Putting Sound Competition and Regulatory Policies in Place
Dr Supachai Panitchpakdi, Secretary-General, UNCTAD, inaugurated the high profile opening session of an International Research Symposium with his insightful and erudite speech. The Research Symposium, “Political Economy Constraints in Regulatory Regimes in Developing Countries” was organised by CUTS Institute for Regulation & Competition (CIRC) on March 22-24, 2007, in New Delhi.

“Developing countries need to create effective institutional mechanisms for successful implementation of competition and regulatory policies. While market-friendly reforms have become common buzzword the process has failed to stop market failures. To address these failures, a sound competition and regulatory policy need to be put in place along with efficient enforcement mechanisms”.

A sound and robust competition and regulatory policy should explicitly recognise and incorporate consumer interests and unambiguously include advocacy as a tool for promoting awareness.

It is also equally important to put appropriate institutional mechanisms in place for effective enforcement and review. If competition policy is to yield all the envisaged benefits, political will and consensus for reform is necessary.

It was emphasised that when economic vested interests dominate political power they also limit growth dynamics and curtail economic opportunities for poverty reduction in developing countries.

Competition policy should be judged explicitly against its contribution to tackling ‘the tyranny of vested interests’ for poverty reduction outcomes. The problem with market is that consumers are disorganised while producers/sellers are organised and they are able to influence the policy makers. The tyranny of vested interests, therefore, needs to be articulated, and should be used to overcome the political economy constraints. The policy makers must differentiate clearly between the public interest and vested interest.

In the concluding session, Dr Bimal Jalan, MP and former Governor of Reserve Bank of India (RBI) underscored an important distinction between regulation and control and hoped that the former does not degenerate into the latter. It was concluded that competition and regulatory policies should drive the governments in developing countries, so that they could be more capable, more accountable and more responsible to deliver growth and welfare in a fair manner to citizens.

For more on the above and for a webcast of the whole conference, please visit: www.circ.in

What’s Happening An Overview

New Age Management
Pacific Institute of US, an international corporation specialising in performance improvement and professional growth, is looking at forging partnerships with Indian public and private sector companies.

It is currently in talks with GAIL, BHEL, Caterpillar and Ford to impart training to the companies’ mid and senior-level executives on new-age management principles. The Institute will focus on educating Indian executives on change management, leadership development and other management principles.

The Institute is in the process of signing a Memorandum of Understanding (MoU) with the Indian Institute of Public Administration, New Delhi under which it will train IAS functionaries in management principles and governance.

FDI in Education
Foreign Direct Investment (FDI) in higher education has been a contentious issue for the last few months, ever since the government announced that it was in the process of formulating a bill to allow FDI in higher education.

The Foreign Education Providers (Regulation) Bill, if approved by the Cabinet, and made a law, will allow foreign universities to set up campuses in India. The Bill will also grant deemed university status to foreign universities.

Foreign universities will, however, have to set up campuses on their own and they will not be allowed to adopt the franchise route. Also, the universities will have to secure the prior approval of the University Grants Commission (UGC).

HC on Distance Education
The Delhi High Court has said that the professional courses through the distance education programme should be discouraged and sought the view of the UGC on the issue.

The Court opines that professional courses must impart practical training. Besides, professional courses should not be allowed to be imparted through distance education.

The Court was hearing a public interest litigation (PIL) filed by the Indian Association of Physiotherapists (IAP) seeking recognition of those institutes, which are offering correspondence courses in physiotherapy.

It was contended by the IAP that physiotherapy was an important health profession, which required practical training in addition to theoretical knowledge. Such correspondence courses were wholly inadequate to train a person as a physiotherapist.

Nod for Setting up Institutes
The Cabinet has approved the promulgation of an ordinance to amend the National Institute of Pharmaceutical Education and Research (NIPER) Act of 1998 to allow for the early commissioning of similar institutes.

The NIPER Act, which was passed by the government to establish the institute offering graduate, postgraduate and doctoral programmes for pharmacy, had provision only for one institute of national importance, which was established at Mohali, Punjab.

The proposal for the five new NIPER-like institutes, which the Ministry of Chemicals and Fertilisers hopes to establish, are expected to serve the crucial shortage predicted in human resources for the booming pharmaceuticals and clinical research sectors.

Corporate Affairs School
Plans are afoot to set up a national institute for corporate law and governance – the Indian Institute of Corporate Affairs (IICA) As per a proposal mooted by the Ministry of Company Affairs, the IICA will work with the objective of providing institutional support to corporates and their regulators in a wide gamut of subjects – economic and financial matters, accounting and auditing standards, use of technologies, knowledge management and (regulatory) delivery systems etc.

In due course, the IICA is expected to commence graduation, postgraduation courses in the corporate law and governance. The government also aims at reinforcing the governance/regulatory delivery and enforcement systems regarding the corporate sector with the aid of the skills to be created in IICA.

Skill Development Mission
The government is planning to launch a major vocational education and training plan that is expected to increase the existing capacity of skilled manpower six-fold over the next five years.

A start will be made in 2007 with the launch of a skill development mission. The industry and service sector employees will be in the vanguard of the development mission.

