Water storage tanks sit at a treatment works in this aerial photograph taken in London, U.K., on Monday, Dec. 9, 2013. Bank of England Governor Mark Carney said Britain's recovery will need to be sustained for a while before it is strong enough to withstand higher interest rates. Photographer: Matthew Lloyd/Bloomberg
Water storage tanks at a treatment works in London, UK. Under the UK’s water privatisation programme, the government created regional monopolies and then played them off against each other to achieve Show more

Economics 101: How should Arabian Gulf countries regulate privatised industries?



The Arabian Gulf countries are embracing privatisation, both to fund the investments necessary in their economic visions, and as a way of improving performance within these organisations, but how should they consider regulating these industries?

By privatising, governments try to use profits as a strong, organic incentive for the company to cut costs and to develop more efficient production techniques and better quality services. In industries such as telecommunications, as GCC citizens have seen, this works well.

However, in some industries, the cost structure means that only one company can operate efficiently, known as a “natural” monopoly. Electricity and water, due to their incredibly expensive infrastructure requirements, fall under this class. Under these circumstances, the absence of competition means that the profit incentive also pushes the company toward charging high prices, which hurt consumers. This is why we need regulation.

Note, however, that the regulator cannot micromanage the company, as that would represent de facto nationalisation, which would put us back to square one. Instead, the regulator has to operate in a manner that balances the benefits of the profit motive (lowering costs, developing technology) with the ills (high prices) that emerge in the absence of competition.

If the regulator forces prices too low, the company might not be able to cover its costs. If it is too lax, consumers will be harmed. Critically, the regulator is missing the most important piece of information, which is the true production cost: the company has a strong incentive to inflate its declared costs, so as to secure a higher permitted price. This turns regulation into a game of cat and mouse: if the regulator responds by capping profits, then this undermines the company’s incentive to innovate, as it won’t be allowed to reap the benefits of a better product or lower production costs.

To mitigate against the company’s efforts at misrepresenting its costs, the regulator can hire industry experts who have inside information on the true production costs. But this leads to a potentially bigger problem, referred to as "regulatory capture": the creation of an incestuous relationship between the regulator and the regulated company, which transforms the regulator into the company’s client, rather than its overseer.

To see how this works, suppose a government decides to privatise water. The cost structure means that it has to be a monopoly, so the government creates a regulator. It needs local experts to operate the regulator, and the best - and possibly only - place to find them is the newly privatised water company. These people have a lifetime of personal relationships with their soon-to-be ex-colleagues in the water company, so it is difficult for them to develop the impartiality necessary to regulate well.

_______________

Read more:

Economics 101: When is privatisation a good idea?

Economics 101: The coming trade war offers opportunities for Arabian Gulf countries 

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Moreover, the company has a strong incentive to offer its new overlords over-the-table and under-the-table "incentives" that further undermine the regulator’s mission. The most frequent example is the tacit promise of a highly lucrative board seat on the private monopoly once the ex-employee’s term at the regulator ends.

Governments’ earnest attempts to counteract regulatory capture usually fail. In fact, companies often embrace regulators because they can manipulate them into passing regulations that help protect the company, usually by limiting entry. This happened a few weeks ago when Facebook chief executive Mark Zuckerberg was testifying before Congress: he proposed the establishment of a regulator. Before you applaud what superficially appeared to be a sacrifice in the general interest, it was more likely a cunning commercial ploy for Facebook to fortify its commercially-created monopoly with regulatory armour, because of Facebook’s confidence in its what it feels is an ability to influence its regulator. After all, where is Congress going to find people who know Facebook well enough to regulate it? Facebook!

However, there are two policies that the Gulf countries may wish to consider when privatising. The first - exemplified by the UK’s water privatisation - is “yardstick competition”. Rather than creating a national monolith, the UK government created regional monopolies, and then played them off against each other in the pursuit of accurate cost information. The regulator allowed each company to set prices a fixed percentage above its estimate of a reasonable production cost and it estimated that cost by (approximately) taking the smallest declared cost among the regional companies. Like an auction, this created an incentive for the monopolists to lower their true costs. In the Gulf, larger countries could adopt such a scheme by exploiting their natural geographical subdivisions: provinces in the case of Saudi Arabia, and emirates in the case of the UAE.

