As noted above, inviting TNCs to deliver infrastructure services tends to place more rather than less responsibility on public officials. Governments that decide to engage TNCs in infrastructure industries therefore need to develop the expertise and capabilities required for the public sector to administer often highly complex projects. This is equally important at the regional and municipal levels of government, which are responsible for a growing number of infrastructure projects but generally have limited resources and institutional capabilities.
Eventually, however, the only way to gain the
necessary experience is through learning by doing
(i.e. by engaging in an actual project). In this context,
it may be advisable to start on a small scale rather
than adopting a major programme across industries.
It may also be useful initially to concentrate on
less contentious segments of an industry. In the
case of water, for example, network operations and
billing are the most politically contentious aspects,
as these activities involve direct interaction with
final consumers.
In contrast, bulk water provision
(including mobilization of new water resources and
building reservoirs and water treatment works) does
not directly involve the customers.
Box V.1. The OECD Principles for Private Sector Participation in Infrastructure
The OECD Principles for Private Sector Participation in Infrastructure were designed to help governments that
wish to involve private investors, including foreign companies, in the development of their infrastructure industries.
They were developed in consultation with a broad group of public and private sector experts as well as some from civil
society. The Principles do not advocate private participation; rather, they suggest that governments should be guided
by an objective assessment of what best serves the public interest - that is, supports the common well being. In this
context, a number of factors should be considered, including current conditions, what households and companies can
afford, coverage, efficiency, long term maintenance of assets as well as social and environmental sustainability.
The Principles can be applied by governments in both developed and developing countries and address five main sets of
challenges:
Deciding on the utility and nature of potential private sector involvement;
1. Providing a sound institutional and regulatory environment for infrastructure investment;
2. Ensuring public and institutional support for the project and choice of financing;
3. Making cooperation between the public and private sectors work;
4. Communicating governments' expectations about responsible business conduct to their private partners.
5. The Principles are intended to serve as a first step in the authorities consideration of private sector participation.
They can also be used as a template for country self assessment at national and local government levels, aid public
authorities to report on progress, provide guidance for private enterprises and serve as a tool for structuring regional
and other intergovernmental cooperation and public private sector dialogues.
As a follow up, a specific application of the Principles was launched for the drinking water and sanitation
sector. The practical guidance to optimize private sector participation in this area involves three interlinked dimensions:
adapting the Principles to the sector, building an information base of country experiences, and engaging discussions at
the regional level. To this end, a round table was organized jointly by the New Partnership for Africa's Development
(NEPAD) and the OECD - as part of the NEPAD-OECD Africa Investment Initiative - in Lusaka in November 2007,
and in March 2008 the OECD and the Asian Development Bank held a joint expert meeting.
The resulting guidelines (to be launched at the Istanbul World Water Forum in 2009) are intended to help
governments and other stakeholders to properly assess the implications of involving private actors in the financing,
development and management of water and sanitation infrastructure.
This should enable them to better manage such involvement, including through an appropriate allocation of roles, risks and responsibilities and the establishment of
the necessary framework conditions. The focus is mainly on developing and transition economies. The private sector
operating in this area comprises a range of players, such as international investors, local and regional actors, smallscale
water operators, construction companies, joint ventures between public and private companies as well as public
companies operating abroad as private participants in competitive bidding.
Building on the application of the Principles in the water and sanitation sector, the OECD plans to develop a
similar framework for energy to support the institution's efforts in addressing the impacts on climate change.
Source: UNCTAD, based on information provided by the OECD (see OECD, 2007b and www·oecd·org/daf/investment/ppp).