Chapter 1. Good regulatory practices in Southeast Asia
Governments of the Association of Southeast Asian Nations (ASEAN) recognise the importance of Good Regulatory Practices (GRP) - the use of regulatory impact evaluation, stakeholder engagement and ex post evaluation - for improving the quality of the regulatory environment for businesses, citizens and society. By applying GRP, policymakers can help maintain a stable and enabling regulatory environment that promotes investment, trade and entrepreneurship while limiting or even eliminating unnecessary administrative burden for businesses of all sizes – especially for small and medium enterprises (SMEs) that tend to have weaker adaptive capacity to adapt to changing or complex regulations. To support local businesses in growing and integrating into global value chains, ASEAN governments have initiated various GRP tools and measures aimed at simplifying regulations, reducing compliance costs, assessing regulatory impacts, migrating administrative procedures online, conducting stakeholder consultation and streamlining regulatory requirements. This chapter highlights uses of GRP across the Southeast Asia region.
Improving regulatory environments with good regulatory practices (GRP)
Governments use laws and regulations as a key lever to achieve policy objectives and outcomes; for example, as a way to promote inclusive and sustainable growth, stimulate competition and productivity, improve social welfare and increase environmental protection. Different forms of regulations exist, with legal restrictions as the most common form used by governments. Other forms include: norm-setting; certification; accreditation; standard setting; market regulation, among others.
The net benefit created by regulations should be positive, and regulation must be fit-for-purpose to achieve its intended objectives (OECD/Korea Development Institute, 2017[1]). Regulations should be built on evidence and they should reflect the needs and objectives of regulated entities and citizens alike. This would also help ensure acceptance, effective implementation and compliance. By extension, regulatory processes should include efforts to minimise the costs and burden associated with regulatory compliance.
Governments around the world have adopted good regulatory practices (GRP) aimed at systematically improving the quality and delivery of regulations. GRP uses key tools in the regulatory cycle – such as administrative simplification, impact assessments, stakeholder engagement, e-government and appeals – to improve the quality of the regulatory environment for everyone.
Good regulatory practices (GRP) are internationally recognised processes, systems, tools and methods for improving the quality of regulations. GRP systematically implements public consultation and stakeholder engagement, as well as impact analysis of government proposals before they are implemented to make sure they are fit-for-purpose and will deliver what they are set to achieve.
Supporting small and medium enterprises (SMEs) with GRP
For businesses, GRP facilitate a stable and enabling regulatory environment that can help boost investment, trade, and entrepreneurship. While GRP benefits businesses of all sizes, they are especially helpful for small and medium-sized enterprises (SMEs). Compared with their larger counterparts, SMEs are often disproportionately affected by the increasing stock and flow of regulations and may, in turn, lack the adaptive capacity vis-à-vis large enterprise to cope and comply with the regulations. A burdensome regulatory environment may irritate a larger enterprise but cripple an SME, shrinking the latter’s already limited resources and inhibiting its creativity to succeed.
The key challenges for SMEs in coping with regulatory requirements tend to be associated with: their size, which restricts access to economies of scale; and resource constraints, meaning issues like access to finance for new investment, information asymmetry, and access to technology. SMEs also face higher obstacles in navigating the legal landscape compared with larger firms that have a greater ability and more resources to address the various regulatory requirements, particularly those in global or regional value chains. Moreover, not only does the burden of regulatory compliance tend to fall more heavily on smaller firms as compared to larger ones – but business procedures themselves are also more likely to be accelerated for large and well-connected local companies, multi-nationals, or investors in priority sectors.
At the same time, SMEs account for the vast majority of businesses and the largest share of employment in Southeast Asia. Although the definitions of SMEs vary across member states and criteria changes over the years, micro and SMEs are found to make up between 70%-98% of all businesses in almost all Association of South East Asian Nations (ASEAN) countries, according to this study.1 Yet, SMEs account for only a minority share – less than 30% – of value added or exports in the region, meaning that despite their numbers, their economic performance still lags far behind larger enterprises.
