In the first part of the “Pitfalls of Regulations” series, we delved into the intricacies of regulation, explored the perils of neglecting the nexus between purpose and means, and outlined what corrective actions should be taken [1]. Now, we embark on a journey concerning the introduction of “Regulatory Impact Analysis” (RIA) into Turkish legislation in 2006 and its ensuing repercussions:
While recovering from the 2001 economic crisis, with a determination to bolster its economy and advance its European Union membership process, aided by support from the OECD, Turkey initiated a “Peer Review” process. This process’s primary objective was to gauge the present state of affairs. It involved relevant Turkish institutions filling out questionnaires designed by the OECD. Subsequently, the results were analyzed in collaboration with OECD experts and local stakeholders to identify areas for improvement. This comprehensive effort culminated in a report titled “OECD Reviews of Regulatory Reform: Turkey 2002 – Crucial Support for Economic Recovery” [2], which would become a significant reference point for future endeavors.
To provide insight into this process, let’s share the perspective of an individual who participated in the “Market Openness Working Group,” one of the task forces established to assess various domains. At one point, bureaucrats representing different public institutions within this group, under the aegis of the Ministry of Industry and Commerce, were asked a pivotal question: “Does Regulatory Impact Analysis (RIA) exist in Turkey?”
Initially, the group members grappled with comprehending the concept of RIA. Everyone had their own interpretation, likening it to “environmental impact assessment analysis” or “feasibility analysis.” However, realizing the need for further clarification, they collectively decided to research and provide a more informed response at the next meeting.
For the subsequent meeting, the group’s youngest and least experienced member prepared a brief presentation after researching what RIA truly entailed. This presentation included two illustrative examples, one from the United States and another from the United Kingdom, to elucidate the concept of RIA. The American example delved into a highly technical RIA concerning a bill to enhance airport security. Conversely, the British example was more straightforward, focusing on legislation designed to address a prevalent issue faced by insurance companies. The issue revolved around the rampant theft of cars in the UK, where stolen vehicles were disassembled and their parts were sold, resulting in substantial financial losses for insurers. Three options, as is customary in RIA, were presented:
- Establish a novel registration system for mechanics who purchase and sell spare parts, mandating them to maintain an additional ledger for this purpose.
- Enact a regulation that permits voluntary record-keeping, offering incentives to those who opt to keep records voluntarily.
- Taking no action is a necessary option in every RIA. If a regulation cannot effectively achieve its intended objective or if intervention wouldn’t significantly impact the situation, doing nothing is a valid choice.
The analysis first quantified the cost of stolen cars to insurance companies in the UK. Subsequently, a detailed assessment of each of the three options revealed that imposing a new record-keeping mandate on mechanics would force many small-scale mechanics to hire additional staff, an expense beyond their financial means, potentially leading to business closures or unreported work. The analysis concluded that the cumulative cost of this action would far exceed the losses insurance companies incurred due to stolen vehicles. Consequently, a solution rooted in voluntariness and incentives was favored over mandatory regulation.
After presenting this example, all participants agreed that such analytical processes were not typically conducted in Turkey’s legislative procedures. Despite this revelation, and except for the presenter, no one opposed the group leader’s directive that “Yes, RIA does exist,” reflecting the prevailing sentiment that “we should affirm its existence” for pragmatic reasons!
However, since the Chairman of the Working Group did not speak English, the responsibility of presenting the findings at the OECD meeting was assigned to someone who had never attended these meetings and held a department head position in another institution. On the flight to Paris, the expert tasked with this responsibility explained the situation to the head of the delegation, emphasizing the precarious position this might place the country in.
Before the OECD meeting, during a preparatory session held at the Permanent Representation, the Ambassador reiterated the dilemma and advised, “Given that we lack a practical implementation of RIA, begin the presentation by mistakenly asserting its existence; otherwise, we’ll have no example to provide if queried.”
At the OECD meeting, following the introductory remarks, the delegation adhered to the Ambassador’s counsel during the presentation phase. When the head of the delegation declared, “We do not have RIA,” a significant number of raised question flags immediately lowered, and some of those intending to inquire remarked, “We were about to inquire about the process of conducting RIA and request an illustrative example, but since you haven’t implemented it, such questions would be moot.” In essence, a potential crisis was averted rather inexpensively.
The remainder of this tale is as intriguing as its outset…
After the release of the 2002 report, a working group was established to introduce and promote RIA in Turkey under the Prime Ministry’s coordination. During this period, my involvement included supporting my colleague, who served as the Head of International Relations at the Competition Authority. This support extended to participation in select activities organized under the leadership of the late Governor Recep Kızılcık.
These sessions illuminated some prevailing sentiments among participants. Notably, some individuals failed to grasp the essence of RIA, while others, albeit with a better understanding, were either reluctant to embrace it or harbored reservations due to concerns about their workload and the perceived risks to their careers. A recurrent viewpoint contended that “Parliament creates laws. Bureaucracy should not constrain or bypass political will; in practice, we’ll receive directives regarding law creation, and we’ll draft legislation and conduct RIA that fits the purpose!.” Unfortunately, insufficient effort was invested in explaining that RIA’s purpose was not to interfere with political will but to provide the Grand National Assembly of Turkey with an evidence-based analysis, grounded in data and sound methodology, to assess whether proposed regulations aligned with their objectives and projected consequences.
