Contents
CHAPTER 1: INTRODUCTION 2
Primary Research Questions 2
The subsidiary research questions: 3
The Strategy of this Paper 3
CHAPTER 2: AN OVERVIEW OF MALAYSIA AND THAILAND REGULATORY FRAMEWORK 4
CHAPTER 3: THE CONCEPT OF REGULATORY GUILLOTINE, GOOD REGULATORY PRACTICE (GRP), AND REGULATORY IMPACT ANALYSIS (RIA) 6
Regulatory Guillotine 6
The Regulatory Guillotine works through five stages: 7
Good Regulatory Practice (GRP) 8
Regulatory Impact Analysis (RIA) 8
CHAPTER 4: LAW AND REGULATORY FORMATION IN THE COUNTRY CONTEXT 10
Malaysia 10
Thailand 11
CHAPTER 5: REGULATORY REFORMS AND SYSTEMS IN MALAYSIA AND THAILAND 14
Malaysia 14
Thailand 15
The ASEAN GRP Principles as per Article 77, the 2017 Constitution 17
10 Elements Requirement for the Relevant Legislation of Laws and Regulations in Thailand: 17
CHAPTER 6: REGULATORY IMPACT ANALYSIS (RIA) 20
Malaysia 20
Thailand 23
CHAPTER 7: INSTITUTIONS THAT FACILITATE THE REGULATORY FRAMEWORK IN MALAYSIA AND THAILAND 24
Malaysia 24
CHAPTER 8: EVALUATION OF THE REGULATORY FRAMEWORK IN MALAYSIA AND THAILAND 27
Malaysia 27
CHAPTER 9: SUMMARY 28
Bibliography 30
CHAPTER 1: INTRODUCTION
The focus of this paper is to compare the Regulatory Guillotine of Thailand and Malaysia. The notion of Regulatory Guillotine refers to the collection of laws and regulations, analyzing them, and ensuring their implementation. The primary reason for engaging in this activity is to ensure that the government eliminates unnecessary laws that can hamper the economic and social growth of the country. A good example of a country that achieved success in coming up with an excellent Regulatory Guillotine procedure was Serbia.
The leadership of the country identified 2024 laws that were affecting the growth and stability of the nation. The government called various stakeholders, and legislators, to analyze the viability of these laws (Joksimović, 2010). The results of this process was a call to amend about 300 laws, and regulations. Furthermore, the Serbian government sought to repeal 192 laws, which were not useful to the country. The implementation of these recommendations enabled Serbia to save 187.11 million euros on an annual basis.
In this regard, Jacobs (2006) denotes that because of the popularity of the notion of Regulatory Guillotine, it is becoming popular in many countries around the world. On a specific note the ASEAN and the OECD countries are using the concept to eliminate unnecessary laws in their countries. The application of this process in dozen countries is so successful, to the extent that approximately 25,000 laws and regulations have been eliminated, saving the costs of doing business and running the government by approximately $ 8 billion annually (Joksimović, 2010). So, this is an indication that the concept of Regulatory Guillotine is becoming popular across the world.
In a bid to ensure the laws and regulations enacted in their countries are efficient in serving the needs of the population, Malaysia and Thailand are also pursuing the concept of Regulatory Guillotine. The two countries have enacted a Regulatory Management System, Good Regulatory Practice (GRP) and Regulatory Impact Analysis (RIA) procedures, whose aim is to ensure that they engage in an effective Regulatory Guillotine procedures that is aligned to the requirements of the ASEAN regional integration scheme.
Primary Research Questions
How the concept of Regulatory Guillotine can be compared to the ASEAN Good Regulatory Practice (GRI) Core Principles, the case of Malaysia and Thailand.
The subsidiary research questions:
What do Thailand and Malaysia have in common when it comes to the notions of the RMS/regimes, GRP and Regulatory Guillotine?
What are the differences?
The Strategy of this Paper
In order to provide an answer to the research questions, the first step is to provide an overview of the Thailand and Malaysian regulatory framework. Chapter 1 is a brief introduction of the evolution of the Regulatory Guillotine in the two countries. The information is useful because it provides an understanding of the implementation of these policies in Thailand and Malaysia, and the factors responsible for their application.
Chapter 3 of this text analyses the concept of Regulatory Guillotine, Good Regulatory Practice and Regulatory Impact Analysis. This section is relevant for the study, because it provides an answer on how countries such as Malaysia and Thailand can carry out the Regulatory Guillotine procedures. This helps to provide an understanding of the process in the named countries, and determine if they are aligned with the recommended ASEAN procedures.
Chapter 4 provides the legal systems of Malaysia and Thailand. This is an important section, because one cannot provide an adequate comparison of the Regulatory Guillotine in Thailand and Malaysia, without understanding how laws are made in these countries. This section is dedicated to providing the information under consideration,
Chapter 5 provides an answer to the primary and secondary sections of this study. One notable thing that emerges from this chapter is that Thailand is very effective in its implementation of the Regulatory Guillotine. In fact, the process is enacted in the 2017 constitution, and it gave the government the powers to develop a 10 point checklist that guides legislators in the formation of laws.
Finally, Chapters 6, 7 and 8 also provide more information of the implementation of the Regulatory Guillotine measures in Malaysia and Thailand, and the institutions responsible for the implementation of the process. Chapter 9 is a summary of an answer to the research questions.
CHAPTER 2: AN OVERVIEW OF MALAYSIA AND THAILAND REGULATORY FRAMEWORK
The Malaysian and Thai economies are ranked second and third in the ASEAN behind Singapore. The two countries have the national economic agenda to transform their nations into a high-income and developed economy status. Malaysia’s and Thailand’s objectives are to become a high-income economy by 2020 and 2026 respectively (Hasan, 2009). One of their crucial strategies is to conduct regulatory review to attain economic and government transformation towards enhancing country’s international competitiveness and economic prosperity amid an increasingly competitive and globalized economy.