Given the large presence of SMEs in Southeast Asia, a regulatory environment ill-adapted to their particular needs and characteristics could significantly undermine the health of the local economy as well as regional competitiveness. Therefore, improving regulatory policy and delivery to support the development of SMEs is a clear priority for governments in the region. The extent to which GRP is implemented to achieve these goals could also reveal important opportunities and challenges for good governance and economic growth at the regional, national and subnational levels.
GRP contributions to structural reforms have been found to promote economic growth and development as well as contribute to societal well-being (OECD, 2011[2]). Improving regulatory policy supports the rule of law, improvements to appeal systems, social cohesion, enhanced transparency and reduced red tape for citizens and businesses alike. There is also a growing body of research linking regulatory performance with economic growth, which has found a positive relationship between the openness of regulatory systems and the growth rate for various economic indicators (OECD, 2011[2]). Additionally, for many countries, strengthening regulatory policy is also a means to minimise opportunities for corruption and its negative impacts on economic and social development.
Much of the literature on regulatory policy and governance confirms that poorly designed regulations could stifle economic activity or gains. However, good regulatory governance and sound institutional frameworks could help mitigate the damaging effects of bad regulation. As regulatory governance and institutional frameworks are context-specific, there is value in examining country-specific case study evidence in the policy process, in addition to trying to quantify the benefits of regulatory policy changes on economic outcomes (Parker and Kirkpatrick, 2012[3]).
Good regulatory practice to enhance SME participation in the Global Value Chains
In Southeast Asia, participation in global value chains (GVCs) has contributed significantly to local economic development and employment generation as ASEAN countries gain a foothold in the manufacturing and supply chain hub dubbed “Factory Asia” (Lopez Gonzalez, 2016[4]). Nevertheless, ASEAN governments recognise that most participation in GVCs to date has been driven by a small number of large firms, while SMEs continue to operate primarily at a local scale.
While tariff barriers are being reduced and phased out over time, ASEAN countries have been struggling with rising non-tariff measures (NTMs) (ASEAN Secretariat, 2017[5]). Non-tariff measures are defined as measures other than normal tariffs, which have the effect of restricting trade between nations (OECD, 2018[6]). When NTMs become barriers for many companies, they can hinder the progress of ASEAN countries in further integrating as a regional trading bloc.
* Assessed based on incidence of standards and technical regulations, and non-tariff measures. Benchmarked against Singapore which has the least of such measures.
Note: Incidence of tariffs and non-tariff measures is based on average across ASEAN member states within sector.
Source: ASEAN Secretariat (2017), Master Plan on ASEAN Connectivity, ASEAN Secretariat, Jakarta, p. 59; OECD (2018), Non-Tariff Measures, http://www.oecd.org/tad/ntm/.
Increasing SME participation in GVCs can be an opportunity to expand or tap into diverse markets, as well as encourage broader socio-economic growth. However, successfully integrating SMEs into GVCs can be particularly challenging if SMEs must meet unfamiliar or additional trading or operational requirements issued by other jurisdictions, on top of domestic regulations. SMEs may also have limited access to information that helps them stay abreast of international opportunities or identify points of entries into GVCs. The complexity of tariffs, regulations and non-tariff barriers, as well as their applications from country to country, can further add to the challenge.
It is also important to recognise that not all SMEs in Southeast Asia want to grow or sell to international markets. SMEs are highly heterogeneous. Some may be perfectly content to supply goods and services to their neighbours or the domestic market. Some may be bound by local resources. A lack of interest in participating in GVCs could indeed be because SMEs truly prefer to operate locally, but it could also stem from various reasons that are in fact related to capacity to respond to the regulatory environment. For example, many SMEs in Southeast Asia are family businesses which may not have sufficient human or financial resources to scale up their operations and may not necessarily know where to obtain support or be eligible even if they did. Others may find it troublesome to understand and comply with licensing, reporting and taxation requirements associated with becoming bigger and therefore more visible companies – certainly, a very large share of SMEs in Southeast Asia operate informally, completely outside of any regulatory jurisdiction.
