Specific challenges of stakeholder engagement seen from the experience of reform practice, Florentin...

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Paper by Florentin Blanc & Giuseppa Ottimofiore, prepared for the 6th Expert Meeting on Measuring Regulatory Performance: Evaluating Stakeholder Engagement in Regulatory Policy, Breakout Session 3, The Hague, 16-18 June 2014. Further information is available at http://www.oecd.org/gov/regulatory-policy/

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  • 1 Academic pre-conference The Hague, June 16, 2014 Florentin Blanc & Giuseppa Ottimofiore Specific Challenges of Stakeholder Engagement Seen from the Experience of Reform Practice (both in OECD countries e.g. France, Slovenia, Italy or the UK and outside of OECD in emerging/transition economies) Introduction While willing to improve transparency, in particular through stakeholder engagement, governments may be confronted with a number of issues presented below. By way of introduction, two particular issues related to stakeholder engagement can be highlighted: - In certain circumstances, stakeholder engagement can be asked by authorities genuinely looking for input into a still open policy; in other cases, such engagement will be aiming at building buy-in and support for an already (mostly) decided policy. If the second sort is done in a way that is perceived as really fake (i.e. nothing is really open for discussion at all) it typically fails. However, it is important to underline that most situations are on a continuum between these two extremes. - Stakeholder engagement is characterized by its cost in financial terms, but also in terms of duration adequate resources are required, as the process is by its very nature expensive and time-consuming (it requires time, but at the time, if the process is too slow, it may generate other problems, such as: the fact that support for change drops and adverse effects of status quo are not being addressed). Nevertheless such costs represent a major investment provided that it is correctly done of both resources. I. Preliminary remarks: definitions and context (a) About stakeholders Stakeholders need to reflect not only businesses and citizens/consumers/non-governmental organization (that is to say representatives of civil society) but also officials/inspectors. Concerning the legal nature of stakeholders: - Representatives of civil society (business and citizens/consumers/NGOs): they are now often an integral part of a decision-making process, in particular of a legislative process (European Union A model for stakeholder dialogue and consultation Charter action line: http://ec.europa.eu/enterprise/policies/sme/best-practices /database/SBA/index.cfm?fuseaction=practice.detail&gp_pk=107&). In fact, this type of consultation is beginning to be seen as the willingness of the legislator to broaden the
  • 2 legislative process through an extended impact assessment in order to improve the quality of the proposals and simplify the regulatory environment. The democratic legitimacy of the process can be just improved. Representatives of civil society are directly affected by regulation, since they are subject to and/or beneficiaries of regulation. - Officials/inspectors: as representatives of the administrative bodies, they are also part of the executive power. They have an extended experience and skills of the practice of law and their engagement can therefore add a particular value to the process. Moreover, they may have a direct interest in getting a satisfactory outcome of the process. Let it be recollected that officials/inspectors are those implementing the regulations (which can be positive or negative). (b) About stakeholder engagement - Possible/desired effects of stakeholder are: - an increased transparency, - an increased effectiveness (by addressing shortcomings in regulation and regulatory delivery), - a decreased burden (by targeting problems flagged by users/regulatees, etc.) - and an increased legitimacy of governments and regulations both because of the process itself (increased transparency as a procedural justice effect) and because of increased effectiveness and reduced burden. In fact, legitimacy is both a product of other effects and a driver of effectiveness. - Stakeholder engagement can only have these effects if it fulfills a certain number of conditions none of which are easy to meet: - Representation of stakeholders has to be large/comprehensive enough and felt to be really representative. Should this not be the case, the procedural justice effect will fail to materialize (as will not feel themselves duly represented/consulted, the legitimacy of the process will not increase). A biased perspective also means that policymakers and officials will not be getting really representative insights (and hence are likely to make wrong decisions on what needs to be done to improve regulations, processes, etc.). - Stakeholders feedback has to be informed and meaningful. o Informed: means that stakeholders are given sufficient information to put their current situation in perspective and/or that the questions/feedback mechanisms are structured so as to ask stakeholders from a perspective that already incorporates some knowledge about benchmarking (what could possibly be done better based on other experiences). o Meaningful: means that questions are asked/structured in a way that does not lead respondents/participants to just voice whatever their latest mood is (to this end, subjective questions or questions without background leading to emotional responses must be avoided). Questions should be presented in a way that leads to precise answers based on facts, and as much as possible give precise information/feedback and suggestions on concrete issues.
