Archives

In the absence of regulations or any force that may compel economic agents to behave rationally, each economic agent will try to fulfil his self-interests, which may some times cause severe disruption and injuries to other economic agents and the environment. Therefore, benefits of regulations in these extreme cases should not be overlooked in favour of complete deregulation.

However, regulations promulgated at one point in time to handle a particular situation may not necessarily suit the same situation at a different point in time, as the prevailing conditions may not be the same. Therefore, policy makers should recognise the fact that, while it is impossible to dispense with all regulations, they could still reform some of the existing regulations to make them more effective and repeal unnecessary, superfluous or redundant regulations. They should also recognise that it is possible to re-introduce a regulation that was previously repealed if any future situation warrants the re-introduction of repealed regulation to re-regulate a particular industry.

All existing regulations should be periodically evaluated to assess the effectiveness of such regulations and their direct and indirect impact on the economy, businesses and competition. Based on these evaluations, unnecessary and redundant regulations should be repealed, ineffective and costly regulations should be either reformed or repealed depending on the need for them, while continuing with only the effective and essential regulations. Successful deregulation should eventually result in government shifting its resources away from ineffective regulations to more efficient ones and businesses to shift their scarce resources to more productive and innovative purposes to attain economic efficiency.

If there is a need for the introduction of new regulations to achieve a particular goal, which could not be achieved by other means, the policy makers should first assess the impact of the proposed regulations on the economy in terms of costs and benefits. Once the declared goal is achieved or if the regulations are not effective in achieving such goals, those regulations should either be repealed or reformed depending on the circumstances. It is necessary that those administering such regulations be aware of the intended objectives of such regulations be aware of the intended objectives of such regulations and competent enough to take bold and correct decisions at the right time.

All decisions should be made by them independently purely on the basis of economic considerations and not on political or any other considerations.

An effective process of regulation should also go hand in hand with civil service reforms. Recommendations for deregulation cannot be implemented unless civil servants are properly incentivised. This is specially so, as deregulation generates an asymmetric first round of benefits, where the industry is the first beneficiary of civil servants adjusting to a lesser degree of authority. The country and the population at large may benefit in the second round, once industry benefits effectively trickle down to the economy.

(Central Bank of Sri Lanka Annual Report - 2001)

News | Business | Features | Editorial | Security
Politics | World | Letters | Sports | Obituaries |

Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.
Comments and suggestions to :Web Manager