Malaysia employed a privatization program in the 1980s where most of Malaysia’s state-owned firms issued shares to private agencies. This revolution in its economic strategies is the origin of the current centralization in Malaysian institutions (Liew, 2007). Malaysia Productivity Corporation (MPC) is the leading player in this centralized system designed to accomplish regulatory reforms. Reducing Unnecessary Regulatory Burdens is another strategy chosen by Malaysia as a way of creating a business environment that is conducive to the entrepreneurs.
MPC is responsible for the success of this process whose objective is to ensure that the business regulations are relevant to the current state of affairs while reducing the compliance costs. Malaysia also pays attention to the public’s input by collecting feedback from the citizens regarding the government’s projects. Therefore, through a public-private task force (PEMUDAH), it can collect and analyze the thoughts of the public regarding the current policies (Semam et al., 2016). These strategies being implemented by Malaysia move the country a step closer to its primary goal of becoming one of the high-income economies by 2020.
At the same period of time in 1980s, Thailand employed red tape reduction for ease of doing business. It helped to reduce the regulations touching that increase the red tape initiatives in the country (Ow‐Yong & Kooi Guan, 2000). In 1992, the state allowed the public to participate in the process of privation and regulation of laws, resulting to the legislation of many laws. The economic policy provided in the 1997 Constitution emphasizes market mechanisms through the enforcement of the anti-monopoly and consumer protection provisions (Antons, 2016). Therefore, government is called on to support a competitive market by protecting the market from all anti-competitive practices.
The Office of the Council of State (OCS), established after the country entered democracy system in 1932, is a central legal agency of the government and have responsibility for regulatory drafting and deal with regulatory reform (Pascoe & Rachagan, 2005). The LRC, established in 1992, have responsibility in ensuring the continuity of regulatory reform and initiated many regulatory reform projects (Liew, 2007). Its priority is to bring the regulations in line with current conditions and ensure that these meet current needs. However, the LRC initiative had frozen due to long political turbulence in Thailand beginning in mid-1992 and the economic crisis in 1997 (Munger, 2019). Regulatory Reform became a dominant policy of the government once again until 2006 after the recovery from the economic crisis in 2002. During this period, the RIA had been reborn, upon the OECD checklist (Pascoe & Rachagan, 2005). The OCS entrusted the RIA and prepared its manual.
The key obstacle to regulatory reform in Thailand is the political instability, especially during the late 2006 to 2013 because of inconsistent policy framework. The new government did not continue the policies that the previous government did. Therefore, the LRC, the OCS and the continuation of the government policy (which depends on political stability) altogether contribute to the achievement of the enactment of an efficient regulatory framework, that has the ability of improving the competitiveness of Thailand. This has been done since 2014, and the climax was the establishment of the 2017 constitution.
CHAPTER 3: THE CONCEPT OF REGULATORY GUILLOTINE, GOOD REGULATORY PRACTICE (GRP), AND REGULATORY IMPACT ANALYSIS (RIA)
Regulatory Guillotine
The principle of Guillotine Approach specifies that any regulation required for future policy needs for market-led development, which is not successfully justified as legal will be eliminated. Besides, it also specifies that any regulation that is needed but not business-friendly will be simplified as far as possible. The Guillotine Approach was pioneered by Sweden in the 1980s and was subsequently used in various forms by Hungary, South Korea, and Mexico in the 1990s in their successful and historic regulatory reforms aimed at sustainable economy-wide transformation. Their experiences have been reviewed and favorably assessed by the OECD.
The Regulatory Guillotine is a technique of rapidly reviewing a large number of old regulations and eliminating those that are no longer needed without the need for long and expensive legal approach and regulation. It is clear, decisive, and fast. It can be used to create a comprehensive and central regulatory registry with positive security, i.e., going beyond the formalities the registry has recommended to include all regulations affecting businesses.
The core principle of Regulation Guillotine is to eliminate regulations that are not aligning to market economy, and simplify regulations that are not support business. If this strategy is successful, it will decrease business cost and uncertainty caused by regulations. This encourages higher competency, investment, job creation. South Korea, using Regulatory Guillotine, spent only 11 months to review 11,000 regulations and eliminate almost 5,500 regulations resulting in 1 million positions in job creations and USD 36,000 million higher in FDI.
Table 1:
Target of reform
Number of regulations reviewed
Percent of regulations eliminated
Percent of regulations simplified
Its impact on economic growth
Korea (11 months)
Regulations
11,125
-48.8%
21.7%
New Jobs created: +1,066,200
Business cost savings: +4.4% of GDP
Increased FDI: $36.5 billion in new FDI
Vietnam (2 years)
Admin procedures
5,500
-8.8%
77%
Business cost-savings: 1.45$ billion/year cost-savings
The Regulatory Guillotine works through five stages:
- The government established Guillotine Unit as a central working group to drive this matter specifically.
- The laws that enter the guillotine mechanism will be considered three times by 1. Government officials, law users 2. Private sector / related civil society and 3. Guillotine Unit
- Considerations will be made using the checklist of 8-15 questions, which will make the answer to the following points: 1. Is the law legal? 2. Is it necessary? 3. Is the business friendly or not? 4. Facilitating Corruption or not
- After considering Guillotine Unit, make suggestions. Which the law is divided into 3 groups: 1. Maintain the original 2. Cancel 3. Update
- The Cabinet takes matters into the Legislature to cancel or revise all laws simultaneously (omnibus) according to Guillotine Unit recommendations.
