CUTS Competition, Regulation and Development Research Forum
2005-2006

Part I: Political Economy and Governance Constraints in Implementing Competition and Regulatory Regimes

Identifying and Overcoming Political Economy and Governance Constraints to the Effective Implementation of Competition and Regulatory Laws

Since the advent of economic and political liberalisation in most developing countries following the collapse of the Centralised Economic principles in the 1990s, there have been considerable policy changes, with increased reliance being placed on market forces.

Further, regionalisation and globalisation of the world has made markets anywhere in the world contestable. There is therefore the inherent need for developing countries, to adopt the most plausible and pragmatic designs for their competition and regulatory laws. Markets in many developing economies tend to be highly concentrated and thus may have the prevalence of collusive tendencies. This scenario would facilitate the exercise and abuse of market power and precipitate other anti-competitive conduct in both individual developing countries and surrounding countries. While competition and regulatory laws may be in place to ensure that certain minimum standards are complied with, unfortunately, the political economic policies of Government do often have a toll on the effectiveness of implementing competition and other regulatory laws.

At the moment, most developing and least developed countries have passed the stage of contemplating whether they would want to have a competition or other regulatory law or not, but rather have reached the stage where the debate on the matter is how to structure their laws, and how best to implement an effective enforcement regime.

The purpose of this paper is to highlight the political-economic and governance issues that constrain the effective implementation of competition and regulatory laws, with particular attention paid to the existing Government policy. The paper seeks to identify the constraints and where possible, suggest strategies and tactics of operating within the helm of such constraints before narrowing down on recommendations on policy reform. The study also hopes to highlight the need and importance of having political support for competition and regulatory laws. The study also hopes to highlight the need and importance of having a strong political support for competition and regulatory laws, with country examples from the Common Market for Eastern and Southern Africa (COMESA).

The Political Economy of Regulation and Competition

This proposal attempts to explore the importance of integrating the political economy concerns in the design and implementation of regulatory and competition policies/strategies in the infrastructure sector. A national consensus to separate issues of regulation and competition out of the political agenda is still not happening in many developing economies. As these economies move through the reform process, political institutions need to reflect on this fundamental issue.

The political economy difficulties/lessons that emerge from this study will shed light on the regulatory capacity of the state, and will explore the inter linkages between the state, politics and business. The study also expects to analyse the impact of the poor design and implementation of regulatory policies on the growth of the sector and consumer welfare.

The issue which this study is interested in, is to explore the nature and levels of the issues of competition which can be effectively incorporated in the regulatory structure. The mutually reinforcing nature of regulation and competition policies requires active coordination between the agencies even in the early stages of opening-up, which is important for many developing countries, as they are setting up sector specific regulatory bodies. The changing dimensions of market failure in the light of developments in technology, and property rights give rise to more opportunities and challenges for developing the integrated/appropriate regulatory and competition strategies. However contemporary research have found out that the boundaries between the roles of the sectoral regulators and the competition policy are difficult to define, and in many countries the competition authority has direct overlap with sectoral regulators.

The Necessary Conditions for Evolving Competition Authorities in Transition and Developing Countries to succeed

The purpose of the research is to identify some of the key ingredients that stand as obstacles on the way of the evolving competition authorities in transition and developing worlds to become truly independent and efficient in accomplishing their mission.

Many transition and developing countries have now adopted competition laws. These laws are generally sufficient, most often modelled on EU Articles 81 and 82. There are however few nuances, in particular related to the powers of competition authorities, that indicate the environment that the competition authorities operate, in particular making it more difficult finding out and prosecuting cartel cases. The existence of more enabling clauses in the laws often points to better competition climate.

In a vast majority of cases in transition and developing countries, competition laws do not adequately translate into effective implementation policies. We should analyse the enforcement practices of the same set of countries and follow the relationship between strength of laws and strength of enforcement practices. We should analyse anticorruption climate in these selected countries using different rankings (e.g. Corruption Perception Index by Transparency International, ranking by the WB/IFC in their “Doing business” surveys, and so on).

Overall the analysis will focus on the period 1994-2004. I intend to draw the links between the factors identified above, i.e.: strength of competition laws- strength of competition enforcement practices- anticorruption/enabling environment.