  • 3 - Feedback/participation/input has to be free (unconstrained): to achieve this, stakeholders need to be sure that there is no risk of reprisals (most common would be businesses afraid to criticize regulators and workers afraid to criticize employers). - Correctly structured engagement/feedback should help avoid Risk Regulation Reflex kind of loops. These are based on what could be called the wrong kind of stakeholders feedback (biased, unrepresentative, uninformed, etc.). - Engagement is a term that needs to be specified: what is targeted here are the following forms/mechanisms of stakeholders engagement: - Consultations: they must exist before the adoption of new regulations (or changing institutions, practices, etc.). They can also be foreseen in order to assess implementation and challenges; in this case, consultations may take the form of roundtables, workshops, etc. (with stakeholders at grassroots level or with representatives of business associations, trade unions, NGOs, etc.). NGOs have less risk to be afraid, but have their own agenda/bias. - Surveys: direct questions are sent to a sample of stakeholders statistically representative (in theory/preferably). - Feedback mechanisms (typically online/application/hotline) where stakeholders voluntarily give their input based e.g. on their most recent experience with a regulator and so on. Certainly, each of these tools has specific limitations, issues and strengths. Our focus concerns here specifically: - Specific stakeholders: mostly businesses, giving feedback/engaging on regulatory and regulatory delivery issues, particularly on business inspections/regulatory enforcement and inspections. - Mechanisms: all of the above-mentioned. We will also take a look at the issues of access to information and transparency requirements (in particular, proactive transparency, which is the pre-condition for feedback/engagement if you dont know what is the process/what are the rules, how can you engage/give feedback meaningfully?). - Stakeholder engagement/feedback must be in relation to regulatory enforcement and inspections. II. Challenges due to lack of experience, reference points, objectivity and assessments (a) The "risk" for stakeholders to be too open and thus jeopardize their relations with regulators This phenomenon is seen everywhere around the world surveys recently conducted by the WBG
  • 4 in Kyrgyzstan saw a high number of people refusing to answer because they were afraid of potential negative consequences. In the UK some time ago inspection officials sometimes were handing out satisfaction survey forms at the end of visit obviously resulting in somewhat biased answers. The fear of potential negative consequences is universal and requires proper tools (trust in confidentiality for grassroots feedback reliance on representative associations when discussions are held) but also a change in regulatory enforcement behaviour (stakeholders need to trust regulators that they really want to get open feedback). Over several surveys in Tajikistan, readiness to respond to corruption questions (objective questions i.e. did you or others have to pay/make gifts and not subjective questions such as is corruption a problem) decreased massively. In 2003, more than 90% reported paying bribes during various administrative procedures. In 2006, this decreased so brutally that the WBG team had to try and ask the question in different ways (for example: did you give gifts, use friends not only during the procedure but before/after) and also look at refused to respond and other hints of what the real level could be. Even when guaranteed confidentiality, many people will be cautious (probably based on well-grounded concerns). Hence, it is difficult to get feedback precisely when the problems are worst. (b) The difficulty often for stakeholders to perceive an issue as being a problem (business inspections, by way of example) This can happen because of the fact that they lack a reference point to another type of practice in another country and thus think this is the "natural" state of things. Examples (from World Bank Enterprise Surveys): - In practical terms, transportation in Tajikistan is a major issue (lack of paved roads and/or horrendous conditions of said roads, very limited rail links to the outside, rare international flights etc.), but only 2 to 5% of respondents in 2002-2005 rated it as a major constraint. While real improvements (however l