Tackling the complex and multifaceted challenges requires concerted action by all parties concerned. The ultimate responsibility for creating an environment that is conducive to long term infrastructure investments and for prioritizing and taking the necessary decisions with regard to the potential role of the different stakeholders in different projects rests with national and subnational governments in each country.
In some cases, cooperation among several countries in a region
may be necessary to maximize the benefits from
infrastructure investments. For many developing
countries, especially LDCs, national efforts have
to be complemented by active support from the
international community.
This chapter reviews current developments
with regard to national and international
policymaking in the area of infrastructure investment,
focusing, in particular, on areas of relevance to
TNC participation. Thus the analysis only briefly
covers issues related to sectoral reform and broader
regulatory matters. The chapter is structured as
follows. Section B provides an overview of recent
trends in host country policies aimed at attracting
TNCs and enhancing the potential benefits from
their participation.
It reviews the extent to which
countries allow and promote TNC participation in
different infrastructure industries and analyses the
various contractual arrangements and policy options
that countries use in order to derive benefits from
the presence of TNCs. Section C considers the role
of international investment agreements (IIAs) and
examines potential implications of the rising incidence
of investor State disputes related to infrastructure.
Section D highlights the role of home countries
and international institutions in facilitating foreign
infrastructure investment in developing countries,
wherever this is desirable, and section E concludes.
B. Host country policies to attract and benefit from TNC participation
A growing number of countries have opened
up their infrastructure industries and are actively
seeking to involve TNCs through FDI and other
forms of participation. TNCs can bring benefits to a
host country if the circumstances are right, but their
involvement may also present risks that governments
need to consider (chapter IV).
This section looks at national measures to attract TNCs in infrastructure
and to maximize the benefits they can bring. It begins
by emphasizing the importance of a country's overall
institutional and regulatory framework. It then
considers the extent to which countries permit TNC
activity in infrastructure and the role of investment
promotion agencies (IPAs) in this context. The
subsequent sections discuss the policy implications
of different forms of TNC participation and various
approaches to enhancing the social development
gains from their involvement.
1. Building the institutional and regulatory framework
With or without TNC participation, countries
need to develop strong legal and regulatory systems
to ensure efficient as well as equitable pricing,
investment and delivery of infrastructure. Moreover,
the quality of the overall institutional environment is
a major determinant of a country's ability to attract
and benefit from foreign investment (chapter IV).
The creation of participatory, transparent and accountable
governance systems that promote and enforce the rule
of law is critical in this context. Before committing
funds to a project, companies consider whether laws
and contracts are likely to be properly enforced, and
whether their rights and responsibilities are well
defined and likely to be respected (section III.D).
Clear, transparent and well enforced rules of conduct,
grounded in law, are important for reducing the risk
of political or popular backlashes against projects. In
this context, governments also need to understand the
implications and costs of compensating a company if
the contract is unilaterally terminated.