The main hypothesis of the paper to examine is that the (lack of) strength of competition laws and the (low) speed of its positive changes are directly linked to the strength of competition policy implementation practices and linked to the (anti) corruption climates in the countries

Promoting Acceptance of a Competition Regime – Competition Law as new Safety Valve

This paper focuses on the research area relating to “Identifying and Overcoming Political Economy and Governance Constraints to the Effective Implementation of Competition and Regulatory Laws”.

Competition law is an integral part of any general policy to enhance competition. Reduction of customs tariffs, encouraging private participation in industry, and inviting foreign investors to the domestic market do not by themselves complete the process of market liberalisation. The necessity for market liberalisation and it benefits are by now largely accepted even in developing countries, as concrete results such as improved standards of living and higher GDP are evident. The challenge then, is to increase the acceptability of competition law as part of this process.

This paper will discuss how, similar to trade remedy measures, competition law has the potential to act as a ‘safety valve’ in the domestic context. As a result of liberalisation, foreign investors have an increasing presence in developing countries. However, domestic players may feel increasingly threatened as foreign players begin to dominate the domestic market not only by way of direct competition, but also acquisition of domestic competitors. The existence of an effective competition regime can ensure that all players, whether domestic or foreign, adhere to the principles of fair competition, thus providing the “level playing field” that domestic players so often demand.

Part II: Institutional issues in Implementing Competition and Regulatory Regimes in Small Economies

Institutional Structures in Micro-states, the Case of the Caribbean

The liberalisation and privatisation movement which started in the UK and New Zealand in the 1980s was intended to remove detailed government control from otherwise competitive markets. In promoting reform of infrastructure industries in developing states country institutions and sector governance play an important role. Most reforming developed and larger developing countries have tended to adopt USA or UK institutional frameworks, especially for the management of competition matters and the regulation of utility industries. These governance structures are now being called in to question, particularly as to their suitability for small developing countries, where problems of economies scale make it difficult to finance and sustain several agencies. The OECS countries and the Barbadian approaches of a hybrid agency demonstrate new and innovative solutions to the institutional problem of small and micro-states.

Competition Constraints In Small Jurisdictions

This paper discusses the constraints that small jurisdictions face in matters associated with competition law and policy in view of their small domestic market. Special reference will be made to Malta, where competition legislation is modelled on EC law. The thrust of the argument is that certain aspects of competition law may not be desirable to implement or may be more difficult to put in operation in a small state. It is concluded that exceptions, based on considerations such as improved efficiency, distribution, and overall consumer benefit, are likely to be of major relevance to small jurisdictions.

This paper highlights a number of areas which are associated with small jurisdictions and which are likely to have a bearing on competition law and policy. The main argument put forward in the paper is not that competition rules should not be adopted in small jurisdictions or that abuse should be tolerated.

Part III: Implementing Competition and Regulatory Regimes: Issues and Constraints at the Level of Competition and Regulatory Agencies

Aspects of the Independence of Regulatory Agencies and Competition Advocacy

This paper aims at assessing the degree of independence of sectoral regulatory agencies of a sample of countries the international Competition Network (ICN)

Independent regulators are important for the advocacy work insofar they are less subject to be captured by specific groups and by political interest. Therefore, competition concerns tend to be given more attention by independent regulators.

Moreover, literature on the institutional design assumes that a good regulatory policy stimulates efficiency and private enterprise. The manner in which the political and social institutions of a country interact with the regulatory process influences economic conditions, directly investors’ confidence and the performance of the regulated sectors. In fact, the Organization for Economic Cooperation and Development (OECD) identified that sectors with independent regulatory agencies had better benefits with the opening of the market, suggesting that independence is an important characteristic for regulation.

Nevertheless, there is not a standard way to measure independence. Neither is there a systematic data bank containing relevant information about the different aspects of independence.

This paper approaches independence of sectoral regulators in three ways. First, we summarize how the literature has measured agency independence. Second, we propose a methodology for calculating an independence indicator, II, and apply it to a sample of countries of the ICN. The information obtained will be available for researchers and delegates and may help future studies, including the elaboration of alternative independence indicators. Third, we compare our indicators with the results of other studies and test a few preliminary hypotheses about agency independence.

