NATIONAL POLICY ON THE DEVELOPMENT

AND
IMPLEMENTATION OF REGULATIONS

Regulatory Review Department

Malaysia Productivity Corporation (MPC)
Lorong Produktiviti, Off Jalan Sultan, 46904 Petaling Jaya,
Selangor Darul Ehsan, Malaysia
Tel: 603 - 7955 7266 | Fax: 603 - 7957 8068 | Email : regulatoryreview@mpc.gov.my
National Policy on the Development and Implementation of Regulations

Foreword
from
Chief Secretary to the
Government of Malaysia

M
alaysia is consistently ranked amongst
the most competitive economies in
Asia. The country is committed to its
goal of achieving a developed nation status by
2020. This goal continues to be pursued against
a backdrop of an increasing borderless and more
demanding environment with the nation having to
meet the challenges of enhancing competitiveness,
achieving sustainable development and inclusive
growth.

The Government is continuously striving for new avenues through which we can maintain and
enhance our efficiency and competitiveness through a private-sector driven and people-centred
growth. We also need to ensure that competitiveness is not eroded and gains made are sustained
and transferred to citizens and businesses. Better regulation is one of the proven instruments
available to achieve this.

Good regulations are required for good governance in these challenging times. Good regulations
are also crucial for harnessing national efforts and resources for competitiveness and sustained
economic growth. This necessitates that regulations and the rule-making process keep pace with
changing times and circumstances. Effective regulations achieved through a more robust process
of analysis and consultation with stakeholders enhances efficiency and accountability and at the
same time promotes greater participation, inclusiveness and ownership of the problem resolution
process.

Reflecting the desire to improve the rule-making process, the Government will introduce a new
policy to transform rule-making in Government. Regulatory Impact Analysis (RIA) is required
for all new regulations. This requirement is introduced to ensure that regulations are effective
in addressing the desired public policy objectives and in serving the country in a balanced and
equitable manner and implemented in a transparent manner. It is the government’s intention to
ensure that cumbersome regulations that create unnecessary burdens to society and business,
discourage competition and innovation or alienate stakeholders are reduced or avoided.

i
 National Policy on the Development and Implementation of Regulations

The National Policy on the Development and Implementation of Regulations will address
the gaps in the management system for regulations to put Malaysia in a position to meet
international best practices in regulations or Good Regulatory Practice (GRP). This will help to
enhance transparency and credibility of regulatory actions and create a climate for better quality
of life and business environment. The Government recognises that this policy will contribute
towards building an economy that attracts industries and investments that value good regulatory
environment, hence generating quality jobs and increasing national wealth.

The capacity and capability of all institutions involved in the management, development and
implementation of regulations will be upgraded and the governance and organisational
structures reviewed to meet the requirements of international best practices. The interconnected
nature of the issues dictates that this change be undertaken in an integrated manner by involving
the various ministries, agencies, industry interests and other stakeholders.

Tan Sri Dr. Ali Hamsa

Chief Secretary to the Government of Malaysia

ii
National Policy on the Development and Implementation of Regulations

Acknowledgement

T
his National Policy on the Development and Implementation of Regulations has been
developed through a consultative process coordinated by the Malaysia Productivity
Corporation (MPC).

Consultations were held and inputs from a wide range of stakeholders within government that
included representatives from all ministries and their agencies responsible for the development
and implementation of regulations in four sessions held in February and March 2012. These
documents were made available for review on the MPC website and all affected parties were
invited to submit comments on the draft policy and Best Practice Regulation Handbook.

The current version of the Policy is the product of the extensive consultations held. The
numerous useful and constructive comments received during the consultation sessions as well
as those directly communicated to MPC have been incorporated after review.

MPC wishes to thank all who participated in the consultation sessions and especially to
record the substantial contributions from the representatives of the Ministry of International
Trade and Industry, Economic Planning Unit, the Malaysian Administrative Modernization and
Management Planning Unit, the Ministry of Finance, Department of Standards Malaysia and the
Attorney General’s Chambers.

MPC also wishes to thank the Regulatory Reform Group, The Netherlands 2007, Office of Best Practice
Regulation (OBPR), Ministry of Finance and Deregulation, Australian Government Productivity
Commission (AGPC), Australia, Regulatory Impact Assessment Team (RIAT), The New Zealand
Treasury, Organisation for Economic Cooperation and Development (OECD), Paris and Jacobs,
Cordova and Associates for the technical assistance provided to enhance the competency and
capacity in developing RIA system.

iii
 National Policy on the Development and Implementation of Regulations

In 1991 the Malaysian government articulated its vision

for the future in VISION 2020.

