The Political Economy of Reform: Implementing Policies for Change


Remarks by Angel Gurría, OECD Secretary-General, delivered at the APEC Structural Reform Ministerial Meeting, Session 1: Political Challenges of Structural Reform

3 August 2008, Melbourne, Australia

Treasurer Swan, Ministers, ladies and gentlemen,

I am delighted to be at this APEC ministerial meeting in Australia. I would like to express my recognition to Minister Swan as he sticks to the reform agenda of his country, even in these difficult times. I agree with him regarding the need to keep a long term goal rather than succumbing to the temptation of using the financial crisis and the economic downturn to relax policies. And I am particularly pleased to be invited to speak on the political economy of reform, an area that has become one of the key interests of the OECD, and where we can gain much from closer co-operation with APEC.

How to design and implement structural reform has been at the core of the OECD’s mission since its inception, to promote a better functioning of the global economy and raise living standards in member and partner countries. Now, it has acquired a higher dimension, trying to figure out how reform can be successfully implemented.  In the course of developing best policy advice, we have advanced understanding of what works and what doesn’t when promoting flexible economies. But reform is not an easy process. What needs to be done is often clear, but policy makers commonly face a series of obstacles when trying to implement reform. Therefore, the real question is how to build and maintain consensus.

Certainly, the OECD does not tell its member and partner countries what to do. They know better. But we do tell them what others are doing, to provide an additional incentive to move faster in the reform agenda. International comparisons can be a powerful tool to foster reform, as I will show later.

There are many tools that politicians can rely on to leverage a particular reform program. International cooperation is one of them. The OECD has launched a new strand of work on the Political Economy of Reform to better understand the factors behind resistance to reform and identify ways to overcome them. This work builds on the OECD’s comparative advantages: sound data and evidence-based analysis drawing on the wealth of reform experiences of our member countries.  But what is new is that the type and timing of the products is very flexible and responsive to policy-makers’ needs. We used to stop with the provision of policy advice, but more and more we are being asked by our member countries to go one step further to support the implementation of such advice in a timely manner.

One of the products which we have found to be very useful and effective is a publication that summarises the OECD’s policy recommendations for a country on specific issues being discussed in that country. It is delivered on request and with a deadline. The first of these was done for the incoming government of President Calderón in Mexico. The following two were addressed to the Attali Commission established by France’s President Sarkozy and to the Hungarian government. Although faster than our usual flagship titles, these publications nevertheless still require time and resources. Thus, some countries may prefer even shorter and faster responses from the OECD to their specific reform challenges, which we can also attempt to provide. But don’t be too much on the quick fix; taking a little longer and preparing the ground well can yield better results.

Benchmarking can be another powerful driver for reform, and international organisations have much to offer in this field. Progress in other countries may trigger reform as governments are encouraged by their peers or fear to fall in the rankings. The assessment of a domestic reform agenda may change when compared with the best performing countries in the world. Complacency can’t stand the test of those that are moving faster. Therefore, international commitments can also foster reform.  And sometimes, a reform concept can be put forward more easily by an objective, credible outsider, like the OECD, that is perceived as neutral partner in the policy debates.

Seminars and workshops on international experiences in the implementation of specific reforms can be helpful in this respect, as can articles or interviews. Positive experiences from elsewhere can help reformers convince a reluctant electorate. Cost-benefit analysis can be made more prominent, and evidence-based debates can also underline more clearly the cost of inaction. We held such seminars for example in Mexico, jointly with a number of other international organisations, as well as in Finland, Portugal or Austria.

We have also started to work more closely with APEC countries that are not members of the OECD.  Canada, the USAustraliaMexicoJapanKorea and New Zealand are already part of the Organisation. Russia and Chile are on their way to accession and we are providing policy advice on many areas. We established a program on enhanced engagement, with a view to membership with countries like Indonesia and China, among others. Recently, I delivered an OECD economic assessment in Indonesia, and we have worked in areas such as environment, innovation and regulation with China. Vietnam has joined the OECD Development Centre as has Peru which has also recently endorsed the OECD International Declaration on Investment

International guidelines also help to advance the reform agenda. At the OECD we have developed such guidelines in many areas. But there is one that can be particularly relevant for this session, given it is high in APEC reform agenda: competition. We developed a Competition Assessment Toolkit which lays out general principles for promoting competition in regulated sectors, based on the successful Australian experience. The principles are simple and flexible enough to be applied to governmental activities across different sectors and countries. The Toolkit is about the “how” of reform. It provides a methodology for examining laws and regulations to identify unnecessary restraints on competition. And it is available in 11 languages. In fact, just a few days ago I delivered the Toolkit in Bahasa to the Indonesian government. My own country, Mexico, is also using the Toolkit now, and I am sure the Mexican delegates will tell you more about it. 

Getting reforms right depends strongly on proper implementation. Bad implementation kills a good idea. Often, problems occur because a partial rather than a comprehensive perspective is taken. OECD analysis shows that comprehensive reform, with a clearly sequenced timetable, works better than piecemeal reform.  Vested interests may find it more difficult to block a reform package that is thorough and comprehensive and that balances multiple policy objectives and interests.  Having compensatory measures early in the process also helps, to avoid increased opposition of those affected that can become quite vocal.

OECD therefore promotes a whole-of-government approach, including comprehensive reviews of public administration. Ireland was the first country to ask the OECD to analyse and recommend public management reforms in areas such as e-government, human resource, budget and performance management. Greece has followed and we are currently discussing such reviews with Finland and Spain.
I would like to thank APEC for the good co-operation with OECD which we hope to continue and expand in the future. I am particularly pleased that the OECD has been invited to participate in the APEC Summit in Peru, and we will be there. In the meantime, we look forward to working with all of you to make structural reform happen and to make it work.  As I mentioned at the outset, sticking to our long term goals and building the necessary ownership will make reforms succeed.

Thank you.