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Role Of government -Direct Intervention
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ROLE OF GOVT – DIRECT INTERVENTION,REGULATION
by Syed Mahmood Javed
A State is an association of individuals in a defined territory that is supreme over all other associations and individuals residing in the same territory. The essence of the state is its monopoly of coercive power i.e. sovereignty.
The Govt is the totality of structures and organizational arrangements of those exercising sovereign authority
The State , The Government
Important developments, external and internal, changing the nature of public administration .
Parallel between globalization, decentralization close. The management of decentralization calls for strong national action, just as globalization requires international interventions.
The globalization, decentralization carries a potential for large overall benefits as well as risks and losses for the more vulnerable areas and groups.
THE CONTEXT OF P.ADMINISTRATION
Good governance rests on : Accountability : Capacity to call public
officials to task Transparency : Low cost access to relevant
information Predictability : Results from regulations ,
clear and known in advance Participation : Needed to supply
information, provide reality check for govt action
FOUR PILLARS OF GOVERNANCE
Four pillars of governance, accountability at the centre
Effective accountability has two components :
Answerability Consequences : predictable and
meaningful
ACCOUNTABILITY - KEY
Keep peace , enforce laws and ensure a stable environment
Key justification for govt action remains the concept of Public Goods and Services
Market mechanism fails in regards to goods and services that are “nonrival” and “nonexcludible” i.e. clean air
There is no incentive to produce clean air
ROLE OF GOVERNMENT
Second key justification for govt intervention is existence of “ natural monopolies”
Govt direct action OR regulation needed to ensure competitive market, equity, social reasons or other public interest
Globalization has created new international public goods , a healthy global environment, international financial stability
Contd
Aggregate efficiency is an important criterian, but not the only one
good political system, to manage inherent conflict of interests peacefully through a process that society believes fair and effective
Remember distinction between majority (minority rights), unanimity(impossible), and consensus(no significant group opposed)
DECISION MAKING IN P.A.
If there is reason for govt intervention : Choose direct govt involvement or indirect
regulation Effective regulation to achieve a specified
public interest- essential govt function Good regulatory system supports
national economic activity, development, equity, defines property rights, avoids litigation
GOVT REGULATION
Fostering competition, correcting market failures, promoting efficient and equitable social and environmental policies
Excessive regulation, when non-transparent and arbitrarily enforced raises transaction costs for economy, generates risks including corruption
Contd
Regulations are promulgated by different govt entities
Delegation of regulatory powers to govt is accepted feature
Regulation is a major activity of provincial / local govt
Regulatory activity is of two kinds, in an autonomous capacity under original powers or through delegated programs
Contd
departments or delegated to other entities
Central govt regulations may be administered by govt ,
power can be delegated either to a separate bureau under regular ministries or
to a fully separate agency exercising power of licensing, rate fixing and safety regulation
Contd
Three : Economic regulations: pricing,
competetion, market entry, or exit Social regulations: public interests, health,
safety, environment and social cohesion Administrative regulations: govt collects
information and intervene in individual cases
CATEGORIES OF REGULATION
In addition to disclosure by public agencies under information laws external checks needed for accountability
In most countries judicial review is main forum for challenging administrative actions and seeking redress
JUDICIAL REVIEW OF REGULATORY ACTIONS
It covers a number of issues : Whether agency/ ministry violated
constitutional provisions or statutory obligations
Failed to adhere to procedural requirements Abused discretion or acted without
evidence May seek criminal prosecution, money
damages Relief by consumer courts ( India )
J.R.
Vertical Conflict: Between national regulations and actions of decentralized govt bodies
Minimum national standards needed in environmental protection, health, international organizations, etc
National standards may conflict with needs of devolution / autonomy
Inconsistent with ability of local govt to enforce them
RECOCILING REGULATORY CONFLICTS
Horizontal Conflict: Between national regulations and objectives of specific govt entities
Laws/ regulations may conflict with management discretion/ operational goals
It occurs in personnel rights of civil servants, privacy and integrity protection, affirmative action
RRC
Govt regulation operates in different ways in different countries
Organization of judiciary and administrative tribunals varies
Formal rules co-exit with customs Major problems in developing countries are
weak enforcement capacity Collusion between regulators and regulated Opaque and discretionary rule making
process Excessive regulations, archaic, unnecessary
Special Problems of Govt Regulation in Developing Countries
Safety, health, land use, environment etc Absence of Arms-length Relationship:
Between regulator and operator restricts competition and accountability, example telecom sector where original public sector operator retains power to license new operators and fix tariffs
Weak Enforcement Capacity
Beyond sheer volume of regulations is their haphazardness and inconsistency
Many regulations are open-ended, ambiguous exposing citizens to discretion of petty officials
Cost of red tape and corruption Strongest single anticorruption measure is
regulatory simplification and streamlining
Spl Prob-Govt Regulations
Regulatory Inflation: In France between 1960 and 1990, annual production of laws increased by 35 % , decrees by 25 %
Australia saw a doubling of subordinate legislation between 1982 and 1990
Volume , Cost , Quality of Regulation
Four components : Fiscal costs to govt of administering the
regulations Administrative and paperwork costs for
businesses and citizens Costs of compliance_ i.e., cost of buying new
equipment, reconfiguring production processes, relocation, and cost of escalation due to delays in receipt of permit
Indirect costs to the economy in the form of reduced competition, innovation, lower investment
Cost of Regulation
Inversely related to volume of regulation Enforcement becomes difficult the greater
the number of rules to be enforced Govt regulation, a case, “ less is more “ Effectiveness of enforcement is a function
of quality and appropriateness of the rules Broad principle: If cost to private operator
of respecting regulation is greater than penalty, regulation has little chance to be respected
Quality of Regulation
Rush to regulate should not be succeeded by rush to deregulate
Streamline and reduce regulatory framework
However pell-mell regulation that does not carefully consider original purpose of each rule and anticipate consequences of removing it is a risky and unnecessary approach
DEREGULATION
Deregulation has reduced govt regulation below what it would have been in their absence
Many countries have established specialized offices at ministerial level for streamlining regulatory mechanisms across the govt.
