A recent OECD symposium emphasized the need to balance regulatory protection with burden reduction and simplification.
Business leaders across the world rank excessive regulation as their most significant challenge, far outpacing taxes and geopolitical instability. Yet policy experts emphasize that regulation can also play an important role in protecting people from harm, preserving the environment, maintaining law and order, and safeguarding fair economic competition.
How can countries reap the benefits of effective regulation while reducing regulatory burdens? To explore this question, scholars, practitioners, and government leaders from around the world gathered late last year in Paris at the Organization for Economic Cooperation and Development’s (OECD) symposium, “Simplifying for Success: Smart Rules, Stronger Business.”
Throughout the gathering, delegates to the OECD Regulatory Policy Committee presented and discussed the survey responses of government and business representatives from over 28 countries. Among survey respondents, 91 percent reported that, in the last three years, their countries had launched measures to simplify regulations and reduce regulatory burden. The results reflected much disagreement across countries, sectors, and industries about how much regulatory cost and complexity is acceptable.
To address this question, the symposium featured speakers from a variety of industries that face unique challenges, including construction, telecommunications, and renewable energy.
But although speakers focused on regulatory simplification, Mathias Cormann, Secretary-General of the OECD, emphasized in his opening remarks that, despite its flaws and burdens, regulation remains necessary in a complex, changing world. Still, he added that although some activities—such as testing new drugs and aviation safety—warrant regulation, not all do. In her remarks, Mary Beth Goodman, the Deputy Secretary-General of the OECD, said that governments must systematically review their existing regulations to identify ways to simplify them.
Vice President of the European Construction Industry Federation (FIEC) Joël Schons, who represents construction enterprises in 27 countries, advocated using digital building permits, a new regulatory tool that is 50 percent faster than existing processes for obtaining building permits. Digital building permits automate the process for construction teams to obtain building permits for construction projects.
Notwithstanding existing reform efforts, Goodman emphasized that the OECD’s research provides a clear warning that governments must assess the instinct to regulate in light of increasing regulatory complexity and compliance costs.
Seventy-seven percent of the countries included in the OECD’s survey reported that the last three years have witnessed an increase in administrative compliance costs, including recordkeeping, filing, and reporting costs. Only 3 percent of countries reported that such costs decreased for businesses over the same time period.
Goodman suggested that governments target sectors with the greatest regulatory burdens to ensure that resources are directed where they are needed most.
In response to the OECD’s survey, governments and businesses alike identified construction and real estate, public administration, and utilities as priority sectors for regulatory burden reduction. In contrast, businesses ranked the agricultural sector as the industry of lowest importance, even though governmental respondents ranked it as a high priority.
Goodman noted that, for simplification efforts to succeed, individuals at all levels of government must be part of the conversation.
Without such involvement, progress towards regulatory burden reduction slows. For example, Schons explained that in one European city, the FIEC received authorizations to build 124 houses, but the city’s regulations allowed only 12 new houses to be built each year.
Such problems cannot be solved without discussion involving everyone who plays a part in the regulation of infrastructure and construction, noted participants in the OECD regulatory simplification symposium.
Goodman remarked that panelists at the meeting debunked several persistent myths, including that technology alone—especially artificial intelligence (AI)—will solve problems of complexity. Instead, she argued that thoughtful discussion, especially about social and economic issues, is necessary.
One high-level regulatory official, Narun Popattanachai of Thailand, explained that his country’s approach to solving issues of regulatory complexity depends on the problem itself rather than solely on AI-generated solutions. The Thai government refrains from regulating the technology industry until social or economic repercussions arise. Only then will Thai regulators intervene, Popattanachai reported.
The lasting impact of AI as a regulatory tool remains to be seen. Representatives from several governments, including Argentina and the United Arab Emirates, reported that they use AI to review regulations and cut red tape. Deputy Minister Huda Al Hashimi of the United Arab Emirates noted that her government uses AI to serve as agents to handle routine human resources requests.
Goodman reflected that the work to simplify and reduce regulatory burden will continue to evolve as new risks emerge. And as the OECD Secretary-General, Cormann, argued, traditional regulatory tools and approaches—including adding more regulations—have not always operated effectively, nor are they always well-suited to today’s world. As societies and economies evolve, so must regulatory instruments.
Overall, governments face immense pressure to keep up with existing regulations and emerging problems while also reducing the burdens placed upon businesses and constituents. As a result, frameworks to reduce regulatory burdens can themselves at times be inconsistent, hard to read, and increasingly burdensome, Cormann adds. At the same time, regulations remain a default tool for advancing policy objectives, so the challenges in meeting these objectives while reducing burdens are far from easy ones.
In responding to these difficult challenges, experts gathered at the OECD symposium emphasized the importance of regulatory dialogue and public consultation. They contended that, to meet today’s regulatory challenges, government officials and regulatory must seek out broad input to ensure that existing and new regulations do not become burdensome.
This essay is part of a series, titled “Regulatory Simplification Around the Globe.”
