This profile of regulatory management approaches in Finland is one of a series of short papers on regulatory management practices in selected OECD countries, prepared for the Canadian External Advisory Committee on Smart Regulation. In addition to the individual country profiles, the series is completed by a summary document, "International Trends and Innovations in Regulatory Management", based on a review of regulatory management practices in Australia, Finland, the United States, the United Kingdom and the European Union.

Prepared by The Regulatory Consulting Group Inc
for the External Advisory Committee on Smart Regulation
Ottawa, Canada
June, 2003

REGULATORY MANAGEMENT ASSESSMENT FINLAND

A. INTRODUCTION

Finland is a relatively small, prosperous northern country, with a population of 5.2 million and a GNP per capita of around 26,800 euros. The national languages are Finnish and Swedish. Finland's place as a competitive open economy and civil society place it high in world esteem. Its business environment has been ranked best in the world (World Economic Forum 2001); it has been determined to be the most competitive nation in the world (World Economic Forum 2001); and the least corrupt nation in the world (Transparency International 2001). Its rapid economic growth and quality of life make it worthy of closer examination in terms of regulatory management and policy.

B. STRUCTURE OF GOVERNMENT AND RULE MAKING

1. Structure of Government

Finland has recently undergone some major changes in government structure and constitutional arrangements. The revised Constitution (Republic of Finland since 1917…) entered into force on March 1, 2000. Under the new structure, executive powers reside with the President of the Republic, who is elected for a term of six years. The President takes most decisions on proposals submitted on behalf of the government led by the Prime Minister and Cabinet, who govern on the basis of maintaining the confidence of Parliament. After parliamentary elections, the parliamentary groups negotiate and agree on a policy program and the formation of a new coalition government.

The Prime Minister is elected by Parliament and legitimized by an appointment by the President. The President appoints Cabinet Ministers on the advice of the Prime Minister. The Prime Minister is responsible for leading the routine work of government at the departmental level. Major decisions such as law and budgeting bills are determined by Parliament in "governmental sessions."

Ministers are responsible for the drafting of all bills concerning their administrative branch; these are approved by Parliament. All approved bills are then submitted to the Office of the President for ratification. If the bill is not ratified within three months, it is returned to Parliament. If Parliament does not change its opinion, the bill enters into force without presidential ratification. Constitutional amendments are left in abeyance, by a majority of the votes cast, until the first parliamentary session following parliamentary elections and shall then be adopted without material alterations in one reading in a plenary session by a decision supported by at least two-thirds of the votes cast. The proposal may also be declared urgent by support of at least five-sixths of the votes cast. In that case, the proposal is not left in abeyance and can be adopted by a decision supported by at least two-thirds of the votes cast.

All foreign policy is directed by the President in cooperation with the Prime Minister and Cabinet. The President and the Ministers responsible for foreign relations discuss the most important matters in the Governmental Committee for Foreign and Security Policy. The acceptance of Parliament is required for treaties and other international obligations that contain provisions of a legislative nature; are otherwise significant; or that otherwise, according to the Constitution, require the Parliament's approval. With respect to its relations with the European Union, the Government leads preparations for all Finnish positions on EU matters, but Parliament can issue directions to Ministers participating in EU meetings and discussions. The Parliament considers proposals for acts, agreements and other measures to be decided in the EU and that otherwise, according to the Constitution, would fall within the Parliament's competence. For the determination of the Parliament's position, the Government communicates such proposals to the Parliament without delay after receiving notice of the proposal. The Government informs the Parliament on the consideration of the proposal in the EU and is politically tied by the Parliament's position according to the principles of parliamentary government.

Previously, the Prime Minister's Office (PMO) has played a minor role in regulatory reform. However, this is likely to change given the implementation of the new Constitution, which assigns responsibilities for central coordination with this Office. The PMO is responsible for implementing the Government Program and related Project Portfolio. From the regulatory reform perspective, the ad hoc High Level Working Group on Legislative Policy and the Council of State Network on Promoting Regulatory Reform have served important functions in the area of regulatory advocacy. The PMO set up a High-level Working Group on the Management and Steering of Law Drafting in June 2003. The Ministry of Justice, in turn, set up, based on the work of the previous Council of State Network on Promoting Regulatory Reform, a permanent Council of State Working Group on Regulatory Reform. To the latter belong, besides the high-level representatives of all the ministries, the Legislative Director of the Parliament. The Ministry of Finance is responsible for reviewing the budgetary impact of draft laws and assessing their potential economic impacts. Such decentralization of responsibilities has created some challenges for coordinating skills.