As a partial antidote to regulatory capture, the Gulf countries should consider hiring experts from other GCC countries as their regulators. For example, Kuwait might hire former senior executives from the Oman airport authority to regulate privatised Kuwaiti airports.

The most important lesson for the Gulf countries, however, is that even the best regulators are flawed, and that there is no substitute for competition as an accountability mechanism. Sometimes, new technology transforms a natural monopoly into an industry where competition is possible: this happened with the advent of wireless technology in telecommunications.

Therefore, resources must be dedicated to developing technologies that enable competition.

Omar Al-Ubaydli (@omareconomics) is a researcher at Derasat, Bahrain.

Frida

Director: Carla Gutierrez

Starring: Frida Kahlo

Rating: 4/5

Match info:

Portugal 1
Ronaldo (4')

Morocco 0

Guardians of the Galaxy Vol 3

Director: James Gunn

Stars: Chris Pratt, Zoe Saldana, Dave Bautista, Vin Diesel, Bradley Cooper

Rating: 4/5

Getting there
Flydubai flies direct from Dubai to Tbilisi from Dh1,025 return including taxes

Specs – Taycan 4S

Engine: Electric

Transmission: 2-speed auto

Power: 571bhp

Torque: 650Nm

Price: Dh431,800

Specs – Panamera

Engine: 3-litre V6 with 100kW electric motor

Transmission: 2-speed auto

Power: 455bhp

Torque: 700Nm

Price: from Dh431,800

'Avengers: Infinity War'
Dir: The Russo Brothers
Starring: Chris Evans, Chris Pratt, Tom Holland, Robert Downey Junior, Scarlett Johansson, Elizabeth Olsen
Four stars

UAE currency: the story behind the money in your pockets
Dengue fever symptoms
  • High fever
  • Intense pain behind your eyes
  • Severe headache
  • Muscle and joint pains
  • Nausea
  • Vomiting
  • Swollen glands
  • Rash

If symptoms occur, they usually last for two-seven days

Women’s T20 World Cup Qualifier

UAE results
Ireland beat UAE by six wickets
Zimbabwe beat UAE by eight wickets
UAE beat Netherlands by 10 wickets

Fixtures
UAE v Vanuatu, Thursday, 3pm, Zayed Cricket Stadium
Ireland v Netherlands, 7.30pm, Zayed Cricket Stadium

Group B table
1) Ireland 3 3 0 6 +2.407
2. Netherlands 3 2 1 4 +1.117
3) UAE 3 1 2 2 0.000
4) Zimbabwe 4 1 3 2 -0.844
5) Vanuatu 3 1 2 2 -2.180

Specs

Power train: 4.0-litre twin-turbo V8 and synchronous electric motor
Max power: 800hp
Max torque: 950Nm
Transmission: Eight-speed auto
Battery: 25.7kWh lithium-ion
0-100km/h: 3.4sec
0-200km/h: 11.4sec
Top speed: 312km/h
Max electric-only range: 60km (claimed)
On sale: Q3
Price: From Dh1.2m (estimate)

Specs

Engine: 1.5-litre turbo 4-cylinder / 2.0 turbo 4-cylinder (S3)
Power: 148bhp / 328bhp (S3)
Torque: 250Nm / 420Nm (S3)
On sale: December
Price: TBA

