Corruption and Regulatory Capture in Public Service Sector Reforms

Worldwide, the infrastructure sectors water, energy, telecommunications and transport ('public utilities') went through some profound changes during the last 30 years. The reforms are aimed at introducing competition through liberalisation (de-regulation) and a restructuring of the sectors. In many cases, state owned enterprises are completely or partially privatised, and new private competitors allowed. This way, reforms seek to increase efficiency and effectiveness of service delivery, to relieve the budget, or to attract desperately needed capital. However, it is also a political decision with far-reaching consequences where stakes are high, and opportunities for corruption arise. But corruption could undermine the success of reforms. This book fills a gap in the relevant literature by applying insights from research on corruption on the different stages of infrastructure reforms. A detailed risk-map and analysis of reform steps and hints for anti-corruption avenues are provided. The book examines questions such as: Can privatisations, as often stated, reduce corruption in these sectors? Where are the risks of corruption in public auctions? How can transparency not only hamper corruption but also improve the outcome of auctions? Which theories are relevant to the problem of regulatory capture? How can recent findings from corruption research, mainly based on new institutional economics, shed new light on this problem? Which regulatory scheme is more prone to corruption: cost-based regulations or incentive-based regulations? Is corruption an argument against regulation in these sectors? What are the measures that can be introduced in order to hamper the risks of corruption in regulatory processes? Throughout the book, the analysis refers to case studies and cases of corruption published in the media, as well as on interviews and practical experience gathered by the author in Colombia.