ABSTRACT
Public utilities such as postal services, telecommunications, transportation (roads, railways, maritime, airline), electricity, gas, and water are sometimes referred to collectively as economic infrastructure.1 In this chapter, we provide an overview, using examples from several developing countries, of regulatory issues arising from the liberalization of public utilities in the face of globalization. To set the stage, we first review the characteristics of developing countries that have a bearing on the analysis of regulation and competition policy. These characteristics include the level of difficulty of raising money, the quantum of audit resources available, the strength of institutional checks and balances, more binding limited liability constraints, and the range of available commitment devices. Although we visit these issues briefly in the following sections, some of the themes are elaborated in this book in the contributions by Bates and by Stiglitz. Then we discuss ways in which regulatory agencies can be structured to render them pro-competition as well as the trade-offs in the unbundling of incumbent monopolies into the non-competitive (monopoly) and the competitive segments. Next, we present the regulatory rules applicable to the natural monopoly segment, followed by a discussion of the crucial issue of the management of the interface between the monopoly segment and the competitive segment. To keep the discussion comparable in size with the rest of the chapters in this book, we sidestep the treatment of competition policy and other complicated aspects of the management of the interface such as access pricing rules. We conclude with lessons on regulatory enforcement and economic development.
