Enhancing Effective Regulation of Infrastructure and Utility Services Hamid Sharif Assistant General Counsel Office of the General Counsel Regulatory Forum on Clean Energy, Good Governance, and Regulation 16 - 18 Mar 2008, Singapore

Infrastructure Development Delivery of basic services Supports economic growth Encourages pro-poor development Promotes sustainable infrastructure

Delivery of basic services

Supports economic growth

Encourages pro-poor development

Promotes sustainable infrastructure

Effective regulation is needed for improved infrastructure development Efficient delivery of quality infrastructure and utility services Lower tariffs rates Attractive investment opportunity

Efficient delivery of quality infrastructure and utility services

Lower tariffs rates

Attractive investment opportunity

Regulatory Framework Regulatory governance Regulatory substance

Regulatory governance

Regulatory substance

Regulatory Governance The “how” of regulation, this includes: design of regulatory system institutional arrangements process of decision making

The “how” of regulation, this includes:

design of regulatory system

institutional arrangements

process of decision making

Regulatory Substance The “what” of regulation, this includes: decisions on tariffs quality accounting investment social obligations

The “what” of regulation, this includes:

decisions on tariffs

quality

accounting

investment

social obligations

Regulatory Framework Formal aspects : laws, regulations, rules, structures, and tariff-setting Informal attributes : how the formal aspects work in practice

Formal aspects : laws, regulations, rules, structures, and tariff-setting

Informal attributes : how the formal aspects work in practice

Obstacles to Effective Regulation Information asymmetry Market failure Political capture Weak capacity Ineffective consumer participation

Information asymmetry

Market failure

Political capture

Weak capacity

Ineffective consumer participation

Actors and Beneficiaries of Regulatory Reform Policy makers Investors Consumers Environment Other stakeholders

Policy makers

Investors

Consumers

Environment

Other stakeholders

Good governance is key to effective regulation Clarity of roles and objectives Autonomy Participation Autonomy Transparency Predictability Non-discrimination Proportionality Requisite powers Appropriate institutional characteristics Integrity

Clarity of roles and objectives

Autonomy

Participation

Autonomy

Transparency

Predictability

Non-discrimination

Proportionality

Requisite powers

Appropriate institutional characteristics

Integrity

Regulatory Reform Experience Singapore: Electricity Act 2001 Malaysia: Energy Commission Act 2001 Philippines: Electric Power Industry Reform Act 2002 Indonesia: Electricity Reform Law 2002 (overturned by Constitutional Courts)

Singapore: Electricity Act 2001

Malaysia: Energy Commission Act 2001

Philippines: Electric Power Industry Reform Act 2002

Indonesia: Electricity Reform Law 2002 (overturned by Constitutional Courts)

Reforms had mixed results Legal and policy reforms Establishment of an independent regulator Lower tariff rates More investors Slow implementation of laws Regulator not fully independent Higher tariffs Lack of investors

Legal and policy reforms

Establishment of an independent regulator

Lower tariff rates

More investors

Slow implementation of laws

Regulator not fully independent

Higher tariffs

Lack of investors

There is a need to evaluate regulatory reform to improve infrastructure and utility services in developing countries.

There is a need to evaluate regulatory reform to improve infrastructure and utility services in developing countries.

Output Identification of successes and obstacles to effective infrastructure regulation Establishment of ASEAN regulatory forum

Identification of successes and obstacles to effective infrastructure regulation

Establishment of ASEAN regulatory forum

Benefits Best practices identified Develop sustainable practices Improved design of regulatory framework Improve operational procedures for more cost efficient and socially responsible outcomes

Best practices identified

Develop sustainable practices

Improved design of regulatory framework

Improve operational procedures for more cost efficient and socially responsible outcomes

For More Information Hamid Sharif [email_address] www.adb.org