The Regulatory Guillotine focuses on transparency and public participation. All details of the consideration process will be taken on the internet for private sector stakeholders, civil society People get to know and express their opinions. There may be additional analysis or discussion groups. Every comment will be considered as a suggestion to cancel or improve the law. The Guillotine Regulatory is different from other legal reforms. “Change the burden of proof” from the original who wants to cancel the rule must be the person who explains why it is necessary to cancel To allow the original law user to explain why it is necessary to keep a law, with Jacobs, Cordova & Associates (JCA) companies providing advice and placing the Guillotine Regulatory System to the legal reform strategy
Good Regulatory Practice (GRP)
The intention to improve regulatory practice and foster cooperation among ASEAN Member States (AMS) are agreed in the form of ‘the six ASEAN GRP Core Principles’ that emphasis common elements applicable to the ASEAN context rather than advocate a particular model of GRP standards. Under the 1st principle, there is a need of introducing the policies and regulations of the state in a clear and rationale manner. These policies should be implemented within the context of ASEAN, and aligned with goals of vision 2025, developed by the regional integration scheme. Principle 2 focuses on the minimization of costs, and maximizing profits. In the context of ASEAN, this involves meeting the regional integration scheme requirements. Principle 3 aims at eliminating duplications, and to achieve consistency with the existing laws in the region. Within the context of align, it should reflect the ability of the country to enhance or facilitate its achievement of vision 2030. Principle 4 established regional cooperation, while 5 seeks to promote stakeholders engagement and participation in the process. Principle 5 is a recommendation for the review of the process, to achieve effectiveness and efficiency.
Regulatory Impact Analysis (RIA)
RIA is a process that assesses the possible consequences before state implements any policies or regulations. According to the OECD, RIA is used to measure expected benefits, expenditure, and social impacts. This is to ensure that governments’ policies are thoroughly assessed and that the most effective options are chosen. Modern economy is complex; thus, legislation implemented by the government has a direct impact to all stakeholders. The key factors that indicate a successful RIA are public participation throughout the process and opening for the public to give feedback. Often in the past, the government did not realize the issues and did not find effective solutions. It is necessary that laws are written with transparency. The public are informed with detailed information that relates to legislation. This is so that stakeholders, including political parties, labor unions, business sectors, and NGOs, can propose suggestions towards the legislation process. This expertise may bring new and innovative ideas to policies and legislation that have impacts on stakeholders and their organizations. The key principles for public participation are: notifications so that the public are informed about legislation (one-way communication); the collection of all comments and feedback from stakeholders (two-way communication); and the involvement of those who will write the legislation.
CHAPTER 4: LAW AND REGULATORY FORMATION IN THE COUNTRY CONTEXT
Malaysia
Malaysia recorded a consistent growth rate averaging 7 percent per annum for more than 25 years according to the 2008 World Bank’s Growth Report. The Commission on Growth and Development listed Malaysia among the 13 countries that had shown a sustained growth rate over that period. The consistency, together with its open economy has warranted Malaysia a place among the upper-middle income countries in the world. As stated earlier, Malaysia’s objective is to achieve extensive growth, and become a high earning country when 2020 reaches. This dream was further strengthened with the launching of the New Economic Model (NEM) in 2010, which has a set of reforms necessary for economic success. In any country, most of the revenue generated comes from the private sector, and Malaysia is not an exception. As such, among the plans set in the NEM is the support and development of private businesses. This move is expected to reinforce the existing approach and modernize the social protection structure of the country. It will also get rid of unnecessary restrictions in the country’s economy hence promoting freedom.
Malaysia is divided into two regions, the West Malaysian region, East Malaysian region, and the federal territory. West Malaysia is made up of 11 states; East Malaysia has two states, while the federal territory consists of three components (Putrajaya, Labuan, and Kuala Lumpur). The two regions are not only separated geographically but also by their political structures. The government appoints the governors that govern the two states in East Malaysia and the other two in West Malaysia, Penang and Malacca. On the contrary, the remaining nine states in West Malaysia are headed by hereditary rulers. However, all these states have two similarities, a constitution and elected members of the legislature. The political party that has the most members of parliament produces the Prime Minister, who is the head of the government of Malaysia. The current Prime Minister, who has been in office since 3rd April 2009, is Mohd Najib Razak.
The Malaysian parliament constitutes two separate houses, the House of Representatives and the Senate. The House of Representatives currently holds 222 members while the Senate has 70 Senators in the 12th parliament. His Majesty the King, who is at the highest office in Malaysia, is also a member of parliament. It is regarded as an essential institution because its members are responsible for enacting laws and any other related activities. Although public consultations are one of Malaysia’s ways of ensuring that the 2020 objective is attained, the parliamentary processes used does not favor the idea, which has been the case since 1957. The system does not allow for the selection of the best possible options. As such, it has proven to be entirely ineffective, with industries and businesses being the primary victims. The unnecessary regulations passed by the parliament have, however, not overshadowed the economic climate of Malaysia. In 2016, the country was ranked 18th in a World Bank report that listed 189 economies with business-friendly rules.
Thailand
The primary laws of Thailand emerge from the parliament. It is responsible for enacting legislations, which are enforced by various authorities in the country, and this includes the judiciary and the executive branch. Any regulation issued by a senior Thai oofical, must be in accordance to the laws enacted by parliament.
Based on the 2017 Constitution, a bill or legislation can be proposed through the channels below:
Picture 1: A group of people who are eligible to propose a bill or legislation
Table 3: The three channels a bill can be proposed
Legislative
Section 131 (2) An organic law bill may be introduced only by Members of the House of Representatives. It should not consist of less than one tenth of the house members. To approve a bill in parliament, the following shall be considered,
To approve of the bill in principle.
To scrutinize the bill by section (done by the commissioner and the House of Representatives)
To scrutinize and consider the bill (conducted by the Senate)
The Prime Minister presents the bill to the King to obtain the royal signature
The Act will be published in the Government Gazette
Executive
Section 133. A bill shall be first submitted to the House of Representatives. The person who has the responsibility of introducing the bill is a Minister.
