Strategies and Practices Toward a More Enabling
Business and Investment Climate in Africa
Regulatory Reform for a Better Business and
Investment Climate
– AN OVERVIEW –
SIMON WHITE

What role does regulation perform?
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Burden of over-regulation and opportunities for corruption
Push for deregulation versus the importance of ‘good’ regulation
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Connection between good governance and an enabling business and investment environment
Regulatory best practice

Excessive regulation is associated with lower productivity
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The quality of regulation affects the level of informality
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Regulatory reform aims at improving regulatory quality, be it the revision of a single regulation; of regulatory institutions; or improved processes for making regulations and managing reform.
Deregulation is a subset of regulatory reform and refers to complete or partial elimination of regulation in a sector to improve economic performance.
Summary Report on Regulatory Reform , OECD 2001,
<http://www.oecd.org/dataoecd/25/39/1826394.doc>

 Cutting “Red Tapes”
 Deregulation
 Regulatory Reform

 Regulation is a hidden tax:
 Businesses must incur compliance cost
 Deregulation will have the same effects as tax cuts
 Regulation affects rate of return on investment by raising costs
 High compliance cost is the real barrier to investment, not the volume of paper work

 Regulatory uncertainties raise business risks
 Higher risks discourage investment
 Regulatory uncertainties come from
 Poor enforcement of rules
 Low quality regulations

 Regulations with vague rules and unpredictable results
 Regulations with low compliance
 Regulations that cause excessive social costs
 Regulations that are unfair to honest people
 Regulations that are redundant and overlapping

 Vague rules and procedures with wide discretionary power of regulators are a source of abuse and corruption as well as uncertainty
 Low compliance is the result of:
 Loose enforcement
 Unrealistic standards or procedures
 Regulations with low compliance are worse than no regulation

 Unfair to honest people
 Some regulations are based on “presumption of guilt” that regulatees are unreliable and potential violators
 Prohibition in principle, permission in exception
 Redundant and overlapping regulations
 Different offices in the government require redundant reports or similar inspections
 Multiple jurisdiction over the same activity

CONCEPTUAL FRAMEWORK FOR REGULATORY AND
ADMINISTRATIVE BARRIERS REVIEW
INSTITUTIONS
POLICY &
REGULATORY
FRAMEWORK
ADMINISTRATION
PROCESS

Ten Principles of Regulatory Best Practice
1 Is the problem correctly defined?
2 Is government action justified?
3 Is regulation the best form of government action?
4 Is there a legal basis for regulation?
5 What is the appropriate level(s) of government for this action?

6 Do the benefits of regulation justify the cost?
7 Is the distribution of effects across society transparent?
8 Is the regulation clear, consistent, comprehensible and accessible to users?
9 Have all interested parties had the opportunity to present their views?
10 How will compliance be achieved?

 Measuring the cost of regulatory compliance
 Regulatory impact assessments
 One-stop-shop