Dr Jamal Khan :
Regulation and development are not dichotomies. They are the two ends on the continuum. Regulation and development are mutually reinforcing and complementary and are implicit in each other. The more, for instance, growth, development, empowerment, differentiation and diversification there are, the greater is the need for regulation, i.e. the regulation of trading, commerce, industry, standardisation, market, technology, finance, information, etc. In Bangladesh, we can only dichotomise regulation and development to our peril, writes Dr Jamal Khan
IN MIXED economies all over the world, the interface between the public sector and the private sector is strong and growing. The interface is simple, yet robust. Regulation is directing and controlling, and development is growing, unfolding and empowering. We have long known that in real life everything is related to everything else, and such being the case, growth in the private sector calls for certain types of oversight, monitoring, control and direction on the part of the public sector authority. On the other hand, expansion in the public sector also invokes a set of checks, balances, impositions, restrictions, restraints and limitations on its conduct, legality, power, authority, scope, jurisdiction and ethics. Blending into each other, the dialectics between regulation and development is such that one cannot sensibly talk about either one of them or both of them without having to bring both into the process. One cannot develop unless one also regulates, and one cannot regulate unless there is enough development to work with. Without regulation development cannot occur, and without development regulation loses its steam.
Regulatory management is seen as an instrument available to the public sector to enforce compliance with nationally-established standards and objectives in varied economic and social fields. It assumes importance while exercising policy control over national resources and environment and ensuring that their use by the private sector is in harmony with national objectives. The heightened recognition and the expanded scope of regulatory management is evidenced in a number of areas, such as foreign exchange, industrial licensing, foreign direct investment regulation, building code, zoning ordinance, profession licensing, wildlife protection, coastal conservation, environmental legislation and the like. To regulate means to direct an activity or to bring it under the control of an authority system. The regulatory function is, therefore, related to the control function. Regulation has two aspects. The positive aspect comprises action to encourage, promote or protect certain activities. Examples include contributing to the development of an economy, furthering the achievement of human rights, promoting surface transportation, facilitating infrastructure, and protecting the rights of the working class, women, children, the elderly and the disadvantaged. The negative aspect comprises action to discourage or prevent individuals or organisations from undertaking certain activities which are socially undesirable and to eliminate the possible harmful effects of certain activities. Examples include the regulation of pollution, the prohibition of narcotics, the licensing of firearms, and the control of organised crimes.
Regulation involves executive, legislative and judicial powers. The executive institution formulates and enforces policies and guidelines. The legislative institution makes law, provides for sanctions, and sets standards. The judicial institution applies and interprets rules and rights, enforces rights and obligations, and makes decisions. Regulation is enforced by oversight, inspection, advice, warning, punishment, prosecution and court order on the negative side, and by protection, promotion, subsidy, facilitation and sponsorship on the positive side.
Regulation dates back to the nineteenth century. Its concerns relate to preventing and punishing economic and financial abuses. Some regulations focus on demonstrating compassion for the individual or group. Matters of compassion have included protecting people from each other, alleviating distress, and warding off major social, political and economic disruptions. Secondly, regulations assure and provide representativeness and fairness in organisation/management processes. It is reflected in legislation and regulations relating to taxation and industrial relations.
All such protections carry with them substantive as well as procedural rules. Differences exist between economic/old-type and social/new-type regulations. While the former focuses on marketing, rates and the obligation to serve, the latter concerns the conditions under which outputs are produced and the physical characteristics of the outputs. Social regulations extend to increasing sectoral activities, affecting many consumers and customers. It has grown as a response to intensified awareness and incidence of risks.
Regulatory procedures fall under four types. One, rule-making is quasi-legislative by nature and applied uniformly to a class of events or organisations. It allows for public inputs, usually for interest and advocacy groups. Of late, there has been an increase in new rules and regulations through this process. Two, adjudication is quasi-judicial, operating on a case basis. The expanded use of these procedures has meant that certain types of law and judges have become more significant than in the past. Three, organisations encourage compliance from individuals, groups and organizations with their rules whenever possible. Four, there is also procedural call for self-regulation. This entails public and private sector self-regulation, e.g. social responsibilities, social obligations, social conscience and code of ethics.
