GOVERNANCE AND ACCOUNTABILITY

OLEH:
SURYA DHARMA, MPA, PHD

PERGURUAN TINGGI ILMU KEPOLISIAN

2022
KEY MESSAGES

• Regulatory governance & accountability (G&A) are different but integrated

• Transparency of public policy does matter to sectoral performance

• G&A is a critical ingredient of private sector involvement in infrastructure

investment, development and operation

• Good management of relationships makes G&A work

KEY MESSAGES (CONTINUED)

• Contractual commitments and public demand: what predominates?

• Decentralization and corporatisation increase need for G&A

• Different political systems do not alter need for G&A

GOVERNANCE - ACCOUNTABILITY
PRINCIPLES
• Good Governance: “The extent to which governments confer basic rights on
their citizens to enable them to fulfill their expectations and potential, including
for example, secure property rights and the protection of the rule of law backed
up by an independent judiciary”

• Accountability: “The extent to, and manner in, which the institutions and
processes of government using the coercive powers given to government
decision makers are held accountable to the citizens who enjoy or suffer the
decisions made”
modified from Keefer, 2004

Successful regulation will be

accountable regulation
REGULATORY GOVERNANCE & ACCOUNTABILITY
Governance
• Clear laws establishing
regulatory system
• Transparent directions from
government
• Independence from
clandestine political
interference
• Quality regulators
• Transparent decision making
and contracting
Accountability
• Reporting on decisions with
reasons to stakeholders
• Consult stakeholders
• Challengeable decisions in
courts
• Predictable and open
processes for stakeholders
• Credibility built on integrity of
process as well as decisions
ACCOUNTABILITY: KEY RELATIONSHIPS
Accountability is complex
• Is accountability master or servant?

Accountability applies to all stakeholders

• Regulator (the integrity of the office)
• Infrastructure service provider(s)
• Consumers* *Not always
• Taxpayers* the same
people
• Government
• NGOs (as representatives of “the public”)

Protecting accountability
• The courts
• The media
• Perhaps - the voters
 PUBLIC
Capital
invested in
POLICY TRANSPARENCY
risk areas

• Globalized economies are built on trust, integrity

• Government policy framework critical element

• Governance quality comes from the “Top” i.e. Governments

• Arbitrary decisions are fatal to investment and growth

If can’t rely on
• Government law making processes
Government,
• Ministerial and officials’ decision making who can the
investor rely
• Regulatory bodies
on?
• Courts No investment
capital, No growth
• Local businesses
 PUBLIC POLICY TRANSPARENCY (CONTINUED)

• Investors engagement depends on:

• Predictability of governmental decision making processes
• Integrity of the processes i.e. corruption free
• Sanctity of contract, enforceable in independent courts
• No sanctity,
Clear accountability of the regulator and the regulated
No investment capital
CONTRACTUAL COMMITMENT & PUBLIC
DEMANDS
• Regulator’s role very difficult

• Independence in the law a key component to success

• Political pressure a real issue for regulators

• A reality to deal with

• Process important: make it transparent (e.g. Ministerial
direction must be in writing and published, criminal
penalties for offenders)
CONTRACTUAL COMMITMENT (CONTINUED)

• Should a contractual commitment be broken?

• Not without good cause e.g. service provider abrogates

contract, or Government directs with compensation
• Unless by agreement with counter-party
• Transparent, The
openattitudes of
process of change
tomorrow’s investors are
important, not today’s
decision
 ACCOUNTABILITY & INDEPENDENCE

• Institutional independence implies:

• Arms-length relationships with regulated firms, consumers and other private interests
• Arms-length relationship with political authorities
• Organizational autonomy + expertise

• Getting the proper balance between accountability and independence needs:

• Rigorous transparency
• Providing effective appeal arrangements with court review
• Subjecting the regulator to the scrutiny of external auditors
CORRUPTION & OPPORTUNISM IN
INFRASTRUCTURE
CHECKS & BALANCES
Loss-Making Underinvestment
Costs not scrutinized Not immediately
visible

Political Imperatives Rents

Lack financial Extracted sometimes
discipline by corrupt means
MONEY & POWER

Corruption Monopoly Pricing

Underspending

Political Self-
Patronage dealing
Public Sector Private Sector

Individuals &
Operators
Political Parties
 POLITICAL INTERVENTION IN REGULATOR’S DECISIONS

Imposing ad-hoc rules in favor of government and consumers will break the
trust / understanding of providers, threaten their sustainability, and
increase investment risks

• Argentina: regulator cut consumer penalties for late payments 

consumers didn’t pay bills

• Ghana: regulatory body imposed new tax on providers  legal appeal

• Kazakhstan: government reversed a promised increase in energy prices

 operator withdrew from market

• Ecuador: government refused to allow regulator’s tariff increases 

operator sued government
POLITICAL INTERVENTION (CONTINUED)

• Service provider lost money

• Argentina: regulator cut consumer
penalties for late payments 
consumers didn’t pay bills

• Ghana: regulatory body imposed • Borderline case? Did rules allow

new tax on providers  legal appeal
this?

• Kazakhstan: government reversed a

promised increase in energy prices • Catastrophic result - future risk for
 operator withdrew from market government

• Ecuador: government refused to

allow Regulator’s tariff increases 
operator sued Government • Breach of contract - clash between
regulator and the government
“BEST-PRACTICE” REGULATION

• Communication: Information should be made available to all stakeholders on a

timely and accessible basis

• Consultation: Participation of stakeholder in meetings promotes the exchange

of information and the education of those affected by regulatory decisions

• Consistency: The logic, data sources, and legal basis for decisions should be
consistent across market participants and over time.

• Predictability: A reputation for predictable decisions facilitates planning by

suppliers and customers, and reduces risk as perceived by the investment
community
“BEST-PRACTICE” REGULATION (CONTINUED)

• Flexibility: The regulator should recognize and respond to changing conditions,

balancing regulatory discretion against the costs associated with creating
uncertainty

• Independence: Autonomy implies freedom from undue stakeholder influence,

and promotes public confidence in the regulatory system

• Effectiveness and Efficiency: Cost effectiveness in it’s own processes should be

implemented by the regulator - it expects it of those it regulates

• Transparency: The openness of the process to stakeholders promotes legitimacy

and regulatory sustainability

+ ACCOUNTABILITY!