Private participation in infrastructure : a review of the evidence

Infrastructure services play a critical role in development, with direct and indirect linkages to living standards, and economic growth. Until de 1990s, most developing countries relied on public sector monopolies to finance, and operate their infrastructure, with disappointing results, with technical inefficiencies estimates causing significant losses. Under public provision, services are often mispriced to meet short-term political goals, leading to additional losses. However, countries around the world have been turning to the private sector, both to finance, and operate new infrastructure assets, expected to offer a number of benefits, namely access to finance for service expansion, to improve incentives for efficiency, and to reduce the burden on public resources. This paper reviews the evidence on the extent to which these objectives have been achieved. As a background to the discussion, Part A provides a brief review of the trends in private participation in developing countries' infrastructure; Part B reviews the evidence from the privatization of, and concessions to existing infrastructure enterprises; Part C looks at some of the evidence from private financing of new assets; and, Part D draws on that evidence to highlight key lessons.