4. Projects and case studies of Regulatory Impact Assessment
4.3. Regulatory Impact Assessment in Central and Eastern Europe
From the middle of the 90s the governments and the legislative bodies of every Central and Eastern Europe an country have worked on harmonising their legal systems with the collection of legal rules of the European Union , called "Acquis Communautaire". In each potential member country of the EU, plans were prepared for each policy area to introduce the respective European Union regulations. These plans have defined the government agencies responsible for drafting and implementing the necessary modifications and for this activity deadlines were set. These activities were guided by various legal provisions. 46
For the small- and medium sized enterprises of the candidate countries of the EU, the Europeanising reform of the legal system was important not only for the purpose of operating in a more up-to-date regulatory environment. 47 Even more importantly, export-oriented enterprises increasingly felt the limitation that their goods and services were allowed to the European market only if these products met the security, health, environmental and other requirements as defined by the rules of the European Union. One of the tasks of legal harmonisation was to develop the legal framework for the enforcement of these rules.
In most candidate countries – including Hungary , Lithuania and later Croatia - the work of legal harmonisation was accompanied by the preparation of impact assessments. The procedure of impact assessments did not follow a uniform methodology or genre, rather, the approach of this applied research has derived methodological ideas (a) partly from the impact assessment activity of the EU operating since 1986 and the resulting „Fiche d’impact" documents, and (b) partly from the experiences of the Better Regulation Office run by the Government of the U.K. since 1988.
In the candidate countries in many cases these impact assessments have considerably contributed to working out a system of argumentation to be applied at the accession negotiations that were preceding the joining of these countries to the EU. Typically, while developing the impact assessment documents, national governments were
44Gemeinsame Geschäftsordnung der Bundesministerien (GGO), see [Veit 2005].
45[BSIC 2006]
46 E.g. in Hungary the 3 years’ plan for the harmonisation of legal rules has been initiated by the 2403/1995 Decree of the Government.
47 [Tibor 2006]
receiving pressure from two sides: (a) on the one hand, from the side of the organisations representing the interests of those stakeholders (e.g. companies) that were affected by the regulations to be modified and (b) on the other hand from the negotiating partners of the European Union whose task was to facilitate and accelerate the approximation of legal rules, to facilitate and to control their implementation.
Hungary offers an example of how the strategy of impact assessment was devised. In this country the government departments (ministries) in charge of preparing the approximation of legal rules were not in the position of financing large scale detailed impact assessment projects. In fact, their possibilities in this respect were rather limited. The lack of sufficient resources has led to the implementation of relatively cheap impact assessment strategies: government departments have decided either to apply the ―comprehensive" or the „in-depth" approach.
“Wide-not-deep" approach. Government departments applying this approach have produced impact assessments for the legal approximation of every regulation of their policy area. However, the source of these impact assessment reports was a meta-research based on the secondary usage of available materials, i.e. existing analyses made previously for other purposes were analysed in the context of legal harmonisation.
Table 4.2. Box 9.
Legal approximation in the field of environment protection
In 1997 an impact assessment project of the Ministry of Environment Protection of Hungary has followed a
―comprehensive" strategy [bib_40]. The underlying research was outsourced to an external consultant company.
The consultants have collected, first of all, several hundreds of Hungarian legal rules belonging to the jurisprudence of the Ministry and have associated these Hungarian legal provisions with the corresponding European Union legal sources in environment protection. Following this, the consultants have collected all those applied research results from the preceding decade which have analysed the impacts of the policy pursued in the field of the regulation in question. Furthermore, the consultants have made interviews with all relevant experts and case workers in the Ministry, including those responsible for enforcing the existing regulations and those responsible for international relations. Based on these materials and findings, the consultants have prepared an impact assessment report, which was structured according to the areas to be regulated by the Ministry, i.e. the protection of air, water, soil, the management of waste, wastewater, noise, etc.
Due to the fact that the financial resources allocated for the research were limited, the consultants have made only a secondary analysis of the already existing several hundreds of impact documents, and no attempt was made to meet the representatives of those stakeholders that were affected by the regulations, i.e. the enterprises, the local governments and other institutions did not have opportunity to tell their opinion about the influence the environmental regulation exerted on them,.
„In-depth" strategy. An alternative strategy of impact assessment of legal approximation goes as follows.
Experts of the regulating agency choose a typical European directive under their jurisdiction, which has been designated to be transposed into national legislation. Researchers perform a thorough, detailed examination of its expected impacts and draw conclusions to a wider group of directives, in order to learn wider ranging lessons referring to a whole policy area or to the legal and institutional environment of the concerned sector. Such examinations are based on a wide ranging collection of primary data, which may involve a questionnaire based survey, stakeholder meetings and a series of interviews with a relatively wide circle of the representatives of the regulating institutions and the regulated enterprises. Such projects are suitable for the analysis of the legal, institutional, and economical aspects of the act of legal harmonisation.
Table 4.3. Box 10.