RESULTS

Dubai Kahayla Classic – Group 1 (PA) $750,000 (Dirt) 2,000m
Winner: Deryan, Ioritz Mendizabal (jockey), Didier Guillemin (trainer).
Godolphin Mile – Group 2 (TB) $750,000 (D) 1,600m
Winner: Secret Ambition, Tadhg O’Shea, Satish Seemar
Dubai Gold Cup – Group 2 (TB) $750,000 (Turf) 3,200m
Winner: Subjectivist, Joe Fanning, Mark Johnston
Al Quoz Sprint – Group 1 (TB) $1million (T) 1,200m
Winner: Extravagant Kid, Ryan Moore, Brendan Walsh
UAE Derby – Group 2 (TB) $750,000 (D) 1,900m
Winner: Rebel’s Romance, William Buick, Charlie Appleby
Dubai Golden Shaheen – Group 1 (TB) $1.5million (D) 1,200m
Winner: Zenden, Antonio Fresu, Carlos David
Dubai Turf – Group 1 (TB) $4million (T) 1,800m
Winner: Lord North, Frankie Dettori, John Gosden
Dubai Sheema Classic – Group 1 (TB) $5million (T) 2,410m
Winner: Mishriff, John Egan, John Gosden

Honeymoonish

Director: Elie El Samaan

Starring: Nour Al Ghandour, Mahmoud Boushahri

Rating: 3/5

ROUTE TO TITLE

Round 1: Beat Leolia Jeanjean 6-1, 6-2
Round 2: Beat Naomi Osaka 7-6, 1-6, 7-5
Round 3: Beat Marie Bouzkova 6-4, 6-2
Round 4: Beat Anastasia Potapova 6-0, 6-0
Quarter-final: Beat Marketa Vondrousova 6-0, 6-2
Semi-final: Beat Coco Gauff 6-2, 6-4
Final: Beat Jasmine Paolini 6-2, 6-2

Traits of Chinese zodiac animals

Tiger:independent, successful, volatile
Rat:witty, creative, charming
Ox:diligent, perseverent, conservative
Rabbit:gracious, considerate, sensitive
Dragon:prosperous, brave, rash
Snake:calm, thoughtful, stubborn
Horse:faithful, energetic, carefree
Sheep:easy-going, peacemaker, curious
Monkey:family-orientated, clever, playful
Rooster:honest, confident, pompous
Dog:loyal, kind, perfectionist
Boar:loving, tolerant, indulgent  

Winners

Best Men's Player of the Year: Kylian Mbappe (PSG)

Maradona Award for Best Goal Scorer of the Year: Robert Lewandowski (Bayern Munich)

TikTok Fans’ Player of the Year: Robert Lewandowski

Top Goal Scorer of All Time: Cristiano Ronaldo (Manchester United)

Best Women's Player of the Year: Alexia Putellas (Barcelona)

Best Men's Club of the Year: Chelsea

Best Women's Club of the Year: Barcelona

Best Defender of the Year: Leonardo Bonucci (Juventus/Italy)

Best Goalkeeper of the Year: Gianluigi Donnarumma (PSG/Italy)

Best Coach of the Year: Roberto Mancini (Italy)

Best National Team of the Year: Italy

Best Agent of the Year: Federico Pastorello

Best Sporting Director of the Year: Txiki Begiristain (Manchester City)

Player Career Award: Ronaldinho

CONFIRMED LINE-UP

Elena Rybakina (Kazakhstan)
Ons Jabeur (Tunisia)
Maria Sakkari (Greece)
Barbora Krejčíková (Czech Republic)
Beatriz Haddad Maia (Brazil)
Jeļena Ostapenko (Latvia)
Liudmila Samsonova
Daria Kasatkina 
Veronika Kudermetova 
Caroline Garcia (France) 
Magda Linette (Poland) 
Sorana Cîrstea (Romania) 
Anastasia Potapova 
Anhelina Kalinina (Ukraine)  
Jasmine Paolini (Italy) 
Emma Navarro (USA) 
Lesia Tsurenko (Ukraine)
Naomi Osaka (Japan) - wildcard
Emma Raducanu (Great Britain) - wildcard
Alexandra Eala (Philippines) - wildcard

COMPANY PROFILE

Company name: Klipit

Started: 2022

Founders: Venkat Reddy, Mohammed Al Bulooki, Bilal Merchant, Asif Ahmed, Ovais Merchant