VISION 2020 recognises the need for reform of regulations in

attaining the goals of a developed nation. The vision statement
focused on deregulation while noting that :

“ there can be no doubt that regulations are an essential part of the

governance of society, of which the economy is a part. What is not
required is over-regulation although it may not be easy to decide
when the Government is over regulating. Wisdom lies of course in the
ability to distinguish between those laws and regulations which are
productive of our societal objectives and those that are not;”

iv
 National Policy on the Development and Implementation of Regulations

Contents
FOREWORD i
ACKNOWLEDGEMENT iii

SECTION 1 Introduction 1
SECTION 2 National Regulatory Policy and Principles 3
2.1 Policy Objective 3
2.2 Principles 3
2.3 Periodic Review 5
2.4 Implementation 5
2.4.1 National Development Planning Committee (NDPC) 5
2.4.2 Malaysia Productivity Corporation (MPC) 5
2.4.3 National Institute of Public Administration (INTAN) 6
2.4.4 Regulators 6
2.4.5 Stakeholders 6
2.4.6 Attorney General’s Chambers (AGC) 6
SECTION 3 Regulatory Process Management Requirements 7
3.1 Application 7
3.2 Requirements 7
3.2.1 General Responsibility 7
3.2.2 Regulatory Process 7
3.2.3 Regulatory Impact Analysis (RIA) 7
3.3 Records and Documentation 9
3.4 Communication 9
3.5 Competency 9
Chart 1 : RIS Process 10
Annex 1 : OECD Guiding Principles for Regulatory Quality and Performance 12
1 National Policy on the Development and Implementation of Regulations

SECTION 1 Introduction

The National Economic Advisory Council (NEAC) that developed the New Economic Model (NEM)
concluded that the vision to be a developed economy by the year 2020 requires economic, social
and government transformation. The New Economic Model (NEM) thus prescribed an Economic
Transformation Programme (ETP) which constitutes a key pillar that will propel Malaysia towards
the goals of Vision 2020. The ETP is in turn supported by policy measures and a corresponding
Government Transformation Programme (GTP).

The NEM strongly indicates the need for regulatory management to improve regulatory quality.
The 10th Malaysia Plan in Chapter 3 on Modernising Business states :

“The regulatory environment has a substantial effect on the behaviour and performance of companies.
Private sector participation in the economy and innovation require a regulatory environment
that provides the necessary protections and guidelines, while promoting competition”. Too often,
Malaysian firms face a tangle of regulations that have accumulated over the years and now constrain
growth. At the same time, regulations that would promote competition and innovation are absent
or insufficiently powerful”. “To achieve this goal, the Government will begin with a comprehensive
review of business regulations, starting with regulations that impact the NKEAs. Specifically, MPC
will :

Review existing regulations with a view to removing unnecessary rules and compliance costs.
Regulations affecting NKEAs will be prioritised;

Undertake a cost-benefit analysis of new policies and regulations to assess the impact on the
economy; and

Make recommendations to the Cabinet on policy and regulatory changes that will enhance
productivity”

The current rule-making processes are based largely on practices that have evolved over time
and have not been consolidated into laws or officially issued guidelines. The absence of an
official guideline has on occasion created gaps in the rule-making process resulting in ineffective
regulations and unnecessary regulatory burdens on industry and businesses.

The current regulatory system will be improved through the adoption of the best practices in the
field of regulatory management that have been implemented in the OECD countries and now
increasingly adopted by regional and global competing economies.
 National Policy on the Development and Implementation of Regulations 2

The National Policy on the Development and Implementation of Regulations (NPDIR) has been
developed to support the modernisation of the regulatory regime. There is increasing recognition
that over-regulation, poorly designed regulations or in some cases under-regulation leads to
regulatory failures which undermines the intentions of good policies. Global competition, social,
economic and technological changes requires the government to consider the inter-related
impacts of regulatory regimes, to ensure that regulatory structures and processes continue to
be relevant, robust, transparent, accountable and forward-looking.

The goal of good regulatory policy is to achieve coherence, effectiveness, efficiency and
accountability in the rule-making and implementation process. This modernization is also an
essential part of realizing several of the policy objectives of the NEM that include:

Removal of barriers and reduce cost of doing business;

Improvement in decision making for policy implementation; and

Improvement in economic efficiency through enabling fair competition.