Impact assessment of the EU Electromagnetic Compatibility Directive in Hungary
The „in-depth" strategy was followed, for example, by the Ministry of Industry and Trade, in 1996, when this government agency examined the potential impacts of a particular European technical regulation to be
Impact assessment of the EU Electromagnetic Compatibility Directive in Hungary
introduced in Hungary . The Ministry had the study prepared as a „pilot project" which means that, on the one hand, on the basis of the impacts of the specific directive they made conclusions concerning the effects of the introduction of other EU directives, and, on the other hand, on the basis of the methodological experiences resulting from this specific project, they intended to carry out other impact assessments, too.
In this project, the so-called EMC (Electromagnetic Compatibility Directive) a was selected to represent a much wider regulatory area, the so-called New Approach technical regulations of the EU. The EMC directive was selected because its introduction affected the whole system of technical regulation of product markets, including standardisation, conformity assessment, accreditation and metrology. Moreover, the regulation affects a wide range of enterprises [bib_41].
In Hungary as in all post-socialist countries, the implementation of the New Approach technical regulations of the EU have put an end to the situation whereby the safety and environmental compatibility of every electric and electronic product had to be checked and testified by independent accredited conformity assessment bodies. Companies have obtained the right to assess the conformity of their low voltage electric products by themselves. The impact assessment has touched upon sensitive points, because the regulation to be introduced has abolished the monopolistic position of designated bodies such as quality control institutes or laboratories.
At the time when the survey was made, these organisations were still owned by the state, but in the course of the coming decade they all became privatised.
The Ministry entrusted an external consultant company to prepare a detailed impact assessment about the introduction of the EMC Directive into Hungarian law [bib_42]. The method of the research was defined by the sample selection instructions and by determining the interview outlines both for interviews to be made with regulators and with the regulated companies.
The success of the research was critically dependent on the selection of the subjects – i.e. the stakeholders - to be interviewed with the help of deep interviews. The survey has covered a wide range of those enterprises of the electronic, electrotechnical and precision engineering sector that have been affected by the planned introduction of the legal rule. Most of these enterprises were successor companies of former large state owned companies that had split into privately owned small or medium sized enterprises during the decade preceding the research, some of them joint ventures.
The guiding principle of the interviews was the same in every case. First, interviewers had to explain the planned modification of the legal rule. After that, the respondents – most of them quality managers of companies - were asked to explain, how the operation, the cost structure and the competitiveness of their enterprise would change if the regulation was introduced.
The main finding of the survey was that the reform of product conformity assessment has affected smaller businesses to a smaller extent, but larger enterprises, exporting firms and enterprises in foreign ownership were affected advantageously.
a Electromagnetic compatibility (EMC) is a requirement, demanding that there should be no disturbing electromagnetic effects of electromagnetic appliances on their environment, i.e. on other appliances or on humans.. Its regulation is supported by the EU Council Directive 89/336/EEC of 3 May 1989 on the approximation of the laws of the Member States relating to electromagnetic compability (EMC directive)
Table 4.4. Box 11.
Impact assessment of the EU Low Voltage Directive in Lithuania a
The "in-depth" strategy of impact assessment was used by the Lithuanian government in 2000 when it has initiated a research on the potential institutional and sectoral impacts of introducing European product safety technical regulations in national law.
The pilot study was prepared by external consultants for the Committee for European Integration of the Lithuanian government [bib_43]. The research has revealed what would be the potential impacts of introducing the technical regulations of the EU on Lithuanian producers of low voltage appliances, on organisations performing conformity assessment and on government agencies enforcing technical regulations.
Impact assessment of the EU Low Voltage Directive in Lithuania a
The substantive results of the study have outlined the expected institutional and economic impacts of introducing the European Union’s Low Voltage Directive into Lithuania. The methodological and didactical result of the project was that it gave a blueprint of preparing impact assessment reports for Lithuanian
government departments which were responsible for adopting a wide range of European legal rules. The study made recommendations for sampling procedures, for the compilation of questionnaires and defined templates for the optimal choice of report structure, i.e. for the subtitles of the final study. b
In a subsequent methodological paper suggestions were made for revealing the impacts of the entire system of legal harmonisation on one single individual enterprise [bib_44].
a The Low Voltage Directive (LVD) 2006/95/EC creates a legal environment for the secure use of low voltage appliances.
b At the time of writing this study, the impact assessment of law harmonization of about hundred concrete legal rules and political spheres can be downloaded from the Lithuanian website on European integration in English:
http://www.euro.is.lt/old/showtopitems.php?TopMenuID=165&LangID=2
4.3.1. Impact assessment culture in Hungary
Since 1989 various Hungarian government administrations have made repeated efforts for reforming the regulatory environment. 48 Regulatory Impact Assessment was one of the tools that were widely recommended for improving the legal environment, but the method was applied only in several isolated projects or short lived campaigns. 49
For several years, while Hungary was a candidate country of the EU, the efforts to harmonise Hungarian regulations with those of the EU gave a significant impetus to assess the impacts of legal harmonisation 50. During the 1990s government decrees have been issued which have rendered the performance of ex ante and ex post Regulatory Impact Assessments mandatory for public administration agencies. Other regulations have defined the methodology of regulatory impact assessments and have declared that impact assessments must be accompanied by consultations with the representatives of affected companies and citizen groups. 51 However, these decrees were never consistently enforced or implemented due to insufficient institutional conditions.