Further, it has been proposed that training institutions of state governments will be organised on the basis of genuine private-public partnerships (PPPs). Private sector skill providers will also be encouraged.

Expert Comments

PPP in Service Delivery: Need for Capacity Building

– Dr S K Sarkar*

Introduction
Public Private Partnership (PPP) has become a buzzword in the infrastructure sector. Interestingly, it is becoming one option in the context of efficient service delivery also, in addition to being widely considered as important option for financing the infrastructure projects. This has happened because the government has recognised its limitations in this regard, and is now looking for partnership with the private sector. That said, not much functional clarity is noticeable at the field level. Thus, how actually one goes about building PPPs is not well known.

What is PPP? According to a definition by Prof E S Savas (2000), there are three players participating in delivery of goods and services in infrastructure sectors:
– service arrangers;
– service consumers; and
– service producers.

The service arranger selects producers or assigns producers to consumers, or does both, and could cover the category of various institutions such as the government, voluntary associations, or service consumer itself.

There are many institutional arrangements for the delivery of public services, wherein the public sector/ government, as well as the private sector, can act as a ‘producer’ or ‘arranger’ or both.

Normally speaking, PPP could cover any arrangement between the public and the private that jointly produces and delivers goods and services and which is commonly used to describe complex projects in infrastructure sectors. For these projects, the generally accepted PPP options are contracts, franchises, and divestments. In fact, PPP models in infrastructure sectors could fall in a continuum.

At one extreme, there is the government department that owns, designs, finances, builds, and operates the facilities. At the other, there is divestiture that allows an existing facility to be operated by private operators in perpetuity under a franchise. Even in this case, the public agency, as ‘arranger’, can exercise control by stipulating conditions such as access, pricing, etc.

Between these two extremes, there lie various PPP options such as service contracts, management contracts, lease, joint venture, concession, Build Operate Transfer (BOT) or its variants. One critical parameter – such as the degree and type of risks being shared among different stakeholders – differentiates between various PPP options.

Critical Issues
There are certain critical issues that have to be resolved for the introduction of any PPP mode for service delivery. These include:
– Roles of different parties;
– Competition issues;
– Regulatory intensity;
– Cost recovery;
– Information availability;
– Risk allocation; and
– Procurement modalities

In any PPP, there are many stakeholders, e.g. government, private players, financiers, construction companies, equipment suppliers, etc. First, a clear listing of responsibilities and roles is required in any PPP design.

These elements vary depending on the mode of PPP used. Second, in the PPP design, should we allow competition for the market? Should there be exclusivity in operation of services during the entire period of concession? These issues need to be resolved.

Third, what should be the degree of regulatory intensity? The necessary, but not sufficient, conditions for successful working of any PPP options include an appropriate regulatory framework, other than political commitments, cost recovery and a solid information base, although the degree of such requirements would depend on the nature of PPP options being used in delivering the services (Cowen 1997). For example, the “services contract” would require low intensity of regulatory framework; in management contract, there is a need for moderate regulatory framework; in lease and BOT mechanisms, a high degree of regulatory framework is called for.

Fourth, risk-sharing formula among parties has to be clearly resolved, especially in relation to business risks, financial risks, political risks, etc. Fifth, what should be the procurement process: should there be an open and transparent bidding process or negotiated procurement. In such cases, how does one prepare the bid documents and fix the evaluation criteria?

Conclusion
In sum, understanding any PPP options would require an in-depth knowledge of the complex issues. There is a shortage of PPP capacity in the country. In fact, there is no platform or specific PPP course available in India, although some efforts are being made at The Energy Research Institute (TERI) University through the introduction of an MBA (Infrastructure) course. In addition, organisations like CUTS, National Council for Applied Economic Research (NCAER) or South Asian Forum for Infrastructure Regulation (SAFIR) are organising workshops and seminars on the subject for sensitisation and wider dissemination. There is a need to have regular courses with academic rigour on a sustained basis so that a cadre of PPP professionals can be developed to undertake activities even in remote urban or rural areas in India.

News & Views

Regional Training Workshop on Competition Policy & Law
February 15-17, 2007, Pretoria, South Africa
The fifth workshop on Competition Policy & Law was held on February 15-17, 2007, in Pretoria. The workshop, a joint effort of CUTS and Institute for Global Dialogue (IGD) was organised under the aegis of CIRC with support from DFID, UK and NORAD, Norway.

The workshop aimed at building capacity among select African countries on competition policy & law. The training workshop was held under the 7Up3 project, and was attended by over 31 participants from various ministries and competition commissions and tribunals, and consumer associations.

Seminar on Experiences of Competition Law from around the World
March 21, 2007, New Delhi, India
A seminar on Experiences of Competition Law from around the World was organised on March 21, 2007 in New Delhi. The event was organised by CIRC in collaboration with Society of Indian Law Firms (SILF) and the Federation of Indian Chambers of Commerce & Industry (FICCI).

The one-day training seminar was organised to discuss the ‘process’ of implementing Competition Law and covered panel discussions on related areas: Merger Regulation, Anti-Competitive Agreements, Abuse of Dominance and Competition-Sectoral Regulation interface. The seminar was widely attended by representatives from Indian law firms, CCI, business houses and media.