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PHILIPPINES - REGULATORY IMPACT ASSESSMENT (RIA) GUIDELINES DRAFT – FOR DISCUSSION AND FINALISATION 1. PURPOSE AND OBJECTIVES The Regulatory Impact Assessment (RIA) Guidelines assist the Department of Finance (DOF), Department of Labour and Employment (DOLE) and Department of Tourism (DOT) staff responsible for developing, reviewing and improving regulation to produce better regulation in accordance with regulatory best practice principles. RIA is a process that is part of the broader regulation making and review processes of the departments. The RIA process promotes assessment of the impacts of a regulation with proper methodology, including cost-benefit analysis and stakeholder consultation to ensure that the regulation is effective and efficient in achieving policy objectives while minimising negative effects on stakeholders affected. See attachment A for Philippines RIA Quick Reference Guide for overview of the RIA system being piloted at DOF, DOLE and DOT. 2. CONTEXT FOR RIA ADOPTION 2.1 Reasons for RIA Regime in Philippines Good regulation is fundamental to a well functioning economy and society. It protects the community, business and the environment. Conversely, regulation that is unnecessary or poorly designed can impose significant cost on business, community and government through inefficiencies due to the time taken to understand, comply with and enforce these regulations. This has the perverse result of lower efficiency and profits for business, higher prices for consumers, and greater administration costs for government. The 2012 World Bank’s Doing Business report ranks the Philippines 136 out of 182 countries in terms of the ease of doing business, a drop of 2 places from a ranking of 134 in 2011. In 7 out of 10 topics, the Philippines’ rankings dropped up to 10 places compared with performance in 2011. The report provides some comparative examples of the difficulties with doing business in the Philippines. For example, the World Bank estimates 15 procedures are required to start a business in the Philippines (compared with 5 procedures in OECD countries), taking an estimated 35 days (compared with 12 days in OECD countries). The cost of starting a business (as a % of the economy’s income per capita) is also very high (19.1% in the Philippines compared with 4.7% in OECD countries). As the Micro, Small and Medium Enterprises sector (MSMEs) accounts for over 99% of enterprises in the Philippines, the burden of these costs falls disproportionately on MSMEs. Version 4.0 23 July 2012 DRAFT Page 4/24
PHILIPPINES - REGULATORY IMPACT ASSESSMENT (RIA) GUIDELINES DRAFT – FOR DISCUSSION AND FINALISATION The RIA system targets the development of regulations in accordance with regulatory best practice principles, and therefore improvement in the quality of new regulations. The RIA system aims to deliver an improved regulatory environment for business that is characterised by: 1. more transparency, rigour, accountability and consistency in the development and application of regulations; and 2. a focus on minimising unnecessary and excessive regulation that diverts time and money away from more productive pursuits. An improved regulatory environment will lower regulatory compliance costs (red tape) and foster more robust competition in the Philippines economy, and provide confidence to the international community (eg., aid organisations and corporate investors) and the Philippines community (eg., local businesses and investors) to participate and invest in the necessary economic and social reform of Philippines. This will benefit the welfare of the Philippines people. The establishment of a RIA Regime in the Philippines is being piloted by the Department of Finance, Department of Labour and Employment, and Department of Tourism through support and funding by the Asian Development Bank under the Strengthening Institutions for an Improved Investment Climate program. 2.2 Regulatory ‘Best Practice’ Principles, Process and Elements Principles Widely recognised ‘best practice’ principles in making good regulation are: 1. Establish clear reasons why Government needs to take action to address the problem 2. Examine the benefits and costs of a range of different policy options to address the problem including regulatory and non-regulatory approaches 3. Adopt the policy option that provides the greatest net benefit to the community 4. Ensure that the regulation does not restrict competition unless the benefits from the restriction outweigh the costs or there is no other way to achieve the policy objectives 5. Provide support and guidance to both regulators and parties required to comply with the regulation to ensure the policy objectives and regulatory requirements are clearly understood and met 6. Review the regulation regularly to ensure it remains relevant and effective over time 7. Consult in a meaningful and effective way with key stakeholders at all stages during the development and review of the regulation 8. Ensure that the regulatory action by the Government is proportionate and effective to the significance of the problem being addressed. Version 4.0 23 July 2012 DRAFT Page 5/24
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