There are significant differences across infrastructure industries as regards the degree of openness, for various reasons. Some factors relate to the nature of each industry, notably the scope for unbundling and competition (chapter III).
Reaping benefits from TNC involvement is easier
in infrastructure industries that are relatively easy
to expose to competition (such as mobile telephony)
than in those characterized by a natural monopoly
(such as water distribution). Other factors are related
to the characteristics of the host country environment,
including the level of development and the quality of
administrative capabilities.
There have also been exogenous factors at play.
During the 1980s and 1990s, a number of developing
countries opened up to TNC investment in response
to structural adjustment policies of the International
Monetary Fund or as part of loan conditionalities of
the World Bank.
In the 1990s, privatization became a
key element of loan conditionalities in the electricity
sector, and privatization and/or cost recovery policies
were recurrent conditionalities in the water sector
(Bayliss, 2001; Grusky, 2001).
Such conditionalities sometimes seem to have led governments to privatize
in a hurry in order to be able to access aid funds. In
some cases this meant shortening the privatization
processes, for example by failing to establish sound
regulatory bodies. Privatization and liberalization are
still included as conditions in World Bank and IMF
loans, but less frequently, and these institutions,
which still exert considerable influence, have not given
much attention to alternative policy prescriptions.
Moreover, there are few donors that completely
disregard private involvement in the infrastructure
sector (Bull, Jerve and Sigvaldsen, 2006: 26).
a. In electricity, openness is the greatest in the generation segment
A 2006 study found that 17 of 50 developing
and transition economies had a total ban on foreign
investment in electricity (UNCTAD, 2006d). The
Asian region was generally more restrictive than
Latin America and the Caribbean.
A large number of low income countries were seen to have full State
ownership of power utilities: 32 out of 47 countries of
sub-Saharan Africa, compared to only 8 countries that
had concession contracts and 7 that had management or
lease contracts with private partners (Gokgur, 2004).
In some countries, State owned enterprises (SOEs)
coexist with private (including foreign) operators
that may be allowed to enter the market by way of
greenfield projects (Wang, 2008; Nazareth, 2008).
Private independent power providers (IPPs) (many of
them foreign) often operate alongside SOEs (World
Bank, 2004a). As expected, openness to foreign
involvement is greater in electricity generation than
in distribution, and very low in transmission (Estache
and Goicoechea, 2005; see also section V.B.3).