In almost all ASEAN countries, policymakers widely acknowledge that there is a significant percentage of SMEs that never register their businesses at all and rather prefer to operate informally. Policymakers also doubt whether limited government capacity to give small loans or training can sufficiently entice SMEs to formalise just to file more paperwork and start paying taxes.
All the same, weak participation by SMEs in the formal market, low SME growth, and limited participation in GVCs could be regarded as lost opportunities, not only for the companies themselves but for the growth of the national and regional economies. Going forward, adopting GRP that make regulations easier to understand and less burdensome to comply with can help SMEs formalise and grow in local communities as well as integrate more easily in global value chains (GVCs). It is important to recognise that GRP can support SMEs to overcome local regulatory barriers to sustaining operation or growing larger and international regulatory barriers where SMEs may need additional support to meet cross-border requirements. It is important that, in developing or updating national regulatory frameworks, governments continue to facilitate the bridge from local to international commerce by aligning national regulatory standards and procedures with international ones where appropriate.
Increasing the use of digital technology can help improve trade and regulatory connectivity for businesses and government alike. Today, the digital economy offers unprecedented opportunities for SMEs to participate in GVCs whether they grow larger or not; the internet can enable even a single-person enterprise to exports through e-commerce or social media transactions. Likewise, for governments, taking advantage of digital technologies can help policymakers deliver smarter policies, regulations and services to its citizens and businesses.
Recognising the importance of using digital technologies for better governance, the Master Plan on ASEAN Connectivity (MPAC) aims to “achieve a seamlessly and comprehensively connected and integrated ASEAN that will promote competitiveness, inclusiveness, and a greater sense of community” (ASEAN Secretariat, 2015, p. 9[7]). The MPAC focuses on three linkages: physical connectivity; people-to-people connectivity; and institutional connectivity. Regulatory excellence is deemed a strategic area in the MPAC as a way for policymakers to support improvements in both physical and people-to-people connectivity.
Applications of GRP in Southeast Asia
One of the first collaborations between the OECD and Southeast Asian countries on GRP was a joint initiative between the OECD and the Asia Pacific Economic Community (APEC) where many Southeast Asian countries are also members.2 In 2000, APEC and OECD launched the APEC-OECD Co-operative Initiative on Regulatory Reform, which stemmed from a strong willingness on the part of APEC to improve the quality of regulation across APEC member economies. As part of this initiative, APEC and OECD started developing an integrated checklist for regulatory reform in 2002, which served as a guide for economies to conduct a voluntary self-assessment on their progress in developing regulatory policy, competition, and market openness. The checklist was subsequently approved and endorsed in 2005 by the respective executive bodies of APEC and the OECD (APEC-OECD, 2005[8]).
Since then, the Association of Southeast Asian Nations (ASEAN) has continued to develop and mainstream good regulatory practices at the regional level. The ASEAN Economic Community Blueprint 2025 recognises the importance of “Effective, Efficient, Coherent and Responsive Regulations and Good Regulatory Practice” in achieving “a Competitive, Innovative and Dynamic ASEAN” (ASEAN Secretariat, 2015[7]). This builds upon previous regional declarations, such as the Putrajaya Declaration by the ASEAN Heads of Civil Service issued in December 2015 and the Nay Pyi Taw Declaration issued by the Heads of State or Governments in November 2015, both of which underscore the importance of GRP. More recently, ASEAN Heads of State or Government have also endorsed an ASEAN Work Plan on Good Regulatory Practice (2016-2025), which aims to further advance the work on embedding good regulatory practices in national and ASEAN contexts.
Individual ASEAN countries have also made progress to implement GRP to varying extents. In Malaysia, for example, Malaysia’s the country’s Vision2020 has underscored the need for “productive deregulation” to minimise the cost and maximise benefits of regulation in the country since 1991 (OECD, 2015[9]). A National Policy on the Development and Implementation of Regulations (NPDIR) subsequently introduced in 2013 has laid the foundations for future improvements in the area of GRP in Malaysia.
