Supporting Regulatory Reforms in Southeast Asia

1. Overview of trends in regulatory reform

Abstract

This chapter highlights the major trends, common challenges and future opportunities for regulatory reforms in Southeast Asia, and connects these trends with research and knowledge gathered in the OECD. The chapter attempts to capture the dynamic nature of the reforms by bringing the understanding of regulatory reform in ASEAN up to date, especially given the impact on regulation from the COVID-19 pandemic observed in OECD members. The analysis presented in this chapter is based on data collected from all 10 ASEAN Member States, which can be found in Chapter 2 of this report.

Introduction

Southeast Asia is an economic powerhouse, in large part due to a region-wide effort to implement reforms aimed at unlocking business opportunities and boosting national productivity and competitiveness in its large market (OECD, 2018[1]). Prior to the COVID-19 pandemic, the region experienced strong growth from 2013-17 with GDP across the 10 ASEAN Member States growing at 5.0%, which rose to 5.2% in 2018 before dropping to 4.6% in 2019 (OECD, 2019[2]). Emerging from the global economic shocks induced by the crisis, the region is expected to return to strong growth with estimates suggesting GDP growth in the region to be at 5.2% in 2022 and 2023 respectively (OECD, 2022[3]), compared to 3.9% in 2022 and 2.5% in 2023 for OECD countries (OECD, 2021[4]). However, the pace of the forecasted recovery varies greatly within the ASEAN block, ranging from -0.3% for Myanmar to 7.0% for the Philippines in 2022 (OECD, 2022[3]).

While the pandemic hampered banking sectors and labour markets in the region, international trade has witnessed a strong recovery following a severe contraction in early 2020 with ASEAN Member States such as Malaysia, Thailand and Viet Nam exporting more than before the pandemic (OECD, 2022[3]). These are promising signs for the region, also in terms of investment, whose economies are highly integrated in global value chains. Still, threats to global markets remain stemming from further COVID-19 variants, inflation, volatile oil prices and uncertainty around the war in the Ukraine and its repercussions (OECD, 2022[3]).

One key driver of this performance at the regional level is the Association of Southeast Asian Nations (ASEAN), which has developed several high-level strategies aimed at fostering the necessary reforms to promote regional economic integration. This includes the ASEAN Economic Community Blueprint (2008[5]); (2015[6]), the Consolidated Strategy on the Fourth Industrial Revolution for ASEAN (2021[7]), and the ASEAN Comprehensive Recovery Framework (2020[8]) and Implementation Plan (2020[8]) that aim to support recovery from the COVID-19 pandemic. Collectively, these strategies guide Member States in their reforms to facilitate trade and investment, support public governance reforms, foster skilled labour, promote competition, protect consumers and intellectual property, and strengthen the region as an integrated economic hub.

A common element across all these strategies has been the need to implement better regulation reforms to create a business-friendly regulatory environment, including for small- to medium-sized enterprises (SMEs), while also protecting citizens, society and the environment. Commonly, this has taken the form of adopting good regulatory practices (GRPs) – such as ex ante regulatory impact assessments (RIAs), stakeholder consultation and ex post reviews aimed at administrative simplification – as tools to improve the quality of the regulatory environment (OECD, 2018[1]). Mirroring the experience in OECD countries, ASEAN Member States are also moving towards reforms that build the broader system of regulatory governance to support the implementation of GRPs (OECD, 2021[9]).

The objective of this report is to foster mutual learning to inform efforts in regulatory policy making and governance systems reforms, both within the ASEAN region and between ASEAN and OECD constituencies. In doing so, it aims to support further domestic regulatory reform efforts, but also more broadly position regulatory reform as an essential tool of public governance to reinforce democracy and foster trust in public institutions. Evidence from 22 OECD countries on the drivers of trust in public institutions suggest that OECD countries are performing reasonably well on average on many measures of governance, such as citizens’ perceptions of government reliability, service provision and data openness (OECD, 2022[10]). However, emerging from the largest health, economic and social crisis in decades, trust levels decreased in 2021 and public confidence is now evenly split between people who say they trust their national government and those who do not (OECD, 2022[10]). Time is of the essence, as the OECD report further notes that it takes a long time to rebuild trust and, in doing so, suggests that governments cannot focus solely on the outcomes of policies but also on the processes. This suggests that improvements in the way regulations are designed and delivered can help contribute to the process of rebuilding trust. While similar data does not exist from ASEAN member states, discussions with better regulation officials in the region have noted similar challenges and opportunities associated with the essential role that trust plays in the success of regulatory reforms.

This chapter highlights the current trends, common challenges and future opportunities for regulatory reforms in Southeast Asia, as well as connecting these trends with research and knowledge gathered in OECD countries. It attempts to capture the dynamic nature of these reforms by bringing the understanding of regulatory reform in ASEAN up to date, especially given the impact on regulation from the pandemic observed in OECD members (OECD, 2021[9]). The analysis is based on data collection from all 10 ASEAN Member States, found in Chapter 2 of this report, which build off and deepen the case studies from the region (OECD, 2018[1]). The data was collected via the ASEAN-OECD Good Regulatory Practices Network (GRPN),1 which was followed up by interviews with GRPN members and a special workshop with the GRPN membership, held in March 2022, to discuss these findings and gather feedback. An explanation of key concepts and terms can be found in Chapter 2.