The Special Task Force to Facilitate Business (PEMUDAH) was established by the government
to ensure that Malaysia remains an attractive and competitive investment location. PEMUDAH
has been addressing service delivery issues that relate directly to investment and starting a
business. It has recognised that changes in rules and legislation are also required. NPDIR policy
complements PEMUDAH’s efforts and will ensure that any new regulation does not result in
disincentives to business, investment and trade.

NPDIR guides the development of good regulations, which is essential in achieving the NEM
policy objectives. It sets out core principles that regulatory authorities should adhere to in
regulating and outlines a number of steps that will be taken to put the principles into practice. It
will also seek to reduce, if not eliminate, cumbersome and inappropriate bureaucratic procedures
that affect the cost of investing and the potential returns on investment.
3 National Policy on the Development and Implementation of Regulations

SECTION 2 National Regulatory Policy and Principles

2.1 Policy Objective

The objective of the policy is to ensure that
Malaysia’s regulatory regime effectively supports
the country’s aspirations to be a high-income and
progressive nation whose economy is competitive,
subscribes to sustainable development and
inclusive growth.

The policy is implemented to promote a regulatory

process that is effective, efficient and accountable
as well as to achieve greater coherence among
the policy objectives of government. To achieve
this, the government has decided to adopt current
best regulatory practices as broadly defined in
the “OECD GUIDING PRINCIPLES FOR REGULATORY
QUALITY AND PERFORMANCE”. (Annex 1)

2.2 Principles
This policy applies to all federal government
ministries, departments, statutory bodies and
regulatory commissions. It is also applicable for
voluntary adoption by state government and local
authorities.

Regulators must, in the course of regulating, ensure

that:

1. Government intervention is justified and

regulation is the best alternative addressing
defined problems with clearly established
objectives.

2. Stakeholders are effectively consulted and

they have an opportunity to participate in
the regulatory development process.

3. An impact analysis is conducted to

demonstrate that the benefits outweigh
the costs to citizens, government and
businesses.

4. Adverse impacts on the capacity of

the economy to generate wealth and
employment are minimized and no
unnecessary regulatory burden is imposed
on any party.
 National Policy on the Development and Implementation of Regulations 4

In particular, regulators must ensure that:

i) All regulations implemented are supported by appropriate legislative

provisions;

ii) Information and administrative requirements are limited to what is absolutely

necessary and that they impose the least possible cost;

iii) Regulatory initiatives are not based on narrow interests of particular interest
groups but address overall national concerns in a balanced manner; and

iv) Special circumstances of small businesses are addressed, equivalent means to

conform to regulatory requirements are given consideration.

5. Systems are in place to manage regulatory resources effectively. In particular, regulators must
ensure that:

i) The Regulatory Process Management Requirements are followed;

ii) Feasible alternatives are considered and the optimum approach that efficiently
and effectively address the issue is selected;

iii) Implementation of regulations is undertaken in transparent manner;

iv) Regulations promote implementation based on fairness and integrity;

v) Resources have been approved and are adequate to discharge enforcement

responsibilities effectively;

vi) Adequate preparation is made for implementation;

vii) Early circulation/announcements are made to create awareness and facilitate

implementation; and

viii) All related directives from Cabinet concerning policy objectives and law making
are followed.
5 National Policy on the Development and Implementation of Regulations

6. Regulations are consistent with Malaysia’s commitments in international and inter-

governmental agreements.

7. Regulators must ensure that all regulations are reviewed once every 5 years.

2.3 Periodic Review

MPC shall initiate a review of the National Policy on the Development and Implementation
of Regulations after 5 years or earlier if the need arises. The review of the Policy will be
undertaken with active participation of stakeholders. The review will take into account
successes achieved, constraints encountered in implementation over the 5 year period,
the changes in national priorities in international business environment and the impact
of other national policies that have direct relationship with this policy.

2.4 Implementation
NDPC will oversee the implementation and will be assisted by MPC and INTAN as follows:

2.4.1 National Development Planning Committee (NDPC)

NDPC is responsible for:

Overseeing the implementation of this policy, assessing its effectiveness and

recommending improvements; and
Examining Regulatory Impact Statements (RIS) for adequacy and making
appropriate recommendations.

