The effectiveness of boards of directors of state owned enterprises in developing countries

This paper aims to shed some new light on the conditions needed to ensure the effectiveness of Boards of Directors of state owned enterprises with a focus on infrastructure sectors. In the case of developing countries, empirical studies have found evidence of positive links between the composition of the Board of Directors and financial performance. Yet the lack of solid theoretical foundations, and in some cases poor data availability, makes the conclusions of most studies weak. Several policy recommendations emerge from the review of the economic literature and evidence from case studies. First, the introduction of a sufficient number of independent directors emerges as an important corporate governance milestone. Empowering them to exercise effective monitoring of management, however, may prove to bea formidable challenge for of state owned enterprises. More attention to board procedures, particularly related to the Board selection and evaluation process, is essential, to produce the necessary insulation of Boards from government interference. Ensuring sufficient continuity of services to directors is particularly crucial to improve corporate governance. In addition, other factors that may reduce directors'ability to monitor corporate activities, such as the age profile and the number of Boards on which they sit, need to be handled more carefully.Corporate Law,National Governance,Emerging Markets,Debt Markets,Microfinance

Governance arrangements for state owned enterprises

The aim of this paper is to shed new light on key challenges in governance arrangements for state owned enterprises in infrastructure sectors. The paper provides guidelines on how to classify the fuzzy and sometimes conflicting development goals of infrastructure and the governance arrangements needed to reach such goals. Three policy recommendations emerge. First, some of the structures implied by internationally adopted principles of corporate governance for state owned enterprises favoring a centralized ownership function versus a decentralized or dual structure have not yet been sufficiently"tested"in practice and may not suit all developing countries. Second, general corporate governance guidelines (and policy recommendations) need to be carefully adapted to infrastructure sectors, particularly in the natural monopoly segments. Because the market structure and regulatory arrangements in which state owned enterprises operate matters, governments may want to distinguish the state owned enterprises operating in potentially competitive sectors from the ones under a natural monopoly structure. Competition provides not only formidable benefits, but also unique opportunities for benchmarking, increasing transparency and accountability. Third, governments may want to avoid partial fixes, by tackling both the internal and external governance factors. Focusing only on one of the governance dimensions is unlikely to improve SOE performance in a sustainable way.National Governance,Banks&Banking Reform,Public Sector Economics&Finance,Debt Markets,Public Sector Expenditure Analysis&Management

Competition, access pricing and regulation in a second degree price discrimination setting.

In broad terms, this work aims to gain a greater understanding of the particular features introduced in the regulatory set-up by competitive issues and vertically related markets. Specifically, we explore their impact on the profitability of the market and the p~ssibility for the incumbent to maintain monopoly profits under different regulatory regimes. There was a time when utilities industries and in particular telecoms each seemed to be a natural monopoly. Most governments liked it that way because they owned the monopoly and siphoned off some of the profits. Nowadays, competition is spreading in most utilities market and it becomes imperative to assess its impact on the tariffs and in general on social welfare. We deal with a second degree price discrimination model allowing the players -namely, an incumbent, who has a natural monopoly on the network, and a rival- to make use of non-linear pricing in intermediate and final goods. In this framework the entrant's choice of the customer types is endogenised in a sequential multistage game, where the incumbent, who is undoubtedly the most powerful player, acts as a first mover. We also show that cream skimming, contrary to the general wisdom, can be welfare enhancing. Particular attention is devoted to the access pricing problem which is becoming the key issue to the regulators, examining the relevance of simple pricing rules, such as the Baumol-Willig rule. Despite the presence of a growing literature in these areas, other models fail to incorporate the use of non-linear access pricing. Since price discrimination is common in practice this omission can lead to misleading results. Our analysis shows that the regulator should not allow competition for the low-demand consumers' types or by a less efficient entrant and should impose the adoption of socially optimal non-linear access tariffs. Therefore the general conclusion is that competition will not obviate the need of regulation

