1887

Better Economic Regulation

The Role of the Regulator

image of Better Economic Regulation

Efficient provision of transport infrastructure is critical to economic growth. The long asset lives of much transport infrastructure indicates governance through regulation, rather than through contract or public ownership. This can ensure predictability in long-term relationships whilst preserving some flexibility to deal with changes in external circumstances.

The transparency created by a fully independent regulator is invaluable for ensuring sufficient investment  is forthcoming, while maintaining reasonable conditions for user access. Discussion at the Roundtable focussed on how to achieve effective independent regulation and how to reconcile independence with the legitimate control of policy by the executive part of government.

Independent regulation is not seen as a universal default governance arrangement. Much of the discussion focused on when to regulate and when to rely on competition, even if imperfect, to drive efficiency. The discussions underscored that there are opportunities to improve performance significantly in the aviation, rail and road sectors, by learning from successful experience in improving governance structures in a range of countries.

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Effective regulatory institutions

the regulator's role in the policy process, including issues of regulatory independence

International Transport Forum

This paper discusses three connected aspects of regulation: 1) What makes a regulatory authority effective; 2) What is the legitimate role of a regulatory authority in the making and implementation of policy, and how that role may be regarded by others, and 3) The issue of independence of regulation from undue political intervention. It argues that regulators are usually established to carry out complex technical tasks which government is unable or unwilling to do, partly because government wishes to distance itself from responsibility for some decisions. However, having invested regulatory authorities with sometimes considerable powers, which are more detailed and intrusive than any possessed by government over state-owned entities or industries, political or bureaucratic impatience or intolerance of that power sometimes takes over, and undue governmental pressure or interventions follow. These interventions come about either because of regulatory failures, or because politicians wish themselves to exercise regulatory powers which they regret having transferred to regulatory authorities. Regulatory independence from political intervention and regulatory freedom from political considerations is internationally recognised as an important facet of effective economic regulation; but despite that, it can come under such severe pressure that the system will fracture, causing severe loss of confidence in the regulatory system and in the reputation of the host government for fairness and respect for the integrity of the system of checks and balances which has been established for the protection of investment. It argues that regulatory independence is as much about regulatory behaviour and legal status.

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