Beyond Privatization : Rethinking Private Sector Involvement in the Provision of Civil Infrastructure

The provision of public services (and the ownership of the associated infrastructure) in both the developed and developing world varied widely throughout the 20th century. Nationalization and public ownership often resulted in below-market charges for services but also featured poor service delivery and disinvestment in the physical systems and human capital. A wave of privatizations of public utilities in the developing world was supposed to bring efficiency through market discipline and modern business practices but often just brought hardship to those least able to pay market prices. As a result, many of the early privatizations were abandoned without finding a solution to the joint problems of the need for market efficiency while maintaining social equity. This chapter will explore the emerging nature of public-private cooperation in the provision of civil infrastructure looking particularly at the financial engineering models that have emerged in the past 10 years. It will briefly describe the generally unsatisfactory results of public service privatization in developing countries, the emergence of the Public Finance Initiative/Public Private Partnership (PFI/PPP) approach in Great Britain, and contrast it with recent experience in other countries, notably Canada and the United States. It will close with some observations on how safeguards can be incorporated into the process to ensure that the interests of the public, especially the most economically challenged, can best be protected