy and legislative formation processes should be to improve people’s lives– Provides a systematic way of analysing whether regulation is likely to have

the expected impact– Provides clarity on the source of expected costs and benefits, and whether

more can be done to increase net benefits– In well-developed RIA systems, ensures that all regulation is tested this

way before implementation

• An evidence-based policymaking technique – can bridge ideological gaps

• Goal is to avoid unexpected consequences as much as possible – particularly where an initiative in one sector impacts unexpectedly on another

International regulatory best practice

5

Components of RIA

European Community guidance on RIA content

What is the problem?

What are the policy objectives?

What are the policy options?

What are the likely economic, social and environmental impacts?

How do the options compare?

Arrangements for future monitoring and evaluation

6

Who can do RIA?

• In established RIA systems, RIA is most often performed by government itself– RIA is done to assess which policy options are best– Done again on draft legislation and regulation to double check – Performed on all material pieces of legislation

• Can also be used as a tool to engage policymakers– Civil society or business can originate RIA– Provides solid evidence for likely negative or positive impact, and the

consequences of different policy choices – again, moves away from ideological arguments

• Private sector RIA impact can be improved if engagement with government is sought early on

7

Where is RIA practised?

• Regarded as best practice in a many developed countries, including the European Community and United States

• Has been in use as a regulatory tool for approximately 30 years

• Increasingly being rolled out in developing world environments– South Korea and Mexico were early adopters: influenced by OECD

membership– Also spreading more widely – for example, Vietnam and Bulgaria in recent

years

Increasing international use of RIA systems

Case studies

9

1: Visa exemptions for truck drivers, SA

• March 2010: SA announced it would require foreign truck drivers to have a work permit, rather than a visitor’s permit

• Stated policy goal: encourage employment of South Africans instead of foreigners – Concern that regulation created a loophole for foreign drivers to work

domestic routes in South Africa

• Not clear that the employment impact for South Africans would be sufficient to outweigh total costs of the initiative– Insufficient evidence of whether the loophole on domestic routes was being

exploited– Industry feedback: difficult to get South African drivers willing to drive cross-

border routes

Policy choice failed to maximise net benefits

10

Outcome

• Substantial protest raised by trucking companies to the proposed visa changes

• Department responded by changing the nature of the intervention in visa requirements– Put time limits on trips by foreign drivers in South Africa– Removed drivers for South African transporters from the visa exemption

• Choice of a different type of policy intervention allowed the desired benefits to be realised (closed work permit loophole for foreign drivers), while minimising the potential costs (drying up the supply of drivers with appropriate skills/interest in cross-border trips)

• RIA by government before the policy announcement would probably have picked up these issues and resolved them

• Alternatively, RIA could have been used by private sector to engage government/amend proposal

11

2: Mass distance charge, Namibia

• 2006 proposed imposition of a travelling distance charge (TDC):– Levied on vehicles over 3 tons, and trailers over 2 tons– On the basis of an assumed travelling distance– Payable annually in advance, with potential refunds at the end of the year

• Policy intention: heavy users damage road infrastructure more, and some of these costs should be recouped

• What had probably not been fully considered was the potential trade-off in terms of increasing logistics costs and suppressing economic activity

• Goal of RIA: find a way to recoup road damage costs that has as little impact as possible on logistics costs

Inappropriate policy design

12

Sources of concern

• The Namibian proposal failed to maximise net benefits in at least two ways:– Charges were levied on expected distance travelled, rather than actual

distance travelled– Charges were levied in advance

• Impact of these issues was that the overhead cost of trucking would have massively increased, and this cost increase would have fallen equally on light and heavy users (ie no signal for behavioural changes)

• Regulation was ultimately successfully challenged on legal basis – costly way to set regulation, and doesn’t deal with need to maximise net benefits to society

RIA potential

14

Making better regulations

• RIA has a number of advantages as a tool for improving regulations:– Takes an eagle’s eye view of impact: not just evaluating impact from the

point of view of a particular interest group– If done by government, can be embedded in policy processes to ensure

consistent regulatory quality– If done by other parties, provides a constructive, evidence-based platform

for engaging with political decision-makers– Extensive international experience to draw on

• RIA should be considered as part of the toolkit for engaging with policy

• Trial RIAs on specific policy issues would be a useful means of illustrating the use of the system

Tel +27 (0)12 362 0024Fax +27 (0)12 362 0210Email contact@dnaeconomics.comwww.dnaeconomics.com

4th Floor, South Office Tower, Hatfield Plaza, 1122 Burnett Street, Hatfield, Pretoria, 0083PO Box 95838, Waterkloof, 0145

DNA Economics is the registered business and trading name of Development Network Africa (Pty) Ltd Company Registration: 2001/023453/07│Directors: Elias Masilela │Matthew Stern