Policy coherence versus regulatory governance. Electricity reforms in Algeria and Morocco

The diffusion of independent regulatory agencies (IRAs) in utilities sectors in developing countries is underpinned by the idea that IRAs are highly effective institutional devices to signal policy credibility to private investors. But is it really so? Institutional economists tend to confirm the effectiveness of IRAs, while also highlighting the many factors that condition its positive impact on investments. Acknowledging the importance of interaction effects, this paper proposes to shift the level of analysis, moving away from IRAs to look at the overall complementarity between policy objectives, instruments, and the wider political context. In sum, it argues that IRAs are, as such, irrelevant. What matters instead is policy coherence. A comparison between two case studies on electricity policy reforms in Algeria and Morocco lends credit to the policy coherence approach. It shows that policy incoherence may deprive IRAs from any impact on sectoral evolution and that there are effective alternatives to IRA to signal policy credibility and attract investors. The paper concludes by suggesting practitioners to relax the focus on preconceived policy solutions, to be open to alternative policy approaches and to focus on helping developing countries designing coherent policies.