Impact Assessment for Developing Countries: A Guide for Government Officials and Public Servants PDF
Preview Impact Assessment for Developing Countries: A Guide for Government Officials and Public Servants
Contributions to Economics Takuya Nakaizumi Impact Assessment for Developing Countries A Guide for Government Officials and Public Servants Contributions to Economics TheseriesContributionstoEconomicsprovidesanoutletforinnovativeresearchin allareasofeconomics.Bookspublishedintheseriesareprimarilymonographsand multiple author works that present new research results on a clearly defined topic, butcontributedvolumesandconferenceproceedingsarealsoconsidered.Allbooks arepublishedinprintandebookanddisseminatedandpromotedglobally.Theseries andthevolumespublishedinitareindexedbyScopusandISI(selectedvolumes). Takuya Nakaizumi Impact Assessment for Developing Countries A Guide for Government Officials and Public Servants TakuyaNakaizumi KantoGakuinUniversity Yokohama,Japan ISSN 1431-1933 ISSN 2197-7178 (electronic) ContributionstoEconomics ISBN 978-981-19-5493-1 ISBN 978-981-19-5494-8 (eBook) https://doi.org/10.1007/978-981-19-5494-8 ©TheEditor(s)(ifapplicable)andTheAuthor(s),underexclusivelicensetoSpringerNature SingaporePteLtd.2022 Thisworkissubjecttocopyright.AllrightsaresolelyandexclusivelylicensedbythePublisher,whether thewholeorpartofthematerialisconcerned,specificallytherightsofreprinting,reuseofillustrations, recitation,broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,andtransmissionor informationstorageandretrieval,electronicadaptation,computersoftware,orbysimilarordissimilar methodologynowknownorhereafterdeveloped. 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The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore Preface Thepurposeofthisbookistointroduceimpactassessment(IA)forimprovingregu- lation,especiallyindevelopingeconomies.IA1isaprocessthatpreparesevidencefor decision-makersontheadvantagesanddisadvantagesofpossibleregulatoryoptions byassessingthoseoptions’potentialimpacts. ThemostimportantpurposeofIAistoimproveregulationbyidentifyingregu- latoryissuesandassessingcostsandbenefitsatanearlystageofregulationmaking. Evenroughestimatescancontributetoimprovingregulation.Furthermore,because developingcountriesfaceahigherdegreeofresourcescarcityandmust,therefore, endeavortouseresourcesmoreefficiently,itismoreimportantforthedeveloping world,ascomparedtothedevelopedworld,toestablisharegulatorysystemthatis asefficientaspossible. Myspecialtyiseconomics,specificallycontracttheory(organizationeconomics) and the economics of regulation. I wrote this book based on my theoretical back- groundandmanyyearsofexperienceintroducingIAinJapanandPakistan,dissem- inatingIA,andconductinginterviewswithrelevantofficialsintheUnitedKingdom, theUnitedStates,andotherOrganizationforEconomicCo-operationandDevelop- ment(OECD)countries.AppointedbytheJapanesegovernmentin2000,Ibeganmy professionaldutiesbyinterviewingDr.JohnMorralIII,chiefoftheOfficeofInfor- mationandRegulatoryAffairs(OIRA)intheUnitedStatesOfficeofManagement and Budget (OMB) at that time. He was kind enough to fulfill my request, and he sharedimportantinformationregardingIA.Healsointroducedmetoseveralimpor- tant US government officials, for example, Dr. Neil Eisner and Dr. Bob Klothe of USDepartmentofTransportation(DOT),Dr.BrettSnyderoftheUSEnvironmental ProtectionAgency(EPA),andDr.RandallLutterattheAmericanEnterpriseInsti- tute (AEI) in 2000, Food and Drug Administration of US Department of Health and Human Services (FDA) in 2004, Resource For the Future (RFF) in 2011. I havevisitedthemseveraltimesin2000s.Eachgraciouslyintroducedmetoseveral importantpersons,includingDr.DominicMancini.Theinformationtheyimparted 1Severalcountriesusetheterms“regulatoryimpactassessment”or“regulatoryimpactanalysis” insteadofIA;however,thesearebasicallythesame. v vi Preface to me encompasses the key concept