Recognize the problems and determine the potential answer, then projects the legislation
The Office of Secretariat of Cabinet (OSC), the government body tasked with drafting national laws pass the draft to Cabinet
The Cabinet consult related agencies and other stakeholders, and then approve
The Office of Secretariat of Cabinet (OSC) consider again and hand in the approved bill to the Parliament through the Whip
The Whip considers the draft for political suitability and submits the bill to the legislative plan of the House.
Eligible Voters
Section 133 (3) identifies the legality of the people allowed to vote.
Submit to the national assembly to consider or sign it through the Election Commission.
The Eligible voters explain each petition to the House of Representatives and the Senate
However, for the organic bills, the 4th channel to propose a bill or legislation can be done under Section 132 (3). The judicial system will have the power to review the law, and if it is inconsistent with the constitution, the National Assembly will have to look at it afresh. The parliament will look at it, within a period of 30 days, and come up with a law that does not violate the constitution. Thus, the constitution is Supreme, and acts as a guide to carrying out checks, when it comes to reforming laws.
Moreover, Thailand has a bicameral system of governance. Once the political party wins the majority vote, they establish a coalition government, which is unstable. The coalition government parties are likely to engage in the negotiation process of Thailand’s RMS more frequently than the government and the opposition parties in the House of Representatives (Ongkittikul and Thongphat, 2016). In the RMS, coherence among the relevant authorities does not exist. Stakeholders do not take policy development as a priority; they priorities their own interests instead. Government officers propose laws to gain their discretionary power of their enforcement as well as to improve their convenience. In particular, the Cabinet engages in the legislation processes to derestrict existing laws to facilitate policy implementation by the government. Members of the House of Representatives shared the same incentive as, the cabinet, need to be re-elected, thus they focus on the rights and participation of people in the legislative process. The Senate ensures the succinct draft and government’s power stability. Simply put, the RMS in Thailand has three main challenges as revealed by the Law Reform Commission of the OCS. First, the bills/laws proposed in the current government and nine-tenths of Thai legislation was done by the closed system. Government officers manually consider huge number of documents to give permits and licenses with no standardized procedure. This hinders the Thai economy to thrive in the globally market-oriented economy and unintentionally support corruption channels inside the government. Second, Subordinate legislation are not likely to go hand in hand with the evolving world because they are not made to facilitate public service, but to simplify the performance of the portfolio minister, who has authority to legislate subordinate law. Third, the outcomes of legislation are not mindfully aware by the public, politicians, and government officers.
CHAPTER 5: REGULATORY REFORMS AND SYSTEMS IN MALAYSIA AND THAILAND
Malaysia
Regulatory reform was part of the plans put in place when the government of Malaysia decided to sell shares of public entities to private firms. The period before privatization, sectoral-based regulation was centered on the government’s self-regulation. To ensure keen control of private bodies, new mechanisms and institutions were formed, and competition became the primary concern. As a result of the lack of policy on competition, the sectoral perspective became the only option. For this, ‘Vision 2020’ was brought in in 1991, and its focus was on ‘deregulation.’ The vision was meant to aid in differentiating between regulations and laws productive and those not productive to the objectives of the society. As re-nationalization and industrial consolidation took place after the 1997-98 financial crisis, reform regulation process got more challenging. Sixth Malaysian Plan (206-2010) ensured implementation of the Privatization program, and this was a result of adopting new procedures that govern privatization. The program kept in line with streamlined processes brought by decentralizing implementation and maintaining the planning centralized and having a standard measure of terms and conditions of privatization. With the government keen on reducing its burden of administration and finance, the Seventh Malaysian Plan was put into action. It was meant to have less presence of the government in the economic sectors and allow demand and supply forces to govern economic movements thereby improving production and efficiency which was in accordance Ito the national policy.
In the Ninth Plan (206-2010), there was recognition of the need to have regulatory reform, partly aimed to reduce costs of doing business and relevant steps were taken to bolster delivery on the public sector through review and simplification of rules and regulations among other procedures. This, of course, came with penalties for noncompliance or wrongful disclosure being enforced strictly. In the period before implementation of GRP, a standard quality system of control was absent, and responsibility of ensuring transparency and quality was not on any specific government institution. Members of the National Parliament, who are elected, usually approve laws to develop regulations that authorized the government to give rules for implementation purposes. Although most regulations have been designed as a reaction to growing concerns, some regulations in Malaysia are still from the pre-independence era (1957 and earlier). As needs keep on changing, the process of making the regulations up-to-date usually lags. Fear of having inappropriate control becoming a barrier to investment and increased productivity, economic planners have more and more realized the need for a regular update of regulations. There have been blocks to effective regulation like changes in technology, trade-growth and conflict or duplication in the administrative and legal systems. Just like Thailand, Malaysia’s reforms in law and deregulation have always been driven by the need to maintain global competitiveness on both fronts of trade and investment (Raj, 2008). Despite evolvement, the regulatory process is still determined through administrative decisions and practice. The process is yet to be put into a standard law of regularization. Choice–making is left to the discretion of individual ministries. With the introduction of the intergovernmental system, the cabinet is usually generally sought for approval, but the final decision is dependent on the ministers. The particular agency decides on consultation of public and stakeholder, but he/she is not mandated by a specific law (Raj, 2008).
Thailand
The Law Reform Commission, researched and noted that 90% of laws in Thailand were not compatible with the international trade liberalization policies that was the trend. Even so, the subordinate laws of the country were outdated, and not compliance with the ASEAN rules and regulations.
So, the proposals to find a solution to the problem are:
Developing the license facilitation act of the 2015
Enacting a royal revision of law decree
Drafting regulations on the RIA.