The Chancellor of Justice of the Council of State, appointed by the President, has a constitutionally guaranteed position as an independent overseer of legality. It is his duty to monitor the legality of the operations of the Government and various public agencies. He also oversees the legal profession. In addition, there is a Parliamentary Ombudsman and specialized sectoral ombudsmen (dealing with consumers, minorities, data protection, bankruptcy and equality issues).

2. Rule Making

In Finland, primary legislation plays a stronger role in setting rules for economic and social regulation than in most other industrialized countries. The Bureau of Legislative Inspection, resident within the Law Drafting Department of the Ministry of Justice, is responsible for checking proposed laws. . It reviews proposals for new legislation, including their technical legal quality and consistency with the existing legal framework, and checks compliance with the "Instruction on the Drafting of Government Proposals" (HELO). Presently, over 75 percent of legislation is checked for compliance by the Bureau. Since 2000, the Ministry of Justice has been responsible for monitoring the compliance of Ministries with the Government's Regulatory Impact Assessment (RIA) requirements.

Given the nature of the Finnish governmental regime, policy-making and regulatory practice are relatively informal, consensual and decentralized. As such, there is no central body to direct overall policy on regulatory quality and monitor the use of regulatory instruments as a key government intervention in the economy. However, the High-Level Working Group on the Management and Steering of Law Drafting set up by the PMO will have a co-ordinating function dealing with the overall regulatory quality.

3. Municipal Regulatory Responsibilities

Finland has devolved responsibility for implementing regulations to the local level. Regulatory direction is provided, however, from the centre. Municipalities can only issue local ordinances and norms that are consistent with laws passed and approved by Parliament. It should be noted, however, that municipalities can issue local norms on matters prescribed in parliamentary acts, as well as on matters concerning building and land use, waste management, health protection and order in schools and harbours. Municipalities decide the level of municipal income tax and, within the limits of specific acts passed by Parliament, the level of real estate tax and charges for municipal services.)

Because municipalities have extensive responsibilities to provide services in areas such as primary education, social services, primary health care, housing, town planning and transport, their representatives participate actively in the legislative process. In addition, there is a tendency towards more decentralisation, where many of the licenses and permits procedures can be carried out at regional and local levels. However, responsibilities have in many cases been transferred to municipalities without a corresponding budgetary allocation. Though municipalities decide on their municipal tax rate and on the charges to be made for municipal services, they have faced difficulties in financing these unfunded mandates. Public opposition to higher taxes and the need to remain fiscally competitive vis-à-vis other municipalities have driven municipalities to achieve their policy goals and mandate through regulatory approaches (e.g., delivering concessions, privatising service providers, setting up public-private partnerships) rather than through taxing and spending. Ex ante oversight by the national government to ensure that the new approaches are effective, transparent and accountable is weak. Specific quality control on public services and new market-based measures (e.g., competitive tendering of services) continues to be decentralised and based on self-assessment. Legally, the relevant ministry (e.g., the education ministry) establishes the national standards and monitors results. But, in practice, it is the courts that provide the fundamental control, though it is necessarily ex post in nature.

The Finnish government is now taking steps to develop assessment systems for municipal services in order to promote greater efficiency of public service provision. The Association of Finnish Local and Regional Authorities plays a major coordinating role between municipalities. Despite efforts at improving cooperation, the OECD noted in its 2003 survey that if the government were to encourage efforts to merge small municipalities and compose co-operative regulatory arrangements, efficiency would be improved.

4. Nordic Values

Regulatory approaches and general governance are guided to a large extent by Nordic values of equity and solidarity. This is reflected in the governing structure where the groups represented in the Parliament negotiate on the political programme and composition of the Government. The high priority placed on equity ensures that regions and particular groups are not disadvantaged. Universal access to social services is expected and high emphasis is placed on environmental protection. Indeed, the World Economic Forum has rated Finland first in environmental sustainability.

