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Threats of Transformation Failures

Author

Listed:
  • Tamás M. Horváth

    (Hungarian Institute of Public Administration, H-1054 Budapest, Alkotmány u. 25, Hungary)

  • Gábor Péteri

    (Open Society Institute, Local Government Initiative, H-1054 Budapest, Nádor u. 11, Hungary)

Abstract

The anticipated transformation of public utility sector at local level consists of the following main steps. Firstly, after the devolution, commercialisation takes place and the sector becomes independent of municipalities. Then, cost recovery begins to operate through tariffs instead of former budgetary transfers and simple cross-subsidies. Parallel to this, service regulations and quality standards are legislated. This is followed by the establishment of semi-autonomous regulatory agencies in the emerging market environment. However, in reality the development process is not so linear. Transition countries have to face not only the traditional failures of government functions. As competition is underdeveloped, market conditions should be established together with correction of market failures and design of new-born public regulatory functions, absolutely at the same time. In this situation market and government failures are mixed. These cumulative transformation failures might be avoided only with effective national and local policies.

Suggested Citation

  • Tamás M. Horváth & Gábor Péteri, 2004. "Threats of Transformation Failures," Society and Economy, Akadémiai Kiadó, Hungary, vol. 26(2-3), pages 295-324, December.
    • Handle: RePEc:aka:soceco:v:26:y:2004:i:2-3:p:295-324
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