December 2003 Insights Issue #49

Regulating for development

Developing countries are now being asked to follow developed countries in the privatisation of goods and services previously provided by the state. It is argued that these countries will gain from the creation of efficient markets which offer their best chance to establish competitiveness, leading to economic growth. But critics claim that privatisation damages the quality of public services and undermines public accountability. Conventional forms of regulation address these two issues; but is it also possible to regulate for development that reduces poverty?
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Other articles in this issue:

Back to the state?

Following privatisation in developing countries, aid donors such as the European Union have promoted a model of regulatory ‘best practice’ based on the western European and north American example of regulatory agencies independent of government control. But there is a reality gap here between donors’ ideas of best practice and the real legal, administrative, economic and political processes which exist in developing countries.

Tricky compromises

Problems with regulation and privatisation

Regulation is required to alleviate the damaging effects that market imperfections such as monopolies can have for social wellbeing and economic development. Regulation, however - be it by governments or independent agencies - faces two particular problems of its own: ‘hold-up’ and ‘information asymmetry’. What is at stake when countries try to regulate the market for development?

Thinking it through

Why corporatisation could be a better way to regulate

State ownership has been rejected and privatisation accepted, too often uncritically by neo-liberal reformers. However, corporatisation - sometimes described as a ‘halfway house’ between state-ownership and privatisation - may offer a better model for regulating monopoly public utilities such as water, public transport and electricity in developing countries.

Tackling corruption realistically

Corruption is deeply embedded in the political culture and poverty of many less developed countries (LDCs). Regulatory bodies are particularly vulnerable to corruption as they have the power to make key decisions on profit-making activities. Corrupt regulatory bodies can thus dangerously impede economic development.

Taming the market

Can self-regulated ethical trade control globalisation?

Global trade brings benefits for some, but also exposes workers and producers in developing counties to the hunger of market forces. Hungry for profit, the globalising market can create badly paid, insecure jobs in unsafe conditions that pollute local communities. Self-regulation through ethical trade (ET) is a relatively new way in which businesses agree to limit and tame their own hunger to help improve social and environmental wellbeing. But what is needed to make ET work?

In defence of the WTO

Hard rules are better than no rules at all?

The creation of the World Trade Organisation (WTO) in 1994 took earlier international rules and agreements on free trade a lot further and added the disciplining bite of a binding Dispute Settlement Body (DSB). About two thirds of the WTO's 146 members are "developing" countries, and they were vocal in Cancun, but are the rules biased against them?

Learning to trip up

How international regulation affects development strategies

Intellectual property rights (IPRs) allow knowledge or information to be owned: the most common forms are patents (for industrial ideas), copyrights (for creative expression) and trademarks (for brands and company names). IPRs allow owners to treat ideas, knowledge and information as if they were physical property; they can sell them, rent them out or demand compensation for their loss.

Managing markets

Using subsidies to regulate in favour of the poor

The World Bank and donor agencies have promoted the privatisation of basic services as a strategy to increase investment and secure improved and extended services. However, in the case of water, investments are still deficient and many of the poor do not have piped supplies in easy reach. Others live close to a pipe but cannot afford to connect to the network or to pay the bills when they are connected.

Is regulation working?

Regulatory Impact Assessment

State regulation needs to be effective if it is to benefit developing countries by removing market failure and promoting sustainable development. Regulatory Impact Assessment (RIA) offers a method for improving regulation by systematically assessing potential or actual costs, benefits and impacts of new or existing regulatory measures. What guidelines are available to regulators in developing countries?

Sites for sore eyes

Further web resources.

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