The governance model emphasizes a strong central government role in the economy and society. The state is regarded as the principal defender of social values, explaining the high value placed on an extensive social welfare system. In keeping with these values, there is high public ownership of assets, but the private sector is expected to participate in ensuring strong adherence to social objectives. At the level of government, individual ministries are highly autonomous, given the extensive role of Parliament in governmental decisions. As noted, public services are provided mainly through municipalities. Also in keeping with its values, Finland places high value on consensual decision-making among government, employers and unions.

5. Coordination with the European Union

Finland joined the European Union on January 1, 1995. Much of Finnish regulatory legislation originates with the European Union. As such, Finland has been building institutions to manage the relationship that is demanding increasing coordination of nation state regulatory policies.

Finland has strong and well-organized decision-making process for EU policies, led from the top. The Cabinet Committee on European Affairs, which is chaired by the Prime Minister, sets priorities for dealings with the EU. The EU Secretariat, located in the Prime Minister's office, coordinates EU affairs, supports the Cabinet Committee and works on EU policy development. A parliamentary committee has also been created. A network of more specialized committees, which may include interest groups outside government, sees to details and ensures effective representation in Brussels. A coordination process links ministries.

At the bureaucratic level, most ministries have units that work routinely with the EU. For example, the Ministry of Trade and Industry (MTI) plays a central role in the preparation of EU-related matters. The Ministry is the central coordinator of the EU's European Business Test Panel (EPBT), which allows the Commission to contact, and obtain through the Internet, the views of up to 3,000 enterprises whenever major European legislative proposals or policy initiatives are proposed. This initiative is expected to improve consultation with business.

C. Regulatory Reform in Finland

1. Background

Prior to the creation of the European Union, Finland's economic performance was dependent to a large extent on state monopolies, widespread cartelization, strict price regulation, and close economic ties to its major trading partner, the Soviet Union. The economy's mainstay was the exploitation of natural resources including iron, timber and agricultural products, and associated manufactured products such as farm equipment, ships, paper, clothing and foodstuffs. The collapse of the Soviet Union, the banking crisis of the early 1990s, and world recession prompted economic reform aimed at trade liberalization and strengthening competition through the enacting of a strong national competition policy that discourages market barriers to entry. Its efforts have been paying dividends with 5 percent economic growth between 1995 and 2000 (double the rate of most EU and OECD nations) and a strong reputation for competitiveness and attractiveness to foreign investment.

Regulatory reform has been a priority since 1975, culminating in key reform initiatives. Since the early 1980s, Finland has used regulatory reform to support policies aimed at opening up the economy. The Norms Project (1984-1993) set the objectives for market liberalization and the Licence Reform Project (1989-1993) proposed a reduction in licensing controls.

National Competition Policy Reform, which was implemented in the mid-1990s, involved the formulation of principles of competitive neutrality and the establishment of special complaint mechanisms to ensure that the principles were applied effectively. The competitive neutrality principles required that significant government business activities should not enjoy net competitive advantages over their private sector competitors simply by virtue of their public sector ownership. These requirements did not apply to non-profit, non-business activities of government. Competition policy in general played an important role, with the Finnish Competition Authority a key driver of reform. In trade liberalization, Finland often went beyond EU requirements.

The revised State Enterprises Act passed in 2002 sets out a framework for state enterprises. Parliament sets the budgets and operating targets and the Cabinet supplements these with more specific financial and performance targets in an iterative process with the relevant ministry. Generally speaking, the formal governance structure "cascades" from Parliament, Cabinet, the Ministry of Finance and other ministries to the board and management. The framework promotes a strong level of political steering and transparency, although there are certain inefficiencies and ambiguities. There is, however, not yet a clear policy to promote significant privatization or framework to guide privatization decisions.

Key bureaucratic reforms were carried out in the 1980s, especially in creating a service orientation, and acting as a facilitator of public services. Such reforms were in keeping with new public management agendas being considered and implemented in Great Britain and the United States. Increased delegation of state social services required new means of control by the centre, again also consistent with many western nations, including Canada.