The LRC identified the following as problems to the regulatory management system of Thailand
The legal mechanism of most of Thai laws and regulations is based on the close government control system which is not in line with the global market-oriented economy. All economic activities requires permissions and licensing. However, there are no standard procedures and rules for government authorities to consider documents, which likely lead to bribery which become the cost for businesses.
Subordinate legislation do not facilitate public service and not responsive to the current world situation, but was made to ease the performance of the power and duties of the minister.
RIA, used as the main tool management, is not working properly. There are neither agencies to scrutinize the OECD guideline nor RIA report.
Therefore, the LRC recommended three reforms to solve the identified problems
Enact the licensing Facilitation Act (2015) to ease doing business and enhance transparency in the Thai administrative procedures. It narrows discretionary power of government officials and make the licensing process, workflow, and duration of the process known to the public.
Enact the Royal Decree on Revision of Law (2015) or the Thai Sunset Law. Laws and regulations are to be reviewed at least every 5 years by ministers with close consultation with stakeholders. The results of the reviewed are required to disclose to the public, and also translated into English for foreigners.
The RIA needs to undergo the Cabinet for approval process.
In order to evaluate the three reform initiatives, there is a need of using an international benchmark standard. The Global Competitive Index is the most recommendable. Even so, the World Competitive Ranking System, can help to provide indicators, on the performance of the initiatives. The primary target of the LRC, is to ensure there is a movement of ranking, by two levels, upowards (Nilpraprunt, 2015). So, in 2018, an initiative was made for the Thai government to engage in enhanced measures of a regulatory guillotine. In this regard, the Prime Minister formed the First Action Law Reform Committee. The intention was to reform laws in the country, and make it easier for people to do business in Thailand.
The committee recognized the need of changing investment and business laws of the country, to be aligned with that of the ASEAN countries. The FTI chariman of the country noted that the government was targeting approximately 1000 unnecessary laws for reform or repeal. This is out of the over 100,000 laws and regulations that are existing in the country.
The Regulatory Guillotine is an issue of interest for the Thai business personalities. Even so, in 2017, the government initiated a process of reducing the Thai red tape, and this is in regard to issuance of permits and licenses. This project was implemented in two phases. The focus of the 1st phase was on the reduction laws and regulations that frustrated the process (Kansanoy, 2018). The second phase involves a review of the permit requirements, and the intention is to eliminate redundant laws, that makes it difficult for people to get permits, in order to engage in business initiatives. This phase involves the collaboration between the government and the private sector. The regulatory Guillotine processes in Thailand have been a success. For example, the World Bank noted that Thailand improved the ease of doing business in the country by moving to rank 26. This is from 48 that it previously held. Other laws and Guillotine Regulatory processes that Thailand engaged in are:\
Elimination of the requirement of a company seal for business organizations to invest in the country.
Elimination the regulatory framework that requires business organizations to get approval from the labor department.
Introduction of an automated risk-based system, whose aim is to help in the selection of companies for a risk audit.
Reduction of rates charged on property transfers.
Introduction of an online filing system for government departments.
The support of these Regulatory Guillotine procedure, got the support of the Thailand Institute of Justice. This is because the institution has been in the fore front of advocating for the review of the many laws that exist in the country. For example, Thailand has approximately 650 laws, and more than 1000 regulations, and most of them are outdated. The Thailand Institute of Justice is advocating for a repeal and reformation of the laws that are outdated. The reason is because they limit the ability of people to access government services, and to do business in the country.
The ASEAN GRP Principles as per Article 77, the 2017 Constitution
The enactment of the 2017 constitution, made it easier for the Thailand Government to enact laws and engage in regulatory frameworks, aimed at identifying and amending redundant regulations and principles. To ensure that Thailand enacts laws that are relevant to solving problems the country faces, the Secretariat of the Cabinet and the Office of the Council of State came up with a checklist.
10 Elements Requirement for the Relevant Legislation of Laws and Regulations in Thailand:
Rule
Requirements
Objectives and goals
It needs to identify the goals and objectives pursued, and put in place measures aimed at achieving them.
It should not conflict with the foreign and domestic interests of Thailand.
Factors to consider
The cost and efficiency of its implementation.
Benefits to the people.
Need for the laws
Why the law
The duties of the state and policy guidelines.
The national strategy
Aligned to the National Economic and Social Development Plan.
Should be aligned to the laws and constitution of the country.
Why repeal of the existing, laws, and the lack of their modification
The need to examine why existing laws are being abolished.
Impact and value
Identification of people affected by the law.
Impact on them
Their rights and freedoms
How it can improve economic and social values
State availability
Consideration of the resources required, and the role of the state.
Responsible agencies and regulators
Is there a duplicate mission
Who are the regulators
How to work and check
Work and Check
Is it defined in good governance principles?
Secondary laws
Are they aligned to secondary laws
Do they contradict one another?
Is it burdensome to people
How does the framework or legislation affect the economic, social and political life of people?
When passing all 10 check criteria, the agencies that want to enact the law must consider the consensus of the draft law. In the following dimensions
- The draft law must be consistent and not contrary to or inconsistent with the Constitution and the Constitution Act, not contrary to the rule of law, does not increase the burden or restrict the rights or freedom of a person unnecessarily, does not affect human dignity, consistent and not contrary to or inconsistent with state policy guidelines
- The draft law must be consistent and not contrary to or inconsistent with national strategies and national reform plans.
- The draft law must be in accordance with the principles and essence of the Act on the Facilitation of Government Authorities (2015); the Royal Decree of Criteria and methods for good governance of the country (2003); the Royal Decree of Review of the appropriateness of the law (2015)
- The draft law must be consistent with the principles under Section 7 of the Constitution. State agencies must check the need to strictly enact laws as follows.
