What Are the Main Requirements of a Good Regulatory System - Essay Example

?What Are The Main Requirements Of A Good Regulatory System To Govern Privatized Infrastructure? Table of Contents Introduction 3 Regulations- Definition 3 A Good Regulatory System- Characteristics 4 Need for Regulatory system in Governing Privatized Infrastructure 6 Requirements of a Good Regulatory System to Govern Privatized Infrastructure 7 Legal Framework 8 Legal Powers 8 Property and Contract Rights 8 Clarity of Roles in Regulation and Policy 9 Clarity and Comprehensiveness of the Decisions of the Regulatory Agencies 9 Predictability and Flexibility 10 Consumer Rights and Obligations 10 Proportionality 11 Regulatory Independence 11 Financing of Regulatory Agencies 12 Accountability 12 Transparency in Regulatory Process 12 Ethics 13 Conclusion 13 References 15 Bibliography 18 Introduction A regulatory system is a group of agencies developed by concerned authorities that are given the responsibility to design policies for firms or individuals altogether in order to limit their functions in a morally and legally justifiable manner. The intention of creating such agencies directly associates with the approach of the government and regulatory authorities to control the unfavourable and unethical approaches of the aforementioned stakeholders and ensure a fair practice within the society. It is owing to such significance that the regulatory systems have become quite important today in order to maintain a healthy balance in various domains of the society1. Arguably, maintaining such a control has been observed to be much challenging in privatised sector where governmental interventions and regulatory norms possess limited influence in comparison to the public sector. Contextually, this paper will evaluate the requirements of a good regulatory system in order to govern the privatized infrastructure. Regulations- Definition Regulations are often considered as the policies enacted the concerned regulatory authorities to monitor as well as enforce varied rules to control any particular aspect of the private or public sector. It will be vital to mention that regulations can be of various forms, which include responsibilities and duties conferred by the governmental agencies, regulations bestowed by non-governmental associations and regulations within the sociality among others. Each of these regulations is supposed to have its own purpose and need in the society for ensuring welfare of the same one way or the other. In precise, it can be stated that regulations are rules formed by concerned authorities or groups with the intention to deliver outcomes that might not be possible otherwise2;3. A Good Regulatory System- Characteristics Developing and continually practicing effective regulations are considered to be among the major challenges for government and other regulatory agencies to govern the private sector. There are several key contents of well framed regulations. To be mentioned, regulations implemented by the government and other concerned agencies need to first emphasize on the problems that prevail in various sectors, including the sector for privatised infrastructure. This will enable the agencies to have a clear idea about what sort of regulatory policies are to be frame and accordingly, the concerned authorities should decide on them. It will be vital to mention that the regulatory policies formed should be focused towards ensuring maximum innovation so that it can tackle the present market scenario and ensure noteworthy and desired results4. A balance between the problems depicted and the solutions framed is quite important to ensure effectiveness of the regulatory policies. In this regard, concerned authorities should need to ensure that the measures they take are directly proportional with the problems that are desired to be addressed in the regulatory system. Targeting the particular sector where the regulations are to be imposed is also vital in order to ensure maximum effectiveness of the designed system. Flexibility is another key characteristic that must be ensured while framing any sort of regulations. Government and other regulatory agencies should therefore adopt the approach of continuous development in the policies that currently prevail with concern to one particular segment or problems. Contextually, they should also review the policies and identify its effectiveness in the present scenario. Furthermore, regulatory agencies must also make changes or eliminate any aspect in policies in accordance to the changing nature business or social environment altogether and hence, should be partially based on a trial and error form. Bit, not all regulatory norms must be made flexible as it might lead to an unstable regulatory environment within the environment, resulting in limited efficiency of the applied system. Hence, flexibility should be taken into consideration in the process of framing regulatory norms at an accurate level, with the intention to ensure effectiveness of the same for a longer duration of time. Subsequently, transparency is also deemed as another vital aspect that is to be considered while framing regulatory norms. Notably, it is important that the approach of the government and other regulatory agencies should be