There are several functions of regulatory management. Nearly all of these play a role in a given country’s development process. Regulation of the economy, for example, is the watchword of regulatory management, enabling the public sector to intervene in the strategic areas of the process. This ensures that the consumer needs protection, especially when a producer enjoys a monopoly position. Consumer protection includes regulation not only of the prices of outputs but also of their quality, e.g. ensuring that the roads are safe, food is fresh, drugs are reliable, order is maintained, etc. Second, regulation is considered justifiable in certain indigenous or fledgling industries, which can develop with initial promotion and protection and help build and spread industrialisation. This entails securing and advancing the interests of domestic production and trading. Operation of the market comprises maintaining deft execution of the output generation system, facilitating trade and commerce, and enhancing general well-being. It prevents individuals or organisations from forming monopolies or trusts, adopting unfair practices, managing stable system of money, currency and banking, controlling the money and capital markets and furthering modernisation. Fourth, public interest includes assuring an individual of his basic and inalienable human rights. Of special interest is ensuring reasonable income, maintaining certain health standards and giving the people certain socioeconomic rights. The promotional and developmental function consists of training personnel, accumulating capital and inputs, utilising natural resources, promoting trade, facilitating entrepreneurship and risk-taking, encouraging technological innovations and advancing institutional/organisational changes.
Sixth, providing the legal framework – including the maintenance of internal order and the establishment of the rule of law – helps consolidate a country’s foundation, which reinforces the idea that growth, development, empowerment and transformation can take place only on a sound foundation of law and order. Seventh, regulation relates to ensuring the existence of an adequate supply of water, electricity, power, transport, communication and telecommunication. Eight, to deal with the lack of uniformity, consistency and regularity, standardisation – the setting of standards – is utilised to facilitate production and trade. Modern trading and industry are not possible unless outputs are standardized. International trade, for example, is considered on the basis of standardized samples. Large-scale manufacturing cannot function without standardization. Standards need to be in place to protect the interests of consumers, too. Last, regulation extends to general improvements in the welfare of the people, a more equitable distribution of income, fuller utilisation of human resources, human capital and social capital, promotion of social justice and employment and ensuring the need satisfaction of the majority of the people.
There are several policy and organisational issues which are ongoing features of regulatory management. These must be examined and, where necessary and possible, resolved in order for regulatory agencies to function properly and add value to national development. One, highly specialised, the regulatory agencies are given an independent status. To ensure soundness of judgement, it is argued that each regulated field should be handled by a specialised organisation. The reasoning is that the decision or action of a regulatory organisation should be based on rational grounds and should be, as far as possible, free from partisan and other interest-group influence. To preserve its expert and nonpartisan nature, considerable authority is delegated to regulatory organisations. The independent or autonomous regulatory organisations are continuous entities, whose members have medium-term appointments, and are structurally a form of collegiate organisation whose decisions are taken collectively. Two, a regulatory organisation is normally served by management and support personnel. The management staff often includes a considerable number of professionals, including lawyers. It also has a number of examiners to deal with individual cases. Three, regulatory functions in most countries are also performed by normal public sector organisations. Examples comprise the registration department (patents, trademarks), the bureau of standardisation, licensing authorities, the health ministry (sanitation, environmental control), the agriculture ministry (commodity market control, fair business practices), tax agencies, the finance ministry, the treasury department, the port authority, the central bank, and so on.
Four, in regulatory management, there is no one or best way to organise. A country does not have the settle for only one type of organisation. Organising should take into account basic management principles, convenience and available resources. Five, regulation is such a widespread field that it cannot be carried out by legislative and judicial institutions alone. Regulations, far too often, entail wide-ranging management action, which is straining for courts or parliaments to handle. The courts, for example, lack technical competence and may have constitutional limitations on their jurisdictions. As to parliaments, they are normally pressed for time and have neither the necessary technical information nor adequate specialised personnel to deal with complex and interdependent regulatory tasks. Six, in fact, a regulatory organisation – whose responsibilities and assignments are clearly spelt out – is in a better and strategic position to dispose of a large volume of work, maintain the necessary records, normally has the advantage of institutional continuity, and a unified approach to such specialised work. Regulation requires a considerable degree of flexibility, since it is not always possible to devise workable rules and procedures covering all situations. Seven, it is better and qualitatively and organisationally more sound to have a regulatory agency which is structured to provide the continuity of action, routine as well as non-routine. Eight, different countries may have different organisational modes. A regulatory organisation may belong to a ministry or department, be an autonomous agency, or may report directly to the head of government. The issue, here, rests on the nature of regulations and on particular conditions as they evolve and in which a target organisation finds itself in.
(To be continued)
(Dr Jamal Khan was professor of public sector management at the University of the West Indies. [email protected].)
