Industry Structure and Regulation

No AccessPolicy Research Working Papers21 Jun 2013Industry Structure and RegulationAuthors/Editors: Martin C. Stewart-SmithMartin C. Stewart-Smithhttps://doi.org/10.1596/1813-9450-1419SectionsAboutPDF (3.8 MB) ToolsAdd to favoritesDownload CitationsTrack Citations ShareFacebookTwitterLinked In Abstract:February 1995 With increasing private provision of public infrastructure and redefinition of the role of government, a key question must be addressed: How should providers of infrastructure be regulated? Sustainable success in regulation requires reforming the structure of each sector in a way that clearly identifies the role of competition and the objectives of regulation -- and making clear distinctions among the functions of policymaking, policy implementation, and operations. As private firms become increasingly involved in the development of key infrastructure, redefining the role of government from that of service provider to regulator presents both challenges and opportunities. The factors that give rise to sector reforms color how much policymakers invest in regulatory design during the reform process. Nevertheless, two factors are essential to sustainable sector and regulatory reform. First, the right structure must be established for the industry concerned, a structure that allows competition appropriate for that industry. Second, the objectives of regulation must be well defined, with a clear distinction between policymaking, policy implementation, and operations. The extent to which competition can be harnessed to help make regulation efficient, effective, and sustainable depends on the intrinsic technical characteristics of the sector. Each decision affects the sustainability of the regulatory regime in the face of the threat of regulatory capture (both political and commercial). Careful regulatory design is crucial not only for successful sectoral reform but also to balance the interests of various actors (government, consumers, developers, investors, and financiers). One model that has been relatively successful combines new entry, unbundled services, and the unambiguous spelling out of the legal rights and duties for both public and private service providers, administered by an autonomous regulatory authority. Problems with regulation often result as much from inadequate attention to sector structure and fostering competition as from weaknesses in the regulatory authority's institutional capacity. As for the tools of regulation, despite differences in some details between licenses and concessions (and their many contractual variations), these are basically instruments that establish the rights and obligations of the contracting parties. Choices about where these rights and obligations are located in the legal hierarchy are shaped by a country's institutional capacity and legal traditions. But the existence of instruments to establish those rights and obligations does not eliminate the need for institutions to administer them, and thus carry out the regulatory function. Establishing effective sectorwide regulation can be difficult in a developing country, but it is necessary. Policymakers will be able to create effective regulatory regimes where adequate attention is given to sector structure, competition, and institution-building. This paper -- a product of the Legal Department, Legal Reform and Private Sector Development Unit -- is part of a larger effort in the department to share with interested parties legal policy research done as part of the department's operational work. Previous bookNext book FiguresreferencesRecommendeddetailsCited byHouseholds' willingness to pay for a motorcycle helmet in Hanoi, VietnamApplied Health Economics and Health Policy, Vol.6, No.2-36 August 2012R&D, Advertising and the Market Value of Internet Firms: Part IJournal of Internet Commerce, Vol.3, No.2 View Published: November 1999 Copyright & Permissions Related RegionsLatin America & CaribbeanRelated CountriesArgentinaChileCzech RepublicHungaryTimor-LesteRelated TopicsEducationInfrastructure Economics and FinanceLaw and DevelopmentMacroeconomics and Economic GrowthPrivate Sector DevelopmentTransport KeywordsCOMPETITIONDEREGULATIONDEVELOPING COUNTRIESDEVELOPING COUNTRYEXCHANGEINFRASTRUCTURE DEVELOPMENTINSTITUTIONAL CAPACITYINTERESTSINVESTORSPRICEPRIVATE SECTOR DEVELOPMENTPRIVATIZATIONREFORM PROGRAMREGULATORREGULATORY AUTHORITYREGULATORY FRAMEWORKREGULATORY REGIMEREGULATORY REGIMESSHARETECHNICAL ASSISTANCE PDF DownloadLoading ...