October, 5, 2017

From Policy to Implementation:

Malaysia’s Regulatory Reform Journey

Faris Hadad-Zervos

Country Manager for Malaysia

National Convention on Good Regulatory Practice 2017: Accelerating National Transformation through GRP

Outline

The World Bank Group in Malaysia

Regulatory quality as a key enabler of sustained growth and productivity

Malaysia’s regulatory reform journey

WBG’s work on Good Regulatory Practices

WBG-Government of Malaysia collaboration on regulatory reform

Opportunities for regulatory reform in Malaysia in the coming years

1

WBG in Malaysia: Why and Who We Are

Three Agreements

• Establishment Agreement (Jan 27, 2015) sets out the broad relationship between Malaysia and

the World Bank Group (IBRD, IFC, MIGA) through the Malaysia Office.

• Facilities Agreement (Jan 27 2015) specifies parameters of WBG Office facilities, use, etc.

• Office Support Agreement, OSA (Oct 1, 2015) objectives of the Country Office, financing

parameters, reporting and interaction with the Government. Annexes outline access to

information, WBG flexibility in use of resources, etc.

OSA

• Five year agreement, with annual consultations and a mid-term review.

• Covers all Hub operations (including DEC). Signed by WBG, MOF and Bank Negara Malaysia.

• 100% Funded on Semi-Annual Reimbursable Basis.

• Two Strategic Govt-WBG Reviews in May 2016 and June 2017- Full Endorsement of Program.

Pre-Launch2015 – March 2016

Hub Launch 28 Mar 2016

Hub Work Programs 2016 - 2020

• Establishment and Facilities

Agreement, 27 Jan 2015

• OSA, 1 Oct 2015

• Provides analytical and advisory services to

Malaysian institutions in support of the country’s

economic development goals

2

Regulatory Quality: A Key

Enabler of Sustainable Growth

and Productivity

3

Lots of research with almost similar stories: Regulation impacts growth, informality, governance…

4

The “macro” impacts are reflected in impacts attributed to specific regulatory management tools…

5

Improvements in regulatory

governance quality leads to

significant economic

benefits.

Mandatory online public consultation on regulatory drafts provides net benefits equaling

0.25% of Vietnamese GDP.

Systematic use of Regulatory Impact Assessment result in

large monetary savings, boosts investments, job creation and

growth

Regulatory Quality and Governance has significant

impact on Foreign Direct Investment

(Jacobzone S., F.Steiner, E. Ponton and E. Job, 2010)

(Ministry of Justice of the Socialist Republic of Viet Nam, 2008)

(Abusah and Pingario, 2011, Ministry of Justice of the Socialist Republic of Viet Nam, 2008)

(Anis et al 2013, Daude & Stein, 2007)

Malaysia’s Regulatory Reform

Journey

6

Malaysia’s regulatory reform journey

7

• Malaysia’s regulatory reform journey from privatization, deregulation, and ad hoc initiatives to streamline regulation, to a systematic whole-of-government application of regulatory governance practices makes up a foundation for great improvements and indicates strong commitment.

• Similar routes have been taken by most developed countries, and is in line with global best practices as recommended by international organizations.

PEMUDAH

Public-private partnership to enhance

public service delivery and improve the

business environment; Doing Business

reforms; delivery reforms and

streamlining of processes.

MPC’s Regulatory Review Department

Reducing Unnecessary Regulatory Burden (RURB);

Doing Business reforms; Business licensing

reforms; Service sector deregulation; quality

standards for regulation

2007-

2010-

National Policy on the Development and Implementation of Regulations (NPDIR)

Promoting a regulatory process that is effective, efficient and accountable, and that achieves greater coherence among

the policy objectives of government.

2013-

Annual Report on Modernisation of Regulations

Continued rollout of NPDIR across government; GRP to also include states

and local governments

2016-

Privatization, sector regulation,

deregulation, administrative reforms

and streamlining of procedures

1970s-

2000s

SELECTED HIGHLIGHTS

Good regulatory polices are reflected in Malaysia’s global ranking

8

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Rep

.

Publication of proposed text

Conduct consultation

Report on results of the consultationresultsConduct impact assessment

Specialized body for impactassessmentImpact assessment made public

With a score of 5.4 out of a

maximum of 6.0 in Global

Indicators of Regulatory

Governance, Malaysia is

among the top-15% globally

…however significant implementation issues remain

• RIAs are not consistently carried out, and sometimes lack the analytical depth

required to fully leverage their potential;

• RIAs are sometimes carried out after decision to regulate, or after regulation has

been developed;

• Monitoring and evaluation of GRP compliance has only recently started, and

could be strengthened with quality indicators (such as number of RIAs complying

with standards);

• Perception by some stakeholders of consultation practices as being pro-forma

and too late to have any impact on final rules;

• Lack of published medium-term strategy with milestones and results indicators

for further rollout of NPDIR;

• Scattered awareness across government of the full requirements of NPDIR, and

of procedural requirements for good regulatory practices.