Performance management systems were instituted based on setting objectives, improving monitoring, and instituting results-based management. In addition, reforms were made to the budgetary process that provided greater budgetary freedom for individual departments. Some concern has been raised regarding the extent to which central control and policy coherence has been undermined by these changes. In an effort to remedy any weaknesses in policy coherence, horizontal policy programs are being adopted with a coordinating minister in charge and an enhanced role for the Prime Minister's Office (PMO).

Nonetheless, potential lack of a coherent approach to policy coordination remains the government's major challenge, especially with respect to economic and regulatory reform. New priorities in the areas of biotechnology, food, health, trade and agriculture that are increasingly becoming globalized demand government-wide solutions including the increasing participation of municipalities. Greater emphasis on developing or expanding the use of modern tools, such as regulatory impact statements, was identified by the OECD in its country review as demanding greater attention in assisting decision-makers.

2. Reducing Administrative Burden

A number of initiatives have been instituted to reduce the administrative burden placed on government, business and social partners to comply with regulations. For example, the Entrepreneurship Project was instituted in 2000 to encourage new and existing entrepreneurs to set up businesses by providing incentives mainly in the form of reduced governmental administrative requirements. E-government has been a priority of government to promote the use of electronic transactions and service delivery. Such an initiative builds on the 1997 TYVI data transfer model to promote electronic data interchange between companies and government such as VAT (i.e., GST for Canada) notifications, tax returns and customs information. The TYVI is used by over 50,000 companies.

Special attention is being given to SME)s. The Ministry of Finance led the development of a web portal, Business Finland, aimed at assisting companies just starting up, new exporters and those seeking R&D support. One-stop shops or Business Service Points have been instituted on a regional basis to assist with licensing and permit requirements and other services in the areas of business financing and training.

3. The Role of Sectoral Regulators

Like many OECD countries, deregulation was used in Finland in the 1980s to liberalize key economic sectors, including telecommunications, transportation, electricity and broadcasting, by removing licensing requirements and controls on the number of players that could enter those markets. This introduction of private sector competition and partial privatization has spawned the creation of a number of sectoral regulatory agencies, most of which are subordinate to individual ministries. Most of these agencies are not fully independent, but report to the relevant ministry for direction.

The Finnish Communications Regulatory Authority (FICORA), established in 2001 as a ministerial agency within the Ministry of Transportation and Communications, decides on matters arising from the electronic communications, information society services, and postal services sectors. The Energy Market Authority, established in 2000 to replace the Electricity Market Authority (1995), is a ministerial agency within the Ministry of Trade and Industry. The Financial Supervision Authority, established in 1993, is an independent body regulating the brokerage and banking activities, stock and derivatives exchanges and mutual fund management companies. There is also an Insurance Supervision Authority, a ministerial agency within the Ministry of Social Affairs and Health; its decisions are more independent than those of the other ministerial agencies. Decisions of all these agencies can be appealed to the Supreme Administrative Court.

4. The Finnish Competition Authority

The Finnish Competition Authority (FCA) plays a special role in supporting reform and market openness. Its principle purpose is to protect sound and effective economic competition and improve economic efficiency by intervening in accordance with the Act on Competition Restrictions and the Competition Act. The FCA was established in 1988 as an independent competition law enforcer. It has jurisdiction over all sectors except the labour market and certain primary production agricultural products industries. It investigates major restrictive practices and acquisitions within its jurisdiction and deals with exemption and negative clearance applications. When necessary, the FCA makes proposals to the Market Court with respect to the prohibition of mergers and restraints on competition and the imposition of fines for infringement of competition. The FCA will also make representations to the government regarding adjustment of market rules, regulations and administrative orders that prevent efficient market competition. It may assist in the preparation of draft bills and provides guidance to business and other interests regarding effective competition.