Other ASEAN countries have also introduced specific laws to support the use of GRP including: Cambodia (Government Decision No. 132, 2016); Indonesia (Law No. 12, 2011); Lao PDR (Law on Making Legislation, 2012); Thailand (Article 77 of the 2017 Constitution); and Viet Nam (Law on Promulgation of Legal Normative Documents, 2008).
Administrative burden reduction
Much of the attention on GRP in the region has stemmed from the need for governments to reduce administrative burden, lower compliance costs and simplify regulations. Cutting red tape has come to be an important method by which policymakers seek to stimulate entrepreneurship, encourage investments, and improve the welfare of citizens. Almost all countries in the region have initiated some kind of administrative burden reduction programme.
Administrative burden reduction programmes seek to make administrative processes more responsive, transparent, and efficient. It aims to provide services and access to services quicker and more effectively. As efforts to reduce administrative burden tend to require reviewing and consolidating laws and regulations, a “whole-of-government” approach is commonly taken. This can be done through a number of way including reviews of the stock of regulation, multi-level co-ordination, one-stop shops or e-services. In fact, many ASEAN countries have taken exactly such measures to reduce administrative burden.
Some ASEAN countries have introduced regulatory policies targeted specifically to SMEs, while others have opted to level the regulatory playing field for businesses of all sizes. For example, Cambodia and Viet Nam both offer simplified taxation schemes for SMEs, allowing them to file taxes less frequently than their larger counterparts, or even exempting certain qualifying SMEs from taxes entirely. Singapore, by contrast, has no SME-specific policies or regulations; all business-related policies and regulations aim to improve the business environment for everyone. It is not a given that a dedicated SME regulatory policy is needed, as long as the general regulatory environment is fair, transparent, clear and effective. The diversity of ASEAN countries means that governments necessarily tailor their regulatory policies and use of GRP to their unique regulatory contexts.
Still, there are some methods to reduce the administrative burden for businesses that have been enthusiastically adopted by all countries – the one-stop shop being a popular example. All ten ASEAN countries have introduced one-stop shops as a single-entry point for registering businesses and obtaining information or certification and permits. One-stop shops can be classified as informational or transactional. The former is used only for gathering information on a wide range of business process other than registration e.g. growing a business and closing a business, while the latter allows you to obtain necessary documents such as permits or business registration. One-stop shops can also be made available on line or off line. Brunei and Singapore are among the countries that have made all business registration activities online; while the rest of the countries offer both online and offline services or solely offline through locally-based offices. Viet Nam is a front-runner, having stipulated the implementation of one-stop shops in its Public Administration Reform Programme as early as 2001, and today has one-stop shops at just about every district level and nearly as many at the commune level. Myanmar has set up more than 70 one-stop shops across the country to deliver transparent and efficient government administrative services closer to its citizens. Lao PDR has also introduced the one-stop service concept in its special economic zones and Cambodia is in the process of establishing its first one-stop shop to facilitate regulatory compliance from SMEs.
A number of ASEAN countries also target the civil service as a way to improve administrative efficiency and instil GRP. This is done by transforming and improving management styles and integrating a “customer-centric” approach to the delivery of regulations. For example, Brunei has introduced a “deliverology” approach to improve the governance and management of the public sector. Viet Nam has undertaken a sweeping Public Administration Reform Master Programme spanning a decade to streamline government procedures. Meanwhile, Singapore and Thailand have introduced incentives such as awards to individuals or agencies that advocate the use of GRP or serve as benchmarks and best practices for other aspiring agencies.
