Confusing means and ends: Framework of restructuring,not privatization,matters most

Abstract

Although a great deal of emphasis has been put on it, privatization of infrastructure is only a means to an end, and not an end in and of itself. The goal is a more efficient sector delivering quality service while fulfilling its social responsibilities. Privatization is only an effective means towards the achievement of that result if it is done in the context of an appropriate market and regulatory/legal framework. In the absence of such a framework, privatization can, as experience has demonstrated, compound problems. There are a number of explanations as to why privatization has been carried out in the absence of a proper framework. Those explanations are useful to explore because they point to incentives to which many governments have been attracted, but which proved to be dangerous pitfalls. Some of the consequences of these attractions hold lessons for other governments and lenders to learn. The critical issue in reforming infrastructure industries is not privatization, but rather the framework within which restructuring occurs.