Avoiding capture: the role of extra-contractual institutions in supporting utility regulation

This paper analyses the political economy of regulation, drawing on case studies of global water concessions. Economic regulators in utility and infrastructure sectors may be susceptible to ‘regulatory capture’ by the regulated industry, or to ‘political capture’ by the government. Both types of capture undermine the role of the regulator in protecting consumer welfare. Potential for capture may be more acute for young regulatory agencies which have not yet been able to build up their capacity.

The paper presents the results of field and secondary research in Asia, Latin America and Africa on the development of regulatory regimes for the water sector. There is evidence for direct political intervention in many cases, as well as more subtle forms of regulatory and political capture. However, the extent and impact of capture on the quality of regulation varies across the cases studied. Regulators may still be able to balance the interests of consumers and investors if there are adequate institutions in place external to the contract that limit arbitrary action by government and limit the influence of private sector actors on administrative processes. The article concludes with policy recommendations. In particular, national efforts to increase transparency and accountability may be more important than sector level policies and laws.

What Should Be The Priorities of Competition and Regulatory Authorities?

The enforcement of competition legislation is not an easy task. Indeed, the majority of national competition enforcement authorities in developing countries are having difficulties in prioritising the cases to deal with amongst a large number of anti-competitive practices. To this effect, I plan to conduct a survey, again of selected competition agencies from (30) developing countries, asking them about their experiences in identifying the factors to be considered in prioritising work, allocating resources and identifying the most damaging practices. In the selection process, an attempt should be made to get a cross-section of country types that reflect differing political and judicial systems, size of economies and level of rule of law in the society, since all of these would impact on the survey results. I will also look at the current literature assessing competition agencies. In addition, I will look at how countries with more developed antitrust laws prioritise cases.

Work on the survey will be split into two main phases. The first phase will focus on the design and selection of questions for inclusion in the questionnaire. The second phase will consist of response data analysis and paper production. With the help of these and other resources, I ultimately aspire to bring together the political and economic challenges faced by competition and regulatory authorities in developing countries in prioritising anticompetitive practices, unfair trade practices and abuse of dominance.

The survey findings will argue that the priorities of competition in each developing country will vary depending on its underlying regulatory infrastructure, the perception of the role of competition in its political and economic culture, and its resource availability.

Assessing the efficiency of competition agencies and related technical assistance programs

In this proposal, we envision two related studies that assess the efficiency of competition agencies and technical assistance programs using primarily a new dataset from the International Competition Network (ICN). The ICN survey is a compilation of nine surveys each directed at either different types of TA or a collection of information about each competition agency. Results of the survey were only made available on 12/23/2005; thus, we do not present summary analyses or general findings. We envision our first proposed study to be exploratory in nature, covering all of the surveys and perhaps partitioning the nations to consider possible cultural, geographic, and economic factors that explain mean responses to answers. Additionally, we anticipate developing and testing theories regarding agency and TA effectiveness in traditional methodology (i.e., limited dependent variable models) for survey assessment and hypothesis testing. We anticipate using several of the ICN surveys to conduct these hypotheses tests (see below for more details).

The second study follows from an emerging area of production analysis using directional distance functions (also called shortage functions) to disentangle sources of scope economies and to measure the technical impacts of TA programs. Here, we will focus on the survey entitled “data survey,” which is included in Appendix A. The overriding objective of both studies is to identify the most effective use of inputs and outputs by competition agencies and to determine the ways in which overlapping TA agencies are effective in enhancing the resource use and output mix of domestic competition agencies. The misapplication of competition policy through ineffective technical assistance or through ineffective allocation of resources within competition agencies are an obstacle to lifting developing nations from poverty and one which the existing literature has not addressed.

Part IV: Cross-Cutting Issues in Implementing Competition and Regulatory Regimes: Lessons from various Experiences

Adopting effective competition and regulatory frameworks in developing countries: what makes the road so long and bumpy?

Developing countries have been striving over the last decade to implement market-oriented reforms that would enhance their international competitiveness and development prospects. Part of such market-oriented reforms is the adoption of effective competition laws and regulations. However, for many reasons, in a number of developing countries this process has proven very difficult. Some countries are still struggling to adopt competition laws, while others have not been able to take steps towards their effective implementation. Behind these difficulties, there are a number of domestic political-economy constraints. This paper sheds light on the key factors that are behind such difficulties, quantifies empirically their impact and identifies ways in which the competition policy agenda can be successfully promoted.

