Electricity, natural gas, telecommunications, railways, and water supply, are often vertically and horizontally integrated state monopolies. This results in weak services, especially in developing and transition economies, and for poor people. Common problems include low productivity, high costs, bad quality, insufficient revenue, and investment shortfalls. Many countries over the past two decades have restructured, privatized and regulated their infrastructure. This report identifies the challenges involved in this massive policy redirection. It also assesses the outcomes of these changes, as well as their distributional consequences for poor households and other disadvantaged groups. It recommends directions for future reforms and research to improve infrastructure performance, identifying pricing policies that strike a balance between economic efficiency and social equity, suggesting rules governing access to bottleneck infrastructure facilities, and proposing ways to increase poor people's access to these crucial services.

A background paper for a course on transport privatization and regulation, organized by the World Bank Institute.For a World Bank Institute course on transport privatization, Betancor and Rendeiro (of the University of Las Palmas, Spain) cover basic issues associated with the regulation of privatized airport infrastructure and services:- Economic characteristics of airports. Three types of activities are carried out in airports: essential operational services (aeronautical and non-aeronautical), handling services (aeronautical and non-aeronautical), and commercial activities.Demand for basic airport services is directly influenced by trip purpose. The two types of airline customers (business and leisure travelers) need different levels of flexibility and tend to travel at different times. Analyzing airport capacity (practical and saturation) under peak demand is essential to airport success.Among other important issues: Runway costs, level and volume of service, pollution, congestion, and air traffic control.- Recent trends in the airport industry. The movement toward privatization may involve public ownership and private operation, including joint ventures; partial or majority divestiture; management contracts; and BOT (build-operate-transfer) schemes and variants, including BOOT (build-own-operate-transfer) schemes and LDO (lease-develop-operate) schemes.Or it may involve private ownership and operation.- Price regulation. Topics covered include traditional pricing policies; price regulation through an RPI-X formula; charges for congestion, noise, and other externalities; investment plans; and design of the regulatory system.- Regulation of quality in the industry. Topics covered: regulation of services to passengers (as measured by targets for check-in queues, immigration queues, baggage reclaim queues, concourse crowding, shopping, parking, and so on); fault repair times; average levels of passenger boarding and disembarkation and baggage delivery; safety; and investment obligations.- Performance indicators in the industry. Topics covered: strategic indicators and other financial indicators (including revenues), as well as indicators of cost, productivity, and quality of service.This paper - a product of Governance, Regulation, and Finance, World Bank Institute - was prepared as a background paper for the course on transport privatization organized by the institute. Ofelia Betancor may be contacted at [email protected].

The 1990s saw an increase in the liberalisation of transport policies and a strengthening of the role of private operators and investors in transport infrastructure worldwide. The search for sustained improvement in efficiency is probably secondary to the need to find additional financing, but it is improvement in services that is at the core of the new role of the government in transport. Governments must now become fair economic regulators of many of the privately operated transport services and infrastructures. This book examines the major challenges that governments are likely to face in taking on their new role in transport.

Thailand's economic crisis in 1997 was fundamentally one of private sector debt, rooted in private behavior that affected the magnitude and composition of investment and how it was financed. Thailand's crisis provides further evidence that financial liberalization must be carefully managed because, by increasing competition, it lowers the franchise value of existing financial institutions and creates incentives for unsound banking practices.

Empirical analysis shows that democracy has facilitated economic liberalization in 25 postcommunist countries of Central and Eastern Europe and the former Soviet Union. The existence of a vibrant civil society at the start of the transition has the most explanatory power in this team's regression.

There may be a compelling discontinuity to financial sector development in that banks need to be supported early in development but need to be "weakened" later, at the expense of bank rents, to foster further development. The important question for policy is when and how to generate and manage this discontinuity so that it is not forced on society by costly and traumatic events such as bank failures.

Partial antitrust policy may lead to less competitive market structures than the total absence of such policy. There may sometimes even be a case for the government providing incentives for particular forms of merger.

China's unique combination of emissions charges and pollution abatement subsidies has given China's most heavily polluting industrial firms incentive to invest in pollution abatement.

Components have been a dynamic leading sector in East Asian imports and exports. East Asian global exports of parts and components totaled $178 billion in 1996; imports, $12 billion less. Components now account for a fifth of East Asian exports of manufactures.