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Additional info for Better Economic Regulation: The Role of the Regulator (ITF Round Tables)
In nearly all countries, the department of transport and/or the department for international affairs negotiate(s) ASAs and thereafter designate(s) airlines and airports. The only exception seems to be Australia (see below). Elsewhere, politics dominate. Recent examples are the blocked entry of Air Asia X on the route Malaysia to Sydney and of Emirates on the route Stuttgart to Dubai. In the case of Air Asia X, a private airline, liberalization would undermine the monopoly of Malaysian Airlines, fully owned by the Government of Malaysia.
Given the costs and market distortions which often accompany regulation, it is worthwhile to adopt pro-active policies to make the best use of markets. In some cases, forced divestment of assets (horizontally or vertically) will be important to enhancing competition. Fair terms of access to key infrastructure will often also be important, as is a pro-active competition policy to prevent abuse of the advantages of incumbency. Where sunk costs are high, significant market power exists, conflicts between the interests of infrastructure management and transport service operations are strong and outcomes are likely to be unstable, economic regulation may be indicated and is most effectively delivered through an independent regulator, charged with the objectives of: Providing incentives for efficient investment in infrastructure and other long-term assets such as rolling stock: o Through protection of returns on investment from sudden changes in government policy and external shocks; o Through predictable pricing of infrastructure use over the medium term; o Through transparent and predictable processes for determining rates of return on regulated assets.
G. carbon reduction targets), but rather it should help to ensure that these broader policy goals can be delivered more cost-effectively. There also needs to be confidence that independent regulation can respond to external shocks and not act as a hindrance to government responses to these. g. to charges or services); for unknown unknowns, governance arrangements need to pre-specify procedures for consultation, negotiation and decision, to facilitate risk-balancing across the broad range of policy goals.