CHAPTER 6: REGULATORY IMPACT ANALYSIS (RIA)
Malaysia
The process of enacting laws in Malaysia, as seen earlier in this discussion, is not entirely favorable to the businesses despite the country’s economic climate being ranked among the best. The bills that pass to law discourage competition in the industry and hinder any innovations. As such, the government has reacted to this by introducing the NPDIR to ensure that the process becomes beneficial. Through MPC, the government is taking this step to ensure that the regulations passed by the Parliament meets the public objectives. These directives are also expected to be balanced and transparent during their implementation. The unnecessary compliance costs that are currently being incurred by business should be scrapped off. The benchmark countries that motivated the NPDIR are the likes of Canada and Australia. It is now a requirement for the use of the Regulatory Impact Assessment, because of a circular written and circulated by the Government Chief Secretary.
The Circular demands that after the assessment, the subjects must present the results of the evaluations to MPC for review of new and existing business-related regulations. It is part of the Good Regulatory Practice where both the public and the authorities engage professionally and systematically. As such, there is high accountability and responsibility, which is the primary emphasis. The agencies and ministries must comply with these procedures and fulfill all the requirements. All these should be done while taking into account accountability, openness, and transparency. Good Regulatory Practice can be very instrumental in the transformation of the law-making process which will then ensure that the regulations are modernized and relevant.
There is a need to ensure that there is a system that tracks and manages the process of making laws in Malaysia’s legislature. This system will be responsible for recommending changes to the current regulations while advising on the quality of new rules. It will also help in ensuring that the unnecessary policies are removed while the important ones receive the emphasis they deserve. The MPC came up with a Best Practice Regulation Handbook through consultations across the government. The organizational structures and type of governance underwent reviews according to the best practices know and agreed upon in the world. Those involved in the implementation, development, and management processes would receive an upgrade on their current status.
Like any other party involved with Malaysia, the government is determined to have an open and transparent law-making and implementation process. The year 2020 is drawing closer quite fast, which is the year when Malaysia is expected to have reached or at least have a significant improvement towards attaining their primary goal. Therefore, the idea of becoming a developed and high-income economy is prioritized in all aspects. Public consultation in the regulation-making process is now treasured more than ever because it is among the main areas. The governmentally of Malaysia uses the guidelines put in place in 2014 for agencies and ministries. The draft rules and the feedback from the members of the Parliament will all be published. Consulting the members of the industry is very important because the information received via this channel is firsthand. As such, the consultation process should commence as early as possible to gain access to important files. As a precaution, the regulations developed are reviewed to ascertain their effectiveness.
Policies that have a direct impact on the exportation sector will undergo trade impact assessment to ensure that they will work as expected. Regulatory Impact Assessment (RIA), by definition, is the procedures taken while examining the possible effects that may arise due to the indeed proposed regulation. This process also takes into account the alternate options which, if chosen, will fulfill the objectives of the government. This tool is vital because it ensures that the steps during law-making meet the agreed upon quality. However, in Malaysia, it is used to assess the government and all its agencies that directly impact the businesses. However, this is only considered if the effect has a substantial alteration to arrangements. Minor changes are not considered because they do not have a significant impact on the current regulations in an alarming manner. All regulations issued should pass through MPC even if they do not require the Regulatory Impact Assessment (RIA). As such, the authority issuing these policies can go on and put the law into practice after it has been approved.
The 2020 goal can only be attained if every department puts in their total effort. RIA plays its role by considering the possible economic outcomes that may result from regulatory proposals. The first step in ensuring that RIA works quite effectively is the identification of the problem. A solution to a given situation can only be found in the question itself is well-known after some analyses. The second step is to provide an outline of the government objectives which will then help in giving the final verdict. Next is to identify the available options necessary for addressing to issue found. After some options have been shortlisted, the benefits and costs incurred will undergo an assessment to come up with the most effective option. The public opinion on the same will be collected, and the information provided will be documented. After all these steps have been followed, the committee involved will then propose an option that is favorable both to the government and business owners. The chosen option will then be attached to its implementation and review processes.
Regulatory Impact Assessment, as seen is an analysis of the effects that come about due to specific rules. After a regulatory body has completed an RIA, it will attach a report that shows the results of the process. It is called the Regulatory Impact Statement (RIS). In the statement, the regulator also gives the steps that were taken during the proposal development and the cost benefits of each considered option while providing evidence of the same. The decision makers must receive the RIS before making any decisions so that they can do so basing their thoughts on available information. Currently, 12 RISs have been completed and submitted to MPC. After they make their decision has been made, MPC publishes the same in a publicly accessible website. The platform runs and maintained by MPC. The general name for all this process is regulatory procedures management. The requirements that should be met by the relevant parties include availing the RIS, consultation, and ensuring that the RIS meets MPC’s guidelines.
According to the Best Practice Regulation, every ministry should appoint someone to coordinate the regulations, have a regulatory process management system, and ensure that the new rules follow a defined process. Also, before starting to look for solutions, any regulatory body must provide proof that the problem at hand has arisen and requires an answer. A statutory authority must be able to assess the available alternatives and explain the final decision to the stakeholders.
Quality Regulatory Management System is the central and most important section of MPC. Pilot projects are created to ensure that each ministry is well aware of the procedures involved in RIA. Three ministries took part in the pilot project. The relevant people received training on accomplishing RIA. The results from these test projects are later used in case studies. After reviewing the results, MPC can make improvements on RIA for better services in the future.
All regulators are expected to refer to the GRP website to find more information. Before adopting any new policy, the regulator can post their RIS on the GRP website for comments. Since 2016, about 95 notification regulatory forms have been submitted to MPC by 15 ministries. A regulatory form is a notice generated by the ministry informing MPC of any changes they would wish to make to their existing policy.
