politicians, it may actually reinforce the scope for private benefits at political levels. In other words, as revealed by standard regulation models (see Estache and Wren-Lewis, 2009), for instance, vertical integration may buy a reduced fiscal cost as compared to competition, but may do so at the cost of a stronger scope for private monetary and nonmonetary benefits.

An often recommended form of competition in infrastructure is _yardstick competition_ . The model for yardstick competition still must be improved in several ways, but evidence shows that it can be effective in reducing undesirable effects of excessive sector control by few actors and of the scope for monetary and nonmonetary benefits. By providing international or interregional benchmarks for cost and other performance indicators, the risk of private agenda influence on sector decisions can be reduced.<sup>59</sup> The literature on infrastructure reform suggests that political consensus about market structure and ownership builds commitment around the chosen market design, while it limits the potentially negative impact of politicians driven primarily by reelectoral concerns betting on the discontent of voters. In general, unbundling, privatization, and nationalization of private services are decisions that involve a large number of political actors. The consent of these players over the long run matters too, even if the reform can be originated or proposed by the executive with support by the parliament. This is because the outcomes of reforms can be slow to come in infrastructure. The time it takes to build a road or a water treatment station can overlap with a local, provincial, or national election—which offers opportunities for strategic uses of happiness or unhappiness with reforms. What needs to be avoided is an unsustainable market structure, where long-term commitments are made without sufficient and reasonable long-term support from key stakeholders. Decisions that simply privatize market power without protections through regulation for users are likely to be questioned sooner or later and lead to policy reversals if this support is not achieved and/or if some of the infrastructure fails to work as scheduled or promised. To some extent this was the experience in the failed privatization of water and energy in Mali and of water in Bolivia, for instance. This is why competition combined with fast payoffs seems to work better. In the telecom sector, the unbundling of telecom services and the opening to private actors in a much more competitive environment has often been effective because the fast access and affordability improvements created the majority constituency needed to avoid the reversal of policies. Users were better off and private actors were making profits without much reason for any of the two parties to feel penalized, while there were few opportunities for strategic manipulation by politicians—even if controversial decisions, initially hidden by success, may come back to haunt reformers—as is currently the case in the telecom sector in Ghana. Clearly, the effectiveness of market reform depends on the quality of institutions in general, and not just sector regulation.

**_Mode of service provision:_** Table 6 indicates high uncertainty about the extent to which most common policy recommendations will be exposed to private agenda biases in governance. To reiterate, the risk will depend on the circumstances, as well as initial conditions, the timing, the specific contractual form, and auction design—indeed, on so many aspects that a generalization of risks would easily appear ideologically tainted.<sup>60</sup> Trying to improve the governance and accountability of the large number of public sector providers in the sector through _corporatization and other forms of incentive-based contracts_ (such as output-based aid) may reduce potential distortions stemming from private agendas in politics . This is clearly an area where more research is needed, as shown by Gomez-Ibanez (2006) **.** Vagliasindi (2009), however, documents quite systematically the circumstances under which reform of state-owned enterprises (SOEs) may prevent politicians and regulators from capturing parts of infrastructure rents. In particular, sector performance improves as corporative principles and standard business procedures are introduced.<sup>61</sup>

Increasingly, researchers tend to suggest that policy makers and advisors have relied too much on the private sector.<sup>62</sup> A combination of private operation and public financing will sometimes generate better

> 59 See Coelli and Lawrence (2006), for instance, on the role and practice of benchmarking. 60 See the reviews of empirical studies in Kenny (2007) and Kenny and Soreide (2008). 61 See also Bertero and Rondi (2000). 62

> See Martimort and Iossa (2009); Engel, Fisher, and Galetovic (2009).

25