Regulatory oversight
To monitor and assess the quality of regulatory delivery, ASEAN countries have assigned government ministries or set up dedicated regulatory oversight bodies. Given the varying extent to which good regulatory practice (GRP) tools are implemented in the ASEAN region, some countries can have a more centralised oversight body, which is responsible for co-ordinating the use of GRP tools, as it is in the case of Cambodia, Lao, Thailand and Viet Nam; whereas, others may have multiple bodies responsible for overseeing the implementation of GRP. However, in some cases, even with multiple bodies operating, there remains to be a co-ordinating body responsible for overseeing all these activities, as it is in the case of Malaysia Productivity Corporation (MPC) and the National Economic and Development Authority (NEDA) of the Philippines. Table 1.2 provides an overview of regulatory oversight bodies in Southeast Asia and whether countries have systematically adopted selected GRP tools.
Oversight bodies are crucial in the implementation of regulatory policy tools and the improvement of the regulatory management system. According to the 2012 OECD Recommendation of the Council on Regulatory Policy and Governance, an oversight body is tasked with a number of functions and can include any of the following (OECD, 2012, p. 12[10]):
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Quality control through the review of the quality of impact assessments and returning proposed rules for which impact assessments are inadequate.
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Examining the potential for regulation to be more effective including promoting the consideration of regulatory measures in areas of policy where regulation is likely to be necessary.
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Contributing to the systematic improvement of the application of regulatory policy.
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Co-ordinating ex post evaluation for policy revision and for refinement of ex ante methods.
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Providing training and guidance on impact assessments and strategies for improving regulatory governance.
Evidently, it is possible to have more than one regulatory oversight body; nonetheless, there is no single structure that is considered the most appropriate way to oversee a country’s regulatory framework (OECD/Korea Development Institute, 2017[1]).
Sources: OECD (2012), Recommendation of the Council on Regulatory Policy and Governance, https://doi.org/10.1787/9789264209022-en; OECD (2017), Improving Regulatory Governance: Trends, Practices and the Way Forward, OECD Publishing, Paris, https://doi.org/10.1787/9789264280366-en.
Regulatory impact analysis
One of the key areas under the purview of regulatory oversight bodies is regulatory impact analysis or assessment (RIA). RIA is a form of ex ante evaluation and is undertaken in the development of new laws or regulations to assess its impact before it is promulgated. RIA is defined as a “systematic process of identification and quantification of benefits and costs likely to flow from regulatory or non-regulatory options for a policy under consideration” (OECD, 2012, p. 25[10]). RIA is applied using a range of methods – from cost-benefit analysis to multi-criteria analysis – and is particularly important when pursuing evidence-based policy making.
Among the pioneering countries in Southeast Asia for implementing RIA is Malaysia, which has successfully embedded its use among ministries across the country since 2015 (OECD, 2015[9]). Most of the other ASEAN countries have also introduced RIA, although they are not always mandatory or fully implemented. Cambodia has made particularly notable progress in RIA implementation; after mandating its use, several follow-up activities have undertaken to sensitise different ministries on its application and to expand its use. Viet Nam has likewise required the completion of an impact assessment as part of its process for preparing new legislation, ordinances and decrees since its 2008 Law on the Promulgation of Legal Normative Documents (Law on Laws) (OECD, 2011[11]). More recently in 2017, Thailand has written RIA into its new Constitution, which stresses the importance of using evidence-based policy making when drafting new laws and regulations as well as when amending or repealing existing ones. Singapore conducts ex ante analysis, similar to RIA, although not through a standardised approach. Other countries have started to explore RIA on a pilot basis.
Ex post evaluation
After laws and regulations are introduced, they should be evaluated ex post for continuous effect, relevance and efficiency in achieving its targets and objectives (Australian Productivity Commission, 2011[12]). A majority of ex post evaluation activities are carried out on an ad hoc basis, often linked to administrative burden reduction programmes or used to address specific issues such as enabling competition.
Present uses of ex post evaluations in Southeast Asia are limited. Only a few countries such as Brunei, Malaysia, the Philippines and Singapore conduct some reviews of regulations after they are implemented, and most typically on an ad hoc or project-by-project basis. This may be linked to the resource-intensive nature of ex post evaluations and the need for more sophisticated tools to review entire sets of regulations more efficiently.
