From the agency perspective on the universal service Analysis of the water supply industry

[Abstract] building a harmonious society and scientific Development is the contemporary theme of Economic reform and Development goals present water supply industry, market-oriented reforms, focus too much on the water supply of the commodity, ignoring the public welfare, the government in place, ignoring the water supply industry is characterized by by the city government as a responsible subject, and has a public nature. This article focuses on the market under the water services industry in general theory of analysis, measures should be taken to the idea.

[Keywords] water supply industry, universal service, the agency

1 the basic characteristics of the water supply industry and its universal service

1.1 the basic characteristics of the water supply industry
Around the water supply industry is the production, use, and a series of business and the formation of the industry, including water flow, water system, water and other sectors.

Water is a quasi-public goods. Water supply industry with exclusive, may prevent those who do not pay for public goods consumption. Water supply industry is non-competitive, in a certain scale, the increase a person's consumption does not affect other water supply from water consumption to obtain the utility, that additional spending of a person, the water industry does not cause any increase in production costs. Because clients are popular, not only necessities, the elasticity of demand is small, but between public goods and private goods between the quasi-public goods, market-oriented context, more attention should be paid pro-poor regulation, market mechanisms can not simply apply the pricing should protect the interests of consumers.

Water supply industry has a public and universal service characteristics, and has a significant internal benefits and external benefits, so-called internal rate of return is the Water of the operators get the direct Economic benefits, external benefits is the performance of water supply facilities as the city's infrastructure, a sustainable urban prerequisite for Development, is an important part of the investment environment, as well as land value and other benefits. external benefits greater than the internal revenue, that is, positive externalities of quasi-public goods. Internationally, water as a basic human needs , a right can be said that the water is more prominent public welfare.

1.2 The universal service water supply industry
Universal service refers to the infrastructure industry products must ensure that service area where everyone can afford to get the minimum quality standard of service. These include the availability and acceptability of two aspects, while maintaining general targets at least two meanings: first, political meaning. With the entry of private enterprises, enjoy universal service obligations had vested interests threats facing the loss of these benefits, it will be resistance to reform. Second, the public significance of these common objectives and Development goals are closely related. The importance of the water sector more generally determines the water supply service is of great significance.

Separation of ownership and management is a fundamental prerequisite for the formation of the agency, and in the two conditions, namely the Economic one goal difference. The case of asymmetric information, principal-agent analysis has been widely used. Here the principal-agent relationship between the water supply industry analysis, special attention to pro-poor and other public goals to achieve the principal-agent aspect.


2 From the perspective of the water supply industry, the agency's basic discussion of universal service

In short, the principal-agent relationship can be understood as a contractual relationship. Contract is to provide the basic content of an agent to the client's interests should take action, the principal should be paid accordingly to the agent what kind of reward. Principal and agent have become a need for further Research, of course, first of all because the agent's objective function is not always consistent with the principal so-called agency problem point is that the client how to set incentives encourage agents to take appropriate action to maximize the client's interests to promote, so the water supply industry, the basic problems facing the principal is how to design a set of incentives to master the two agents get the information, and then to active cooperation the following agent analysis framework for analysis on the use of the water supply industry, the market-oriented reforms of public utilities under the model, analysis of point pro-poor nature.

2.1 Analysis of the traditional mode of government supply
Traditional government supply mode, faced with a commission, the general public on the government, and provide a unified enterprise, efficiency may be lacking, but the pro-poor, since their services directly, the main single, easy to implement universal service obligations Obviously, lower monitoring costs in the supply side the government is the government agency within the executive agency, there is no Economic agent commission. water supply organization by the government, whose interests do not clearly exist independently, so if possible, the government reflect the will of the owner, the pro-poor nature can be achieved. In addition, the administration of public power may be due to the increasing chain of principal-agent, agent risk progressively larger. comprehensive view, the government administrative commission, relatively speaking, the efficiency in lack of motivation, but fairness would be better guaranteed.

