Over the last decade, governments around the world pursued policies to involve the private sector in the delivery and financing of infrastructure services. The scale of this move away from the hitherto dominant public sector model was far more rapid than had been anticipated at the start of the 1990s. By the end of 2001, developing countries had seen over $755 bn of investment flows in nearly 2500 private infrastructure projects. But investment flows peaked in 1997 and have since dropped by more than half. Macroeconomic crises have severely tested the robustness of this new paradigm. Problems with individual projects related to cancellation or renegotiation have made the headlines. Critics of the private provision of infrastructure argue that it has made services less affordable, and adversely affected access by the poor to modern infrastructure services. The decline in public opinions of private provision is matched by the reduced enthusiasm of many investors in developing country infrastructure, driven in part by some disappointing experiences.
Many of the problems we have seen relate to difficulties in sustaining cost-covering user fees for these sectors, which have a tradition of pricing below costs. They have also highlighted the challenges involved in the regulation of these sectors. This report aims to distill the experience with the private provision of infrastructure over the last 15 years. It looks at the growth that occurred during the mid 1990s, and the subsequent declines. The main factors driving this are examined. The report assesses the impact that the private provision of infrastructure has had on service delivery, and what the consequences for other important goals have been. Finally, it looks at the main policy lessons that can be drawn, and what governments have to do moving forward if they are to ensure that the supply of infrastructure services does not become a bottleneck to growth.