Major trends in regulatory reform

Whole-of-government initiatives

International regulatory co-operation continues to have a strong impact on better regulation in Southeast Asia

International regulatory co-operation (IRC)2 has been a major driver of regulatory reforms in Southeast Asian countries by virtue of their membership in the Association of Southeast Asian Nations (ASEAN).3 This includes the ASEAN Economic Community Blueprint 2025 that recognises the importance of good regulatory practices, as well as the ASEAN (2019[11]) Guidelines on Good Regulatory Practices that provide advice to countries on implementing better regulation reforms at the domestic level. Better regulation also underpins the ASEAN Comprehensive Recovery Framework (ASEAN, 2020[8]) and Implementation Plan (2020[8]), which focus on COVID-19 pandemic recovery. The ASEAN Work Plan on Good Regulatory Practice (2016-2025) further aims to embed GRPs in both national and regional level contexts (OECD, 2018[1]), with support by the Economic Research Institute for ASEAN and East Asia (ERIA) that produces policy-oriented economic research, including in the areas of regulation and governance (ERIA, n.d.[12]).

Individual country profiles featured in this report illustrate the impact of IRC efforts stemming from regional ASEAN-led initiatives, such as through the strong drive behind implementing the ASEAN Single Window (ASW). The ASW originated from the Ninth ASEAN Summit (2003) as a regional initiative that connects and integrates the National Single Windows (NSW) of ASEAN member states to exchange electronic trade-related documents (ASEAN, 2018[13]). By the end of 2019, all ten ASEAN member states had joined the ASW live operation. As part of the implementation of the ASW, it is required that the NSWs for each ASEAN member state are compatible with international open communication standards, thereby fostering predictability and transparency of trade-related procedures and regulations (ASEAN, 2015[14]). The OECD Best Practice Principles for Regulatory Policy: One-Stop Shops for Citizens and Businesses (2020[15]) notes that, when done well, one-stop shops such as national single windows can provide a “win-win” outcome for governments and stakeholders by improving both service delivery and compliance with regulations, a result of reducing burdens on citizens and businesses by helping them more easily locate forms, supply information and do business. In this way, they are often important parts of a broader administrative simplification strategy.

All ASEAN Member States are signatories to international trade agreements. In the last decades, trade agreements have been increasingly used as a vehicle to promote effective regulation through the embedding of good regulatory practices (Kauffmann and Saffirio, 2021[16]). This has included using trade instruments to address transparency in rulemaking and adopting international standards in technical regulations, as well as more recent efforts to have more detailed and ambitious “standalone chapters” on good regulatory practices, IRC, or both (Kauffmann and Saffirio, 2021[16]).

In Southeast Asia, the most recent major trade agreements include the Regional Comprehensive Economic Partnership (RCEP), which includes all 10 ASEAN member states, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which include five ASEAN Member States. RCEP represents a more traditional approach to embedding improvements to regulatory quality in trade agreements as it contains chapters on standards, technical regulations and conformity assessment procedures, as well as various sub-sections on regulatory issues. However, it does not include references to GRPs specifically (OECD, 2021[9]). On the other hand, the CPTPP contains a dedicated chapter on regulatory coherence that encourages good regulatory practices amongst signatories that aims to promote a minimum level of GRP and strengthen IRC amongst members (Kauffmann and Saffirio, 2021[16]). While the CPTPP chapter contains stronger commitments than some other agreements, it still uses best efforts language (i.e. “should,” “to the extent appropriate and consistent with its law, each Party should encourage…”) and is not subject to the TPP Dispute Settlement Chapter (Kauffmann and Saffirio, 2021[16]). Rather, it uses regular implementation reports by parties to monitor and encourage the enactment of the provisions in the agreement.

Better regulation, and public administration reform more broadly, are priorities for national development for all Southeast Asian countries but tend to focus on the business environment

Major better regulation reforms are often derived from broader whole-of-government efforts to transform government and modernise approaches. Public administration reforms feature prominently in every country profile covered in this report, and these often explicitly refer to better regulation as one of the elements. This includes integrating regulatory reforms into national visions and development plans. This has further trickled down to major legislative changes to improve regulations, which have occurred in nearly all ASEAN Member States.

Collectively, these make better regulation a whole-of-government priority for countries in the region. However, the strength, depth and breadth of the reform efforts vary considerably between countries. Some focus on improving property rights and legal systems to be on par with trading partners. In others, efforts extend further into reforms to improve the environment for investment and trade. Some jurisdictions notably have undertaken more systematic regulatory reforms, as the individual country profiles below will highlight.

Regardless of the intended policy outcomes, most reforms seem to be driven by efforts to improve economic performance, especially related to facilitating trade, investment and economic development. This is also consistent with the effects of IRC-led reforms via trade agreements. These reforms focus on the stock of existing regulations (i.e. burden reduction initiatives), and the flow of new regulations (i.e. ex ante RIA evaluations and, in some cases, oversight). Furthermore, this is consistent with a priority on improving the regulatory environment for businesses, which has been a hallmark of reforms in the region for many years.

There appears to be less of a focus on regulatory reforms in support of improvement to society more broadly, including protection for the environment. This may be linked to the fact that frameworks for calculating regulatory costs (often to businesses and the economy) are generally more developed than for calculating benefits. In practice, past OECD Regulatory Policy Outlooks (2015[17]; 2018[18]; 2021[19]) have further noted that more countries measure costs than benefits.

