Infrastructure Privatization and Regulation : Promises and Perils

Abstract

Infrastructure is crucial for generating
 growth, alleviating poverty, and increasing international
 competitiveness. For much of the twentieth century and in
 most countries, the network utilities that delivered
 infrastructure services such as electricity, natural gas,
 telecommunications, railroads, and water supply were
 vertically and horizontally integrated state monopolies. But
 this approach often resulted in extremely weak services,
 especially in developing and transition economies and
 especially for poor people. Common problems included low
 productivity, high costs, bad quality, insufficient revenue,
 and shortfalls in investment. Over the past two decades many
 countries have implemented far-reaching institutional
 reforms restructuring, privatizing, and establishing new
 approaches to regulation. This article identifies the
 challenges involved in this massive policy redirection
 within the historical, economic, and institutional context
 of developing and transition economies. It also reviews the
 outcomes of these policy changes, including their
 distributional consequences especially for poor households
 and other disadvantaged groups. Drawing on a range of
 international experiences and empirical studies, it
 recommends directions for future reforms and research to
 improve infrastructure performance.