Thailand
Government officials had not understood the RIA until 1992 as a mechanism for deregulation. After the 1997 Asian economic crisis the RIA is used to support regulations to strengthen economic and social resilience process. The LRCDC is responsible for this task. In 2003, LRCDC proposed RIA as a main tool management for the submission of regulation before presenting to the Cabinet for consideration. The Office of the Council of State (OCS) is responsible for equipping government official with Legal knowledge and know-how so that they are able to conduct the RIA and prepare the RIA statement for Cabinet consideration.
Albeit good progress to use RIA as a mandatory procedure, according to TDRI TDRI is short for Thailand Development Research Institute.
, the utilization in practice of RIA is still questionable. First, there is no dedicated agency to examine the OECD guideline thoroughly. Second, the RIA itself can be an impediment not only because the RIA is initiated after the draft bill was settled, but its reports also do not benefit the lawmaking process as each report has a few pages. Third, the RIA is not applicable throughout all levels of legislation. Only an Act bearing on the Parliament requires RIA.
The Process of Regulatory Impact Analysis (RIA) is also required in the process of legislation after the 2017 Constitution is implemented. It is consisted in Section 77 Paragraph 2. The state has the responsibility of engaging in a consultation process before the enactment of the laws, and follow up its evaluation, with the intention of finding its impact to the society.
CHAPTER 7: INSTITUTIONS THAT FACILITATE THE REGULATORY FRAMEWORK IN MALAYSIA AND THAILAND
Malaysia
Malaysia’s Performance Management and Delivery Unit were formed in 2009. It was placed under the leadership of the Prime Minister. The government set up PEMADU to enhance change in the country and to ensure successful delivery of its national transformation programs which consists of two main strands, The Government Transformation Program, and the Economic Transformation program. GRP aims at providing the quality of new regulations by translating the government’s rule-making procedures and modernizing business regulations. Regulatory reforms will be sped up to align new existing laws, their administration, and enforcement with GRP strategies as in the 11th Malaysian plan. This will be achieved by performing a regulatory review of various agencies and ministries and increasing adoption of the National Policy on Development and implementation of Regulations (NDPIR), (strategy paper 1: Unlocking the potential of productivity) Compared to other developed countries Malaysia still lags in regulatory quality and environment. This is as a result of insufficient stakeholder consultation during the formulation and implementation of new regulations or changes in the existing ones. The regulatory framework for the services sector responsible for spanning government ministries and agencies have also made it quite difficult to navigate and streamline regulations. Industry players, on the other hand, find rules and practices to be obsolete or inept.
As of 2010, a total of 896 agencies at federal and state level administered 3000 regulatory procedures impacting hugely on businesses., this according to the National Economic Advisory Council. A formal RMS was established by the government therefore to improve regulatory quality. The RMS has four elements which are regulatory tools, regulatory institutions, regulatory procedures, and regulatory policies — having most efficient regulatory systems enhance credibility and transparency of regulatory actions creating a suitable environment for business and better quality of life.
The 10th Malaysia Plan’s primary objective was to improve Malaysia’s productivity, and it included various regulatory initiatives such as; liberalizing the services sector, rationalizing subsidies to remove market distortions, modernizing business regulation, improving the interface between government and business and introducing competition legislation. Adopting the best practices in the field of regulatory management that have been implemented in the Organization for Economic Corporation and Development (OECD) countries, now taken mainly by regional and global competing economies will improve the current regulatory system. The MPC aimed at modernizing business regulations through overseeing the implementation of the recommendations set. It also provides detailed productivity statistics and benchmark levels against other countries. Another way is by submitting suggestions to the cabinet, reviewing the existing regulations, and making an analysis of the cost benefits of the new policies.
To start, the MPC team researched to figure out what Malaysia already has and what to adopt from other countries GRP. This was major to assist ministries and agencies in implementing GRP in making and administering regulations, and currently, there is an excellent progress in some areas. A review has been conducted in on rules in the oil, gas and energy sectors and the electrical and electronics industry. Licenses have been scanned comprehensively to identify those that pose problems in terms of productivity, including their administrative burden. Furthermore, a one-stop center with communication programs has been set up for business start-ups to create awareness in public and private sectors on the significance a good business environment.
Besides maintaining the quality of new regulations through the NPDIR, the MPCs initiatives include; Business Enabling Framework, Reducing Unnecessary Regulatory Burden (RURB), Improving Initiatives in Ease of Doing Business, and Comprehensive Scanning of Business Licensing. The National Development Planning Committee (NDPC) ensures improvement in the process and quality of developing new business regulation. It oversees the NPDIR and regulatory process with the support of the MPC and administers the government’s regulatory impact assessment (RIA) requirements. MPC implements the NPDIR by developing specific guidelines and programs for its implementation. It ensures availability of capacity building programs for regulators and guides regulators in RIA and the preparation of RIS. It assists the National Development Planning Committee (NDPC) in assessing RIS and promotes the transparency of RIS. It will also submit periodic reviews of progress and report to the NDPC. The National Institute of Public Administration (INTAN) provides training on RIA. The attorney general’s chambers offer legal advice to the cabinet or any minister on matters relating to the regulatory quality of the proposal, especially its legal compliance to constitutional issues detailed in the RIS.
The Special Task Force has strongly supported the MPCs Initiatives on Modernizing Business Regulation to facilitate business (PEMUDAH). A public-private innovative advocacy body that offers guidance and leadership in moving forward the reforms. PEMUDAH will enforce all working groups, focus groups and task forces established since its implementation through the MPC which coordinates all focus group activities. The goal is to monitor the efficiency of improvements made and enable transparency and accountability of public and private sectors. Existing regulations are inspected from a ministry (vertical) perspective and a business (horizontal) aspect to reduce compliance costs with businesses. It is complemented by a thematic perspective. The PEMUDAH Focus Group in 2012 reviewed business licenses using guillotine approach, covering 22 federal ministries. Currently, this initiative is extending to the states. Efficiency in attaining construction permits have been improved where as many as 20 agencies in the public and private sector collaboration are engaged in consultation with key players such as engineers, principal submitting persons, and architects. The procedures reduced from 37 to 10 and the time decreased from 140 days to 100 days. Also, there was a development of a business enabling the framework to support expediting 100 percent foreign equity participation. Of 18 service sub-sectors announced for liberalization, nine have already been liberalized.