Regulatory oversight is starting to take hold; however, more can still be done to strengthen this institutional anchor to support better regulation outcomes

OECD Recommendation on Regulatory Policy and Governance (OECD, 2012[20]) notes the cornerstone role oversight plays in effective regulatory policy making. It stresses the importance of establishing mechanisms and institutions to incentivise government actors to use the processes and tools of better regulatory policy making to foster regulatory quality across government. Regulatory Oversight Bodies (ROBs) are the institutional embodiment of this function and often have the following core roles (OECD, 2021[19]):

• Quality control of regulatory management tools (i.e. reviewing the quality of individual regulatory impact assessments, stakeholder engagement processes, and ex post evaluations);

• Issuance or provision of relevant guidance on the use of regulatory management tools;

• Co-ordination on regulatory policy; and

• Systematic evaluation of regulatory policy.

OECD research on ROBs suggest that they host strong competences in GRPs and better regulation reforms, including an understanding of why they are necessary and how they can have a positive influence on regulatory policy design and delivery. They also have a crucial role to play in the implementation and promotion of reform efforts (OECD, 2021[19]). This is reflected in data collected on OECD countries, which note that all OECD members have at least one ROB in operation, but there is significant heterogeneity in terms of both their location in government and core functions performed (OECD, 2021[19]). ERIA research on ASEAN Member States has noted the similar importance for ROBs in institutionalising and implementing GRPs.

The ASEAN member state country profiles in this report show a trend towards strengthening oversight, with similar heterogeneity as compared to OECD countries. Six ASEAN Member States have identified that they have some form of regulatory oversight body in operation. All of these have training functions, whereby they encourage the use of better regulation via capacity building, trainings, production and dissemination of guidance materials. Four of these six have a gatekeeping function, scrutinising regulatory proposals to evaluate the quality of regulatory impact assessments (RIAs), stakeholder engagement or ex post review efforts. It appears as though all the ROBs who undertake this function do so in an advisory fashion, without the powers or mandate to block a regulatory proposal on the grounds of insufficient evidence.

Of these ROBs, there is a split between the use of central agencies (often inside the Office of the Government/Prime Minister/President) and use of Ministerial or Agency level units. OECD-wide guidance on ROBs has yet to be developed; however, entities such as RegWatchEurope, a network of independent bodies,4 has issued recommendations for developing regulatory oversight further at the EU level (RegWatchEurope, 2020[21]).

Good regulatory practices

Good regulatory practices (GRPs), also known as regulatory management tools, are tools and processes developed to help support policy makers in their efforts to use evidence-based decision making throughout the policy cycle. These tools include regulatory impact assessments (RIAs) that help decision makers to evaluate ex ante the various options for regulatory responses and choose the most optimal solution, stakeholder engagement that gathers evidence from those directly or indirectly affected by the proposed solution, and ex post review that evaluates the effectiveness of regulations to offer opportunities to revise regulations to improve their effectiveness and efficiency.

The analysis in this section relies on the methodology behind the OECD Indicators of Regulatory Policy and Governance (iREG) that are measured and presented every three years via the OECD Regulatory Policy Outlook (2015[17]; 2018[18]; 2021[19]). iREG are composite indicators looking at four elements pertaining to the adoption and implementation of good regulatory practices:

• Systematic adoption records formal requirements and how often these requirements are conducted in practice.

• Methodology presents information on the methods used in each area, e.g. the type of impacts assessed or how frequently different forms of consultation are used.

• Oversight and quality control records the role of oversight bodies and publicly available evaluations.

• Transparency records information which relates to the principles of open government, e.g. whether government decisions are made publicly available.

The iREG indicators presented in the Outlooks are the result of a robust data collection and verification process conducted every three years. As this type of exercise is outside the scope of this paper, a more qualitative approach was taken to analyse the data in the profiles to achieve an initial indication of ASEAN Member States’ progress towards implementing GRPs. An in-depth data collection and analysis by country would provide significantly more depth, and could be seen as a future priority for countries looking to advance their GRP reform agendas.

RIAs are becoming more widely adopted in ASEAN Member States, though still more focused on procedural applications than driving a thorough evaluation of regulatory options

In terms of systematic adoption, the country profiles indicate that seven of the ten ASEAN Member States have a formal requirement to conduct RIAs as part of regulatory policy making, with one additional country having the requirement to conduct RIA but on a voluntary basis. This demonstrates that ASEAN Member States do recognise the importance of this tool to improve regulatory policy making, tracking with similar trends in OECD countries (OECD, 2021[19]). However, the profiles indicate that these formal requirements do not always lead to continuous use of RIAs in practice, which is an area of possible reform for ASEAN Member States going forward. Discussions at the GRPN and research by ERIA have noted similar trends.

Similarly, methodology seems to be an area of strength for ASEAN Member States in progressing their RIA systems. All countries that have RIA systems in place have also produced some form of guidance or manual for how to conduct RIA, combined with training initiatives. In some cases, this has been produced by the government alone while others were developed with the support of development partners, such as with United States Agency for International Development (USAID); the Foreign, Commonwealth and Development Office (FCDO); the World Bank; or the OECD.

