Unpacking regulation: too many cooks in the kitchen?

What do we mean by regulation? What does current literature tell us about the developing nature of regulatory systems and regulatory reform? How can best practice and policy be transferred between developed and developing nations? What additional policy-relevant research into southern regulatory systems is needed?

The University of Manchester’s Centre on Regulation and Competition (CRC) provides an overview of current thinking about regulation in its report ‘Governance-based analysis of regulation’. Highlighting the significance of the process through which regulatory policies are delivered, it maps out categories of analysis. The report warns that regulation is culturally embedded and northern regulatory blueprints travel badly. If they are imposed on developing countries, implementation is likely to be lacking.

The starting point for research into regulation must be to construct a check-list of questions. What are the institutions of rulemaking? Through what processes are rules designed? Who are the rulemakers? How are rules implemented and by whom? How is compliance obtained and by whom? How do public rulemaking and private rulemaking interact? What are the forms of accountability that promote rulemaking?

We must look not merely at changes in the formal rules which govern relationships between public and private sectors, but also at changes in the relation of state and market and the range of institutional forms and relationships that determine the operation and outcomes of these changes.

The report notes that:

• The often overlooked variety of forms which privatisation takes are each associated with different regulatory forms.
• Orthodox models – ignoring politics and emphasising legal rules, formal structures of organisation, rational policy choice and presumed implementation of formal policies – are flawed.
• Managerial reforms aimed at increasing delegation, discretion and autonomy often increased central controls.
• As the UK has pushed privatisation and deregulation, there has been a substantial increase in the output of statutory government regulations – in 2000 alone there were 3 412 new regulations.
• There is a risk that the multitude of new regulatory and adjudicative bodies intrinsic to the public sector may become unaccountable.
• Regulatory capture – the effective control or domination of regulatory mechanisms by the interests who are the object of regulation – is a risk which must be lowered.

Relations of trust and an ethos of public interest are essential for effective regulatory institutions. The report argues the need to:

• make regulatory agencies more independent and accountable
• test the hypothesis that the weakness of regulatory mechanisms in developing countries lies in low levels of government legitimacy, inefficiency and political capture
• realise the absurdity of supposing that regulatory models established in developed economies can be transferred into a contextless environment
• map existing networks, focus on co-operation and accountability and examine various forms of partnership – customer-contractor, principal-agent, public-private and voluntary
• construct an ‘architecture’ of regulation involving the design of networks which ensure the development of appropriate capacities and reinforcement of organisational commitment to regulatory purposes
• recognise that political factors may be taken to represent an opportunity for commitment to regulatory reform as well as a potential source of inhibition or resistance.

Source(s):
‘Governance-based analysis of regulation’, Annals of Public and Cooperative Economics 73(4), pp 649-66, by Martin Minogue, December 2002
‘Governance-based analysis of regulation’, Centre on Regulation and Competition, Working Paper Series, no 3, by Martin Minogue, October 2001 Full document.
‘Public management and regulatory governance: problems of policy transfer to developing countries’, Centre on Regulation and Competition, Working Paper Series, no 32, by Martin Minogue, December 2002 Full document.

Funded by: Department for International Development, UK

id21 Research Highlight: 30 May 2003

Further Information:
Martin Minogue
Centre on Regulation and Competition
Institute for Development Policy and Management
The University of Manchester
Crawford House
Precinct Centre
Oxford Road
Manchester M13 9GH
UK

Tel: +44 (0)161 275 2824
Fax: +44 (0)161 275 0808
Contact the contributor: martin.minogue@man.ac.uk

Centre on Regulation and Competition, University of Manchester, UK

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'Pro-poor regulation of water and sanitation: the role of tri-sector partnerships'

'Wine and worker welfare: private sector self-regulation under scrutiny in South Africa'

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'A Framework for Regulating Microfinance Institutions' from the World Bank

'The Costs and Benefits of Regulation: Some Implications for Developing Countries' from the World Bank