REGULATORY IMPACT ASSESSMENT
by Colin Kirkpatrick and Jenifer Piesse
1.ENTERPRISE DEVELOPMENT AND THE ENABLING BUSINESS ENVIRONMENT:
1.1Private Sector Development
1.2An Enabling Business Environment
1.3Encouraging Business Enterprise within the Context of Good Governance
1.4Market Failure and the Enabling Business Environment 1.5Market Failure and Government Policy
1.6Is an Enabling Business Environment also a Sustainable Development Environment?
2.THE REGULATORY ENVIRONMENT
2.2Regulatory Reform and the Enabling Business Environment
3.REGULATORY IMPACT ASSESSMENT (RIA)
3.2What is Regulatory Impact Assessment (RIA)?
3.3Estimating the Costs, Benefits and Risks of Regulation
3.4Assessing the Impact of Regulation on the Business Environment
In market economies, the private sector is the predominant source of economic activity. Much of the investment, human capital and knowledge which drives economic growth is sourced in the private sector and private enterprises are the major providers of employment, incomes and essential goods and services. The private sector can also provide expanding opportunities for poor people whether through self-employment in microenterprises or as employees in small and medium businesses.
Well functioning markets are needed if the private sector’s role in generating growth and incomes is to be sustained. But markets often fail to function well if left to themselves, and public intervention may be required when markets fail to deliver economically efficient outputs of goods and services. Intervention may also be needed if the markets generate an outcome that is inconsistent with broader goals of social justice or environmental sustainability.
Governments in most developing countries now recognise the private sector as the main engine of economic growth, and acknowledge the need to focus public policy on a narrow set of core functions which enable the markets to function efficiently and contribute effectively to the goals of environmental sustainability and social welfare.
The purpose of public policy towards the private sector, therefore, should be to create the conditions which will enable private enterprises to contribute to the country’s development goals of economic growth, improved social conditions and environmental protection. Regulation is the means by which government attempts to affect private sector behaviour. The design of regulation policies is both complex and challenging for decision-makers, for the following reasons. First, regulation can give rise to both benefits (gains) and costs (losses) for different groups, and across time. Second, the positive and negative impacts are not confined to the economic effects, but also include social and environmental gains and losses resulting from the regulatory policy. Third, the empirical evidence on which to base the potential or actual impact of a particular regulatory measure is frequently weak or absent.
This introduction has made the following points:
• the private sector is the key driver of economic growth
• the role of government is to ensure that markets contribute fully to the nation’s development goals. Where markets are imperfect, or do not meet the needs of sustainable development, government regulation may be required
• the private sector’s development will also have impacts on economic growth, social conditions and environmental sustainability
• regulation will alter the economic, social and environmental effects of the private sector’s development. These impacts can be negative and positive.
The remaining sections of this Application Guidance Note discuss the following issues:
Section 1 explains what is meant...