of implementing IA to produce better regula- tion.Ofcourse,anymistakeismyown.Thereafter,ItrackedIAprogressinOECD countries. This entailed conducting several interviews with US and UK officials. My Japanese government contacts graciously introduced me to several important persons,includingDr.SeanEnnisintheUSDepartmentofJusticeandDr.Andrei Greenawalt,formerviceofficerofOIRA. After the Japanese government mandated IA in 2008, I focused on competi- tionassessment,whichentailsassessingwhether regulationunnecessarily restricts competition.IwasappointedtoaJapanFairTradeCommissionstudygroup,andI conductedseveralinterviewswiththeaboveofficialsin theUnitedStates(in2009) and the officials of Competition Market Authority(CMA) or other Ministris in the UnitedKingdom(in2018)regardingcompetitionassessment. IwasalsoappointedregulatoryreformadviserinPakistanbytheJapanInterna- tionalCooperationAgency(JICA).MyobjectivewastohelpthePakistangovernment introduceIAandregulatoryreformwithintheperiod2013–2015basedonmyafore- mentionedexperience.ThankstotheexcellentteamsinPakistan,Ihadamemorable timethere.IwouldliketothankallthestaffofJICAPakistanandtheIERU,including Mr.AamirQawi,Dr.NatashaJehangirKhan,Ms.HibaHaiderZaidi,KomalKenneth Shakeel,andmycounterpartandconsultant,Dr.NaveedIftikhar.Thesepeoplewere members of the best team that I have had the honor of working with and are also goodfriends.IamparticularlygratefulforthespecialsupportIreceivedfromformer ChiefJusticeTassaduqHussainJillaniofthePakistanSupremeCourt. This book is a practical guide for better IA and competition assessment toward improved regulation. I describe the essence of such assessment and simplify the importantaspectsincludingtheunderlyingphilosophyandbestpracticesforgovern- mentofficials,especiallythoseindevelopingcountrieswhowishtointroduceorI orarealreadyimplementingIA. We take the rather conservative view that we can realize any achievement by learning incrementally from poor choices. Additionally, we focus on the concept of the baseline and system design for conducting IA appropriately, rather than on detailedanalysismethods. Theprogressandspreadofevidence-basedmethods,ontheotherhand,havebeen remarkableinrecentyears,andstrategiesforincorporatingthemintoIAconstitute an important issue. The novel coronavirus (COVID-19) epidemic has also made strategies for incorporating crisis management into policy assessment a pressing issue.Thisbookmentionsthem,butthereisvastliteratureexplainingmethodsand institutional design. While I refer to that literature as much as possible, the main purposehereistoclarifythewholepicture. InPartIofthisbook,weintroduceIA.Chapter1explainstherelevanceofIAand provides an outline that includes several remarks on introducing IA in developing countries. In Chap. 2, we describe the philosophy. The appendix to Part 1 lists the basic principlesofIA. In Part II, we introduce IA procedure and institutional design, mainly referring toEuropeanUnion,UK,andUSgovernments.Toimproveregulation,itisessential Preface vii forIAtocoincidewithearly-stageregulationmakingandthatadequatereviewsare provided. PartIIIdescribestheIAmethod,whiletheassessmentviewpointisaddressedin Chap. 8. Firstly, IA entails analyzing the necessity of a measure and then demon- stratingitssufficiencyviacost–benefitanalysis.Anassessmentreportisproduced, showingcorrectionpointsidentifiedthroughpubliccommentary,aswellascompli- anceissues.Here,necessitymeansascertainingwhethertherehasbeenanymarket failure,imperfectcompetition,orotherdistortionthattheprivatesectorhasfailedto address.Afterjustifyingthenecessity,oneneedstoestablishsufficiencytointroduce theproposedregulationbyquantifyingandmonetizingcostsandbenefitsasmuchas possible,afteraccuratelyformulatingthebaselineandthecounterfactual.Evidence- basedpolicymaking(EBPM)playsanimportantroleincost–benefitanalysis.Thus, wedescribehowtousetherecentdevelopmentofcausalinferenceinEBPMtoassess