These include for example, the office of Regulatory Affairs in Canada.
DEREGULATION
Classic three E’s of public administration : Economy ; acquisition of goods and
services of a given quality at lowest cost, on a timely basis
Efficiency: production at lowest unit cost Effectiveness: Objectives of activity
achieved Example: Vaccination program, quality
vaccine at lowest cost, maximum no of vaccinations given, reduction of disease
THREE TO FOUR E’S
A fourth E must be added to the mix: Equity : Unless a govt takes into consideration
the circumstances and needs of the poorer and disadvantaged groups in society,
the most efficient system will not be sustainable,
owing to the cumulative internal tensions and to the withdrawal of voluntary cooperation, which is the cement of good governance
Three E’s
Decentralization continuum progresses from deconcentration through delegation to full devolution:
Deconcentration: First stage, shifts responsibility to central govt, province or district but does not transfer central govt authority
Delegation: Exemptions from certain rules and implement decisions without govt supervision
Decentralization: What, When, How
Devolution: Full transfer of certain functions from central govt to sub national govt units
The central govt normally retains some monitoring and financial role
Decentralization can: 1.Open up public participation in govt
decision making
Contd
2. Create opportunities for more accountable govt
3. Provide more transparent govt 4. Ease financial strain on the central
govt Decentralization can result in more
flexible and effective govt administration Govt can tailor its services to the different
needs of society, foster political stability, and national unity
Contd
Decentralization carries potential costs and risks if it is an ad hoc reaction to an urgent problem instead of carefully designed structural reform
Cause duplication, waste, underemployment of staff, equipment, coordination problems, regional inequities and societal conflicts
Contd
Decentralization has positive/ negative impact on governance
Generic test: Whether legitimacy and quality of governance are higher at local level than at national level
If answer is no, decentralization into a comparatively worse governance climate will tend to worsen quality of governance
Contd
DGD of public services only one option for govt intervention
Public services may also be delivered by autonomous public entities, private businesses or nongovernmental voluntary organizations
Basic distinction is between service policy, service financing and service delivery
DIRECT GOVT DELIVERY
Depending on the nature of the service and on administrative capacity,
appropriate govt involvement is a continuum- from full and direct involvement in all aspects of service provision
to only setting a few basic rules
DGD
Destination between policy function and implementation function has led some developed countries to a complete separation between the govt organization charged with setting policy and an “executive agency” entrusted with service delivery- fully autonomous and responsible for results
DGD
When, as in developing countries, govt has a weak capacity to measure results and monitor behavior of autonomous entities, the executive agency model is especially hazardous
Historically public enterprises have played an important role
Clearly there is a need for efficient ways Corporate governance is a way out
DGD
Corporatization is the setting up of a separate legal entity for the enterprise
It is subject to ordinary commercial law It has resulted in major efficiency gains Has added advantage for developing
countries And transitional economies of classifying
legal title and sorting out property rights
CORPORATE GOVERNANCE
The problem of selecting an agent to represent the state has different solutions
Experience suggests that the best solution, on balance, is to create a central public agency to exercise the state ownership rights in the public enterprises
But without managing the enterprises themselves
Contd
The main options for an arms’ length relationship between govt and enterprise, which still protects public interest and enterprise assets, are a board of directors and a performance or management contract
One has to assure effective board control over enterprise management
Close monitoring by govt is a must Performance/ management contracts are
risky
Contd
Countries have set up regulatory bodies for a variety of reasons
The first was the enforcement of health and safety standards
Special agencies like the Food and Drug Administration of the US were established to protect the public from adulterated or poor quality food and drugs
STRUCTURE, ORGANIZATION OF REGULATORY BODIES
Regulation of banking activity, establishment of central banks to implement monetary policy, regulate banking activity
Maintaining exchange rate stability Control of foreign investments And remittances in accordance with
international practices
Contd
Through various means agencies regulate major aspects of transportation, communication, power production and distribution, banking securities issuance and trading, commodities and securities exchanges, safety of consumer products and labor management relations
Such agencies are also set up at provincial and local levels
Contd
Regulatory agencies for utilities and the environment tend to be independent bodies
Govts also regulate enterprises and citizen activity through govt bureaus that are autonomous but not free from control of govt
US Food and Drug Administration
ORGANIZATIONAL FORMS
Decisions of regulatory agencies have varied impact depending on the country
In some, decisions are binding on the govt In others, merely recommendatory If govt disagrees with the authority, it
must explain publically its reasons for doing so
DECISIONS
THANKS