2.2 mode of modern enterprise system state analysis
Implementation of modern enterprise system, the state-owned enterprises, with separating the principal-agent chain stretching, the second-level proxy agent by the administrative agency into the economy. Face a more complex two-way agent, multi-agent problem, although the main changes directly , but because of state-owned property controlled by the government can still be so low cost in terms of asymmetric information. motivation and various means of government control and therefore more easily. This model is the most critical position of state-owned water supply enterprises, ie whether the state capital requires value-added priority. If you do not take into account the technical characteristics of the water supply industry itself and quasi-public character, the state capital to their primary purpose of capital appreciation, so that enterprises and government pro-poor and other public welfare goals at odds, then the principal-agent incentive problems will be highlighted, so public interest in increase the cost of supervision and encouragement, so that pro-poor targets are in jeopardy if the supply of state-owned enterprises need to take the public nature of the obligation, then and government goals, pro-poor are protected. the government agency commissioned by state-owned enterprises, although shareholders still public, but also the information already exists asymmetry. enterprises independent operators, there will inevitably increase the cost of the new model may be of interest groups on the game. the middle of an agent (the government), the ultimate agent of (state-owned enterprises), probably because of financial difficulties and other reasons, a conspiracy, increase the cost of damage to the initial principal (public) interest. In short, this new mode of state-owned enterprises, increase the portion of the principal-agent costs, but the government and state-owned enterprise was able to coordinate to some extent, the main problem is location and state-owned enterprises proper supervision and encouragement of the supporting measures or not.

Links to free download http://www.hi138.com 2.3 franchising model of government
Analysis of government licensing model, in particular, involvement of private capital under the circumstances. Intuitively, the private capital involved, in order to ensure their profits, and efficiency in terms of profit is likely to increase, but more likely is exacerbated by the threat of pro-poor areas. Because the target is certainly different from the government and more private goals, especially the public welfare, the agent for the principal specialization intensified hidden action and hidden information problems, so the information processing, adverse selection and moral hazard problems and more, private participation in water supply of the main changes made too complicated, easy to shirk responsibility, the cost of increased public scrutiny. franchising the face of market bid, which may be an agent collusion by corporate interests affected. Estache impact on prices that utility depends not only on the pre-reform level of costs and tariffs, but also on how the benefits of privatization in the distribution between the various corporate interests. Privatization will weaken the government's ability to take into account social equity by weakening the ability of this government, privatization will erode the local level the importance of democratic participation. In short, the involvement of private capital will greatly enhance their profit requirements can supply Economic commission get the benefits of the agency professional, made the provision of efficiency might be improved, if it is "real" monopolize the market has solved the disadvantages, but the Government's original goal of the agency may be more threatened, and the serious problem of an agent collusion.


3 to solve the path

According to principal - agent theory Research that address the moral hazard and adverse selection problems, first establish a sound internal incentive - restraint mechanism, that is determined by the rational agent contract, agent specific rights and obligations to give agents the best behavior incentives, so that the target agent behavior close to the client's goals, to reduce opportunistic behavior and the agent to be adverse selection motives, so that moral hazard and adverse selection can be controlled. The second is to establish a sound external incentives - and restraint mechanisms, namely In the introduction of market competition mechanism between agents, the principal - agent relationship to the market to determine, monitor, so that agents can make the adverse selection and moral hazard be punished sooner or later to accept the negative behavior of the market the same time, the agent market the presence of the agent's behavior will be comparable, thereby reducing the impact of environmental uncertainty, reducing the required monitoring and performance evaluation of factor inputs. Specific measures are as follows:
First, in the context of market-oriented, must make the public has a right to adequate supervision, so as to reflect the characteristics of water rights were fundamental rights, this is the principal-agent theory in urban water supply industry with the premise of fully Shi Yingxing from multiple utilities in characteristics of the principal-agent perspective, utility regulators in the agency, including: public, urban management, regulators, enterprises, which form a multiple principal-agent. this relationship is the core of the regulator as an agent of the consumer, it is to ensure the interests of consumers by monitoring enterprises. Not only that, the agency needs the public to monitor the actions of corporate incentives for businesses to have a direct impact on behavior, so that only a strong public awareness of an agent and eventually an agent, supervision, incentives can be conducive to reform.

Second, legislation to protect the importance of consumer demand regulators were able to achieve the legal authority to regulate corporate disclosure, and requires precise regulation to implement if the regulator can implement the exact regulation, regulators can improve their own status and evaluation in the community, the establishment of such incentives, the regulator is necessary for the excitation mechanism in the regulator and the regulated business of the principal - agent relationship is very important to be strict legislation, the law can be by.

Finally, the two agents on the supervision and management of the public, through hearings, media monitoring, etc., this may ease the conspiracy in which important point, regardless of the political principal-agent, legislation is too long, or the economic commission, the consumer can establish a direct Oversight Committee to monitor the implementation of those so shortening the chain of supervision, so that pro-poor nature of the protection.


References:
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[4] Wuxu Liang, China's private sector participation in infrastructure industries and pro-poor regulation [D]. Dongbei University of Finance, 2004 Links to free download http://www.hi138.com