This document summarizes a presentation on the implementation of regulatory reforms in Italy's water sector from 1994 to 2006. It finds that implementation was slow at first but accelerated later. Factors like previous privatization agreements, supportive policy networks, and changing reform statutes that opened opportunities or imposed threats affected the trajectory. Specifically, an area that already consolidated some water services saw faster implementation initially. Overall, political and historical context greatly influenced the uneven and variable path of reform across Italy's multi-level governance system.

1. 8th TransAtlantic Dialogue
Working Group on Multi-level Governance
Radboud University, Nijmegen, The Netherlands
6-9 June, 2012
Implementing Regulatory Reforms
in Multi-Level Governance Systems:
The Case of the Reform
of the Water Sector in Italy (1994-2006)
Dr Alberto Asquer
Lecturer of Business Strategy and Policy
Faculty of Economics
University of Cagliari, Italy
Visiting Fellow
Robert Schuman Centre for Advanced Studies
Florence School of Regulation
European University Institute

2. 1. Introduction
“Transformative” regulatory reforms, such as liberalization, re-
regulation, and privatization of sectors of the economy, typically
entail large amount of political confrontation between actors.
Political confrontation takes place in both the making and the
implementation “stages” of regulatory reform policy cycles
(implementation as “continuation of politics by other means”;
Wildavsky and Majone, 1979).
Does political confrontation undermine the effectiveness of
regulatory reforms? Whose interests prevail? Can the
government overcome resistance to implement unwelcome
policy reforms from other actors?

3. 1. Introduction
Patashnik (2003, 2008) addressed the issue of what makes a
policy reform “politically sustainable” in the post-enactment stage.
He aimed to identify “systematic patterns of reform trajectories”
(e.g., sustained success, reversal, mixed results).
“Factors” that induce a sustainable reform implementation pattern
especially include:
a) shift of institutional configurations that “disable” policy-makers
from taking new actions contrary to the reform “spirit” and
objectives;
b) policy feedback effects that affect identities, political resources,
and strategic behavior of relevant actors.

4. 2. Introduction
The argument here:
a) We may question whether there are any “systematic patterns”
in the way regulatory reform implementation unfolds:
What shall we make of “erratic” trajectories of reform
implementation efforts, i.e., those trajectories where
implementation efforts of actors do vary considerably in timing,
pace, and intensity?
b) When (i.e., under which conditions) do shifts of institutional
configurations and policy feedback effects take place?
How do we know whether/when such favorable “factors” come
into play?

5. 2. Theoretical background
Question: How does the process of implementing regulatory
reforms unfold, especially within a MLG context?
Case: Implementation stage of the policy cycle to liberalize, re-
regulate, and privatize Italy's (drinking and waste) water sector
(1994-2009)
Case path and outcome: The episode presents these features:
a) a period of slow implementation of both liberalization and re-
regulation (1994-1997) and privatization (1994-2001) was
followed by a period of rapid implementation;
b) some part of Italy (Tuscany) proceeded in the implementation
of the reform faster than others;
c) the implementation resulted in the widespread establishment
of the new regulatory system, but in limited privatization of water
service provision (roughly about one fourth of providers).

6. 3. The reform of the water sector in Italy (1994-2009)
1997 2001 reform 2003 reform
1994 funding for
water of local public of local public
wastewater services services
reform works
Generally, inertia Establishment of water regulatory jurisdictions and of
to establish the local water regulatory authorities 92 local
water
new regulatory
regulatory
system authorities
Generally, inertia to privatize water Some “Formal” 67 of them
service provision privatization of privatization awarded
water services while water
retaining local franchises
to:
government
ownership 27 mixed
ownership
Water districts
water firms
Establishment of new regulatory where
system and award of water especially 69 LG-
franchise in Alto Valdarno, Tuscany municipal water owned
firms operated water firms
1994 1997 2001 2003 2009

