ASi" kUCTURE FlOR DEVELOPMENT

elements of natural monopoly and must be -regu- accountable to users and having clear incentives for
latedwhen privatized.
providing high-qualitr reliable services and effi-
Reform of the dominant entities that will remain cient asset management is also desirable. The rein
many countries-especially in power ansus- sponsibilityof government in such situations is, at
sion-should focus on creating financial and man- minimum, to ensure commercial operation, which
agerial autonomy and on promoting commercial can be achieved through delegation to a private
behavion Doing so will often quire private partid- company via a rmanagemnent, lease, or concession
pation in ownership-through joint ventures or di- contracL Public oversight is necessary to ensure acvestiture-and
private management or concession cess for low-income users and to protect public
contracts, although private companies involved in health and environmental quality In countries with
power transmission are best kept separate fom pni- modest technical capacity, concessions can successvate
Companies involved in power generatioiL Insti- fully draw on international experise. Pricng water
tutional change is needed to provide incentives for to reflect the full financial, envirornmental, and ecosuppliers
to seek economic tariffs, which are neces- nomic costs of supply is essential for generating
sary to promote the self-financing of investment, funds to expand service and for promoting efficient
conservation of energy, and more efficient use of ex- use.
isting capacity. Tariffs must also incorporate any environmental
charges paid by power comparies, in SANITAnON. Low-income countries should conline
with the principle that the polluter pays for any sider a two-pronged approach to developing sanitaenvironmental
costs it imposes on others-
tion. Fist contracting schemes, such as concessions,
can apply commercial management to sanitation fa-
GAs5 Natural gas could potentially be competi- cities in urban areas, Second, m poorer urban and
tively supplied in many countries. Often, natural rural communities which are unlikely to be congas
production is vertically integrated with petro- nected to the fornMal supply systems in the foreseelean
production* that is under public ownership. able fitureintermediate technology can be adapted
Ubundlng is required to permit competitive pro- to match users' service requiremns and their willduction
under CDncessions, contracts, or private ingness to pay. These lower-cost tertiary systems
ownership. The main regulatory issue is to ensure (facilities directly serving end-users, described in
competitive access of producers to the transmission Chapter 4) can be chosen, financed, and operated by
pipeline.That assurance canbe handled by a regula- the community with technical assistance The trunk
tory body or through contract terms in leases or ifrastructure to which the terbary systems connect
concessions. Competition from substitute .fuels and the associated treatment facilities remain the di-
(when realistically priced) can provide sufficient red responsibflity-in planning, financing, and opmarket
discipline to obviate the need to regulate gas eration-of the sector utilities concerneL
prices. Private (foreign) investment has oonsiderable
potential to meet investment needs for gas pro- RuIcxnoN AND DRANAGE The policy agenda for
duction and distbution, provided that noncom- irrigation works also varies accrding to the dharacmercial
risks related to the heavy foreign exchange teristics and scale of the systems involved, but it is
requirement of projects can be reduced.
much the same across country groups. The operation
of trunk and feeder facilities can increaswngly be
Water and waske
handled by financially autonomous entities, while
the ownership and operation of tertiar systems
Actvities involving water and waste all have strong may be best devolved to user associations or coopenvironmental
links that make them less marketable eratives. This solution improves both mnaintenance
than telecommunications or energy, and their local and the collection of water charges-two perennial
nature makes some activities natural candidates for problems in mnany irrigation systems
communitY provision (Table 65). User tees are com- User assocations for operation and maintenance
mon in these sectors, although thfey rarely cover the of small-scale irrigation schemes and tertiary canal
full costs of service.
networks have proved successful in countries as diverse
as Argtina, NepaL the Philippines, and Sri
WAIER suw ANrD- SWERAw;G Urban piped Lanka. Colombia, indonesia, and Mexico have sucwater
and sewerage at the municipal or metropoli- cessfully transferred responsibility for operations
tan level should be provided by enterprises run on and maintenance to farmers, even for larger-scale
commercial principles. Professional management state-owned schemes. Careful prparation has been
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