Cross-Country Effectiveness Gaps in Antitrust Policies: A Quantitative framework

This paper proposes a quantitative, cross-sectional, framework for ex-post evaluation of antitrust policies from an effectiveness and efficacy perspective. The paper looks at antitrust effectiveness and outcome efficacy in the sample countries and reaches some tentative conclusions. Effectiveness is defined as the link from the legal framework and resource use to implementation. Effective implementation is an intermediate policy outcome that is achieved through the use of an enforcement mechanism.

Efficacy is defined as the link from general governance to a “final outcome,” defined as long-term prosperity. Each of these links is assessed through the use of one or more numerical indicator. Preliminary statistical results are consistent with the existence of measurable implementation gaps (1) between the developing and the developed countries, and (2) between the recent European Union members or candidates and the more senior E.U. members, controlling for the size of the agency budget. This gap cannot be bridged merely by increasing the size of the antitrust agencies’ budgets. Reorganizing agencies’ spending priorities as well as developing extra-agency initiatives can be complementary means to bridge these gaps.

The purpose is to measure effectiveness differentials in the implementation of antitrust policies that may exist (1) between the developing and the developed countries, and (2) between the recent European Union members or candidates and the more senior E.U. members. The paper will also investigate the direction and the significance of any correlation between antitrust implementation effectiveness and foreign direct investment inflows.

Part V: Country Case Studies

Policies for Effective Competition Case Study: Namibia

It is obvious that competition policy is not the only legal framework that states are aiming to enforce. At times, deviation from competition principles may be necessary in order to meet other development goals and objectives, which can be of economic or social nature. One of the realised challenges in Southern Africa is that the development of regulatory frameworks, in most instances, lags behind the fast moving development of an integrated regional economy, and the competition framework is no exception to this phenomenon. Namibia has recently introduced a competition law, which is yet to be operationalised.

This paper seeks to identify contrasts and complementarities between competition policy and other policies. The study identifies the lack of recognition of inter-relationships among various policies as an impediment to effective implementation of the competition policy. To take account of trade-offs that competition laws and authorities have to make, the study undertakes a comprehensive policy and regulatory scan in all major sectors of the economy in order to identify any clauses that have positive and/or negative impacts on competition. While it is a case study for Namibia, few inferences will be made to the Southern African region in order to reflect on the importance of competition policy with respect to regional/international trade, which is the main driver for most developing country economies.

The paper will be of assistance to policy makers in identifying overall policy linkages with respect to competition in the economy. The paper will further seek to create awareness and stimulate participation by businesses, consumers and other structures within the local and international civil society.

Institutions and the Effectiveness of Competition Policy and Regulatory Regime in Kenya

Since late 1980, regulation policy in Kenya has shifted from the model of a positive or interventionist state, to a deregulation, state reduction model to the current focus on regulatory state. The regulatory state implies leaving production to the private sector where competitive markets work well and using government regulation where significant market failures exist. There are three main dimensions: liberalisation, state retrenchment and new regulatory design.

There are four emerging issues that may be used in explaining the essence of new regulatory design. First, rules had to be set in network industries to make access to the non-competitive segments of the industry by a plurality of service providers possible and efficient. Second, in industries where liberalisation had involved the unbundling of vertically integrated monopolies markets had to created ex novo to replace transactions that were previously taking place within the firm. Third, in industries where (non-economic) public interest objectives were ensured within a regulated non-competitive environment, ways had to be found to achieve these objectives in a competitive framework. Finally, where firms had been privatised or activities had been contracted out, regulation through public ownership had to be replaced by an arm’s length regulation.

Arguably, however, the performance of the new regulatory regime in Kenya remains under researched, especially in the context of the peculiar economic and social problems and institutional characteristics. Building effective regulatory structures is not simply an issue of technical design of the regulatory instrument; it is also concerned with the quality of supporting regulatory intuitions and capacity. Many of the institutions that support markets are publicly provided and the effectiveness of these institutions becomes an important determinant of how well market function. The quality of regulatory governance will affect regulatory outcomes, which in turn can be expected to impact on economic growth.