Stakeholder engagement
Stakeholder engagement is a key part of the regulatory process for raising public awareness and understanding of new laws and regulations, which also serves to garner their acceptance and compliance. A meaningful engagement process can help make regulatory policy making and governance more inclusive, accountable, and efficient by giving concerned users, citizens, and businesses the opportunity to provide their insights towards improving the quality and utility of regulations.
There are different forms of stakeholder engagement, based on the extent to which stakeholders are involved in the process and how information is relayed (OECD, forthcoming[13]). A basic classification of stakeholder engagement is presented in the figure below.
The first form of stakeholder engagement is notification, which is a one-way process from the agency to the citizens or the concerned stakeholder. Examples of this include circulation of regulatory proposals, e-notification, and public meetings during which stakeholders are informed of a new or amended regulation.
The second form involves public consultation, which is a two-way conversation between the agency and the stakeholder. This includes activities such as public hearings, feedback, public notice-and-comment, advisory bodies, and workshops. Some public consultation mechanisms are also carried online in the form of e-consultations or online petition systems.
Lastly, there is active participation, which is a partnership formed between the agency and stakeholder. This often concerns the formal involvement of stakeholders in the regulatory process; for example, in citizen juries, expert panels, focus groups, and working groups or government committees.
Source: OECD (forthcoming), Best Practice Principles on Stakeholder Engagement in Regulatory Policy, OECD Publishing, Paris.
ASEAN governments recognise the importance of stakeholder engagement, which is practised regularly in all countries, albeit to varying degrees and not always formally or systematically. Public consultation is the most common form of stakeholder engagement used in ASEAN countries. Across the countries, public consultations are most often undertaken in the form of open community consultations or business consultation meetings. Public consultation is mandatory in several ASEAN countries, including Lao PDR, Myanmar, Thailand and Viet Nam, although the process by which this is done is not prescribed. By contrast, Brunei, Malaysia, and Singapore have developed guidelines for stakeholder engagement throughout the regulatory process. Indonesia and the Philippines practice public consultation when developing new policies and programmes even though this is not mandated by law. Stakeholder engagement may happen before or after the notification of new regulations, although most consultations in Southeast Asia occur in the later stages of policy development.
Business sector engagement is a top priority in Cambodia and Viet Nam, where the Prime Ministers have been known to chair private-public sector fora to discuss with investors on how government could more effectively create an enabling business environment. In Indonesia, digitally-savvy citizens can participate in stakeholder consultations via online fora such as Hukum Online, in which legal experts also participate to respond to public inquiries. Singapore engages stakeholders through its reaching everyone for active citizenry @ home (REACH) and a Pro-Enterprise Panel (PEP).
Given the heterogeneity of SMEs in ASEAN countries, policymakers should continuously update their understanding of SMEs’ needs, which are more dynamic than ever. SMEs today can operate across or even between sectors and jurisdictions, and it is no longer sufficient for policies and regulations to be defined on a purely localised or sectoral basis. Regulations must reflect the dynamism of SMEs and the contemporary business environment, and government support policies need to consider the needs of SMEs according to their diverse economic activities and means of conducting business. To date, many ASEAN countries continue to distinguish the support offered to SMEs according to their size – that is, the number of staff employed, or their annual turnover – but do not adequately reflect on other characteristics of SMEs’ operations, such as whether they operate online or whether they trade in goods or services, which may, in fact, be more relevant factors for targeted regulatory interventions.
E-customs
ASEAN countries have been making significant advances in improving customs regulations and developing national customs databases – otherwise known as National Single Windows (NSW). The NSW aims to facilitate the import and export of goods by simplifying trade and administrative processes via an integrated electronic customs process (E-customs). E-customs allow government agencies, exporters and importers to conduct all customs-related transactions online, as well as reduce the need for paper documents and government visits.
