However, if countries wish to involve TNCs in infrastructure activities that are complex to manage, as in water, it may be appropriate to start with lowlevel contracts. For example, technical assistance or management, operations and maintenance contracts do not attract capital inflows, but neither do they have the potential for controversy or entail the same level of costs and contractual risk.
On completion of such a contract, the government can choose to
revert to municipal operation, award a follow up
contract on similar terms (through an open tender or
by negotiation with the original contract holder), or
develop a concession contract. Another option may
be to corporatize the public operators in the sector
and recruit managers with private sector experience
to run the operations (Estache and Fay, 2007: 27-28).
Whatever the nature of TNC involvement, low-income
countries are likely to benefit from partnerships with
various development partners that can contribute both
financial resources and expertise.
2. Openness to TNC involvement varies by industry and country
Since the Second World War, the opening up
of infrastructure industries to foreign investment
has been much slower than in other industries. It
was only in the early 1990s that developing and
transition economies began in earnest to dismantle
legal barriers to private - and often foreign -
investment in infrastructure.
Today, many countries
have some foreign involvement (chapter III). As
with private sector participation more generally, the
trend towards opening up to TNC participation has
been more widespread among developed countries
and the relatively advanced developing and transition
economies. Although the nature of liberalization
has varied significantly, all groups of countries are
now more open to TNC activities in infrastructure
than they were two decades ago.
However, national investment policies with respect to infrastructure
development are generally still more restrictive than
those relating to manufacturing and other service
industries (UNCTAD, 2006d: 19; Golub, 2003).
Box V.2. The ECE Guidebook on public-private partnerships
A common misconception about public private partnerships (PPPs) is that they require less public sector
involvement; in reality they demand more. PPPs require a strong public sector that is able to adopt a new role
and perform new skills. Weak institutions can hamper the implementation of PPP programmes. Moreover, poorly
constructed, non transparent projects can lead to failure and considerable frustration. This in turn can generate a
backlash and political opposition towards the whole concept of partnerships between the public and private sector in
infrastructure development.
The United Nations Economic Commission for Europe (ECE) has prepared a Guidebook on Promoting Good
Governance in PPPs (ECE, 2008). Its purpose is to assist Governments in realizing the benefits from PPPs through a
strengthening of their governance frameworks.
The Guidebook sets out seven principles of good governance and the ways each principle can be achieved with respect to:
A coherent PPP policy to provide clear direction and leadership;
Strong enabling institutions within the Government, with skills in identifying, initiating, delivering and monitoring
projects;
A legal and regulatory framework that offers clarity, simplicity and predictability in legal processes;
Fair risk-sharing between public and private sectors;
Transparency, openness and fairness in selecting private partners;
Putting people first by making the projects accountable to them for performance and delivery; and
Sustainable development, ensuring the outcomes have the maximum developmental impact and respect for the
environment.
With these principles as a basis, the ECE is currently elaborating a toolkit entitled How to do PPPs, consisting
of training the trainer modules for a PPP capacity building programme designed to improve PPP governance.
Source: UNCTAD, based on information provided by ECE.