Diagnosing Regulatory Problems

Excepts from Jacobs, Cordova & Associates diagnostic work:

“The main reason for the poor performance of Asian utility regulators is that the external environment of structural, policy, and governance reforms remains extremely difficult. Structural problems, such as market abuses and control of networks and essential facilities, have crippled many liberalization initiatives. Today, markets in utility sectors are a confused mix of public and private enterprises, concessions and competition, and protectionism and openness.” Scott Jacobs, Governance of Asian Utilities: New Regulators Struggle in Difficult Environments

“To understand how a 'political economy' approach can effectively drive a regulatory reform agenda, requires that we focus on why reforms work better in some countries than in others.” Cesar Cordova, Building Drivers and Engines for Reform: Integrating Business and Citizens in the Regulatory Quality Process

Good diagnostics are needed to design effective regulatory reform solutions that are feasible under tight time and resource constraints and are capable of changing entrenched regulatory practices. We have to understand the true causes of problems before we can solve them.

Jacobs, Cordova & Associates has been a pioneer in assessing the origins of regulatory problems. For governments who need this work, we carry out initial diagnostics of issues unique to each economy, before we propose solutions. See our diagnostic projects here.

We identify regulatory bottlenecks to development, and priorities for government action. We focus on identifying the high-cost, high-risk elements of regulation. Using benchmarks of good regulatory practices, we have evaluated national regulatory practices in G7, developed and developing countries in Europe, Africa, Asia, Middle East, and Latin America. Our reviews range from broad assessments of regulatory impediments to private sector development to specialized issues such as sectoral licensing practices.

Our diagnostic work is based on the OECD framework for the review of national regulatory practices. Scott Jacobs and Cesar Cordova developed this comprehensive framework for the influential OECD reviews carried out since 1998. The framework allows reformers to pinpoint problems in legal frameworks, institutional capacities, relationships with stakeholders, or skills.

The key to designing solutions is to know, not only the symptoms of regulatory problems, but why problems have emerged. Regulations emerge from a system where incentives and habits are strong, and that is fully capable of making the same mistakes over again. It is more important more relevant to markets to change how regulation is made and implemented in the future.

The Jacobs, Cordova & Associates diagnostic approach – looking at the big picture -- is becoming the mainstream of regulatory reform. As evidence accumulates, the regulatory reform community seems to be swinging away from easy and short-term reforms to more systemic reforms (see Regulatory Governance in Developing Countries, 2010).