© 1999 International Bank for Reconstruction and Development / The World Bank
research-article |
Managing Government Exposure to Private Infrastructure Risks
Timothy Irwin is an economist in the Private Participation in Infrastructure section, World Bank; Michael Klein is chief economist of Shell International; and Guillermo E. Perry is chief economist and Mateen Thobani is principal economist in the Latin America and the Caribbean Region, World Bank. The paper summarizes papers and discussions of a conference held in Cartagena, Colombia, in May 1997 on the topic. The authors are grateful to conference participants for their contributions and owe special thanks to Kathcrine Brewer for her excellent organization.
The privatization of infrastructure should lead to the development of new infrastructure, improvements in the operation of existing infrastructure, and a reduction in budgetary subsidies. Whether countries reap the full benefits of privatization, however, depends on how risks are allocated. If, as is often the case in developing countries, governments assume risks that should be borne by investors, they may reduce incentives for efficiency and incur significant liabilities. To solve these problems, governments need to improve their policies and restrict their risk bearing to certain political and regulatory risks over which they have direct control. When a government provides guarantees, it should attempt to measure their cost and improve the way they are handled in the accounts and budgets. Measurement and budgeting are critical to improving decisions about the provision of guarantees, to improving project selection and contract design, and to protecting governments from unknowingly entering into commitments that might jeopardize future budgets.
CiteULike 
Connotea 
Del.icio.us What's this?