The main purpose of the study is to examine institutional issues in the effectiveness of competition and regulatory regimes in Kenya

Independence of Competition and Regulatory Agencies: Feasibility? Practicality? And Necessity? The case of Fiji

An essential requirement of a developing nation is the availability of strong competition laws to ensure smooth transition of state reform programs for the achievement of national economic efficiency objectives. In Fiji for example the Commerce Act provides for the establishment of Access Regimes in utility industries to enable competition in markets where duplication of infrastructure would be difficult. This allows possible competitors to operate in the same market as the owner of the infrastructure providing competition to the incumbents resulting in benefits such as lower prices and wider range of services.

Whilst it is the government which appoints the competition agency, it is vital that such institutions are accorded some autonomy in order to execute regulatory functions free of political conflict of interest. The Fiji Commerce Commission whilst accorded independent rights, receives its funding from the state which is controlled by the Ministry of Commerce.

The research for this paper focuses on the structural reform policies of Fiji, a small developing economy in the South Pacific region and the establishment of a competition regulator as part of institutional development arising out of the reform process. Within this context it provides regard to the introduction of competition legislations and the government’s initiative to bestow importance to this legislation as an initiative to provide protection to its citizens from unethical practices with increasing trade and commerce.

It will review the efficiency of the commission in light with the cases brought before it and the expected outcome. It will also discuss in detail the specific feature of the competition regulator such as; accountability, autonomy, political independence, appointment procedures and budgetary support. It will also briefly compare these specific features with a competition regulator in another developing country.

The main purpose of this research will be to measure the independence of competition regulator in Fiji and its impact on regulatory efficacy.

Independence and Autonomy of Competition Authority of India

Competition litigation is not necessarily adversarial in character. It is adversarial in cases of private action, in which there is a complainant and a respondent/defendant. The latter is the offending party, who faces charges of having perpetrated an offence under the competition law. In litigation not adversarial in character, the charge against the offending party is generally one of having acted against consumer interest and of having trenched competition in the market. The investigative agency or the Competition Authority (Authority) itself may initiate action in such non-adversarial litigation cases.

It is therefore imperative in this context that the Authority needs to be independent and autonomous in its functioning. Besides equity, fair play and justice which are the basic pillars of judicial (and quasi-judicial) adjudication, an underpinning that is equally an important pillar is the character of independence and autonomy for the Authority. Independence can generally be presumed in private litigation which is adversarial in character. But where the Government itself or a Government undertaking is the perpetrator of a competition offence and where action is brought against it under the competition law, independence of the Authority may not be presumed.

But some competition laws have provisions to ensure that the Authority inheres independence and autonomy.

Independence and autonomy constitute the cornerstone of an effective and efficient Authority. At the same time, one should not obfuscate the possibility of the Authority having unbridled power to question and annul Government policies and objectives thus diluting the sovereignty of the Executive. There should be a balance. The paper will address the said balance after reviewing the character of independence and autonomy of the Competition Authority in the new Indian competition law namely, Competition Act, 2002.

Credibility and Accountability in Belgian Competition and Regulatory Policies
Belgium introduced a competition law as recently as 1993. In the same period more or less independent regulatory agencies were installed for telecommunication, postal services and energy. At present the job of regulating infrastructure in the recently opened up sectors of railway transport and airport infrastructure is being given to ministerial departments. It follows that a very different kind of independence is present according to the sector in question.

The purpose of this is to analyse the credibility of the competition authority and these regulators. In how far have the bodies concerned been successful in building up credibility towards the various stakeholders, such as government, the regulated industries and consumers?

In this paper we will also analyze how accountable Belgian competition authorities and regulatory agencies are. The scope of the paper will be on the Belgian Competition Council, on the Belgian Institute for Postal Services and Telecommunications (BIPT), on the Committee for the Regulation of Electricity and Gaz (CREG) and on the Ministry of Mobility which houses the two services that regulate railway infrastructure and airport infrastructure respectively.

The purpose of the present study is to also show how Belgium is batting the problem of creating sufficiently independent competition and regulatory authorities without impeding on their accountability to the democratic process. In that way the study can act as an example for other countries, especially developing countries that still have to give form to their institution.

