Heavy-handed and costly regulation
This year's budget speech repeated a commitment to cut down on the cost of public bureaucracy. Once again a specific figure was given. There is no report so far to suggest to what extent the first target has been met. If it has been satisfied to any...
This year's budget speech repeated a commitment to cut down on the cost of public bureaucracy. Once again a specific figure was given. There is no report so far to suggest to what extent the first target has been met. If it has been satisfied to any extent at all, that is, for the budget speech does not say anything in that regard. If the reduction starts now it will be better late than never.
The important thing is that it won't be one more expression of pious hopes. A real process of bureaucratic cost cutting has to start without delay. That would be one main step forward towards reducing government-induced costs. There are other steps that have to be taken, in the context of apparent contradictions.
While proclaiming to wish to reduce the size of government the administration has embarked on the creation of countless agencies and various regulators over the years. The need for agencies to take over, and in some cases duplicate, the functions of government departments is at times dubious. The need for regulators should not fall in the same doubtful category. The more the public sector is liberalised, the greater the necessity to have proper regulation.
In a broader context there is a need for regulation of standards as well as of activities. Question is, where does that need stop and is it being met sensibly without imposing unnecessary compliance costs. A cursory look at the tourism sector, for instance, does not give a clear cut positive answer.
Tourism is a pillar service industry. Its success depends on competitiveness and quality. Competitiveness is regulated, in the final analysis, by the degree of competition. That degree is high. There is fierce competition in the tourist market, both within Malta as well as from other destinations in our region and beyond. Tourism enterprises which charge prices higher than the market are very quickly brought to their senses.
That is done by the simple fact that operating unjustifiably above the market drives business away. Tour operators, while not the mainstay they once were in our tourism segment of the economy, try to dictate their own terms. Even now, relatively diminished in importance though they are, they put a lot of store on the prices quoted to them, and the value for money they can offer to potential customers on the basis of those prices.
Independent tourists who book over the internet, a rapidly expanding sector, never book before they have satisfied themselves that they are getting the best deal going. They can do that through the immediate transparency offered by the internet. Hoteliers who pitch for such custom can themselves identify their competitive position, both internally and externally, and guide themselves accordingly.
What the authorities try to regulate, therefore, is quality. Experience is showing that the compliance costs of trying to keep up with the requirements of the regulators in this regard may be quite higher than is necessary. It is not that regulation should be done away with: it is the manner of its enforcement that counts.
Hoteliers are regulated for environmental issues, under the multitude of requirements set up by the Malta Tourism Authority, and also for relevant matters pertaining to the Occupational Health and Safety Authority.
It is not immediately clear why there have to be several different authorities, which in any case overlap each other, rather than trusting key regulation to one body, in this case the MTA. The Tourism Authority is very strict in its requirements and in the inspections it carries to see that they are met.
It is also quite sensible. Its requirements are stated plainly; its inspectors point a finger accurately; and where anything is amiss, the hotelier's attention is drawn with specifics, and not with generalised references to clause this and the other of the relevant Act of Parliament.
Issues pertaining to the environment also tend to be specific. Recent experience has shown that there is room for much improvement, not least in coordination with Mepa at the stage of applications for permits for new development. But in terms of existing enterprises details also tend to be specific.
The same cannot be said for the Health and Safety Authority. This is a regulator of maximum importance. Its rational brief is to ensure that enterprises are up to date in the very key sectors of health and safety. The way it sometimes goes about ensuring that, however, is not always a beacon of clarity.
There tend to be wide gaps between inspections and follow up, leaving it to the inspected enterprise to keep it advised of whatever action it has taken. On occasion hoteliers are unclear regarding what action is required of them. It does not help them at all that the authority does not seem to operate on a complaint-specific basis, like the MTA.
There have been cases where the more important objective seemed to be not to help a hoteliers carry out what is specifically required of them, but to take them to court and to demand a pound of flesh from them.
That is not what regulation should be all about. Regulation should be a mechanism structured to ensure that recourse to legal action is unnecessary, even irrelevant. It should aim to firmly guide operators to understand the regulations and related stipulations and to nudge them purposefully towards implementation.
Regulators may have to initiate legal action where their efforts to bring about enforcement with purposeful persuasion fail. Nevertheless, that should be a last resort. An authority which feels it has to initiate too many legal cases would be well advised to ask itself whether that is a sign of failure on its part.
