Electricity sector reform in developing countries: Deconstructing the good regulatory governance paradigm

Regulatory governance is generally acknowledged as fundamental to attract investors to finance infrastructure development in developing countries. This is what I refer to as the ‘good regulatory governance’ paradigm. This paper challenges the strength of this commonly held causal link between regulatory governance and investments in two steps. 1) regulatory governance is not a sufficient condition for investments: other factors are needed for regulatory governance to bring the expected outcomes. 2) regulatory governance is not a necessary condition for investments: other policy strategies can be successful in attracting investment. Put bluntly, we can have both ‘bad’ regulatory governance and ‘good’ non-regulatory governance. This argument is explored qualitatively based on two case studies of electricity reforms meant to foster investment in renewable energies in Algeria and Morocco. The study and comparison of both cases bring a strong support to the argument and provide interesting insights on the interaction between other factors (such as political will, policy consistency) and the policy instruments set up to attract investment. Its main conclusions are: 1) we need to relax the causal link between regulatory governance and investment in developing countries 2) we should start reflections by focusing on policy needs before concluding on the appropriate policy instruments (instead of starting with pre-conceived ideas about appropriate policy instruments) and 3) we should also relax the focus on policy instruments to explore how instruments interact with the context in which they are implanted.