ASi" kUCTURE FlOR DEVELOPMENT

process works well, earmaricing should be avoided vices: the adoption of commercial principles. Abid-
(Box 28 gives guidelines).
ing by these principles will be unsustainable, however,
if they do not reflect a political commitment to
COSr RECOVERY FOR LOCAL INFRASIXUCrUR EXPEN- improve public sector. delivery. Political commit-
DITURES. Local governments have been more suc- ment underlies good public sector performance in
cessful in recovering costs indirectly-as in Colom- Singapore and the sustainability of reforms in
bia,.for example, where "valorization" taxes pay for Korea's public enterprises. It also explains why
street improvements, water supply, and other local Botswana has been willing to search internationally,
public services. With valorization, the cost of public not just locally, for the best managers of its public
works is allocated to affected properties in propor- entities.
tion to the benefit the work is expected to bring. Im- . Explicit or implicit contracts between policymakportant
for success are the participation of prospec- ers and managers or operators have been used effective
beneficiaries in planning and nianaging tively to generate political conunitment. The out-
.projects, care in planning and irnpleme.atation, an standing common element in contracts used by the
effective coUection system, and-in many cases- most successful countries is that they are governed
significant advance financing from general govern- by. clear rules. Among contracts that maintain ownment
revenues so that works may be started on ership in th-e public sector, service contracts seem
dinme In Korea and North America, local infrastruc- the most promising in this respect. Moreover, thev
hnre development has recently been financed using test the capacity of the private sector to contribute to
exactions, lot levies, development charges, and sim- the provision of infrastructure. Thus,. service conilar
mechanisms to levy charges on would-be prop- tracts may be the most useful complement to corpoerty
developers to cover the added demands their ratization and may provide a ready means of alterdevelopment
will impose on the urban infrastruc- lng the partnership between the public and the
ture The success of local taxes in contributing to the private sectors. Performance agreements have been
financing of infrastructure also depends on the the least successful because they often endorse disquality
of a city's institutional infrastructure-such cretionary decisions driven by the many conflicting
as its records, valuations, and collections. Each local or evolving government interests.
51.
tax requires technical expertise and political will in Simply establishing cormmercial principles and
its implementation.
maintaining them through political commitment are
The need for political commitmnento
not
reform
sufficient for the success of commercial enter-
The a political need for commitment toreformprises, however. The missing element for success is
Thischapterhasfocused ononeessentialelementin the introduction of competition with appropriate
the effective public provision of infrastructure ser- regulation. That is the focus of the next chapter.