apparent to the community and the business units that are supposed to be affected from the same. This approach of the concerned authorities to maintain transparency in the policies is quite likely to promote the knowledge sharing in the regulatory systems5. One more vital characteristic of good regulatory policies is consistency and predictability. Observably, regulations practiced by the government and other agencies should ensure maximum consistency with different laws and agreements of the government so that any sort of confusion could be avoided. Furthermore, in order to ensure stability in the regulatory policies of the concerned authorities, predictability should be maintained in the same. This will ensure confidence of the business units on the policies framed. Besides, cooperation also forms another vital component of good regulatory norms. Under this principle, cooperation and involvement of the society and business units is deemed to enhance the quality of the policies and in turn increase the probable chances of its effectiveness6. Hence, in this context, whenever possible, the government and other concerned authorities should seek to build policies in accordance to the views of the stakeholders like business players and community to ensure a cooperative culture in the society altogether. Apart from the mentioned components or principles, accountability is also confirmed as one more crucial characteristic for a set of good regulatory policies. It is important that the government or other regulatory authorities must explain its approach on framing the policies to the people and other effected stakeholders in the society. In this regard, the result of the policies implemented should be conveyed to the public on a periodic basis.7 Need for Regulatory system in Governing Privatized Infrastructure Privatization of infrastructure is regarded as the approach of the government to rope-in private organizations and maintain as well as operate certain activities of government to enhance its effectiveness. However, it is crucial to note that privatization of infrastructure has several issues related to standards of conduct and ethicality of the companies, which has the potential to raise threats for the interests of the citizen in a given economy. In this regard, the primary need of having proper regulatory system is to safeguard the rights and welfare of the citizens that are affected one way or the other from the approach of the privatized infrastructure based companies8. In the foremost, regulatory system or regulations ensure that the customers get fair and equitable treatment from the companies. Secondly, regulations make sure that the privatized sectors are fair in their conduct and maintain a legal standard in their operations to work in abidance with the stated concerns related to stakeholders’ interests9;10. Requirements of a Good Regulatory System to Govern Privatized Infrastructure There are certain specific requirements in the regulatory system that are formed with regard to deal with or govern the privatized infrastructure. It is in this context that the government aims to manage the social and economic activities of the privatized infrastructure through various stern laws and regulations11. Some of these important characteristics that should be required in a good regulatory system for governing the privatized infrastructure are discussed in detail below. Legal Framework It will be crucial to mention that the agencies of regulatory system should be competent enough to deal with the challenges in governing the private sector. Contextually, the agencies should be created by the government under a specific law. The law further needs to fully articulate the authorities, duties and responsibilities of the agencies along with conveying the approach or the process of their work12. Legal Powers Power and authority are among the two vital components that enable effective functioning of the regulatory agencies in governing the privatized infrastructures. In this regard, the agencies under the regulatory system should require having certain specific authorities with regard to take vital decisions without the consent of the other agencies of the government. Some of those might include the authority to take decisions on setting tariffs as per the mutual benefit interests of the consumers and the entities. It also emphasises authority to make decisions to set standards and thereafter, ensure proper service quality. Furthermore, authority to make decisions regarding remedies for those entities which have been alleged for violating the rules and regulations of the agencies among others must also be directed under the given principle13. Property and Contract Rights The rules and regulations set by the regulatory agencies under the regulatory system will require respecting as well as protecting the rights of the people and the entities in the privatized infrastructure with equal significance to eradicate biases and maintain transparency. The contract between the entities and the regulatory agencies should also be made as per the laws and the rights of the contracts should not be excessively limited at the same time. Furthermore, in case of any misconduct of the entities in the privatized infrastructure sector, they should be given