9

WBG’s work on Good

Regulatory Practices

10

The drivers Good Regulatory Practices

Increased attention to systemic issues is in response

to new drivers of regulatory reform and reform

support experience

o Many countries experience a large discrepancy

between regulations “on the books” and actual

regulatory practice.

o Broader calls for accountability and

transparency from international and domestic

players.

o Various GRP requirements becoming mandatory

in international agreements, including Bilateral

Investment Treaties (BITs), Preferential Trade

Agreements (PTAs) and several WTO protocols.

11

The World Bank’s “Good Regulatory Practice” Program: Seven components delivering on three objectives

Launched in October 2015; initially as a 4-year program

Program

• Trade and Competitiveness GP• DEC (Global Indicators Group)• Governance GP

WBG Partners

Help governments enhance the quality of regulatory regimes and their outcomes and put in place effective, transparent, accountable and consultative reform processes that assist in reform prioritization, design, and implementation

Goal

Create reform momentum and help identify priority reform areas

Improve quality of

regulatory design

Ensure good

implementation of

regulatory reforms

Cross-country Indicators on Rule-making

Regulatory Policy and Delivery Review

Notice and Comment Systems

Feedback Loops on implementation gap

Evidence-based Policy-making

Systemic Investor Response Mechanism

Closing the Implementation Gap and Uncertainty of G2B Services

Program Components

12

An integrated approach to Good Regulatory Practices

13

WBG-GoM Collaboration on

Regulatory Reform

14

Two tracks of dynamic and reform-oriented collaboration

15

“Inbound” technical assistance: On-request reform support.

Current collaboration: web-based system for public consultation for

regulation (Notice & Comment)

(Details of collaboration in subsequent slides)

“Outbound” knowledge program: Documenting Malaysia’s Regulatory

Reform journey.

A strong and coherent narrative will allow other countries and regional

fora to learn from Malaysia’s regulatory reform experience

Part of a broader “outbound” knowledge agenda documenting and

sharing Malaysia’s innovations Public Sector Performance

(Collaboration planned to commence in second half of 2017)

Working modality: Highly collaborative and dynamic involvement of MPC,

Hub-based staff, and the WB’s global Regulatory Policy and Management

Team

What is Notice and Comment?

16

“Online, web-based tools that are

intended to support general public

participation in rulemaking.”

N&C generally happens in the rulemaking proposal stage.

Although it can be used:

• for the design of regulations,

• when drafting regulations,

• as part of a RIA, and

• to review existing regulations.

N&C and Regulatory Governance Reform

17

N&C is considered a good regulatory practice,

which is more effective when conceived in broader

regulatory governance reforms.

N&C is also an essential part of a set of regulatory

governance tools to improve new regulations:

Regulatory impact assessments (RIA)

Consideration of regulatory alternatives

Forward regulatory planning

Other consultation mechanisms

Through public consultation, N&C improves

transparency, efficiency, effectiveness and quality

of regulations.

Notice-and-Comment: An excellent example of Malaysia’s

strong GRP policy and implementation challenges…

18

Malaysia’s Good Practices Challenges

National regulatory policy (NPDIR)

requires consultation with

stakeholders.

“Guideline on Public Consultation

Procedures” to support regulators

with consultation practices.

Government circular requiring that

public consultations are conducted

online.

Some agencies taking important

initial steps to comply with GRP

requirements.

Ad-hoc compliance with GRP

requirements, including public

consultation.

In most consultations, the legal text

of the regulation and comments

received are not publicly available.

Public perception that consultation

are “briefings” or “ticking-the-box”

exercises.

No unified website to provide

access to regulatory proposals and

opportunity to comment on them.

WBG – Government of Malaysia collaboration on N&C

Formalized in March 2017 through a letter of request from the Director General of Malaysia Productivity Corporation (MPC).

Focus on designing and piloting a unified website for online public consultation in rulemaking initiatives: Notice and Comment (N&C).

To improve online consultation practices, the WBG and MPC agreed on an action plan, including:

1. Review of current consultation practices in Malaysia.

2. Review of international experiences with online N&C

portals.

3. Co-design specifications/requirements of the proposed

unified N&C web-site.

4. Development of N&C website.

5. Design and execution of N&C “experiments”, to learn

which approaches toward online public consultation

conduct to better outcomes and results.

6. Strategy and guidelines for online N&C processes.

19

Malaysia: The road ahead on

GRP

20

Opportunities to consolidate and improve GRP – some ideas

Policy: NPDIR 2.0 with updated and revised

elements that create a more realistic and

consolidated implementation plan.

Monitoring: Regular reporting on GRP progress

must focus on agency-specific compliance with

specific regulatory management requirements, and

strengthen indicators of regulatory quality .

Enforcement and support: Ensure a better

calibration between powers of the regulatory

oversight function and the desired regulatory quality

outcomes.

Incentives: Encourage inclusion of GRP targets in

performance agreements of regulators’ staff.

Partnerships: Continue collaborations with external

partners (such as the WB) to constantly inform and

challenge reform processes.

21

Thank you

22

wbg.org/Malaysia

http://www.worldbank.org/en/topic/governance/brief/regulatory-policy-and-management-incubator-global-solutions-groups

http://www.worldbank.org/en/topic/governance