RIA oversight and transparency are two areas where ASEAN Member States may still be in need of further development. As discussed previously, regulatory oversight is not yet systematically adopted in all ASEAN Member States as a tool for improving the system of regulatory governance. Only four countries that have an oversight body have indicated in their profiles that this oversight body also scrutinises RIAs. More often, the oversight body develops guidance and methodologies for conducting RIAs, as well as conducting training sessions for policy officials. Further, transparency was not highlighted strongly in the profiles, though OECD guidance recommends that RIAs be made public to both support stakeholder engagement and as part of publishing the final regulatory decision. Collectively, this may drive implementation issues whereby individual ministries and agencies may adopt some or all elements, while others do not, resulting in a piecemeal approach.

One possible way forward for ASEAN Member States in trying to develop further their RIA systems would be to focus on RIA as a “theory of change” rather than a procedural hurdle. Discussions at the GRPN have noted the perception that RIA takes significant resources in terms of time, expertise and data, which has emerged both in OECD and ERIA research on the region. This perception can be true when conducting full cost-benefit analyses (CBA). However, RIA is not fundamentally about only conducting quantitative analyses and calculations; rather, it is a structured process that aims to give decision makers crucial information on whether and how to regulate to achieve a public policy goal (OECD, 2020[22]).

OECD guidance notes the variety of methods that can be used to conduct RIA, ranging from faster and less time consuming qualitative methods to fully quantitative cost-benefit analyses, which offers a path forward for countries wanting to deepen their use of RIA. The OECD (2020[22]) Best Practice Principles on Regulatory Impact Assessments notes that other key elements of RIA include problem definition, objective setting, description of the regulatory proposal, identification of alternatives and preferred solution, and setting out a monitoring and evaluation framework – all of which do not need specialised skills, knowledge or significant time commitments and, when done right, provide the necessary essential information to decision makers. Furthermore, the Principles note the use of proportionality and thresholds in some OECD countries, which establish impact requirements whereby above a certain threshold a full CBA is required but, under this threshold, less rigorous and resource intensive methods can be used. Therefore, establishing clear rules for choosing between shorter and longer forms of RIA can help increase the uptake of the tool.

Stakeholder consultation is a strong building block of GRPs in the region, but slightly less widely adopted from a whole-of-government perspective and may be less used in practice

Nine of ten ASEAN member states have stated that they have some type of formal requirement to conduct stakeholder engagement in regulatory processes, though this was split between having a whole-of-government policy requiring it (six of ten member states) and having individual ministries opting to conduct stakeholder consultations (three of ten member states). However, it is unclear from the information collected how systematically these consultations are undertaken in practice or at what stage in the process they occur. The later they occur in the policy making cycle, the less likely they are to have an impact on the final outcome.

Half of the countries indicated the use of guidelines, manuals or trainings to encourage stakeholder engagement. Similarly, five of ten ASEAN Member States have explicitly set up consultation groups to solicit regular feedback into regulatory policy making and evaluation, or identified groups of stakeholders to engage with on a regular basis when developing policies. These were often oriented towards business groups, such as chambers of commerce. The existence of such standing bodies to conduct ongoing consultation can be quite helpful in overcoming some of the difficulties in gathering evidence to support decision making as these stakeholders can provide immediate feedback on regulatory proposals and provide options for alternative solutions. However, without voices from a diverse set of backgrounds, there is a risk of overlooking benefits of the current proposal and/or possible alternatives that may be most efficient. A full analyses of these groups would be needed to come to an appropriate set of recommendations.

Transparency appears to be most advanced in stakeholder engagement, compared to the other GRPs. Seven of ten countries indicated the use of a public platform, such as a website, to run consultations and/or report on the results. Conversely, oversight seems to be least developed for stakeholder engagement, with only two countries indicating that the ROB was involved with some form of scrutiny in regards to consultations.

Ex post review is the least used GRP, similar to OECD trends

Of the three major types of ex post review examined by the questionnaire sent to members (post-implementation review, sunset clauses and burden reduction), burden reduction continues to be dominant with eight ASEAN Member States having explicit programmes underway. In all cases, these have been institutionalised into either central units responsible for whole-of-government initiatives, or ministry level units responsible for implementing and evaluating burden reduction. Comparatively, five countries require either post-implementation reviews or sunset clauses, though nearly all identify this practice as being implemented on an ad hoc basis on the decision of individual ministries overseeing the policy.

In terms of methodology, three out of five countries who identified having a policy to conduct post-implementation reviews also have guidance for ministries to implement these reviews in practice. Four out of eight cases with burden reduction programmes have dedicated methodologies in place, such as through guidelines or units who provide support. The lesser adoption of methodologies with burden reduction may be linked to the establishments of units responsible for implement burden reduction initiatives, and thus not requiring others to do the burden reductions on their own. This would negate the need for developing guidance. It is unclear from the data collected what sort of cost calculation methodologies are used by burden reduction units to conduct their analysis.

Oversight seems to be consistently in place when countries do decide to implement ex post reviews, with eight countries having some sort of oversight mechanism to oversee the review process. For burden reduction, a dedicated unit is almost always responsible for implementing the initiative. For post‑implementation reviews and sunset clauses, this is often under the purview of the ministry or agency overseeing the regulation, which is consistent with findings from the OECD (2020[23]) Best Practice Principles for Review the Stock of Regulation. At least one country with a centralised ROB has also given this entity responsibility for scrutinising reviews. Burden reduction initiatives seem to be transparently communicated on, following countries’ motivation to publicly display their progress on improving the business climate.

