Choices for Efficient Private Provision of Infrastructure in East Asia

This report draws on the experiences of East Asia (Malaysia, Australia) and elsewhere (India, Chile) to analyze the impediments to and prospects for private financing of infrastructure, and to show the strategies governments have followed. The report illustrates the policy concerns and choices in moving toward efficient private involvement in infrastructure. Choices arise in the strategy and organization of reform -with regard to structure, the extent of private participation, the speed of reform, and the planning and coordinating roles of the government. Choices must also be made in the methods for contracting and regulation, the management of environmental and resettlement issues, and the development of financing mechanisms to increase access to long-term funds. Chapter 1 describes recent trends in international financing of infrastructure projects in East Asia, discusses key policy and institutional impediments to greater private participation, and assesses the role of domestic capital markets and finance. It then outlines a national and regional strategy for stimulating private investment. Chapter 2 looks at government ' s role in involving the private sector in infrastructure development. It draws on experience in the region, particularly in Australia, to set guidelines for government processes and organization. Chapter 3 describes the form contracting took between the public and private sectors in Malaysia for infrastructure provision, operation, and maintenance, the main ones being leasing and concession contracts. Chapter 4 discusses the phases that regulation of private participation in infrastructure took in Chile, particularly examining government priorities that wereconsidered. Case studies of four infrastructure sectors are presented. Chapter 5 considers the fundamental questions governments must consider as they try to reduce deterrents to private investment, namely, operational and political risks related to environmental and resettlement risks. Finally, Chapter 6, using lessons learned from India, examines the reasons so many developing countries have experienced difficulties in implementing private sector infrastructure projects. It focuses on problems associated with tariff regulation, risk mitigation arrangements needed to ensure financeability, and the need to mobilize a suitable mix of finance, especially long-term finance.