a clear and fair opportunity to present their views before the ultimate decisions are made. It will be vital to mention that none of the entities in the privatized infrastructure sector should be held accountable for the misconduct of any activities until and unless it is proven that they fail to comply with the set laws and standards of the agencies of the regulatory system14. Clarity of Roles in Regulation and Policy The law set by the agencies of the regulatory system should also provide clear and comprehensive provisions with regard to the allocation as well as differentiation of the roles and responsibilities of the various agencies and governmental bodies in the privatized infrastructure sector. In this regard, the agencies will also need to convey their roles and responsibilities in compliance with all the public policy framed by laws. Moreover, in this regard, the government can have their interventions but in a transparent manner that the mutual benefits demanded by the stakeholders are sufficed justifiably15. Clarity and Comprehensiveness of the Decisions of the Regulatory Agencies One of the key requirements in the regulatory system in order to govern privatized infrastructure is to ensure clarity and completeness in the decisions of the regulatory agencies. Some of the major decisions in this particular sector, including tariffs, service quality standards and other conducts should be conveyed unambiguously, accompanied with necessary legal documents. The related information should further be apparent and conveyed in a complete manner focused on the rights and responsibilities along with the consequences that the entities might enjoy or face for their different conducts16. Predictability and Flexibility An effective or good regulatory system to govern the privatized infrastructure sector will also need to be feasible and flexible upto an extent. The decisions of the agencies in the regulatory system should accordingly be reasonable and must be consistent with the decisions made in the previous occasions. If in any case, the regulators need to make varied or deviated decisions, they must inform the entities and the public with prior notice stating the need for the same unambiguously17. Consumer Rights and Obligations It is evident that the primary aim of the agencies in the regularity system is to protect the present and future interests of the consumers without hampering the justified benefits of the company. In this regard, the agencies need to provide a statement that depicts the rights of the consumers in this particular sector to be informed to the employers and marketers operating in this sector. The statement must also include aspects such as quality of the services entitled to be received by the customers and remedies they are liable to be gained in case of any sort of misconduct or violation to the set norms18. Proportionality Policies of the regularity agencies in governing the privatized infrastructure should always include the minimum amount that is necessary to maintain the aspect of equality and efficiency in this particular sector. This will mean that the agencies should develop policies to control any sort of market failures, maintain economic and social balances, to protect the rights and interests of the customers and to ensure ethical and legal conducts of the entities in the privatized infrastructure sector19. Precisely, it can be depicted that the actions of the agencies in the regulation system should be well targeted towards the problems to be tackled so as to develop a good framework. Regulatory Independence The agencies in the regulatory system should be independent in their conduct and should not get influenced from other external bodies or governmental agencies. There should be certain specific and reliable sources as well, imbibed in the regulatory system, from which the stakeholders must obtain their required information and make their decisions accordingly with utmost effectiveness. Moreover, the staffs of the regulatory agencies should be remunerated with competitive packages and trained properly in order to make sure that they work with utmost effectiveness, following the principles of a good regulatory framework20. These factors will collectively assure positive performances of the regulatory system and help it to govern the privatized infrastructure with utmost effectiveness. Financing of Regulatory Agencies It is evident that the agencies operating in the regulatory system should be properly funded so that they could be able to fulfil their responsibilities with delivering desired results. This aspect should be taken into foremost concern, especially in the initial phases of the establishment of the regulatory agencies, which can in the long-run also eradicate chances of corruption. In this regard, the government should provide certain exclusive fund sources to the agencies operating in the regulatory system so that the flow of funding should not be hampered at any point of time21. Accountability Some of the legislative committees or other relevant agencies should be involved in periodically reviewing the performances of the agencies in the regulatory system. This will include evaluating the decisions of the agencies, the transparency and effectiveness of the policies, the clarity