Digitalisation and innovation

Digitalisation is a clear driver of administrative reforms in the region

There is a general movement towards the use of digital tools to improve regulatory policy design and delivery in the ASEAN region. This both supports the implementation of GRPs, and occurs independently of GRP reforms to improve broader aspects of public governance including through the Consolidated Strategy on the Fourth Industrial Revolution for ASEAN (2021[7]). All ASEAN Member States have a national policy or strategy for promoting digitalisation, with a broad focus including public administration reforms. In these cases, nearly all (8 of 10) include a focus on improving the business climate, while 7 involve digitalisation for improving procedures around designing or delivering regulations.

However, GRPN members also highlighted the need to recognise that technology is not a cure-all that will solve all problems. The gains from technology are often unevenly distributed, with many potentially feeling left behind if they do not have the skills and resources to access technology-based systems. This highlights the need to engage in digitalisation as a mode to improve governance, while still using targeted and assistive approaches with multiple channels to ensure inclusiveness.

A common tool used in this regard are one-stop shops (OSS) or national single windows (NSW). All ASEAN member states had at least one version of an OSS/NSW, in line with their commitments under the ASEAN Single Window programme as mentioned above, with several countries having several in operation at once. In terms of functions, 7 of 10 are branded as full one-stop shops; however, how much they align with good practices in terms of OSSs needs to be evaluated5. Similarly, 7 of 10 have online business registration and/or payment portals aimed at reducing burdens on businesses.

While countries appear to be highly committed to the use of digital tools to improve administrative processes, the use of more advanced forms of innovations to regulatory systems are less frequent. For example, only one country identified the use of regulatory sandboxes to support the digital transformation of their society. Another identified the use of artificial intelligence supporting administrative processes.

Challenges and opportunities for regulatory reform in Southeast Asia

The OECD conducted interviews with main contact points of the ASEAN-OECD Good Regulatory Practices Network (GRPN) and held a workshop with the network to further explore the challenges and opportunities in driving regulatory reforms in respective contexts. This section dives into some of the themes identified, which is not exhaustive but is meant to reflect priority views of GRPN members.

Leadership

GRPN members identified the need for strong leadership in implementing better regulation reforms. The success of these reforms is contingent upon the large number of public servants inside the regulatory policy making system shifting ways of working to adopt new approaches, which may take time and effort as well as often subjecting themselves to scrutiny in the process. For these reasons, there can often be a reluctance to adopt new reforms.

Strong leadership within government is often a pre-condition for successful GRP reforms. The lack thereof was identified as a major potential challenge. On the one hand, members identified a lack of leadership as one reason for why various ministries and agencies may not adopt new reform. That is, if their direct leadership did not initiate reforms, reform ideas, and the necessary steps, then they do not feel they have to abide by the requirements in the reform. On the other hand, members also noted that it is the role of the political leaders to debate issues and reach consensus about the best way forward. This will often involve compromises, and political leaders may not be ready to fully implement reforms as part of the consensus‑making process. As a result, it can be difficult to drive strong reform agendas across government.

However, this is also seen as a source of solutions. Members noted that when leaders place their full weight behind reforms, it can overcome internal resistance. Often this support is generated by demonstrating to leaders the value of reforms, such as being a tool to advance their agendas and demonstrating how the reforms are having tangible impacts, which then can create more space and credibility for the better regulation unit.

Powers and functions

Members also noted the delineation of legal powers and functions of various ministries and agencies as a challenge to implementing regulatory reforms. In some instances, this is a legal issue from both the perspective of the centre of government “better regulation unit” charged with implementing the reform and the ministries and agencies who are being asked to adopt new ways of working.

For the former, some better regulation units are created by the current or recent governments inside central executive offices to carry out centrally-driven reform initiatives, but without the benefit of the legal standing of more codified government entities. When trying to implement reforms, these units have noted that they can face some resistance both from a perceived lack of legitimacy to enact system-wide change, as well as an assumption that any change in political leadership or focus could result in the unit no longer being in existence. As a result, ministries and agencies may take a “wait and see” approach to determine if they commit resources to implementing the reform or not.

For the latter, some ministries and agencies use their powers and functions, sometimes codified in law – such as agency creation acts – to resist reforms. Members noted that ministries and agencies often argue that, according to the law in some instances, the better regulation unit does not have the right to instruct on reform. As a result, the reforms stall. This is related to leadership, as some members noted that the common solution is to gain the support of the leadership, including often the Head of Government and/or State, who directs ministries and agencies to comply and resolves inter-Ministerial conflicts over the matter.

Co-ordination

Several members identified challenges associated with co-ordination, especially in building and maintaining a constituency for change that could help remove roadblocks and support reform implementation. Specifically, having the right skill sets internally and creating alliances of willing partners for change were highlighted as necessities for successful reform implementation. Members noted at least two perspectives where co-ordination challenges were remained.

First, there is co-ordination across the national government – often between “better regulation units” who create the processes, rules, guidelines and training to improve regulatory policy making and the “regulators” who have to use them in practice in their given sector. In addition to leadership, powers and functions discussed above, having the right type of co-ordination mechanisms is essential in promoting a whole-of-government approach to better regulation. Examples from ASEAN and OECD countries note a variety of ways to approach improving co-ordination, ranging from special bodies or task forces to formal institutional mechanisms.