2.4.2 Malaysia Productivity Corporation (MPC)

MPC is responsible to NDPC to implement its functions on this policy. In performing this
function MPC shall assist in the coordination for implementing the policy. It shall perform
these duties by:

Developing guidelines and programmes for the implementation of NPDIR;

Ensuring that capacity building programmes for regulators are available;
Assisting NDPC in assessing RIS;
Providing guidance and assistance to regulators in RIA and preparation of RIS;
Conducting periodic reviews of progress made and submitting reports to
NDPC; and
Promoting transparency of RIS.
 National Policy on the Development and Implementation of Regulations 6

2.4.3 National Institute of Public Administration (INTAN)

INTAN is the agency responsible for providing training on RIA.

2.4.4 Regulators
Regulators comprising of government agencies such as Ministries, departments, statutory
bodies and regulatory commissions that are responsible for developing, maintaining and
enforcing regulatory programs, are to observe this policy and meet the Regulatory Process
Management Requirements.

2.4.5 Stakeholders
This policy is also dependent on the input of stakeholders such as business community,
employees, interest groups, professional organisations and individuals into the design and
review of regulations.

2.4.6 Attorney General’s Chambers (AGC)

AGC is responsible for offering legal advice to the cabinet or any minister. The Chambers
may provide legal opinions on regulatory solutions, drafting of regulations, harmonisation of
regulatory requirements, provisions on compliance and enforcement as well as compliance
with obligations of international treaties and relevant agreements.
7 National Policy on the Development and Implementation of Regulations

SECTION 3 Regulatory Process Management Requirements

3.1 Application
These requirements apply to all federal government regulators1 and are confined to
regulations that relate to or impact business, investment and trade. The requirements do
not apply to matters concerning national security and sovereignty.
The process is also applicable for voluntary adoption by state government and local
authorities.

3.2 Requirements
3.2.1 General Responsibility

Every federal government regulators should appoint Regulatory Coordinators and notify
the appointment to MPC. Regulators must ensure that the development of regulations meet
the Regulatory Process Management Requirements set out below. It is the responsibility of
regulators to develop and maintain an internal system to document clearly how they are
met in each proposal to create or amend regulations.

3.2.2 Regulatory Process

The creation of all new regulations or review of regulations must be in accordance with
the process that is defined in these requirements. In this requirement, regulators are to
notify MPC on proposals to introduce or amend regulations. MPC will assess whether the
regulator is required to submit RIS for the proposed regulation. If RIS is required, it needs to
be submitted to NDPC which will examine RIS for compliance with the regulatory process
management requirements. This process is defined in Chart 1: RIS Process. RIS shall be
prepared as per these requirements. Guidance for implementing the regulatory process
management requirements and preparation of RIS is provided in Best Practice Regulation
Handbook issued by MPC.

3.2.3 Regulatory Impact Analysis (RIA)

Regulators proposing new regulations or regulatory changes must undertake the

regulatory impact analysis involving the following components :

Problem Identification

Regulators must establish clear objectives, evidence that a problem has arisen and
government intervention is required. When any risks are involved, regulators must
ensure that risks are of sufficient significance to justify intervention.

This process is applicable to regulations and other legally binding instruments which
are issued by regulators.

1
The requirements are mandatory for all ministries and agencies of the federal government that have regulatory powers. State governments
and their agencies and local authorities may choose to adopt and apply the provisions of this policy.
 National Policy on the Development and Implementation of Regulations 8

Objectives
The desired objectives of the proposal or the problem that is being addressed must be identified,
described, analysed and documented clearly and concisely. Interested parties must be consulted
on alternative ways to achieve the objectives or solve the problem.

Instrument Options
A range of options (regulatory and non-regulatory) that may constitute feasible means for
achieving the desired objectives must be analysed to ensure the most effective and efficient
option is chosen. It must be demonstrated that new regulations will help solve the problem.

Assessment of Impact
An assessment of the impact (costs, benefits and where relevant, levels of risk) of a range of
feasible options for consumers, business, government and the community must be carried out
to assess potential effects. It must be demonstrated that the benefits are greater than their
costs. When regulations address health, social, economic or environmental risks, it must be
demonstrated that regulatory effort is directed where it will do the most good. Information
obligations should be limited to what is absolutely necessary and impose the least possible cost
on affected parties. The impact of additional regulatory burden on small businesses in particular
must be considered, and the least burdensome but effective alternative for their circumstances
should be chosen.