The actual content of Finnish competition policy tends to be similar in form to that of the EU, emphasizing efficient markets and consumer interest. Its statement of purpose calls for protecting "sound and effective economic competition from harmful restrictive practices." It attempts to reduce unjustified barriers and restrictions. The overall objective is to ensure free access and to eliminate restrictions that can distort or harm competitive conditions. In Finland, three types of horizontal activity are expressly prohibited: collusion in tendering, price fixing, and agreements to limit output or divide markets. Business associations agreed to eliminate price agreements in the 1980s; as a consequence, most have disappeared. The issue for Finland is that sanctions may not be extensive enough to deter its re-emergence. Despite the ban on price and market division agreements, few enforcement actions and mechanisms are available to deter this behaviour. The courts have appeared lenient on this issue especially with respect to imposing fines that are proportionate to the extent of benefits derived from collusion.

Decisions of the FCA can be appealed to the Market Court, which has a dual role in handling matters related to competition. The Court enforces the government's policy on enhanced competition within the European Union by pronouncing on government decisions regarding competition restrictions, mergers and acquisitions and imposing fines. In almost all cases the decisions of the Market Court can be appealed to the Supreme Administrative Court.)

In addition to the EU, the FCA's international partners include the OECD, other Nordic countries, the Baltic countries and Russia. The FCA works closely with the Association of European Competition Authorities (ECA) and the International Competition Network (ICN), each established in 2001. The ECA is the central forum for all European competition authorities. The ICN was established by the United States to promote worldwide economic cooperation in the area of regulatory consistency. In addition, the OECD Committee on Competition Law and Policy is a major forum for discussion on competition policy and legislation. The Committee publishes reports on competition and annual reports by the Member States' competition authorities. The Nordic competition authorities gather annually to discuss topical competition-related issues. The FCA also works closely with the government of Estonia and the Russian Anti-monopoly Ministry (MAP).

5. Consumer Protection

Consumer protection is addressed under separate legislation and institutions. Such institutions as the Consumer Complaints Board, the Finnish Consumer Agency, and the Consumer Ombudsman have traditionally provided strong protection. Such differing mechanisms for competition and consumer protection means that institutions can have different views on such issues as the risk associated with high product standards and the extent to which they harm consumers by limiting competition.

D. REGULATORY MANAGEMENT AND PROCESSES

Finland has implemented important changes in its regulatory management regime and processes. This section examines the use of regulatory principles and regulatory impact statements, the exploration of alternatives to regulation or alternative forms of regulation, public consultation approaches, coordination activities, the use of international standards, harmonization and mutual recognition of standards or regulatory regimes, and improvements in market openness.

1. The National Regulatory Policy and Regulatory Impact Analysis

The national regulatory policy of Finland is outlined in the "Second Programme of the Government to Improve Law Drafting," enacted in 2000. The policy's main focus is to improve the quality of new primary legislation, which is more prevalent than secondary legislation in Finland. Guidelines for the preparation of proposals are presented in the policy paper, "Instructions on the Drafting of Government Proposals" (HELO), and the "Finnish Checklist" based on the 1995 OECD Principles of "Good Regulation."

There is a wide range of partial impact assessments required in particular circumstances in Finland. The Instructions on Drafting examines economic, organizational resources, and environmental impacts, as well as effects on different sectors of the public. In some cases, assessments may be done of human social and health impacts, effects on SME)s, and regional policy. Instructions are being developed for assessments of gender equity. Like most OECD countries, an extensive RIA is required in those instances where the minister is advised that the likely impacts of a proposal are "significant."

Despite the many approaches to impact analysis and the early adoption of economic analysis considerations, the RIA in Finland is a long way from playing an effective role in regulatory management. An appropriate balance is being sought between quality consultation (a high value) and rigorous assessment of the impact of using cost benefit or other analytical tools to influence decision-making. There is no overriding criterion to determine whether a proposal should be accepted or rejected. The OECD noted that there is an absence of quantification rules and too many instructions on the assessment of the various impacts (e.g., economic, environmental, and business impacts) at the ministry level that are not consistently applied across government. Most officials also agree that RIA has had little impact on regulatory decision-making, but there is also concern that a stronger analytical mandate could generate red tape and delay. At the moment, the different types of RIA-instructions are, on a general level, brought together in the HELO-Instructions presently under revision.

2. Consultation and Transparency: Building Consensus vs. Understanding Regulatory Impacts

Transparency of rulemaking is a significant element of Finland's regulatory approach and is consistent with its governance values of equity and solidarity. Great value is placed on public consultation to provide decision-makers with valuable feedback on potential costs and benefits of regulatory action, and indications as to how to achieve successful compliance and enforcement. The traditional object of consultation, however, has been to achieve consensus, with less emphasis being placed on information gathering for impact analysis or the design of efficient and effective regulatory systems.

