Table of Contents

Regulation, Deregulation, Reregulation

Regulation, Deregulation, Reregulation

Institutional Perspectives

Advances in New Institutional Analysis series

Edited by Claude Ménard and Michel Ghertman

Building on Oliver Williamson’s original analysis, the contributors introduce new ideas, different perspectives and provide tools for better understanding changes in the approach to regulation, the reform of public utilities, and the complex problems of governance. They draw largely upon a transaction cost approach, highlighting the challenges faced by major economic sectors and identifying critical flaws in prevailing views on regulation. Deeply rooted in sector analysis, the book conveys a central message of new institutional economics: that theory should be continuously confronted by facts, and reformed or revolutionized accordingly.

Chapter 5: From Technical Integrity to Institutional Coherence: Regulatory Challenges in the Water Sector

Claude Ménard

Subjects: economics and finance, institutional economics


Claude Ménard INTRODUCTION If we look at the deregulation movement of the last 25 years or so, the pace of reform in the water sector has been remarkably slow, and changes likely the less radical among public utilities. Water was never deregulated. Even in the most spectacular reforms, like that implemented in the UK at the end of the 1980s, the sector remained heavily regulated. Moreover, there was never a significant move towards privatization. At most there has been private participation, supervised by a very visible public hand. A recent survey of 973 major urban water and sanitation systems in developing countries showed only 136 of them involving private sector participation, with divestitures constituting 10 per cent of this subset, while 66 per cent were concessions, 19 per cent management contracts, and the remaining 5 per cent leases or ‘affermages’ (Gassner et al., 2007: 16).1 This reference to the limited role of privatization or private participation does not intend to suggest that privatization would be the solution to water problems. It rather points out that resistance to changes in the regulation and mode of organization of the sector, beside other changes that may be needed as well, is particularly striking if we take into account the essential character of water provision for human beings and the huge needs in that respect. According to the UN Millenium project (2005), confirmed by several reports from the World Bank and other institutions, over one billion human beings do not have access...

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