Simultaneously, ASEAN countries are in the process of integrating their respective NSWs to establish an ASEAN Single Window (ASW). The ASW is a regional-wide initiative that aims to accelerate cargo clearance through electronic exchanges of border documents across ASEAN countries. As shown in Table 1.4, progress towards the ASW varies from country to country, since integration requires the development of accompanying legal frameworks to support cross-border exchanges of electronic data along with the standardisation of processes in the respective NSWs.
At present, the implementation of ASW has been focused on the ASEAN Trade in Goods Agreement (ATIGA) Form D or the intra-ASEAN certificate of origin. As of January 2018, Indonesia, Malaysia, Singapore, Thailand and Viet Nam are participating in e-filing of ATIGA Form D. The remainder of the ASEAN countries are expected to follow suit. Other regional services that have not yet been integrated include a reference data service (RDS) application to serve as a master copy for regional references, a management information system (MIS), and a regional services portal.
Aligning standards and regulations
Standards and regulations are often designed in national contexts, resulting in heterogeneous regulatory environments across countries. Yet, the ASEAN community’s aspiration to achieve a single market means that, at one point or another, national standards and regulations will need to be complementary, if not standardised, across countries. As ASEAN countries advance towards regional integration, further challenges lie ahead for regulatory co-operation and co-ordination.
ASEAN countries have already been making progress towards harmonising and aligning regulations, as well as adopting international standards, conformity assessment procedures, and other standardisation procedures in priority sectors. Since 2003, the ASEAN Consultative Committee on Standards and Quality (ACCSQ) has harmonised ASEAN standards in line with international standards via mechanisms such as mutual recognition arrangements. At present, all member countries have harmonised standards for 20 priority products (ASEAN Secretariat, n.d.[14]).
Individual ASEAN countries have also spearheaded regional standards and agreements in potential niche sectors. A notable example is Malaysia, which has proposed regional halal guidelines as a way to facilitate its halal exports within and outside the region. The guidelines are promoted through the ASEAN Working Group on Halal Food under the Senior Officials Meeting-ASEAN Ministers of Agriculture and Forestry (SOM-AMAF).
To better align local and international standards and regulations, the first step to take is to ensure that local, subnational and national regulations are not contradictory. Reviewing whether existing or planned domestic regulations could be integrated or scaled up to the regional level would also be helpful. Taking a forward-looking approach to regulatory policy development will pave to way to broader market access and economic integration, ultimately smoothing the learning curve for local companies aiming to expand from domestic to international trade.
The halal industry poses a huge opportunity for the ASEAN region. The industry could undoubtedly evolve into more complex activities within the logistics, cosmetics and pharmaceutical, and tourism industry. With the increasing demand for halal products, interested countries in the ASEAN region can benefit from a more harmonised certification process. Malaysia envisions setting up an international halal authority board to help synchronise and align the various procedures in issuing halal certification for products and services. In addition to certification, Malaysia aims to achieve harmonised laboratory testing and accreditation schemes as a way to expedite the trade of manufactured halal goods and materials (Dube et al., 2016[15]).
Source: Dube, F. et al. (2016), “Halal certification system as a resource for firm internationalisation of China and Malaysia”, International Journal of Asia Pacific Studies, pp. 125-141.
Special economic zones (SEZs) and industrial clusters
Special economic zones (SEZs) and industrial clusters have been introduced in every ASEAN country as a space to gather and incubate strategic or priority sectors. These special zones are typically located in strategic areas, such as borders or ports, to facilitate trade with other countries. Generally, SEZs are designed to level the playing field between local and international investors and otherwise offer the same incentives for operations. In countries such as Cambodia, the Philippines and Thailand, enterprises within SEZs are eligible for a range of financial incentives, including exemptions for profit tax, import and export duty, foreign exchange operations, and even more flexible labour mobility. SEZs and industrial clusters may provide an opportunity for SMEs to benefit from preferential policies and logistical support at the same level as larger enterprises. At present, ASEAN countries typically do not provide preferential allocation or additional benefits for SMEs in SEZs beyond those that are already offered to all accepted businesses.