Finland has a long-standing tradition of access to information in order to assist citizens to comply and make use of legal requirements. The principle of access is provided in the new Constitution and supported by statutory requirements including the 1952 Act on the Publicity of Official Documents, the Act on the Openness of Government Activities, and the requirements of easy access to public laws and other regulations. The 1999 Act on the Openness of Government Activities requires ministries to make information accessible on draft legislation and major projects.

Ministries inform the public of their intentions through the Internet and press releases. The government's main regulatory activities are announced in the Government's Program (i.e., a general description of the government's administrative agenda, which has been negotiated in Parliament) and the Project Portfolio, which is a legislative report that explains how the Program is to be carried out through specific projects under the particular responsibility of ministries. Information is readily available on ministerial home pages, and the Project Register (HARE), which details the activities of specific ministries.

Ministries are also required by law to seek widespread opinion and determine the likely impacts of regulatory action on affected groups. Traditionally, the most influential groups tend to be centralized employer and employee organizations.

A range of consultation methods is employed in Finland, including traditional committees and councils that invite groups likely to be affected by regulatory proposals to give their opinions. Results of committee deliberations are published to ensure widespread acceptance. The government is responsible for inviting particular groups, which may be serving to favour incumbent rather than emerging interests. There is also a long-standing tradition of informal consultation, which may also exclude certain stakeholders.

3. General Oversight of the Regulatory Management System

In general, Finland lacks effective mechanisms for managing and tracking reform inside the central administration. Given the relatively large independence of the individual ministries, inter-ministerial horizontal approach to regulatory reform could be further improved. Finland lacks a central oversight unit that tracks regulatory activities across ministries staffed by experts who are linked to centres of administrative and budgetary authority. In this regard, Finland has not kept pace with other OECD countries, which indicates that regulatory reform tends not to occupy a central place in the priorities of government. The previously mentioned High-Level Working Group on the Management and Steering of Law Drafting set up by the PMO and having a co-ordinating function on the overall regulatory quality will to some extent compensate for the lack of a central oversight unit. Also the present Government (elected in 2003) is committed to further improving the regulatory quality, The Government Program sets out an intent to improve inter-ministerial co-operation and strengthen the planning and management of law drafting, securing to the ministries real possibilities to high-quality law drafting and strengthening the position of the Ministry of Justice Bureau of Legislative Inspection.

E. Challenges Facing the Finnish Regulatory Management System

Despite the preparation of various assessment tools, criteria and checklists, the OECD in its country review of Finland noted a number of significant challenges with respect to the effective usage of RIAs in the preparation of Finnish regulation. While it should be noted that these challenges are not unique to Finland and indeed, may not be as severe a weakness as in a larger country.

1. Political Commitment to the RIA Process

The OECD suggests that in order for the RIAs ystem to be an effective instrument that aids decision-making, it must be strongly endorsed at the political level. In Finland, there is inconsistent usage, participation and application of the RIA at the ministry level, given that there is no political pressure being brought to bear on their appropriate use nor sanctions to enforce their requirements.

2. Allocating Responsibilities for RIA

Despite the norm that the responsibility for RIA be shared between ministries and a central quality control unit to ensure appropriate quality control and consistent application, Finnish ministries are assigned the primary responsibility for the use of RIA and are subject to minimal challenge regarding their performance. The Bureau of Legislative Inspection (Ministry of Justice) and the Ministry of Finance exert limited and specific control. In addition, the Cabinet Finance Committee and individual ministries can choose to block the submission of unsatisfactory proposals but these mechanisms tend to be inadequate in practice.

3. Application of RIAs

Finland lacks a consistent approach to reviewing existing regulations. This responsibility is left to individual ministries, which are not checked by any central institution. Finland has tended toward the wholesale review of legislation, including the Constitution, the Act on Openness of Government Activities, and the Penal Code. The review of laws tends to be reactive rather than strategic. They are amended in order to keep them up-to-date when pressed. The combination of weaknesses in the application of RIAs , lack of emphasis on ex ante impacts, and ministerial independence has limited strategic action at the level of detail needed to ensure regulations are reviewed systematically.

