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VOL 20 NO 280 REGD NO DA 1589 | Dhaka, Thursday May 24 2012

Regulatory bodies: Accountability versus control

M S Siddiqui concluding his two-part article on regulatory authorities
Regulatory agencies will find it difficult to attract and retain high quality staff unless they are allowed to raise required resources and be given freedom to structure the pay-scale to make it attractive for their staff. One of the most crucial aspects of the organisational structure of regulatory agencies is that of selection and appointment of the regulator. Persons of vigour, who possess the necessary knowledge of law and economics, are required to lead the regulatory bodies. The regulatory agencies in the UK, which enjoy financial autonomy, appoint skilled personnel on the strength of their financial strength. The Ministry of Energy in South Africa can direct the regulator to use the ministry's staff but the regulatory agencies decide on nature, strength and salaries of their staff. In Australia, the law provides for an exchange of staff between the telecom ministry and the regulator. The UK regulators are also empowered to decide on their staff strength though their salaries are subject to standard civil service scales. In South Africa, the Financial Services Board is allowed to raise funds through a fee or levy or service charge on companies it regulates, but it is the government that determines the amount of service charges. The waterregulator in the Philippines is allowed to raise resources through a service cost on the services with prior approval of its board. In Canada, the regulatory agencies also raise resources through levy on service recipients. Budgetary allocations for the regulators should be on the basis of broad heads of expenditure. Regulatory agencies regulating all the utility sectors should be allowed to cover their expenses through service charges and fees. The national budget must allocate funds for the regulatory bodies which must have full authority on utilisation of the funds. These bodies should be allowed to raise fund through charging fee on their services etc. The parliament, government or the regulators may fix the cost of services etc. The qualifications for regulators should be mentioned explicitly in the legislation in an unambiguous manner. The policy should be to refrain from appointing retired bureaucrats/judges, who lack the required leadership quality and vigour. Manpower planning should ensure that selection of regulators is made in advance of a position falling vacant. People from nongovernmental organisations (NGO) and experts in the relevant fields should be encouraged to join regulatory bodies. Attractive salaries and compensation are needed to attract young blood. Prior to induction, regulators and staff should be provided training. The accountability of regulators may be a concern of policy makers. There is sometimes confusion regarding the border line between accountability and control in many countries, particularly developing countries. Appropriate mechanisms are required to make independent regulatory agencies

accountable. It could be political and legal in form. Political accountability includes submitting reports to the legislature, which may have a special committee to scrutinise and debate its contents. Legal accountability enables the service recipients, if aggrieved by a decision, to issue a formal complaint or appeal. In most cases, regulatory bodies are made accountable to the legislature through the line ministry. Regulator's actions are questioned only when there is an impending crisis or such actions give rise to a serious debate in the country. In the UK, the regulatory agencies report to the parliamentary committees on a regular basis and the latter is empowered to scrutinise the former. In Sri Lanka, the minister may ask the commissioners of the multi-utility regulator to appear before the parliament or its sub-committee to clarify some matters. There should be a provision of appeals against orders of regulatory authority, which allows review of regulator's decisions. The judiciary is the common appellate authority but some variations exist. In Australia and the UK, appeals lie at the Competition Tribunal. Consumers are important stakeholders in the market and they must have a role in the functioning of the regulators. The consumers may play an active role with a position in the regulatory body for policy making and conducting day-to-day activities. Consumer groups may have a scope to question and participate in regulatory matters. It is needed to empower civil society and consumer groups to work as watchdogs. For example, Energywatch in UK is an independent gas and electricity watchdog. In Zambia, the Energy Regulation Board (ERB) and National Water & Sanitation Council (NWASCO) have agreed to form joint consumer councils or watch groups in three sectors, namely, communications, energy and water. There are some international regulatory practices in many countries for independent/peer reviews on periodic basis. For example, peer reviews of competition authorities are undertaken by the Organisation for Economic Cooperation and Development (OECD) and the United Nations Conference on Trade and Development (UNCTAD). Facilitating public consultation is an important step towards transparent decision-making and this is perhaps the most significant dimension that the regulatory institutions have provided to the consumers. With the exception ofthe water regulator of the Philippines, each of the regulatory agencies in project countries organises consultations with the stakeholders and provide opportunity to participate in the regulatory process. Indian telecom and electricity regulatory agencies have been very effective in this regard. In the electricity sector power purchase agreements signed by the utilities are expected to be made public and debated. The telecom regulator also invites comments from stakeholders and organises open house discussions prior to taking a view on important matters. The regulatory agencies in both sectors are required to invite views from stakeholders prior to even framing various regulations. Some of the most advanced economies have institutional arrangements to fund consumer advocacy. In the UK, the government makes budgetary allocations to the watchdog agencies. In Australia, consumer advocacy in the electricity sector is funded by the government in a structured manner wherein a Consumer Advocacy Panel has been set up to provide financial assistance to consumer groups. In India, consumer groups are not given financial assistance, which is a major constraint to their effective participation. Businesses are one of the major stakeholders and deserve a stake in the decision-making process and regulations. Hence, the Bangladesh Garments Manufacturers and Exporters Association (BGMEA) has been given the authority to issue Certificate of Origin and Bond Utilisation Certificate. The BGMEA is performing better than the Export Promotion Bureau (EPB) in terms of efficiency and corruption-free service. The active participation of three major stakeholders, the businesspersons, consumers and civil society, is essential to make the rules and regulations pro-people.

The writer is part-time teacher, Leading University, and pursuing PhD in Open University, Malaysia. shah@banglachemical.com