Way forward
The OECD has published numerous guidelines and toolkits to help countries (central governments, sectoral ministries, regulatory and competition agencies) design and implement regulatory policy, management and governance. These include the OECD Guiding Principles for Regulatory Quality and Performance (OECD, 2005[16]), APEC-OECD Integrated Checklist on Regulatory Reform and the Best Practice Principles for Regulatory Enforcement and Inspections (OECD, 2014[17]). The OECD has also worked with individual countries to improve regulatory delivery, including in Southeast Asia.
This report takes into account the importance of context in regulatory policy development and implementation and focuses on country-specific approaches to regulatory delivery in supporting SMEs. Regulatory opportunities and challenges specific to each of the ten ASEAN member states are highlighted in the country chapters of this report.
References
[8] APEC-OECD (2005), APEC-OECD Integrated Checklist on Regulatory Reform.
[5] ASEAN Secretariat (2017), Master Plan on ASEAN Connectivity, ASEAN Secretariat, Jakarta.
[7] ASEAN Secretariat (2015), ASEAN Economic Community Blueprint, ASEAN Secretariat, Jakarta.
[14] ASEAN Secretariat (n.d.), ASEAN Cooperation on Standards and Conformance to Facilitate Trade in the Region, http://asean.org/asean-economic-community/sectoral-bodies-under-the-purview-of-aem/standards-and-conformance/.
[12] Australian Productivity Commission (2011), Identifying and Evaluating Regulation Reform, Research Report.
[15] Dube, F. et al. (2016), “Halal certification system as a resource for firm internationalisation of China and Malaysia”, International Journal of Asia Pacific Studies, pp. 125-141.
[4] Lopez Gonzalez, J. (2016), “Using Foreign Factors to Enhance Domestic Export Performance: A Focus on Southeast Asia”, OECD Trade Policy Papers, No. 191, OECD Publishing, Paris, https://doi.org/10.1787/5jlpq82v1jxw-en.
[6] OECD (2018), Non-Tariff Measures, http://www.oecd.org/tad/ntm/ (accessed on 10 August 2018).
[18] OECD (2017), Improving Regulatory Governance: Trends, Practices and the Way Forward, OECD Publishing, Paris, https://doi.org/10.1787/9789264280366-en.
[9] OECD (2015), Implementing Good Regulatory Practice in Malaysia, OECD Publishing, Paris, https://doi.org/10.1787/9789264230620-en.
[17] OECD (2014), Best Practice Principles for Regulatory Enforcement and Inspections, OECD, https://doi.org/10.1787/9789264208117-en.
[10] OECD (2012), Recommendation of the Council on Regulatory Policy and Governance, OECD Publishing, Paris, https://doi.org/10.1787/9789264209022-en.
[11] OECD (2011), Administrative Simplification in Vietnam: Supporting the Competitiveness of the Vietnamese Economy, OECD Publishing, Paris.
[2] OECD (2011), Regulatory Policy and Governance: Supporting Economic Growth and Serving the Public Interest, OECD Publishing, Paris, https://doi.org/10.1787/9789264116573-en.
[16] OECD (2005), OECD Guidance Principles for Regulatory Quality and Performance, OECD Publishing, Paris, http://www.oecd.org/fr/reformereg/34976533.pdf.
[13] OECD (forthcoming), Best Practice Principles on Stakeholder Engagement in Regulatory Policy, OECD Publishing, Paris.
[1] OECD/Korea Development Institute (2017), Improving Regulatory Governance: Trends, Practices and the Way Forward, OECD Publishing, Paris, https://doi.org/10.1787/9789264280366-en.
[3] Parker, D. and C. Kirkpatrick (2012), The Economic Impact of Regulatory Policy: A Literature Review of Quantitative Evidence, OECD Publishing, Paris.
Notes
← 1. The ten countries that comprise the ASEAN of Southeast Asian Nations (ASEAN) are: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam.
← 2. Southeast Asian countries that are also members of APEC are: Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Viet Nam.