Second, similar needs extend to sub-national governments, especially in the case of unitary systems where rules made at the centre are to be implemented at the sub-national level. However, harmonisation and alignment often does not always happen automatically and members identified gaps in co-ordination between levels of government that could help more forward better regulation reforms. Involvement of sub‑national governments in regulation-making takes time, but medium-long term benefits outweigh the costs of co-ordination (OECD, 2012[20]).

System change

Another challenge identified by the GRPN regards the need to update systems across government to ensure reforms work in practice. This includes changes to administrative processes, which need to account for the new ways of working imposed by the better regulation reforms. For instance, appropriate scrutiny often requires that the oversight body is granted sufficient responsibility to intervene, but also that this intervention is at the right moment in the policy making process and with sufficient ability to affect the outcomes. Similarly, the ability for RIAs and stakeholder engagements to have an effect is also linked to when they are conducted (OECD, 2020[22]; 2021[19]). When they are done too late, they will be mostly used to justify decisions that have already been taken rather than informing the decision over which decision to take.

Further system changes are also required to adapt to the wave of digital transformations occurring in country administrations of all ASEAN Member States. GRPN members noted that issues related to interoperability of systems or adapting digital systems to new requirements can pose challenges in implementing the reforms, including long delays.

Resources

Reforms require an extensive commitment to changing the behaviour and attitudes of the public service on a wide scale. For this reason, GRPN members cited having the right financial and human resources to carry out these duties and responsibilities over the long term as a central challenge. Internally, this means the ability to hire enough – and sufficiently qualified – staff to be able to appropriately deliver on the scrutiny and/or training functions. Externally, this means being able to deliver these functions across the wide array of ministries and agencies involved in the system of regulatory policy making. Some members noted that underfunding has reduced their ability to deliver the reforms entrusted to them.

Countries also noted the need to consider resources in parallel with delivering on efforts to improve governance via decentralisation. Members noted that reforms need to not only affect national government decision making, but also sub-national decision making as well. This can greatly expand the size and scope of resources needed to fully implement reforms.

A related challenge raised by several GRPN members was the impact of multiple funding streams in ASEAN Member States, including through Official Development Assistance (ODA). For many reasons, state budgets in many ASEAN Member States are often insufficient to carry out all national development goals. This is where ODA can help ASEAN Member States bridge resource gaps, especially to support strategic reform programmes. While this assistance is vital for many countries, uncertainty in the regularity and availability of development funds, compounded by co-ordination challenges among some donor initiatives can pose challenges in implementation. This can result in continuity challenges for reforms over time that, again, gives way to hesitance by ministries and agencies who are asked to implement the reform.

Capacity building

The implementation of better regulation reforms often requires extensive and sustained capacity building. This is aimed at introducing the wide variety of actors across government to the new tools and processes, as well as work with these actors to help them adopt these reforms in their day-to-day activities. Members noted challenges associated with delivering these sessions in practice.

On the one hand, this is related to the resource issue – having the budget and staff sizes to deliver training courses and work with ministries and agencies to answer their questions is difficult, especially to plan these activities over the long term if relying on ODA or other types of temporary funding. On the other hand, some GRPN members noted a more general challenge related to technical knowledge. Some of the analytical tools used in good regulatory practices require some base knowledge of economics and related disciplines, which is not always available internally or easily accessible without considerable cost externally.

Fostering trust

Finally, members highlighted the essential role of trust as both a driving factor of regulatory reforms, as well as a potential challenge to overcome. Members noted that reforms do not happen on their own, which has been a running theme of the challenges noted above. Rather, they are the result of concerted efforts to build and strengthen the system for the benefit of the whole of government, businesses and society at large.

They noted that, in low trust environments, such efforts can be difficult to push forward. Other government actors, businesses or members of society who lack trust may view these efforts negatively and resist coming along in the change process. Members highlighted two avenues to help improve trust in the reform process: first, internally by investing in effective capacity building and support mechanisms to help civil servants adopt new ways of working and, second, externally by demonstrating to citizens and businesses that the new systems are used equally (i.e. no preferential access or treatment) and lead to better outcomes for all. This aligns well with the key message of the OECD (2022[10]) report on the drivers of trust in public institutions, which notes that rebuilding trust requires governments to not just focus on outcomes but also on processes.

Future of regulatory reforms

OECD interviews with GRPN main contact points and the workshop with GRPN members also honed in on some of the expectations for regulatory reforms in their respective administrations going forward. This section dives deeper into these areas of potential focus, including elements from the OECD (2021[9]) COVID-19 Policy Paper on Regulatory responses to the COVID-19 pandemic in Southeast Asia. These are not government policy; rather, an assessment by GRPN members of trends they are observing and where they think the trends may lead to next. As with the challenges section, this is an overview from a limited sample size and project. More analysis via a dedicated research project would be needed to understand these trends further, identify missing elements, and offer recommendations for all ASEAN Member States.

Improving the quality and delivery of online services

GRPN members noted that they expect the movement towards improving the quality and delivery of online services to continue going forward. This is both a result of the pandemic, which OECD (2021[9]) notes forced governments to adopt digital solutions en masse to alleviate government process oriented burdens, and pre-pandemic digital transformation efforts enshrined in national development strategies and regional efforts, such as the ASEAN Single Window. Two strong tailwinds provide momentum towards these reform efforts.

