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Facilitation vs Regulation

Should governments be putting more emphasis on industrial policy and developmental approaches in ICT, ask Morten Falch and Anders Henten.

Facilitation vs Regulation

"Industrial policies – meaning policies by which governments attempt to shape sectoral allocation of the economy are back in fashion." So said Nobel prize winning economist, Joseph Stiglitz and colleagues, in 2013.1 The quote highlights that there are two approaches to ICT policy – regulatory and developmental. In telecoms, the objective of a regulatory approach to policy is to create a stable policy framework for a liberalised telecoms market with real competition. The instruments are rulemaking and correction of market failures. The argument is that a stable regulatory environment reduces transaction costs and stimulates investments But direct market interventions are to be avoided.

In contrast, the developmental approach stimulates investments and the use of technology through various public sector activities. The instruments could be demand stimulation via public consumption or subsidies to use or supply ICT services. This includes direct market intervention, such as in public-private partnerships that give public support to infrastructure development.

So a country that is a developmental 'state' contrasts with the regulatory state, where the state is mainly concerned with creating a framework for economic competition, but not with direct intervention in substantive matters. Japan has been mainly a developmental state (while the US is mainly a regulatory state). Chalmers Johnson claims that state intervention in Japan and especially the role of the ministry of trade and industry (MITI) played an instrumental role in the successful economic development of the country, and that other East Asian countries (Hong Kong, Taiwan, Korea and China) have each developed their own versions of the developmental state.

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