The Liberalization of Infrastructure
Edited by Matthias Finger and Rolf W. Künneke
Chapter 27: Infrastructure Liberalization: Challenges to the New Economic Paradigm in the Context of Developing Countries
Catarina Figueira and David Parker INTRODUCTION In all economies the provision of efficient, reliable and affordable infrastructure services is an essential prerequisite of economic growth and sustainable development. Key infrastructure services include the provision of water and sanitation, power, transport and telecommunications. Without an adequate infrastructure, market development and output growth is likely to be seriously slowed (World Bank, 1994). Moreover, affordable infrastructure services are critical to the improvement of household welfare and the reduction of poverty. It is a sobering fact that today around 1 billion people lack access to adequate, clean water supplies and a further 1.2 billion to adequate sanitation. The result is disease and high mortality especially amongst infants. In the twentieth century, generally, infrastructure provision was the exclusive province of the public sector, with large, state-owned enterprises (SOEs) being responsible for investment and service delivery. However, in recent years the inadequacies of state enterprises have been revealed with sometimes costly and inefficient services and insufficient capital investment. When the water and sewerage industry was privatized in England and Wales in 1989, this followed years of under-funding. By 2010 the industry will have invested £69 billion since privatization in improving drinking water and raising environmental standards. The result is cleaner and more reliable supplies and less polluted rivers and beaches. But it has come at a price. Water and sewerage tariffs in England and Wales rose by 39.1 per cent in real terms between privatization in 1989 and 2006 (Ofwat, 2007). Meanwhile, through the private finance...
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