Narrow Results

This paper provides an empirical analysis of the impact of economic regulation on the inflow of private foreign investment in the infrastructure sector in Asian economies over the period 1988 to 2002. The results confirm that foreign investment in infrastructure has responded positively to the establishment of an effective regulatory framework which provides regulatory credibility to the private sector. The main policy implication of the findings is the need to support capacity building and institutional strengthening for robust and independent regulation in the developing countries of Asia.

The following sections are included:

• Introduction

• A theoretical framework
  • Literature review
  • Theoretical expectations
  • The UK electricity generation industry - modelling assumptions
  • Model
    • Environmental regulation
    • Economic regulation
    • Implications of the non-co-operative regulatory regime
    • Cupertino

• Conclusions

• References

Since the Second World War, Africa and especially Sub-Saharan Africa (SSA) has had the poorest economic performance of any region in the world. Ironically, many African countries had set out with high hopes once they had thrown off the yoke of colonial rule but it was not long before disaster struck. Against the background of an expanding world economy Africa experienced ‘a chronic failure of economic growth’ (Collier and Gunning, 1996), so that by the end of the 20th century incomes per capita were little better than they had been at the time of independence, and in some cases a good deal worse. The main problem was the failure to improve the efficiency of resource use; in contrast to the position in many other developing countries total factor productivity was either static or negative for much of the time (Ndulu and O'Connell, 1999; Crafts, 2000). Thus while poverty was declining elsewhere, it was increasing steadily in SSA. By the turn of the century two-thirds of the population were estimated to be living at subsistence or below the absolute poverty line, while nearly one-half the world's poor lived in Africa (United Nations, 1997).

There are of course many factors which can explain this remarkable state of affairs, but the one we shall focus on this chapter is Africa's great weakness in statecraft, by which we refer to political systems, bureaucracies, administrative organizations, property and legal rights and general issues of trust and contract enforcement. In other words, it is a question of good governance as opposed to bad governance and corruption. The general argument here is that with few exceptions African countries have lacked a sound social and political base which would favor growth and development and that this base has tended to deteriorate over time.