First, there is a strong recognition that citizens and businesses can benefit greatly from improved access to services online. This would help support burden reduction efforts, which are well established as areas of focus to help improve trade and investment environments, both domestically and in partner countries. Second, the COVID-19 pandemic and resulting crisis demonstrated that governments need to become more agile in order to handle future crises, including economic, social and environmental issues. Digital government is seen as an important part of government preparedness to handle such future crises. One‑stop shops are a centre piece of many governments’ efforts in these regards, and their continued development and iteration will likely be an important focus for ASEAN Member States in the short- to medium-term.

Re-engineering government systems

As part of both digital transformation and efforts to implement regulatory reforms, ASEAN Member States are realising that whole-of-government reforms will need a more intensive investigation into how the system of government can be re-engineered to deliver these reforms. This includes how to implement processes and tools to make better regulation, such as RIAs, but also how to deliver effective capacity building to help effectuate the desired behaviour change. This may be a reason why oversight was featured in recent reform efforts, and may be increasingly the focus as a means to drive such system-wide change via scrutiny and gatekeeping.

This will be interesting to evaluate further vis-à-vis the effects of the COVID-19 pandemic, as OECD (2021[9]) analysis notes that scrutiny functions were at times side-lined during the early stages of the pandemic in favour of faster decision making. The analysis recommended a review of the mandates, roles and procedures of entities involved in the regulatory policy making system, especially in light of crisis preparedness, and to adjust reform efforts based on the findings.

To make this happen in practice, governments are likely to look again at the laws that govern both regulatory policy making and sectoral regulation via burden reduction efforts. On the former, there is a recognition that some investigation into formal functions and powers may be needed to determine where and how to optimise the regulatory policy making system. On the latter, various sectoral laws will need to be evaluated ex post to determine their fitness, and revised and improved accordingly to allow for more modern approaches to regulatory policy design and delivery.

Further refining the various systems of good regulatory practices

The country profiles note a gap between ASEAN Member States in terms of GRPs that have been implemented. In some contexts, countries have been iterating a full system of GRPs for several decades. In others, the focus has been on some of the GRPs over others, or on the creation of a legal requirement to use GRPs but with little practical use. Others still are at the very beginning of their GRP reform processes.

Because of this complex and diverse landscape, and the continued political will to promote better regulation, ASEAN Member States are expected to continue to focus on creating, implementing and iterating their GRP systems for the foreseeable future. The heterogeneity in the level of development in the region also offers many avenues for countries to share lessons, both bilaterally and through regional foras such as ASEAN and the ASEAN-OECD GRPN.

From a post-pandemic perspective, OECD (2021[9]) further highlights the need to develop robust systems of ex post review. In the short term, evaluating what worked and what did not from rapid changes to regulatory policy making as a result of the pandemic can help “lock in the gains” and modernise regulatory systems. Longer term, ex post reviews will be vital to ensuring regulations remain fit for purpose in future crisis, as opposed to “set and forget” styles of regulatory management. But such review process should also be applied to the system of GRPs as well, which is where OECD normative guidance and best practice principles can serve as a resource to support the evolution of the GRP system across the ASEAN region.

Lessons learned from the pandemic can also help to link regulatory reform efforts with broader goals to bring about positive societal change on a more macro level, including towards achieving the sustainable development goals (SDGs) and gender inclusive practices. Regulation can be a key tool for policy makers in promoting these better outcomes, and incorporating SDG, gender and other relevant perspectives into the GRPs can help mainstream these considerations into policy decisions (OECD, 2019[24]). Ex post reviews could also be an ideal place to begin with this analysis, as looking back on regulatory decisions and evaluating them through an sustainable development lens can help provide an opportunity to identify unnecessary costs on society and reduce unintended consequences (OECD, 2019[25]).

References

[7] ASEAN (2021), Consolidated Strategy on the Fourth Industrial Revolution for ASEAN, https://asean.org/consolidated-strategy-on-the-fourth-industrial-revolution-for-asean/ (accessed on 8 March 2022).

[8] ASEAN (2020), ASEAN Comprehensive Recovery Framework: Implementation Plan, ASEAN, Jakarta.

[11] ASEAN (2019), ASEAN Guidelines on Good Regulatory Practices, ASEAN Secretariat, Jakarta, https://asean.org/storage/2017/09/ASEAN-Guidelines-on-Good-Regulatory-Practices2.pdf (accessed on 3 May 2021).

[13] ASEAN (2018), About ASW, https://asw.asean.org/index.php/about-asw (accessed on 2 March 2022).

[6] ASEAN (2015), ASEAN Economic Community Blueprint 2025, ASEAN, Jakarta, https://asean.org/wp-content/uploads/2021/08/AEC-Blueprint-2025.pdf (accessed on 11 May 2022).

[14] ASEAN (2015), ASEAN Single Window Lowering the Costs of Trade through Faster Customs Clearance, https://www.asean.org/wp-content/uploads/images/2015/October/outreach-document/Edited%20ASEAN%20Single%20Window-2.pdf (accessed on 22 April 2022).

[5] ASEAN (2008), ASEAN Economic Community Blueprint, ASEAN, Jakarta, https://www.asean.org/wp-content/uploads/images/archive/5187-10.pdf (accessed on 11 May 2022).

[12] ERIA (n.d.), Regulation and Governance - Research : ERIA, https://www.eria.org/research/topic/regulation-and-governance (accessed on 4 May 2021).

[16] Kauffmann, C. and C. Saffirio (2021), “Good regulatory practices and co-operation in trade agreements: A historical perspective and stocktaking”, OECD Regulatory Policy Working Papers, No. 14, OECD Publishing, Paris, https://doi.org/10.1787/cf520646-en.