The initiatives of the Ministry of Justice. In Hungary it is the Ministry of Justice which is responsible for regulatory policy, for the simplification of the regulatory framework and for the quality of legal rules. In 2002, within the Ministry of Justice, for a limited period of time, a department was formed, responsible for impact assessments and deregulation. This department has created training materials for public officials 52 and implemented pilot projects which have assessed the impact of specific legal rules. 53
The initiatives of the Ministry for Economy. The Ministry for Economy and its legal successors are responsible for creating stable, transparent and predictable regulatory framework and institutional conditions for the operation of companies. The reduction of administrative burdens was one of the most important aims of Hungarian small and medium sized business development policy 54 since the basic political changes of 1989 following the transformation of the socialist system into a functioning market economy [bib_44]. Hungarian SME development policy has been harmonised with the respective European policies. The principles of this policy were laid down in several Hungarian laws and international documents, e.g. in the influential document entitled „A European Charter for Small Enterprises" which in 2002 has been signed among other EU Member States by the Hungarian government as well. 55. In various declarations the government has obliged itself to shape the regulatory environment of SMEs in a way that transaction costs can be reduced to a low level both for transactions between companies and between companies and government agencies 56, 57. It is the level of these transaction costs that are central indicators of regulatory impact assessments. Finally, the law concerning small-
48 [Orbán – Kovácsy 2005]
49 [OECD 2005c]
50 [Binning - Futo 1997]
51 The legal rule of 1987/XI on legislation and the governmental decision of 1994/1008 (Sept.,20) and the governmental orders of 1999/1052 and 2005/1080 (July, 27), 8001/2006 (Jan., 30) IM bullettin.
52[Kovácsy – Orbán – Ovseiko 2004]
53An example for the impact assessment of an individual legal rule: [Feiler and others 2004]
54E.g. proclaimed in the „Széchenyi" Enterprise Developing Program. Announced: 1213/2002 (23 Dec.) Government decision.
55[EC 2000]
56[GKM 2006]
57[Kállay – Kissné – Kőhegyi 2003]
and medium size enterprises has also made the performance of impact assessments compulsory in cases of modifications of legal rules which affect SMEs. 58
Consultation. Since the political changes of 1989 interest reconciliation between regulators, consumers, entrepreneurial groups and other stakeholders was regarded as an organic part of the Hungarian legislative process [bib_46] However, the depth and quality of consultations about specific regulations and policies varies widely, depending on which government agency enters into consultation with entrepreneurial interest groups.
One of the tasks of the country’s economic chambers – also put down by law – is, to give expert opinions about drafts of propositions and bills of economic subject. 59 In 2003 Hungarian government departments have sent 250 materials to the Hungarian Chamber of Commerce and Industry and have asked feedback in form of stakeholder opinions. 60 The Chamber has established an economic research institute which performs a questionnaire based survey among entrepreneurs several times a year, in order to collect their opinion about the business climate and also about the current changes taking place in the administrative and institutional environment. 61
Certain online debate forums have also been created to facilitate these consultations. Thus, for example, in the years 2006-2008 the Ministry of Economy and Transport has maintained an online forum on its website for collecting the opinions of entrepreneurs about regulations. 62
Deregulation refers to the invalidation of those legal rules which have become unnecessary. 63 After the political changes of 1989 several Hungarian government administrations have implemented extensive deregulation projects which have invalidated thousands of legal rules in two waves: between 1989 and 1991, and between 1995 and 1998. According to data provided by the Ministry of Justice, since 1990, at least seven thousands legal rules: laws, government decrees and ministerial orders have been invalidated. Officially, in 2007 a deregulation programme was in force, according to which ministries and local governments are obliged to periodically update and streamline the body of regulations issued by them. This activity must be based on impact assessment for which the administrative procedures must be created. 64 In practice, however, deregulation efforts have not reached their aims: on the contrary, between 1990 and 2004 the number of valid Hungarian legal rules has been significantly increased, whereby approximately half of the new rules were modifications of already existing rules. In many cases these modifications were needed due to the fact that the original rules had not been based on a corresponding impact assessment and were issued without proper consideration of their impacts.
In Hungary the legal basis of impact assessment activities is satisfactory, but the institutions entrusted with performing these assessments refer to chronic shortage of resources. For this reason, RIAs are prepared only occasionally. Some isolated impact assessment projects are carried out by various government departments:
these are progressive initiatives, but these projects do not represent a critical mass which could have a considerable influence on the entire regulatory environment of enterprises. The ongoing few impact assessment projects are not coordinated and in most cases are not supported by consultations with entrepreneurial interest groups and other interest representations. A powerful political will and a long term view are needed to spread the culture of impact assessment in the Hungarian public administration.