Tobegin with, definiton of the term of regulation is critical for the understandingof the idea of how the SWFs are governed. Regulation characterized as theproclamation of standards by government joined by instruments for controllingand requirement, for the most part pressumed to be performed through aspecialist public agency or the direct intervention of the state in the economyin any frame or again the greater part of the systems of social control orimpact influencing all parts of conduct from whatever source, regardless ofwhether they are deliberate or not.
Anotherdefiniton of the regulation is the managed and centered control practiced by apublic agnecy over exercises that are accepted by a community.Beside from thedefinition of regulation, it is very important the understand of goodgovernance features. There are five different criterias to be used as key teststo evaluate whether a regulatory act can be counted as ‘good’.Regulation can beclassified as good must have:i. Supported by thelegislative authority, ii.
Convenient scheme ofaccountability, iii. Equal and accessibleprocedures, iv. Regulator is acting withsatisfactory expertise,v. Action is efficient overall. Apart from theirdefinition, it can be easily claimed that good governance occurs only wherelegitimacy already contains all of the discussed criterias. Legitimacy in itssimplest form is the authority given to a person ( public or private, legal ornatural ) by the one(s) particular person’s virtual authority for practicalreasons.
Moreover it is the satisfaction of the people which have the power toremove an authority – a legal or natural person- from its regulatory position. It comes fromsocial contract theory but we can easily say that it comes from the fear ofchaos and the belief as that the governor/ruler that takes its power from thepeople in its wider sense is more eager to response the needs of that people ontheir behalf if and that is accountable to them. Legitimacy can be supposedthat already covers efficiency and accountability. As in the example of agovernment losing its legitimacy once economy starts falling down although itis selected with the majority of the votes of the public.
As long as a countryhas excess or continues to growing even a dictator does not lose its powerthough he or she is corrupted in all the ways which is in the example of richMiddle East countries. Because of this, accountability is -although it is usedas a finance term- economy. In shortly, legitimacy is economy.