An Overview of Private-Sector Financing of Urban Infrastructure Services: A Developing Countries Perspective

Although most private-sector financing activity takes place in developed countries, attention is quickly shifting to less developed countries, where enormous infrastructure deficiencies, rapid urbanization, and limited public-sector resources are forcing governments to consider alternatives to the traditional public provision of infrastructure services. This article provides an overview of the principal methods used by central and local governments to foster the private provision and financing of urban infrastructure services. The techniques include land privatization; development exactions; special assessment and benefit assessment districts; certificates of participation; private contracting of services; leases and concessions; build, operate, and transfer (BOT) projects; public-private partnerships; the privatization of services; commercial bank financing; infrastructure funds; and private bond financing. Each section describes the technique, provides examples of where it is used, and discusses key implementation issues.