The requirements for fostering the transition in infrastructure, as set out in the Transition Report 1996, include entry liberalisation, commercialisation, the introduction of competitive pressures and services that respond to demand, the move to cost-reflective prices, the establishment of effective regulatory institutions and the reduction of environmental costs. Commercialisation encompasses the introduction of hard budget constraints and competitive pressures, including all types of private sector participation, from management service contracts to full private asset ownership and operations. Finally, regulation and institutional design includes the establishment and implementation of legal and regulatory institutions that protect consumers by limiting monopoly power and protect investors by ensuring entry and fair competition in liberalised markets. The indicators are sector-specific to reflect the different challenges faced in each sector. In telecommunications, for example, there has been more scope for competition due to the existence of large unmet demand and the possibility of low-cost new entry in certain segments of the market, such as mobile telephony.
Electric power faces more complex organisational restructuring and tariff reforms.
Railways are often subject to strong political pressures to maintain unprofitable passenger routes, for example, thus slowing down market-oriented reform. All infrastructure sectors, however, share the challenge of designing and implementing effective legal and regulatory systems. The infrastructure transition indicators show considerable variation across countries and sectors. Overall, there is a positive correlation between the country average in the infrastructure transition indicators and its average in the general transition indicators as presented in Table 2.1. However, this correlation does not imply causality.