Competition Policy Across Transition Economies

This paper classifies competition policy rules and implementation experience across transition economies and assesses its relationship with the intensity of economy-wide competition. First, we define a range of competition policy rule and implementation criteria relevant for transition and developing economies along the three main dimensions of enforcement, competition advocacy and institutional effectiveness. Implementation and improved legislation appear to have been spurred by the prospect of EU membership. Improvements in all dimensions of rules are strongly correlated with better implementation across countries. Finally, we find that implementation is generally characterised by a strong relationship with intensity of economy-wide competition, as measured by the lower structural concentration in the market and expansion by more efficient enterprises. This is not always the case for competition policy relative to rules. JEL classifications : K20, P21, P31Politique de la concurrence dans les économies en transition Cet article classifie les politiques de la concurrence et les expériences de mise en application dans les économies en transition et évalue leur relation avec l’intensité concurrentielle dans l’ensemble de l’économie. Tout d’abord, nous définissons un ensemble de règles de la politique de la concurrence et de critères de mise en place pertinents pour les économies en transition et développées suivant trois dimensions principales : mise en application, soutien de la concurrence et efficacité institutionnelle. La mise en oeuvre et l’amélioration de la législation ont été stimulées par le projet d’accession à l’UE. L’établissement de la réglementation est fortement lié à sa mise en place entre les pays. Finalement, nous montrons que, généralement, le degré de réglementation est fortement corélé dans chaque pays avec l’intensité concurrentielle dans l’ensemble de l’économie. Classification JEL : K20, P21, P31Vagliasindi Maria. Competition Policy Across Transition Economies. In: Revue d'économie financière (English ed.). Hors-série, 2001. Ten years of transition in Eastern European countries. pp. 215-250

Politique de la concurrence dans les économies en transition

Competition Policy Across Transition Economies This paper classifies competition policy rules and implementation experience across transition economies and assesses its relationship with the intensity of economy-wide competition. First, we define a range of competition policy rule and implementation criteria relevant for transition and developing economies along the three main dimensions of enforcement, competition advocacy and institutional effectiveness. Implementation and improved legislation appear to have been spurred by the prospect of EU membership. Improvements in all dimensions of rules are strongly correlated with better implementation across countries. Finally, we find that implementation is generally characterised by a strong relationship with intensity of economy-wide competition, as measured by the lower structural concentration in the market and expansion by more efficient enterprises. This is not always the case for competition policy relative to rules. JEL classifications : K20, P21, P31Cet article classifie les politiques de la concurrence et les expériences de mise en application dans les économies en transition et évalue leur relation avec l’intensité concurrentielle dans l’ensemble de l’économie. Tout d’abord, nous définissons un ensemble de règles de la politique de la concurrence et de critères de mise en place pertinents pour les économies en transition et développées suivant trois dimensions principales : mise en application, soutien de la concurrence et efficacité institutionnelle. La mise en oeuvre et l’amélioration de la législation ont été stimulées par le projet d’accession à l’UE. L’établissement de la réglementation est fortement lié à sa mise en place entre les pays. Finalement, nous montrons que, généralement, le degré de réglementation est fortement corélé dans chaque pays avec l’intensité concurrentielle dans l’ensemble de l’économie. Classification JEL : K20, P21, P31Vagliasindi Maria. Politique de la concurrence dans les économies en transition . In: Revue d'économie financière. Hors-série, 2001. Dix ans de transition en Europe de l'Est : bilan et perspectives. pp. 233-272

Competition across transition economies: an enterprise-level analysis of the main policy and structural determinants

This paper examines the main policy and structural determinants of the intensity of competition at the enterprise level across transition economies, presenting new evidence based on an enterprise-level survey and a legal survey directed to both competition agencies and legal experts in the area of competition policy. It explores the key variables, at the country and enterprise level, that affect the variations of the intensity of competition in domestic markets. At the country level an important finding is that competition policy and recent changes in its implementation are significantly and positively correlated with the intensity of competition. This result is robust to the introduction of other policy-level controls and alternative specifications of the basic model. Other interesting results at th and exit, and higher perceived elasticity of demand. In addition there are robust ownership, size ande micro level include a significant positive relationship between the intensity of competition, lower barriers to entry sectoral effects but not life-cycle effects.competition, competition policy, transition economies

Estimating the size of external effects of energy subsidies in transport and agriculture

It is widely accepted that the costs of underpricing energy are large, whether in advanced or developing countries. This paper explores how large these costs can be by focussing on the size of the external effects that energy subsidies in particular generate in two important sectorstransport and agriculturein two countries in the Middle East and North Africa, the Arab Republic of Egypt (transport) and the Republic of Yemen (agriculture). The focus is mainly on the costs associated with congestion and pollution, as well as the impact of underpriced energy for depletion of scarce water resources, including through crop selection. Quantifying the size of external effects in developing countries has received relatively little analytical attention, although there is a significant body of literature for developed countries. By building on earlier research, as well as employing the United Nations ForFITS model, the paper provides indicative estimates of the external costs of energy subsidies, as manifested in congestion and pollution. The estimates using simulations indicate that these costs could be materially reduced by elimination or reduction of energy subsidies. The paper also describes the impact of energy subsidies on water consumption in a region where water resources are particularly limited. The findings provide further evidence of the adverse and significant consequences of subsidizing energy. Document type: Boo