Markets , Regulatory Institutions , Competitiveness and Reforms

Recognising the importance of transitioning to a markets-based economy, with the attendant benefit of competition, as the most effective method of increasing economic competitiveness, the paper discusses the consequent limitations and problems that are likely to arise during the transition. It confines itself primarily to infrastructure sectors (most often characterised by natural monopolies and network economies) and the financial sector (due to the systemic risk and widespread information asymmetries), since it is these that are most susceptible to market failures. Regulation might be needed in limited areas in these sectors, but the scope of regulation should be strictly limited and declining. The role of the government is aligning incentives of the various stakeholders involved in a market economy and ensuring universal access to services through a well-designed subsidy structure. Disclaimer: The opinions presented in the paper are those of the authors and not of the organisation to which they are affiliated.