thebenefitsandcostsofregulation. InPartIV,weexplaincompetitionassessment.Itisdifficult,however,toquantify theeconomicimpact,andmainstreamcompetitionassessmentisbasedoneconomic theory. In developing countries, the market economy is weaker than in developed economies because there are few operational firms, resulting in imperfect compe- tition. In some markets in Pakistan, only state-owned firms and foreign-owned enterprises operate. If foreign direct investments were heavily regulated, foreign- owned enterprises’ position would be weakened, causing market monopolization. Thus, weak market conditions require greater competition considerations. Hence, competitionassessmentismoreimportantindevelopingcountriesthanindeveloped economies. PartVaddressescurrentissuessuchasnudge(Chap.11),theCOVID-19pandemic and crisis management (Chap. 12), and regulatory reform and the digital transfor- mation(Chap.13).ConcludingremarksaregiveninChap.14.Usingtheexampleof theCOVID-19pandemic, weexplain strategiesfordealingwithproblems thatare sourgentthatdecisionsmustbemadeimmediatelybeforeevidencecanbeobtained. Among my contacts are several Japanese researchers and government officials whoprovidemewithaccesstoimportantinformation,discussions,andopportunities. IwouldliketothankTokyoUniversityemeritusProf.YoshitsuguKanemoto,emeritus Prof.AkiraMorita,Prof.TanabeKuniakiofTokyoUniversity,Prof.AtsuoKishimoto of Osaka University, Prof. Tatsuya Ono of Tottori University, and Mr. Masamichi Takasaki of MUFG (in 2007), Dr. Yohei Kobayashi of MUFG, along with many governmentofficialsattheMinistryofInternalAffairsandCommunication(MIC), Ministry of Economy, Trade and Industry (METI), Japan Fair Trade Commission (JFTC),andJapanInternationalCooperationAgency(JICA)inMinistryofForeign AffairsofJapan(MOFA).Thisresearchisheavilybasedoninterviewswithgovern- ment officials from several countries, as well as on cooperation with my fellow researchers.AndWendyHuang,ChiekoKehoe,Marc-AnthonyIsaacswhohelped viii Preface me to sum up the interviews as assistants. I express deep thanks to all those offi- cialsandresearchers.ThisworkwassupportedbyJSPSKAKENHIGrantNumbers JP15K00473,JP19K01562,JP17H02501,andJP20K01643. Yokohama,Japan TakuyaNakaizumi Contents PartI OutlineandSignificanceofImpactAssessment(IA) 1 OutlineandtheNecessityofImpactAssessment(IA) ............. 3 1.1 Why Impact Assessment (IA) Matters in Developing Countries? .............................................. 3 1.2 WhatisImpactAssessment(IA)? ........................... 6 1.3 ImportanceofIAandWaystoIntroduceittoDeveloping Countries ............................................... 8 1.3.1 ImportanceofIAinDevelopingCountries ............ 8 1.3.2 Ways to Introduce IA Into the Government inDevelopingCountries ........................... 9 1.3.3 Obstacle of Introducing IA Into Developing Countries ........................................ 11 1.4 LessonIntroducingIA:PakistanandJapan ................... 13 References .................................................... 15 2 RoleofEvidence-BasedAssessmentinDemocracy ............... 17 2.1 Introduction ............................................. 17 2.2 OptimalityofEvidence-BasedPolicyinDemocracy ........... 18 2.3 FacingInformationAsymmetryandDifficultyofAnalysis ..... 20 2.4 ConcludingRemark ...................................... 21 AppendixofPart1:PrincipleofIA ............................... 22 References .................................................... 26 PartII Procedure and Organization of Conducting Impact Assessment(IA) 3 Procedure of Impact Assessment (IA) and Concept ofInstitutionDesignforConductingImpactAssessment(IA) ...... 29 3.1 Introduction ............................................. 29 3.2 KeyComponentofInstitutionalDesignforConducting ImpactAssessment(IA) ................................... 30 ix
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