Nobody should seriously doubt the usefulness of proper regulation to ensure that standards are maintained. Nor should anybody, donning the cap of authority, think that heavy-handedness is the way to go about securing results. The Parliamentary Secretary for Tourism, in addition to keeping an eye on numbers, marketing, promotion and standards, would be well advised to find time to ensure that regulation does not turn into costly bureaucracy.
The important thing is that it won't be one more expression of pious hopes. A real process of bureaucratic cost cutting has to start without delay. That would be one main step forward towards reducing government-induced costs. There are other steps that have to be taken, in the context of apparent contradictions.
While proclaiming to wish to reduce the size of government the administration has embarked on the creation of countless agencies and various regulators over the years. The need for agencies to take over, and in some cases duplicate, the functions of government departments is at times dubious. The need for regulators should not fall in the same doubtful category. The more the public sector is liberalised, the greater the necessity to have proper regulation.
In a broader context there is a need for regulation of standards as well as of activities. Question is, where does that need stop and is it being met sensibly without imposing unnecessary compliance costs. A cursory look at the tourism sector, for instance, does not give a clear cut positive answer.
Tourism is a pillar service industry. Its success depends on competitiveness and quality. Competitiveness is regulated, in the final analysis, by the degree of competition. That degree is high. There is fierce competition in the tourist market, both within Malta as well as from other destinations in our region and beyond. Tourism enterprises which charge prices higher than the market are very quickly brought to their senses.
That is done by the simple fact that operating unjustifiably above the market drives business away. Tour operators, while not the mainstay they once were in our tourism segment of the economy, try to dictate their own terms. Even now, relatively diminished in importance though they are, they put a lot of store on the prices quoted to them, and the value for money they can offer to potential customers on the basis of those prices.
Independent tourists who book over the internet, a rapidly expanding sector, never book before they have satisfied themselves that they are getting the best deal going. They can do that through the immediate transparency offered by the internet. Hoteliers who pitch for such custom can themselves identify their competitive position, both internally and externally, and guide themselves accordingly.
What the authorities try to regulate, therefore, is quality. Experience is showing that the compliance costs of trying to keep up with the requirements of the regulators in this regard may be quite higher than is necessary. It is not that regulation should be done away with: it is the manner of its enforcement that counts.
Hoteliers are regulated for environmental issues, under the multitude of requirements set up by the Malta Tourism Authority, and also for relevant matters pertaining to the Occupational Health and Safety Authority.
It is not immediately clear why there have to be several different authorities, which in any case overlap each other, rather than trusting key regulation to one body, in this case the MTA. The Tourism Authority is very strict in its requirements and in the inspections it carries to see that they are met.
It is also quite sensible. Its requirements are stated plainly; its inspectors point a finger accurately; and where anything is amiss, the hotelier's attention is drawn with specifics, and not with generalised references to clause this and the other of the relevant Act of Parliament.
Issues pertaining to the environment also tend to be specific. Recent experience has shown that there is room for much improvement, not least in coordination with Mepa at the stage of applications for permits for new development. But in terms of existing enterprises details also tend to be specific.
The same cannot be said for the Health and Safety Authority. This is a regulator of maximum importance. Its rational brief is to ensure that enterprises are up to date in the very key sectors of health and safety. The way it sometimes goes about ensuring that, however, is not always a beacon of clarity.
There tend to be wide gaps between inspections and follow up, leaving it to the inspected enterprise to keep it advised of whatever action it has taken. On occasion hoteliers are unclear regarding what action is required of them. It does not help them at all that the authority does not seem to operate on a complaint-specific basis, like the MTA.
There have been cases where the more important objective seemed to be not to help a hoteliers carry out what is specifically required of them, but to take them to court and to demand a pound of flesh from them.
That is not what regulation should be all about. Regulation should be a mechanism structured to ensure that recourse to legal action is unnecessary, even irrelevant. It should aim to firmly guide operators to understand the regulations and related stipulations and to nudge them purposefully towards implementation.
Regulators may have to initiate legal action where their efforts to bring about enforcement with purposeful persuasion fail. Nevertheless, that should be a last resort. An authority which feels it has to initiate too many legal cases would be well advised to ask itself whether that is a sign of failure on its part.
Nobody should seriously doubt the usefulness of proper regulation to ensure that standards are maintained. Nor should anybody, donning the cap of authority, think that heavy-handedness is the way to go about securing results. The Parliamentary Secretary for Tourism, in addition to keeping an eye on numbers, marketing, promotion and standards, would be well advised to find time to ensure that regulation does not turn into costly bureaucracy.