Regulation and Competition in Infrastructure Industries: Lessons from Experience of Turkey
Competitive structures in infrastructure sectors are essential to promote both sustainable growth and social welfare. In our paper, after establishing this argument, by reviewing Turkish experience, we suggest that a co-existence of independent regulation and competition authority is necessary to make utilities industries competitive. However, the borders between jurisdictions of two independent authorities should be clearly drawn, leaving competitive oversight to the area of competition authority. In addition, dispute resolution mechanisms should be established between two bodies and government should take the role of endorsing competition in these industries in the long-run. We also provide instances that promotion of competition in these industries was hindered in Turkey because of the lack of these mechanisms.

In the public interest: An account of the South African competition policy five years on
In terms of the Chicago school of thought, competition policy is intended exclusively to preserve consumer welfare, defined solely in terms of economic efficiency. Competition laws in some jurisdictions are premised on this notion. Not so in South Africa, where instead, the competition laws have a myriad of objectives. These can be classified broadly as promoting either ‘efficiency’ or some ‘public interest’ goal.

Thus, in implementing the Act, competition authorities in South Africa have to take cognizance not only of efficiency goals but of public interest objectives as well. Often there is a trade off between efficiency and public interest goals, necessitating a balancing act by the authorities.

This paper gives an account of the challenges faced and approaches taken by the South African competition authorities’ in implementing the public interest objective of the Competition Act during the first five years of their existence. It will analyse whether this double-pronged approach to competition policy has stymied the effectiveness of the authorities.

Part VI: Sectoral Issues

Introducing Competition in Indian Electricity: Problems and Prospects
Competition contributes to economic growth and to consumer welfare and it creates an atmosphere that favors change and improvement. Competition in electricity markets can produce same results. While competition in wholesale markets for power can provide better incentive for controlling construction and operating costs of new and existing generating capacity, to encourage innovation in power supply technologies, and to shift the risks of technology choice, construction cost and operating mistakes to suppliers and away from consumers, retail competition is supposed to allow consumers to choose the retail power supplier offering price/service quality combination that best meet their needs. While most of the developed nations have established effective competition in their electricity markets, the developing countries has recently started a move towards it.

In India protection and controls are being replaced by a competitive and de-regulated open economic system during last one and half decade. This fundamental transition in Indian economy is well reflected in the electricity sector. During first phase of reforms private players (IPPs) were introduced in electricity generation to create a competitive wholesale market, which achieved some degree of success as we have a number of IPPs contributing almost 32 percent of total generation. The next step was restructuring of the state electricity boards, which included unbundling-separation of potentially competitive segments, and corporatisation. To meet the gaps in the first phase of reforms, the second phase emphasized on privatization of distribution and establishment of independent regulatory commissions to manage the competition.

The purpose of this paper is to analyze different possibilities of retail competition in Indian electricity, and what are the problems and prospects of a competitive retail electricity market in the light of present Competition Act, 2002. The paper will discuss various steps taken to introduce competition in retail electricity market and will assess the process in the light of existing international models. On the basis of this analysis the paper will recommend an ideal way of introducing competition in retail electricity market.

Competitive Electricity Markets in India: A Regulatory Challenge
It is important that competitive electricity markets develop in India so as to meet the growing demand for electricity in India in economically efficient manner. Poor infrastructure including inadequate and inefficient power supply are frequently cited as potential hurdles that may come in way of sustained economic growth.

Regulatory mandates and scope of regulation: Paper will seek to see the differences in the objectives and scope of regulatory bodies at the central and state level. Evidence on the regulatory capabilities at the central and state regulatory commissions: The issue will be examined by looking at the human resource profiles at the commissions, annual budgets, involvement of external consultants and other informed stakeholders such as consumer groups in regulatory process, information and knowledge resources available to the commissions.

Process of regulation in generation, transmission and distribution: The evidence on the process of consultation and decisions will be collected from the information published by the commissions.

Regulatory performance and accountability: This issue will be briefly examined by looking at the regulatory acts.

