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Infrastructure Privatisation: Oversold, Misunderstood and Inappropriate
Author(s) -
Tan Jeff
Publication year - 2011
Publication title -
development policy review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.671
H-Index - 61
eISSN - 1467-7679
pISSN - 0950-6764
DOI - 10.1111/j.1467-7679.2011.00513.x
Subject(s) - incentive , context (archaeology) , economics , developing country , capital (architecture) , investment (military) , revenue , private capital , business , finance , public economics , market economy , macroeconomics , economic growth , foreign direct investment , political science , history , paleontology , archaeology , politics , biology , law
Infrastructure privatisation aimed to finance capital investment and improve efficiency, but the results have been disappointing because of the mismatch between privatisation theory and the characteristics of infrastructure and utility projects in developing countries. This article reviews the evidence and seeks to explain the results in terms of the high capital costs and low revenues that have necessitated public financing and risk‐sharing, diluting private incentives and requiring regulation. However, it argues that the emphasis on strengthening weak regulatory capacities in poor countries is misplaced, because these are the outcome of the development process, and are constrained by technical capacities, informational problems and the resources available. In this context, infrastructure privatisation is argued to be inappropriate for developing countries.