A study done by the World Bank, Reforming Infrastructure – Privatization, Regulation and Competition has cited “effective regulation” as the key for alleviating poverty and improving infrastructure in developing countries, according to a press release issued by the WB on Tuesday.
“Getting infrastructure reform right is essential to achieving the Millennium Development Goals on reducing child mortality and empowering women,” said Francois Bourguignon, chief economist and senior vice-president.
“There [might have been] some ‘irrational exuberance’ in recent years based on the potential benefits of privatization, the fact is that utilities in developing countries need private financing to maintain and expand services to the poor,” he added.
The report notes that regulatory agencies must be free of political influence, and that their decisions must be subject to review by the judiciary or another non-political entity. Regulatory processes, the report urges, must encourage competition, be open and transparent and designed before privatization is undertaken.
According to the report, privatization has low credibility in many developing countries, with disapproval rates over 80 percent in Argentina and Peru. The report argues that this dissatisfaction with privatized utilities is not due to their ownership structure, but due to the weakness of institutions regulating them.