[10] OECD (2022), Building Trust to Reinforce Democracy: Main Findings from the 2021 OECD Survey on Drivers of Trust in Public Institutions, Building Trust in Public Institutions, OECD Publishing, Paris, https://doi.org/10.1787/b407f99c-en.

[3] OECD (2022), Economic Outlook for Southeast Asia, China and India 2022: Financing Sustainable Recovery from COVID-19, OECD Publishing, Paris, https://doi.org/10.1787/e712f278-en.

[4] OECD (2021), OECD Economic Outlook, Volume 2021 Issue 2, OECD Publishing, Paris, https://doi.org/10.1787/66c5ac2c-en.

[19] OECD (2021), OECD Regulatory Policy Outlook 2021, OECD Publishing, Paris, https://doi.org/10.1787/38b0fdb1-en.

[9] OECD (2021), “Regulatory responses to the COVID-19 pandemic in Southeast Asia”, OECD Policy Responses to Coronavirus, https://www.oecd.org/coronavirus/policy-responses/regulatory-responses-to-the-covid-19-pandemic-in-southeast-asia-b9587458/ (accessed on 2 March 2022).

[26] OECD (2020), International regulatory co-operation: Adapting rulemaking for an interconnected world, https://www.oecd.org/gov/regulatory-policy/international-regulatory-cooperation-policy-brief-2020.pdf.

[15] OECD (2020), One-Stop Shops for Citizens and Business, OECD Best Practice Principles for Regulatory Policy, OECD Publishing, Paris, https://doi.org/10.1787/b0b0924e-en.

[22] OECD (2020), Regulatory Impact Assessment, OECD Best Practice Principles for Regulatory Policy, OECD Publishing, Paris, https://doi.org/10.1787/7a9638cb-en.

[23] OECD (2020), Reviewing the Stock of Regulation, OECD Best Practice Principles for Regulatory Policy, OECD Publishing, Paris, https://doi.org/10.1787/1a8f33bc-en.

[2] OECD (2019), Economic Outlook for Southeast Asia, China and India 2020: Rethinking Education for the Digital Era, OECD Publishing, Paris, https://doi.org/10.1787/1ba6cde0-en.

[25] OECD (2019), Governance as an SDG Accelerator : Country Experiences and Tools, OECD Publishing, Paris, https://doi.org/10.1787/0666b085-en.

[24] OECD (2019), Recommendation of the Council on Policy Coherence for Sustainable Development 8, OECD/LEGAL/0381, Paris, https://www.oecd.org/gov/pcsd/recommendation-on-policy-coherence-for-sustainable-development-eng.pdf (accessed on 4 July 2022).

[1] OECD (2018), Good Regulatory Practices to Support Small and Medium Enterprises in Southeast Asia, OECD Publishing, Paris, https://doi.org/10.1787/9789264305434-en.

[18] OECD (2018), OECD Regulatory Policy Outlook 2018, OECD Publishing, Paris, https://doi.org/10.1787/9789264303072-en.

[17] OECD (2015), OECD Regulatory Policy Outlook 2015, OECD Publishing, Paris, https://doi.org/10.1787/9789264238770-en.

[20] OECD (2012), Recommendation of the Council on Regulatory Policy and Governance, OECD Publishing, Paris, https://doi.org/10.1787/9789264209022-en.

[21] RegWatchEurope (2020), Further Development of Regulatory Oversight at EU-Level, Joint Discussion Paper by RegWatchEurope, https://www.regwatcheurope.eu/wp-content/uploads/2020/10/RWE_DiscussionPaper.pdf (accessed on 2 March 2022).

Notes

← 1.  ASEAN-OECD Good Regulatory Practice Network (GRPN), co-chaired by Malaysia and New Zealand, is comprised of around 70 senior officials responsible for Good Regulatory Practice initiatives in ASEAN Member States, OECD member countries as well as representatives from regional and international organisations. The GRPN fosters the exchange of good practice and mutual learning among policy makers. The Network builds upon the longstanding partnership of the OECD with Southeast Asia on regulatory reform both regionally through APEC and ASEAN and bilaterally with individual ASEAN member states. See more: https://www.oecd.org/gov/regulatory-policy/asean-oecd-good-regulatory-practice-network.htm.

← 2.  IRC is the consideration of the international environment – including international evidence, expertise, rules, and standards – in domestic regulatory frameworks and decisions to help support alignment between countries. For a more detailed explanation, see (OECD, 2020[26]).

← 3.  ASEAN was founded in 1967 as an inter-governmental organisation, and that aims to promote an ASEAN Community in accordance with the purposes and principles as stipulated in the ASEAN Charter (2008). There are 10 members of ASEAN: Brunei Darussalam, Cambodia, Indonesia, Lao DPR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam. More can be seen here: https://asean.org/about-us/.

← 4.  RegWatchEurope is composed of oversight bodies from eight European countries (Czech Republic, Denmark, Finland, Germany, the Netherlands, Norway, the United Kingdom and Sweden) who meet to share good practices, advocate for better regulation, promote independent scrutiny, and advise on the quality of EU-level impact assessments.”

← 5.  The OECD (2020[15]) Best Practice Principles on One-Stop Shops for Citizens and Businesses may be helpful in supporting countries in evaluating and iterating their OSSs.