By the time 2006 arrived, the Regulation on Procedures and Principles Regarding Legislation, published in the Official Gazette on February 17, 2006, had formally defined RIA as a “preliminary assessment prepared to demonstrate the effects on the budget, legislation, social, economic, and commercial aspects, the environment, and relevant segments concerning regulations.” [3]. It introduced the obligation to incorporate RIA into draft laws and decree-laws, outlined in Article 10(3) of the Regulation. Article 24, titled “Regulatory Impact Analysis,” delineated the circumstances and entities subject to RIA. Additionally, the Regulation’s Annex contained ten fundamental questions RIA reports needed to address.
However, the development of the Circular related to this Regulation was an equally captivating tale. For instance, the Competition Authority, inspired by the OECD’s “RIA Competition Assessment Toolkit,” crafted a comprehensive study spanning approximately ten pages, outlining how to assess the impact of proposed legislation on the market. Yet, Prime Ministry officials, considering the brevity of contributions from other institutions (some submitted only half a page or none at all) and fearing that the Competition Authority’s submission would be excessively lengthy, opted to translate an abridged version of the OECD RIA Guide into Turkish. This decision was made to ensure textual uniformity and balance within the Circular. To illustrate this, the Circular stated that the analysis of a draft’s impact on competition should be carried out “in cooperation with the relevant competition authority” (not specifically the “Competition Authority”?!). Remarkably, only four lines were dedicated to the aspects to consider in this analysis.
The effectiveness of the RIA system and its impact on enhancing the quality of drafted legislation between the 2006 Regulation and the 2007 Circular remains a subject of extensive discourse and debate.
To shed further light on this evolution, let’s conclude this article with an anecdote, two pieces of pertinent information, and four suggestions:
- In 2010, during a casual conversation with acquaintances attending the OECD’s Global Forum in Paris on behalf of the Prime Ministry, I inquired about the status of Regulatory Impact Analysis (RIA). Their response was disheartening: “Regrettably, none of the institutions responsible for drafting legislation conducts any meaningful analysis; they merely generate more work for us by producing drafts. We’re adding to our workload without reason. This thing called RIA suddenly appeared and landed on our plates…”
- As of June 27, 2015, when this article was crafted, accessing General Circulars on the page dedicated to Prime Ministry Circulars remains impossible. This situation has persisted since at least April 2015. Moreover, the official website “www.mevzuat.gov.tr,” which provides a link to Prime Ministry Circulars, fails to grant access to the Circular. However, the Circular can be accessed through the link provided in footnote [4] of this article, facilitated by indirect internet searches.
- For insight into assessing the impact of legislative drafts on competition in RIA studies, stakeholders can benefit from the “Competition Assessment Guide” prepared by the Competition Authority [5] and the OECD’s “Competition Assessment Toolkit” [6]
Moving forward, here are four suggestions for further enhancing the RIA system:
- Clarify the method for calculating the impact threshold (amount) stipulated in Regulation No. 2007/6. Currently, ambiguity surrounds the calculation method, causing hesitancy among analysts and facilitating the avoidance of “Full RIA.” Clarification is necessary.
- Broaden the scope of RIA application beyond a limited number of laws or decree laws, extending it to various regulations, including lower-level instruments like administrative decisions and notifications. These regulations have the potential to significantly impact markets, either by restricting or monopolizing them, potentially causing substantial financial repercussions.
- Enhance stakeholder engagement in the RIA process. While the Regulation and Circular outline the submission of analyses to the relevant Prime Ministry unit, the subsequent procedure remains unclear. To reach a wider array of stakeholders, make RIA reports accessible through the websites of relevant institutions and the Prime Ministry. Additionally, ensure that these reports are provided as annexes to draft and decree-laws undergoing analysis in the Turkish Grand National Assembly, facilitating evaluation during the legislative process.
- Launch a comprehensive awareness campaign across bureaucracy, politics, and civil society organizations. This campaign should aim to educate stakeholders about what RIA entails, when and how it should be conducted, and the benefits of widespread RIA adoption, ultimately promoting its widespread use.
In closing, the essence of the “Pirfalls of Regulatoion” alluded to in the title can be encapsulated as follows: The trap lies in the act of “pretense.” Initially, we feigned that RIA already existed in our country. Subsequently, we pretended to introduce a unique RIA system to Turkey. Presently, we are feigning RIA implementation.
As previewed in the title, the next article will explore the journey toward achieving “Flawless Regulation” as I participate in a Parliamentary Committee.
[1]For the previous parts in the series, please refer to PITFALLS OF REGULATION – PART 1: CONFUSING THE GOAL WITH THE MEANS
[2] http://www.tusiad.org.tr/__rsc/shared/file/duzref.pdf
[3] http://www.mevzuat.gov.tr/MUHEsaslari.aspx
[4] http://www.basbakanlik.gov.tr/genelge_pdf/2007/2007-0010-006-3896.pdf
[5] http://www.rekabet.gov.tr/File/?path=ROOT%2F1%2FDocuments%2FKilavuz%2FRekabet+Degerlendirmesi+Rehberi+Sonn.pdf
[6] http://www.rekabet.gov.tr/File/path=ROOT%2f1%2fDocuments%2fGenel+İçerik%2fRekabeti+Değerlendirme+Araç+Kiti+İlk+versiyon.pdf
