Synthesis documents

Economic Governance: Improving the economic and regulatory environment for supporting private sector activity, Colin Kirkpatrick, 2012

    This paper reviews the state of knowledge on the effectiveness of donor interventions aimed at improving the regulatory environment for private sector development in developing countries.

    Summary of results
    The literature on regulatory policy and governance seems to confirm that poorly designed regulation can stifle economic activities and ultimately reduce economic growth. However, it also shows that regulatory governance and the institutional framework in a country may mitigate the damaging effects. In other words, donors should be alert to the dangers of adopting a ‘one size fits all’ approach to regulatory reform and instead recognize the need to modify and adapt regulatory management processes to meet each country’s institutional and regulatory endowment. For example, it is unrealistic and ultimately counterproductive, to introduce a comprehensive RIA procedure across all departments and applied to all new legislation, where human resource capacity within the public sector is limited. Similarly, the reform of enterprise registration procedures, without at the same time reforming licensing regulations, is unlikely to succeed. Independent regulatory institutions will be less likely to affect an improvement in economic outcomes where there is the risk of ‘capture’ by the regulated industries or where there are inadequate safeguards against arbitrary political interference. Further, the literature review has revealed methodological and data limitations in the quantitative evidence on the economic consequences of regulatory reform in developing countries.