The Governance of Network Industries

The Governance of Network Industries

Institutions, Technology and Policy in Reregulated Infrastructures

Studies in Evolutionary Political Economy series

Edited by Rolf W. Kunneke, John Groenewegen and Jean-François Auger

Infrastructures are subject to substantial readjustments of governance structures, often labeled as liberalization, privatization or re-regulation. This affects all traditional infrastructure sectors including communications, energy, transport and water. This study highlights and illustrates some of the major challenges for readjusting the governance of network industries from an economic, institutional, political and technological perspective. The three parts of the book address the institutional design of infrastructures, the role of technology in different sectors and actor behaviour.

Chapter 2: Why Reform Infrastructures and with what Institutional Arrangements? The Case of Public–Private Partnerships in Water Supply

Claude Ménard

Subjects: economics and finance, industrial economics, institutional economics, public sector economics


2. Why reform infrastructures and with what institutional arrangements? The case of public– private partnerships in water supply Claude Ménard INTRODUCTION Reforming public utilities has been high on the agenda of policy-makers. The 1980s were dominated by the major slogan of privatization. The late 1990s shifted to another one, public–private participation. In both cases, the underlying logic was that involving the private sector in the provision of public utilities meant the introduction of powerful market forces that would push toward higher investments and lower prices. It would thus benefit consumers and improve the general welfare. There is a lot to question about this pseudo logical sequence (see Yarrow 1986). The goal of this chapter is different, however. After a brief overview of why reforms became considered a necessity, I will focus on why reforms based on contracts became so fashionable, and on some lessons we have learned about performance obtained through contracting. By reform I mean a substantial change in decision rights that modifies the governance and eventually the allocation of property rights of existing operator. In other terms, reform is viewed here as a structural change in the mode of governance. Reforms of public utilities (PUs) vary widely across sectors because of substantial differences in the nature of networks, which depends on differences in their technologies (and the pace of their technological changes), on differences in market structures and transactions at stake, and on differences in their institutional environment. Broadly speaking, the range of reforms goes from...

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