Economics and Finance
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- Department: Economics and Finance
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The economics of electricity reform in developing countries: an estimated econometric and political economy approach
As developing countries seek to improve their economic prospects, power sector reform has been generally agreed as the centre piece of this effort. While the focus of numerous research to date has been at developed countries, south Asia, Latin America countries; there has been much less research on electricity market reform on Africa countries. Africa as a continent presents a unique case, as it shares similar economic and political system, whilst having been given considerable flexibility in how they implement their reform.
However, either for political or economic reason and/or both have network industries been dominantly under state-ownership control? Most of the reform in the sector took the form of privatisation, restructuring, deregulation, commercialisation and regulation. The push for private sector participation in the power sector was the order of day in early 1980s in both developed and developing countries, this departure from the status quo was not unprecedented. This process has changed how the electricity supply industry should be owned, structured, organized and regulated in the last three decades.
It is worth to know that privatization is not a prerequisite for restructuring, either the introduction of competition or regulatory framework. But it is a combination of economic ideology and anticipation of sale proceeds that has meant privatization to become a major reform step and, to some extent, has become an objective rather than a means to the end. (Jamasb Tooraj & Michael Pollitt 2008). In nutshell, privatization has changed the characteristics of the sector in terms of the structure; ownership and corporate governance of the electricity supply industry and alters responses to external factors such as capital market and regulator agents.
This study seeks to fill gap in the existing literature on the effects of market-oriented policies on economic performance in network industries with focus on electricity supply industry. We will contribute through estimated econometric and political economy technique. This approach will serve as one of few studies aimed at verification of liberalization policy theories, since theory regardless if its elegance in exposition and it sound logical consistency cannot be established or generally accepted without empirical testing.