Economic governance
The efficacy of regulation in developing countries
De-regulation within a regulatory framework
Authors:
S. Hafeez
Publisher:
Department of Economic and Social Affairs, United Nations, 2003
The receding role of direct state intervention coupled with a consensus on private sector-led growth and development has led to a reduction in economic regulation of industries. Most developing countries have undertaken liberalisation and privatisation as a first step toward free market regimes, though progress has been uneven. This paper considers why this deregulation has not worked for all countries.
Using data from surveys about regulatory constraints on the private sector firms in thirty countries, this document presents the argument that for economic de-regulation to be effective it must be set within a holistic regulatory framework, which supports the efficient functioning of free market enterprise.
The author presents a comparative analysis of 30 economies grouped according to their level of economic development. To put the regulatory burden into perspective, the paper constructs quantitative indices to measure the policy and institutional constraints on the overall 'enabling environment' which are an important determinant of the efficient functioning of markets. In doing so, the paper identifies key areas where states need to design high-quality regulation. The following areas are considered:
- regulatory reform in developing countries
- the measurement of state regulation
- data and methodology of the study
- the political economy of regulatory reform
- economic growth and regulatory regimes: is there a link?
The author argues that it is of vital importance that states aim at improving the mechanisms and processes governing the market place. The basis of an effective economic policy framework in developing countries is building and supporting the development and maintenance of an effective and efficient economic and regulatory environment conducive to efficient private-sector activities. The new role of the state must focus on building regulatory regimes within the context of its constitutional, economic, legal and political systems.
