Private Enterprise and Financial Markets > Infrastructure and Financial Markets
Private Infrastructure: Ten Commandments for Sustainability
By Antonio Vives (02/97, IFM-304, En, Es)
The last five years have seen a significant increase in the participation of the private sector in infrastructure development, particularly in developing countries. This trend has received a great deal of attention from practitioners, as reflected by the many conferences and seminars that are taking place and the number of articles that are being written about it. Statistics confirm the growth of private sector participation, particularly in emerging markets, but also in most developed countries. However, the projects that have reached closure seem to be below the expectations that have been created. The apparent gap between the amount of interest stirred and the relatively few completed projects call for an answer to a key question: Is this a passing fad or does it reflect a permanent change in the way infrastructure is provided? The answer depends largely on how the transition process is handled and how the new framework is managed.
The intensity with which some countries have faced the change seems to point to a permanent change. However, we should remember the cycles that the ownership and management of infrastructures have gone through in the last century. At the turn of the century, railroads, irrigation and the supply of power, water and gas were promoted, financed and managed primarily by private sector enterprises. The pervasiveness of the private sector was common in all continents. With time, infrastructure firms were regulated and nationalized. Although the timing of public sector involvement in infrastructure was not the same in the different countries, periods of war and economic recession triggered waves of nationalization in most countries. In the late fifties, infrastructure services were largely provided by the public sector. The drop in the quality of these services, which was associated with the participation of the public sector, turned the tide and generated a wave of deregulation and privatization during the seventies. We seem to be at the crest of this wave now. The question, which does not have a clear answer, is aimed at determining whether this is a fad or an irreversible process. To be a lasting process, a number of conditions, presented in this paper as the ten commandments of sustainable private infrastructure, should be met. First, however, we analyze the reasons countries have for choosing to incorporate the private sector into the provision of infrastructure and will briefly review the modalities in which private sector privatization occurs and their impact on the relationship between government, the private sector and consumers. Even though what follows is mostly addressed to developing countries, there are many lessons for developed countries as well, particularly those in which public services have been traditionally in the hands of the public sector, like most countries of the European Union.
Last updated: 02/26/07
