Economists and lawyers define ‘regulation’ in different ways. Traditionally the legal definition refers - narrowly to a subset of delegated regulatory instruments. In contrast, economists have adopted a broad ‘generic’ definition that embodies all written legal and quasi-legal instruments ranging over primary legislation, secondary instruments, guidelines, circulars, codes, standards, and others. This broader definition is adopted for purposes of this guide and for the MPC reviews.
As well as the content of written regulations, the way they are implemented, administered and enforced can also significantly impact compliance burdens for businesses and the effectiveness of regulations. This is also under review.
Hence, for its reviews, the MPC is assessing both written regulation and the administration and enforcement of regulations. As depicted in figure 1, there are four broad stages to writing and implementing regulation:
- Ex-ante analysis before the new regulation is written
- Writing and ratifying/approving/issuing regulation
- Implementing, administering and enforcing regulation
- Monitoring, reviewing and rewriting existing regulations.
Figure 1: The Four Stages of Making and Implementing Regulation
The MPC is introducing regulation impact analysis, including the cost-benefit analysis, for all new legislation (stage 1) to ensure the approval of good quality is written regulation (stage 2). It is also conducting reviews of existing regulation (stage 4) both what is written (stage 2) and how it is administered and enforced (stage 3) with a view to removing unnecessary rules and compliance costs.
In conducting the reviews of existing written regulations and how they are applied, six core principles provide the framework to assess the quality of regulations and help identify where unnecessary burdens on businesses could be reduced. These principles are aligned with best practices in a number of developed countries.
With regard to written regulation, all types of legislative instruments used by Malaysian Federal and State Governments, as well as rules set by a Local Government, such as by-laws, guidelines, circulars, codes or policies are potentially under review. The conditions contained in licenses, permits, consents, registration requirements and leases are also under review where they impose a compliance burden on businesses or restrict competition.
Regulatory rules can usefully be considered as a spectrum ranging from industry self-regulation (where there is no government involvement), through quasi regulations (with increasing degrees of government involvement) explicit government regulation (figure 2).
The term ‘quasi-regulation’ refers to the range of rules, instruments, and standards where government influences businesses to comply but which does not form part of explicit government regulation. Quasi-regulation can take many forms such as codes of practice, advisory notes, guidelines and rules of conduct, issued by either non-government or government bodies.
Figure 2: A simplified spectrum of regulation
The boundaries between these three principal forms of regulation are indistinct. For example, an industry might develop a code of practice in response to government promptings. Further, if Parliament writes into law the ability for industry codes to be made mandatory, then its character becomes less quasi-regulatory and closer to explicit government regulation.
Thus, it is evident that these three principal forms of regulation should not be regarded as mutually exclusive. It is better to consider them as lying on a continuum with no government involvement at one end and complete government control at the other end, with quasi-regulation occupying the middle ground.