Consultation
Regulators proposing new regulations or changes must carry out timely and thorough
consultations with affected parties. The consultation effort should be proportionate to the
impact of the proposed regulation. Notice of proposed regulations and amendments must
be given so that there is time to make changes and to take comments from affected parties
into account. Regulators must clearly set out the processes they use to allow affected parties
to express their opinions and provide input. In particular, regulators must be able to identify
and contact stakeholders, including, where appropriate, representatives from public interest,
employees and consumer groups. Consultations should begin as early as possible in order to get
stakeholder’s input on the identification of the problem, as well as on proposed solutions.

Other regulators having an interest in the matter must be consulted. Regulators must determine
what, if any, related regulations already exist and which other departments and agencies are
involved. New regulations must be coordinated with existing ones to avoid duplication and to
take advantage of possible efficiencies.
9 National Policy on the Development and Implementation of Regulations

Conclusion and Recommendation

RIS should include a statement identifying the preferred option based on the impact
analysis.

Implementation
The implementation strategy and a review of the preferred option must be described
comprehensively in RIS. The plans, procedures and resources that will be used for
compliance and enforcement should be described. Obligations arising from treaties
and international agreements must be complied with.

Publication of RIS
RIS is to be published on the regulator’s and MPC website as soon as practicable from
the date of official announcement of the decision. MPC will consult the regulator on the
publication.

3.3 Records and Documentation

Regulators must document their regulatory policy and processes. The documentation
should include, but not be limited to, a description of the problem, alternative solutions,
the risks involved, the reasons for regulating, the consultation methods, outcome of the
consultations, the cost benefit analysis and the conclusion and recommended option. A
comprehensive set of these documents must be retained. These documents should be the
reference in the 5-year review process.

3.4 Communication
Regulators creating new regulations must inform stakeholders about the proposal
in simple, clear, complete and concise language that the general public can easily
understand. New regulations and changes, as well as material incorporated by reference,
must be well publicised and easily accessible to affected parties. The RIS should include a
communication plan.

3.5 Competency
Regulators must ensure their personnel are competent to carry out the Regulatory Process
Management Requirements.
 National Policy on the Development and Implementation of Regulations 10

Chart 1 : RIS Process

Notification
Regulator notifies MPC

RIS NEED ASSESSMENT UNDERTAKE RIA

MPC assesses the need for RIS Regulator to carry out impact analysis
(3 days) Yes and consultation.

RIS is submitted to MPC

ASSESSMENT AND REVIEW OF RIS

MPC reviews RIS
(3 weeks)

SUBMISSION OF RIS TO NDPC

MPC presents RIS to NDPC
(1 week)

NDPC EXAMINES RIS FOR ADEQUACY

(3 weeks)

PROVIDE RIS TO DECISION MAKER

RIS is forwarded to the Cabinet, Minister or
other authority responsible by the regulator

PUBLICATION OF RIS
MPC to consult regulator on publication
of RIS
11 National Policy on the Development and Implementation of Regulations
 National Policy on the Development and Implementation of Regulations 12

Annex 1

OECD Guiding Principles for Regulatory Quality and Performance

Malaysia Government’s best practice regulation requirements provide a systematic approach
to ensure high quality regulation and are consistent with the OECD Guiding Principles for
Regulatory Quality and Performance.

The Organisation for Economic Co-operation and Development (OECD) contends that a
coherent, whole-of-government approach is needed to create a regulatory environment
favourable to the creation and growth of businesses, productivity gains, competition,
investment and international trade (OECD 2005). The following OECD Guiding Principles for
Regulatory Quality and Performance captures the dynamic, whole-of-government approach
to implement regulatory policy;

1. Adopt at the political level broad programmes of regulatory reform that establish clear
objectives and frameworks for implementation.

2. Assess impacts and review regulations systematically to ensure that they meet their
intended objectives efficiently and effectively in a changing and complex economic
and social environment.

3. Ensure that regulations, regulatory institutions charged with implementation, and

regulatory processes are transparent and non-discriminatory.

4. Review and strengthen where necessary the scope, effectiveness and enforcement of
competition policy.

5. Design economic regulations in all sectors to stimulate competition and efficiency, and
eliminate them except where clear evidence demonstrates that they are the best way
to serve broad public interests.

6. Eliminate unnecessary regulatory barriers to trade and investment through continued

liberalisation and enhance the consideration and better integration of market openness
throughout the regulatory process, thus strengthening economic efficiency and
competitiveness.

7. Identify important linkages with other policy objectives and development policies to
achieve those objectives in ways that support reform.
Notes