CHAPTER 8: EVALUATION OF THE REGULATORY FRAMEWORK IN MALAYSIA AND THAILAND
Malaysia
OECD noted several challenges required reforms according to its 2015 report. The first recommendation given by OECD is the institutionalization of GRP by making the necessary additions to the current procedures. According to OECD, there should be implementation indicators in the government and performance indicators (KPIs) for top management. This records should then be reported periodically during meetings with the Secretary General. Another expectation by OECD is that the Attorney General, EPU, and Malaysia Competition should be engaged in NPDIR implementation. Phasing of this implementation should be able to encourage compliance for regulatory proposals while ensuring that regulatory quality is improved. As such, an effective communication strategy among the parties involved will be built. Also, the government should put in place training programs aimed at strengthening regulatory literacy. The final recommendation by OECD was the linkage between GRP and national plans. According to OECD, the government should embed GRP into the 11th Plan of Malaysia. It should also prioritize GRP on a regional basis after the 2015 agenda.
The government has, therefore, to go with these recommendations and the process of reforms has already begun. Ten ministries have already started the first step which entails gathering enough information before analysis. The licenses, regulations, and acts will then be reviewed to scrap off the irrelevant inclusions. The main aim of this is to enable constant monitoring which will result in accurate ministry profiling. The MPC will then thoroughly monitor the ministries’ progress in incorporating NPDIR to their system by reviewing an annual regulatory plan. Each annual regulatory report citing the overall activities of the government will give an idea of how far the government is in implementing NPDIR. NPDIR is expected to further spread to the remaining agencies and ministries with the motivation of MPC. This move will ensure that there is an improved regulatory environment favorable enough for those which it is intended. All agencies should develop an annual regulatory plan which is subject to reviews after every half a decade.
CHAPTER 9: SUMMARY
The need to engage in the Regulatory Guillotine process in Malaysia was contained in the Ninth Plan (206-2010). The intention of the need to engage in the process, emerged out of the desire to reduce the costs of doing business, and initiate relevant methods that can help to improve service delivery. The government of Malaysia believed that this was achievable through the simplication of rules and procedures. Moreover, while seeking to implement the Regulatory Guillotine procedures in the country, the government of Malaysia sought public participation. The intention was to help in the identification of laws and policies that were obsolete, and needed reforms.
Nonetheless, the primary weakness of the Malaysian Guillotine regulatory procedures is the notion of reactiveness. This means that the country restructures and reforms laws, as an element of public demand. Because of this factor, most laws in Malaysia date back to the pre-independent periods. Even so, the government is still behind, when it comes to the reforms of laws and regulations. So, the Regulatory Guillotine procedures of Malaysia are not aligned to that of the ASEAN countries. Besides, the country faces challenges in the implementation of the Regulatory Guillotine procedures because of trade growth, rise of technology and duplicate administrative and legal systems.
Even so, Malaysia is working hard, to ensure that its laws and policies are aligned with that of the ASEAN region, and the vision 2025, established by the regional integration scheme. This is an essential reason why the country initiated a formal RMS system, aimed at ensuring that the Guillotine Reform initiatives are centrally driven, and has the ability to determine if the government is meeting its objectives. The target under consideration is the reformation of laws, so that they can be aligned with the goals of the country, and that of the ASEAN regional integration schemes.
Nonetheless, Malaysia’s rigorous RMS approach is formal and centrally driven and focuses on measuring progress against targets. Three institutions have been implemented for the regulatory approach. PEMUDAH being the first, a high level public-private innovative advocacy body established in 2007 to facilitate business. PEMUDAH focused on the ease of the World Bank measures, that aim at judging if it is easy to do business in a country. The National Development Planning Committee was the second institution which contains the highest civil servants as members. They examined the efficiency of RISs on new or modified regulations that significantly impact on trade, investment, and business. The third institution is the MPC, which is responsible for all technical, secretarial support to the PEMUDAH, and overseeing the implementation of the national plan. The MPC also provides advice on the preparation of RIA to regulatory agencies. The three institutions have unanimously contributed to improving regulatory quality.
Moreover, the 2014 performance indicators of Thailand, does not depict any element of market improved, when compared to other the previous years. This is in comparison to that of Malaysia. This can be implied that Thai rules and regulations do not accommodate businesses or there is no effective regulatory system reform in Thailand to remove burdens and improve national competitiveness before the enactment of two landmark laws: the Licensing Facilitation Act (2015) and the Royal Decree on Revision of Law (20115).
Still, when it comes to Thailand, the country adopted a new constitution in 2017, and this gave the leadership of the nation powers to be able to check the kind of laws developed and implemented by the legislature. This process helps to ensure that laws, which are aligned to the interests of the people and the country are enacted. For instance, one of the checks that the Thailand government looks at, when it comes to the implementation of the Regulatory Guillotine measures, is to understand if the reforms or laws under consideration are a threat to the national and foreign interests of the country. A good example of a foreign interest of Thailand is to meet the vision 2025, established by the ASEAN integration scheme.
Furthermore, the regulatory checklists, enables Thailand to ensure that the laws enacted by the country are good enough, and serve the interests of the people. This includes the enactment of laws and regulations, aimed at improving the manner which business is conducted in the country, and making it easier for people to get trade licenses and permits. This is aligned to the 2025 goals established by the ASEAN.