7. 3. The reform of the water sector in Italy (1994-2009)
1997 2001 reform 2003 reform
1994 funding for
water of local public of local public
wastewater services services
reform works
Generally, sub- Establishment of water regulatory jurisdictions and of
national local water regulatory authorities 92 local
water
governments' this
Why regulatory
inertia
acceleration? authorities
Generally, sub- national Some “Formal” 67 of them
governments' inertia privatization of privatization awarded
Why this water
water services while
acceleration? franchises
retaining local
to:
government
ownership 27 mixed
ownership
Water districts
water firms
Establishment of new regulatory where Why no more
system and award of water especially privatization? LG-
69
franchise in Alto Valdarno, Tuscany municipal water owned
firms operated water firms
1994 there?
Why 1997 2001Why there? 2003 2009

8. 4. Explaining the implementation of the water sector in Italy
Explaining the general pattern of no implementation:
a) Features of the water district governance system, related to
(i) features of the water reform statute and (ii) features of
legislation on public service provision;
b) Features of the water industry (i.e., local governments owned
and controlled local water services and water-related jobs and
public contracts were generally important for building support of
clienteles in the local politics)
c) Features of the water reform statute (i.e., water franchises
should be awarded to either private firms or mixed ownership
firms for serving water districts larger than local governments'
jurisdictions)
d) Features of territorial organization of water services (i.e.,
generally highly fragmented at local government level).

9. 4. Explaining the privatization of the water sector in Italy
Explaining implementation in Alto Valdarno (Tuscany):
Distinguishing conditions in Alto Valdarno
a) Previous events (before 1994) included negotiated agreement
to consolidate and partially privatize water service provision
managed by local municipal firms;
b) Regional and local government politicians of the dominant
Democratici di Sinistra party held favorable positions towards
mixed ownership forms of local public service delivery;
Distinguishing conditions shared with other parts of Italy
c) Executives of water municipal firms, that enjoyed more
autonomy than managers of water municipal departments,
championed the transformation into mixed ownership firms.

10. 4. Explaining the privatization of the water sector in Italy
Explaining acceleration of the implementation process:
a) Previous events (privatization in Alto Valdarno) provided
supportive evidence for the viability and beneficial effects of the
reform channelled through a policy network of water
professionals (i.e., local governments could share ownership of
larger water firms while retaining some influence on water-
related activities) (diffusion of ideas);
b) The 2001 local public services reform changed some design
features of the water reform, especially providing compulsory full
privatization apart from the possibility to award water franchises
to mixed ownership firms within 18 months deadline (opportunity
and threat);
c) Executives of water municipal firms, that enjoyed more
autonomy than managers of water municipal departments,
championed the privatization.

11. 4. Explaining the privatization of the water sector in Italy
Explaining no more privatization after 2003:
a) Features of the water industry (i.e., local governments owned
and controlled local water services and water-related jobs and
public contracts were generally important for building support of
clienteles in the local politics);
b) The 2003 local public services reform again changed some
design features of the water reform, especially providing the
option to either fully privatize water service provision or award
water franchises to “in house” firms (opportunity);
c) Where local water services were provided by municipal
departments, local governments preferred to keep shared close
control of water service provisions while organizational features
were not favorable to privatization.

12. 5. Conclusions
Relevant context conditions play an important role:
a) Initial condition of public ownership in the form of municipal
firms rather than municipal department;
b) Past events that already formed negotiated agreements about
privatizing public services;
c) An active policy network of public service professionals that
help diffusing ideas about the viability and beneficial effects of
the reform;
d) Changing reform statute that opened up opportunities to
retain and/or threats to lose influence on the public services.

13. 5. Conclusions
More generally:
A) It seems hard to discern “systematic patterns” of reform
trajectory – rather, it seems that reform implementation paths
are highly dependent on historical and local circumstances;
B) The multi-level governance context provides both
venues through which policy reforms may enable/disable sub-
national political actors to take actions pro/against the reform
“spirit” and objectives, and
conditions that are conducive to policy feedback effects
propagated through horizontal policy networks across sub-
national governments.

14. Thank you