An investigation of the relationship between regulatory process and regulatory efficacy and governance in the Indian power sector
India is increasingly turning to independent regulation as a means of governing economic activity. Regulators have been charged with the difficult task of reversing entrenched problems of mis-governance in electricity, a key sector for economic growth. However, India has a unique institutional structure, wherein regulators regulate state-owned utilities, who in turn have clout in government. This has led to a general skepticism of regulatory efficacy. However, there is little rigorous understanding of regulatory effectiveness, or indeed of regulators’ capacity to fulfill their mission in this context. In particular, there is little attention to the building blocks of good governance processes – institutional robustness, transparency, participation, accountability, capacity – that are necessary for effective and fair regulation.

The past seven years have borne out the skepticism surrounding regulation of state-owned entities. There are strong reasons to question the autonomy and institutional integrity of regulatory bodies, the regulatory selection process, regulators’capacities, and the robustness of the governance framework within which they interact with other stakeholders in performing their tasks.

This paper will examine in-depth the structure and practice of good governance in electricity regulation in four states in India, with a focus on the relationship between regulatory process and regulatory governance. A related objective of this research is to explore practical and effective modes of public involvement in regulatory rulemaking.

The purpose is to provide concrete recommendations for improving regulatory efficacy in the Indian power sector.

Adaptability of Western Style of Regulation in Developing Economies: A Case of Electricity Sector in Delhi, India
In recent times a typical ‘reform model’ comprising setting up of regulatory commission independent of government and functional unbundling of utilities followed by their privatisation, has been propagated as panacea to all ills that electricity industry is characterised with in most of the developing economies.

This model was borrowed from the Western world and is based on the premise that: Having an absolute disconnect between the political establishment and economic policy/regulatory decisions is feasible. During last decade many of developing countries have adopted this model with little adaptation and the outcomes by and large have been far different from the desirable.

The case of electricity sector in New Delhi India is a representative one that has many of the dimensions stated above. The regulator (Delhi Electricity Regulatory Commission) who is supposed to function independent of the government was perceived as ineffective in regulating the sector. The perception of consumers was that the regulator was there just to raise tariffs without even bother about quality of services. The government continues playing an active role in regulatory matters, such as tariffs, though is not suppose to do so.

The case described above (thereafter referred as Delhi Case) has raised some basic issues. Can adoption of the Western style of regulatory model address peculiar challenges being faced by developing economies in the utility services? Is absolute insulation between regulatory processes and political establishment achievable in developing economies? Is regulatory independence a guarantee for effective and impartial regulation? Is it possible to have a mechanism that is more acceptable and implementable in the context of developing economies, yet the objectives of effective regulation are achieved?

The proposed research would study and analyse the Delhi Case as representative one and seek answers to the questions mentioned above. The paper would carryout an objective analysis in light of the experiences with the Delhi case. The approach would be to look for pragmatic solutions in the context of the economic-political realities in developing countries rather than striving for ideal solutions which the textbooks often recommends.

Regulation and Demonopolization of the Telecommunication Sector in Serbia
Telecommunication Sector in Serbia was a complete state monopoly until 1997. Partial privatization of Telekom Serbia in 1997 (Telecom Italia, 29 percent; OTE-Greece, 20 percent) prior to regulation of telecommunication sector resulted in replacement of public monopoly by private-public monopoly.

After the partial privatization of Telecom Serbia, the established public – private monopoly was even worse solution than public monopoly, as it resulted in permanent growth of prices, disinvestments and worsening of the quality of telecommunication services.
Until April 2003, when the Telecommunications Law came into force, this area was regulated by the obsolete Serbian Law on Communications, which did not correspond to the basic elements of modern EU legislation. The new Telecommunications Law, adopted in May 2003, was developed in line with the EU determining conditions and the ways of conducting operational activities.

However, the implementation of this law was not possible because the law contained a provision that provided that Telekom Serbia retains exclusive rights on the market until June 2005.

The purpose of this paper is to present the current unfavorable situation in the telecommunication sector in Serbia, and to give recommendations and conclusions on the necessary steps that have to be taken for the improvement of the existing situation.

Dealing With Monopoly Power In The Context Of Asymmetric Power Relations: The Case Of Cable And Wireless In The Caribbean
Most members of the Caribbean Community (CARICOM) have been locked into a monopoly contract for provision of telecommunications services with Cable and Wireless (C&W) for the last two decades or more under very exploitative conditions of contract in favour of Cable and Wireless. During the last five years, the grip which C&W held in the region has been gradually loosened, and competition is being introduced, with the entry of several other companies providing telecommunication related services (mobile; internet etc.).