Based: Dubai, UAE

Industry: Digital receipts, finance, blockchain

Funding: $4 million

Investors: Privately/self-funded

Company profile

Company name: Fasset
Started: 2019
Founders: Mohammad Raafi Hossain, Daniel Ahmed
Based: Dubai
Sector: FinTech
Initial investment: $2.45 million
Current number of staff: 86
Investment stage: Pre-series B
Investors: Investcorp, Liberty City Ventures, Fatima Gobi Ventures, Primal Capital, Wealthwell Ventures, FHS Capital, VN2 Capital, local family offices

MATCH INFO

What: 2006 World Cup quarter-final
When: July 1
Where: Gelsenkirchen Stadium, Gelsenkirchen, Germany

Result:
England 0 Portugal 0
(Portugal win 3-1 on penalties)

Pakistan T20 series squad

Sarfraz Ahmed (captain), Fakhar Zaman, Ahmed Shahzad, Babar Azam, Shoaib Malik, Mohammed Hafeez, Imad Wasim, Shadab Khan, Mohammed Nawaz, Faheem Ashraf, Hasan Ali, Amir Yamin, Mohammed Amir (subject to fitness clearance), Rumman Raees, Usman Shinwari, Umar Amin

Closing the loophole on sugary drinks

As The National reported last year, non-fizzy sugared drinks were not covered when the original tax was introduced in 2017. Sports drinks sold in supermarkets were found to contain, on average, 20 grams of sugar per 500ml bottle.

The non-fizzy drink AriZona Iced Tea contains 65 grams of sugar – about 16 teaspoons – per 680ml can. The average can costs about Dh6, which would rise to Dh9.

Drinks such as Starbucks Bottled Mocha Frappuccino contain 31g of sugar in 270ml, while Nescafe Mocha in a can contains 15.6g of sugar in a 240ml can.

Flavoured water, long-life fruit juice concentrates, pre-packaged sweetened coffee drinks fall under the ‘sweetened drink’ category
 

Not taxed:

Freshly squeezed fruit juices, ground coffee beans, tea leaves and pre-prepared flavoured milkshakes do not come under the ‘sweetened drink’ band.

RESULTS

5pm: Al Maha Stables – Maiden (PA) Dh80,000 (Turf) 1,400m
Winner: AF Alfahem, Tadhg O’Shea (jockey), Ernst Oetrel (trainer)
5.30pm: Al Anoud Stables – Handicap (PA) Dh80,000 (T) 1,200m
Winner: AF Musannef, Tadhg O’Shea, Ernst Oertel
6pm: Wathba Stallions Cup – Handicap (PA) Dh70,000 (T) 1,400m
Winner: AF Rasam, Tadhg O’Shea, Ernst Oertel
6.30pm: Arabian Triple Crown Round 2 – Group 3 (PA) Dh 300,000 (T) 2,200m
Winner: Joe Star, Tadhg O’Shea, Helal Al Alawi
7pm: Liwa Oasis – Group 2 (PA) Dh300,000 (T) 1,400m
Winner: AF Alajaj, Tadhg O’Shea, Ernst Oertel
7.30pm: Dames Stables – Handicap (TB) Dh80,000 (T) 1,400m
Winner: Silent Defense, Oscar Chavez, Rashed Bouresly

Law 41.9.4 of men’s T20I playing conditions

The fielding side shall be ready to start each over within 60 seconds of the previous over being completed.
An electronic clock will be displayed at the ground that counts down seconds from 60 to zero.
The clock is not required or, if already started, can be cancelled if:
• A new batter comes to the wicket between overs.
• An official drinks interval has been called.
• The umpires have approved the on field treatment of an injury to a batter or fielder.
• The time lost is for any circumstances beyond the control of the fielding side.
• The third umpire starts the clock either when the ball has become dead at the end of the previous over, or a review has been completed.
• The team gets two warnings if they are not ready to start overs after the clock reaches zero.
• On the third and any subsequent occasion in an innings, the bowler’s end umpire awards five runs.

Company profile

Company name: Leap
Started: March 2021
Founders: Ziad Toqan and Jamil Khammu
Based: Dubai
Sector: FinTech
Investment stage: Pre-seed
Funds raised: Undisclosed
Current number of staff: Seven


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