4. Train the Regulators

Although ongoing and quality training is required in order to maintain the skill sets necessary to carry out quality impact statements, there is no sufficient detailed, practical guidance on this issue. Several partial guidelines have been published in the 1990's (e.g., on economic, environmental, and business impacts as well as impacts on the regional policy). The Ministry of Finance issued advice on this in 2001 in the framework of a selected number of pilot projects, but it is unknown what effects have been observed as a result. The low demand for central guidance in this area indicates a preference for maintaining independent ministries and weak central control.

5. Using Consistent and Flexible Analytical Methods

An effective RIA regime requires a sound cost-benefit analytic system that includes a quantification element. Quantification of impacts is required in the Finnish regime. But there are no central guidelines on specific methodological approaches. There are no minimum standards that have been prepared to ensure quality. Not surprisingly, the quality of RIAs have been observed to be in many cases poor even though examples of high-quality RIAs do also exist.

6. Data Collection Strategies

With respect to the extent and quality of collected data to inform an effective RIA, Finland has a long-standing tradition of information sharing that has been engrained in its public-private-societal institutions. As such, information tends to be of high quality, but analysis is weak.

7. Targeting RIA Efforts

The OECD has indicated that RIA resources should be targeted at regulations that are likely to have significant impacts and alter current outcomes. In Finland, RIA is focussed mainly on primary legislation and there is no objective test to target efforts. The High-Level Working Group on the Management and Steering of Regulatory Reform has chosen targeted RIAs as a central area of its work.

8. Integrating RIA with the Policy-Making Process

RIA has not been strongly integrated in the Finnish policy-making process and appears to have had little impact on decision-making, according to the OECD. The introduction of "partial" RIAs in the policy process is being considered to streamline the legislative decision-making system. At present, the use of RIAs is at times considered to be an "add-on" to the process that is both time-consuming and regarded as an additional step yielding insufficient benefits. In addition, RIAs are too often, depending on the law-drafting project, prepared late in the process after significant decisions have been taken.

9. Involving the Public

Although Finland has a strong history of consultation, the RIAs at present lack the rigour required to act as an effective consultation tool. Although Finnish guidelines require that RIAs be made available during the consultation process, this seldom occurs, especially with respect to inter-ministerial or public consultations.

F. INNOVATIONS AND TRENDS

1. New Approaches to Consultation

In addition to traditional approaches, Finland has been using public hearings to gauge public reaction to regulations. However, it was noted that these tend to be held on short notice, thereby limiting effective or useful feedback. Finland has also been experimenting with the use of referenda at the municipal level. Between 1991 and 1998, 24 referenda were conducted, mostly to approve municipal mergers. However, if found to be a useful approach, their use may be extended in the area of regulatory action.

The "tripartite agreements" between social partners comprising employer and employee groups, and government are used in appropriate areas They are then, though to a lesser extent than in the previous decades, used to cover wages, employment policy and issues of working life extending to social welfare, pension schemes and taxation

2. Alternatives to Regulation and Alternative Forms of Regulation

Under the RIA requirements, alternatives to regulatory instruments are assessed before proceeding with regulation but not systematically despite requirements to do so. The OECD noted that there tends to be a lack of guidance and practical support for considering alternatives, especially given that regulators too often lack the necessary economic training to evaluate options.

However, some successes have been noted on a sectoral basis. In the area of environmental protection, alternative instruments such as the use of green taxes, grants, voluntary agreements and information programs. Although applied piecemeal, efforts are being made to integrate approaches across ministries. For example, Finland was the first nation to apply a tax on CO2 emissions, and set environmentally related taxes. Such taxes represented 11 percent of total central government revenues in 2001. Subsidies are used extensively to support energy conservation and renewable energy. Voluntary agreements are used by industry in environmental management systems under the EU's Eco-Management and Audit Scheme (EMAS), which was established in 1995 for manufacturing companies. This adoption of alternative approaches, especially in the environmental area, may have contributed to Finland's reputation in the forefront of sustainable development.