This paper explores the initial conditions in the negotiations that led to exploitative agreements between governments in the region and C&W, the track-record of this transnational corporation’s (TNC’s) performance while holding the monopoly position, the experience to this point in the liberalization process and the establishment and performance of the regulatory bodies. The paper thus focuses on monopoly power, the abuse of monopoly power, and the impact of liberalization, but the experience is contextualized in the changing global economic and trade environment and in the asymmetric power relations between large TNCs and small economies.

Indian Civil Aviation Industry: A Challenge to the Emerging Regulatory and Competition Experiment
The decade of the 90s has seen a paradigm shift in the approach to economic management in India. There has been a greater recognition of the value and significance in the use of markets and the market friendly processes in the economy (Anant & Sundar 2004). It is also perceived that the markets were not competitive due externalities, economies of scale and scope, imperfect and asymmetric information, and imperfect competition. These factors lead to large scale market manipulation that ultimately lead to market distortion where the
business and the consumers where the ultimate losers.

The objective of this paper is to address the existing practices and issues relating to the airline regulation and the framework; examining the anti –trust practices in the sector; and finally propose the role of economic regulator and competition authority addressing these issues.

The study proposes to examine the economics of airline industry, contemporary policies, laws and procedures as available in the existing literature for other countries especially in the developing countries. Attempt will also be made in appraising the existing Civil Aviation Ministry guidelines and procedures.

On the basis of this, the study shall formulate an indicative guideline for the sector in terms of probable issues that shall lead to develop the industry and also the practices that may be detrimental to the industry s being and becoming. The study shall highlight the institutional mechanism to deal with these contentious issues.

Regulation, Competition & Government Ownership: A case study of Financial Sector in India
The case for appropriate regulation of financial sector to ensure stability and investor protection is fairly obvious. The need of government ownership in designing such regulation is not, however, so obvious. These days competition is seen to be a facilitator of effective regulation (Whittaker, 2001). Changes in communication and computation technology are changing the face of industry affecting, inter alia, structure and competition. (Wharton Financial Institution Centre, 2001) This is also affecting the trends in regulation of financial sector making it more elaborate and internationally convergent.

Government of India has significant ownership stakes in major segments of financial system viz. banking, insurance, and pension & fund management. Creation of a single regulatory agency to oversee all segments of financial sector is a major issue in ensuring regulation through competition. The other issue is to ensure government ownership does not impede competition and regulation in financial sector. From the perspective of regulation and competition, it is not the percentage of government holding per say is very important; but the manner in which government ownership affects the internal working these entities is the most relevant aspect.

This paper seeks to identify the balance between competition and of regulation in financial services sector so as to ensure stability of the system and investor protection. It also enquires whether government ownership is essential for proper regulation of financial sector. The theme of the paper is developed in the context of financial sector in India, which is characterized by dominant government ownership.

Competition and Regulation Issues in the Finance Sector of South Asia: A Survey
It is a fact that in developing countries, governments have a substantial interfering role in economic and business activities. This fundamental reason has placed considerable weights on competition and regulation authorities in these countries. It is difficult to improve competition and regulation in a sector where the government has conflicting objectives. In this case the interference is not only coming from political sources in a particular government but also from higher level bureaucratic sources who are appointed by the government as well. To overcome this problem, there are so called ‘independent regulators’ appointed by governments. However, the issue here is how far these regulators are going to be ‘independent’. This will lead us to spot true competition and regulatory authorities in these countries before identifying priorities of such authorities.

In a market economy, to implement appropriate competition and regulatory policies for the benefits of the nation, political and other implications should be given lower priorities. However, as the political and other interferences in economic activities are significant in developing countries, non-economic factors could not be ignored easily.

The purpose of the study is to enhance knowledge on the main theme area by contributing to the literature. The proposed topic will examine two major issues namely, the level of financial regulation in each South Asian country and whether the existing level of regulation in each country is contributing positively/negatively towards competitive financial market activities in the region. It is a fact that financial market in any country is not able to function itself efficiently without some regulations. Therefore, regulations are part of the financial system. However, common belief is that when the regulations are higher, the level of efficiency is lower in financial markets. This will be the issue that is going to be tested.