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BGR Takeaways For Session 3

This document discusses the need for and proper implementation of economic regulation. It states that regulation is needed to correct market imbalances, avert system risks, and protect all economic players. The sectors that need regulation are those with natural monopolies, recently privatized entities, moral hazard issues, government concessions, or historical behavioral problems. However, regulation must be competently formulated and executed in an independent manner, without political influence or control by interest groups. The regulator takes on multiple roles as monitor, enforcer, facilitator, and protector of the market. Sound regulation implemented by a professional, independent regulator is ultimately in the best interests of all market participants, though some vested interests may oppose it initially for competitive reasons. Understanding the

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32 views1 page

BGR Takeaways For Session 3

This document discusses the need for and proper implementation of economic regulation. It states that regulation is needed to correct market imbalances, avert system risks, and protect all economic players. The sectors that need regulation are those with natural monopolies, recently privatized entities, moral hazard issues, government concessions, or historical behavioral problems. However, regulation must be competently formulated and executed in an independent manner, without political influence or control by interest groups. The regulator takes on multiple roles as monitor, enforcer, facilitator, and protector of the market. Sound regulation implemented by a professional, independent regulator is ultimately in the best interests of all market participants, though some vested interests may oppose it initially for competitive reasons. Understanding the

Uploaded by

Affan Ali
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© © All Rights Reserved
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Takeaways for BGR MBA Class of 2015

BGR - Session 3
Reading:Speech at the Toronto Centre on July 14, 2004
(How a major program of capital market reform - that received global recognition - was achieved in Pakistan)
1) Why is economic regulation needed?

correct imbalance in market forces;

avert precipitation of system risk; and

protect legitimate interests of all economic players.


What sectors need to be regulated?

those
those
those
those
those

that
that
that
that
that

exhibit natural monopolies;


endure dominance by recently privatized entities;
suffer from the phenomenon of moral hazard;
entail concessions from the Government; and
are historically prone to behavioral issues

2) Badly conceived regulation or poorly implemented regulation is worse than no regulation


3) The regulator must be duly empowered, professionally competent, operationally independent,
and not only has integrity but is manifestly seen to have integrity.
4) Regulation must:

retain purity of formulation and execution, and not be tainted by any political agenda; and

not be captive to, or serving the interests of, any particular interest group.
5) The regulator is at once:

a monitor, a policeman, and a magistrate;

a father figure and patron of the market; and

(in developing countries) a facilitator of the markets development through appropriate


regulatory positioning
6) All things considered, it would be best for business enterprises and business associations to
support the implementation of sound regulation by competent, professional and independent
regulators, shorn of any influence by government or strong vested interests.
7) Very important for any enterprise operating in a regulated sector to fullyunderstand the
regulatory scene the strengths and weaknesses of the regulator, precise de facto role of the
concerned government department, who can be depended on for what, and who is doing what
and to whom in order to decide how best to address regulatory issues.
8) Assuming the regulator is professionally savvy, competent, and independent:

in the short run, there are always vested interests against regulation because of their
dominant position or some other way in which they can over-ride the market/exploit other

participants; and
in the long run, duly enforced sound regulation is in the best interests of all participants.

BGR MBA Class of 2015 (Semester IIIB Nov 5 Dec 27, 2014)

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