Gridlock No MoreHow Regional Cooperation Accelerate Regulatory Reform

The Case of Passenger Transport Sector

Pich Nitsmer, Ph.D.

26 February 2007

Fiscal Policy Research Institute, Thailand

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Presentation Outline

Policy and Regulatory Process

Why sub-optimal? How to reform?

Regional Cooperation Which forums and channels? What to be gained?

perhaps with the support of …

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National Economic and Social Development Board

5-year National

Plan

1) Transport Ministry

2) A Ministry 20) B Ministry

Transport 5-year Plan

Transport & Traffic Policy & Planning

Office

…

A Policy & Planning

Office

Transport

≠

Thailand’s Policy Process: Top-down

Policy X

Implementation

Incompetence

Interference

Sub-optimal

Outcome

B Policy & Planning

Office

Policy Y

Policy Z

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Department (e.g. Land Transport Dep.)

Regulatory Process: Non-linear, Multi-agent

Reg. Action Imposed on Operators

Internal

Internal: Safety, security & scheduling External: Price, coverage & social requirement

External

Commission (e.g. Land Traffic Commission)

Transport Permanent-Sec.

Land Transport Director-General Police Commissioner-General Bangkok Governor

Problems

Limited regulatory expertise

Lack of inter-ministerial cooperation

Resistance from vested interest

Interference from rent-seeking public officials

Can’t serve as check &

balance tool b/c conflict of

interest

External

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Regulatory Reform: Competition Enhancement

Risks of Privatization w/out Effective Regulatory Regime

Shares majority-owned by govt continued govt interference

Share distribution through IPO ‘unfair’ capture & rent-seeking

Operation unregulated imbalance of economic & social ends

Short-term Implications To facilitate competition before privatization (e.g. quality standard & target for phasing out subsidy)

To strengthen regulatory muscles regardless of privatization

How?5

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Reform: Independence and Other Conditions

Regulatory Independence: Separation from Operation & Policy

Commission: Centralised? Enabling factors (e.g. regulatory capability): How?

Regulatory Check-and-Balance

Regulatory Impact Assessment (ex-post & ex-ante) Transparency & Accountability

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Regional Cooperation: the Case of APECExpected Benefits from Regional Forum Capacity building: Experience & expertise sharing (existing) Regional institutional building: Developing regional vehicle for independent policy evaluation (not yet materialised)

Bangkok Conference (2007) Proposal

Hadi Soesastro: ‘Establishing an ongoing APEC Productivity and Efficiency Commission … that has the capacity to respond to requests by APEC and member economies for analysis of micro- policy and regulatory issues’.

Existing Mechanisms?7

APEC Channels: Existing Mechanisms

Trade & Investment Committee(Issue-specific - focusing on

deregulation)

Transportation Working Group(Sector-specific)

Economic Committee(Issue-specific - focusing on

reform)

Possible Interactive Channels

Business Advisory Council(Facilitator)

Organisational Structure

Leaders’ Meeting

Ministerial MeetingBusiness Advisory Council Sectoral Ministerial Meeting

Working Groups (11)- TransportationEconomic Committee

Trade & Investment Committee

Experts Groups (11)- Competition & Deregulation 8

Economic Committee: Issue-specific

LAISR Thematic Work Plan

Mandate To promote structural reform by undertaking analysis & action- oriented work

Principle Leaders’ Agenda to Implement Structural Reform (LAISR)

Priorities in regulatory reform, economic & legal infrastructure, competition policy, governance & public sector management

Capacity Building

Studies based on APEC-OECD Checklist on Regulatory Reform Seminars on competition policy as a sub-set of structural reform

Year 2005

2006

2007 2008 2009

2010

Focus Issue

s

Regulatory reform-Sector specific (e.g. transport)

Economic & legal infrastructure

Stocktake of progress on reform

Public sector governance

Competition policy

all relevant to transport 9

Trade & Investment Committee: Expert Group

Mandate To enhance region’s competitive environment Principle Principles to Enhance Competition & Regulat

ory Reform Strengthening the functioning of markets

Capacity Building

Technical assistance & training in competition policy & regulatory reform Competition policy & deregulation database

Expert Group in Competition Policy and Deregulation

Function Overlapping?

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Transportation Working Group: Sector-specific

Mandate

To achieve liberalisation of transportation services & to encourage sectoral - development in Asia Pacificwhile balancing safety, security & social objectives, thus focusing on facilitation of domestic policy regulation

Principle

2004 Transport Ministers Statements

Ensuring a safe, secure, efficient, integrated and environmentally sustainable transportation system for the region

Capacity

Building

Symposium on Intelligent Transport System Accessibility

Very sector-specific but unrelated to the realm of regulation?

How to integrate sector-specific with issue-specific mechanisms then?

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Conclusion: Implications for Transport Value Chain

Terminal Infrastructu

re

Vehicle

Construction Supply

Operation Operation

regulated

what about here?

mostly state-run

Capacity building through regional cooperation is also needed for procurement process to reduce interference & develop local

suppliers along the chain.

Component

system integration

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End of Presentation … Thank You

Ari Skytrain Station – 10 minutes from the FPRI

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