and completeness of their decisions and efficient use of the resources by the agencies among others22. Transparency in Regulatory Process Each and every decision of the regulatory agencies should be presented in a clear and transparent manner with properly notifying all the entities and people in the private sector about the process and the time of implementing the policies. The agencies should also state the purpose and probable consequences of the policies to the stakeholders. Furthermore, the agencies should also provide the entities and people in the private sector with considerable opportunity to provide their inputs for the policies of the agencies23. It is expected that such an attribute will enhance the aspect of coordination and cooperation between the regulatory agencies and the stakeholders in the privatized infrastructure. Ethics Ethical conduct of the personnel in the regulatory agencies is also quite important. All the members working in the agencies of the regulatory system should therefore maintain a certain specific standard of ethics in their conduct, which will include avoiding the influence of external agents in their work among the prime. They should also not disclose the policies of the agencies with the outsiders. Apart from this, members of the agencies should also restrain them from obtaining gifts and favours of outsiders as it will raise serious questions on their ethical conduct and corruption issues24. Conclusion From a generalised perspective, fulfilment of the above mentioned aspects will help the agencies in the regulatory system to govern the privatized infrastructure with utmost effectiveness and ensure favourable results for the overall society. It can be comprehended that regulations are quite important and plays a crucial role in limiting the inappropriate approaches of the people or corporate bodies within the privatised infrastructure settings. A good regularity system must therefore work towards protecting the interests of the citizens and safeguard their rights without inhibiting or disrespecting the just demands of the entities. If otherwise, such regulatory system may fail to preserve its unbiased intentions and therefore, cause a negative influence on the companies, discouraging them to penetrate the sector. This may in the long-run result in the entire downturn of the privatised infrastructure setting. Correspondingly, in order to ensure effective results in this regard there are other certain requirements that a good regulatory system needs to fulfil in order to enhance or ensure their maximum effectiveness such as having a proper legal framework, proper coordination in the policies, proper flexibility in the policies and transparency and flexibility in the policies among others. References Brown, A. C. & et. al., Handbook for Evaluating Infrastructure Regulatory Systems, World Bank Publications, 2006. Besides, I. N., Reforming Infrastructure: Privatization, Regulation, and Competition, World Bank Publications, 2004. Department of Environment and Primary Industries, 2013. Key Characteristics of Good Regulatory Systems. Home. [Online] Available at: http://www.dpi.vic.gov.au/agriculture/pests-diseases-and-weeds/protecting-victoria-pest-animals-weeds/legislation-policy-and-permits/new-invasive-species-management-legislation/discussion-paper-invasive-species-management-bill/appendix-1-key-characteristics-of-good-regulatory-systems [Accessed December 03, 2013]. Harlow, C. & Rawlings, R., Law and Administration, Cambridge University Press, 2009. Irwin, T., Dealing with Public Risk in Private Infrastructure, World Bank Publications, 1997. Jacobzone, S. & et. al., 2007. Indicators of Regulatory Management Systems. Home. [Online] Available at: http://www.oecd.org/gov/39954493.pdf [Accessed December 03, 2013]. Smith, A. J., Privatized Infrastructure: The Role of Government, Thomas Telford, 1999. United Nations ESCAP, 2013. The Regulation of Infrastructure Facilities and Services: The Principles. Home. [Online] Available at: http://www.unescap.org/ttdw/Publications/TPTS_pubs/pub_2191/econreg_chI.pdf [Accessed December 03, 2013]. Wade, H. L., Basic and Advanced Regulatory Control: System Design and Application, ISA, 2004. Bibliography Amy, D. J., 2007. Capitalism Requires Government. Home. [Online] Available at: http://www.governmentisgood.com/articles.php?aid=13 [Accessed December 03, 2013]. Brown, A. C. & et. al., 2006. Evaluating Infrastructure Regulatory Systems. The International Bank for Reconstruction and Development, pp. 1-422. Estache, A. & Rus, G. D., 2000. Privatization and Regulation of Transport Infrastructure: Guidelines for Policymakers and Regulators. World Bank Publications. Holder, S., 1998. Privatisation And Competition: The Evidence From Utility And Infrastructure Privatisation In The UK. Home. [Online] Available at: http://www.oecd.org/daf/ca/corporategovernanceofstate-ownedenterprises/1929658.pdf [Accessed December 03, 2013]. Kolawole, I. O. & Agolla, J. E., No Date. Privatisation And Regulations Of Infrastructure: A Crosscontinental Impact Analysis. Home. [Online] Available at: http://www.nersa.org.za/SAERC/Documents/SAERC/Idowu%20Kolawole.pdf [Accessed December 03, 2013]. Rorrison, R., No Date. Privatizing Infrastructure. Macquarie Bank Limited, pp. 1-7. Read More