club-leadership also arise in countries without big endowments of nonrenewable natural resources or by means of getting to power that are not directly linked to the use of these revenues. In a number of countries, including Uganda, Cuba, Venezuela, Ethiopia and Zimbabwe- —radical movements have resulted in political power for a “club” of allies.

The power-seek may build on common discontent in the majority of the electorate; political solutions are presented as if the voice of the electorate is finally being heard. Despite frequent references to “justice,” the movement may defend violations of property rights against the private sector or human rights against a minority. Once in power, norms and rules established to secure democracy can be set aside and the radical basis for support can be used to legitimize violation of constitutional rules. The “club” gains ultimate power. The less educated the population, the more exposed it will be to the risk of patronage and eventually club leadership.<sup>27</sup> Resistance requires a majority able to reveal the true intentions of the movement. Table 3 summarizes how infrastructure policy decisions can be distorted by patronage-based movements.

_Table 3. Likely consequences of patronage/club leadership_

|**Strategic planning: Identification and**<br>**prioritization of projects**| Reduced long‐term investments<br> Projects stuck at the pre‐feasibility stage because of lack of<br>commitment and low credibility of political decisions keeps<br> More expensivepublic‐private deals|
|---|---|
|**Market structure, entry and**<br>**evolution**| Reforms may be postponed. Opening to competition delayed.<br> Lower FDI, fewer foreign firms|
|**Mode of service provision: SOE, PPP,**<br>**PPI**| Lack of financing for private investment<br> Lower sustainability of contracts and higher odds of renegotiations<br> Management contracts|
|**Pricing and subsidies**| Concerns about the sustainability of subsidies in particular<br> Lack of credibility to implement screening mechanisms<br>(sophisticated tariff schemes) or the usage of social program<br>databases as a proxy of affordability issues<br> Lower opportunities to useprices for demand management|
|**Oversight and regulation**| Concerns about the sustainability and enforcement of contracts<br>with private operators – higher return asked in first period, less<br>committed investments<br> PPP: low sector performance as a consequence of inefficient<br>operation(private)or lack ofpubliclyfinanced investment|

**_Strategic planning_** _:_ Patronage-based leadership is often described as “political risk.” It is frequently referred to low and high political risk, usually depending on the perceived likelihood among private agents that the government will keep to its pronounced strategies and respect established property rights. A main goal in strategic planning by patronage systems/club leadership will be to keep political control over the sector, regardless of the legal framework and contracts. The consequence is low trust in the government and hence suboptimal investments in long-lived physical assets and human capital, low sector performance, low foreign direct investment, among other problems. The lack of trust in the government is translated into higher cost of capital and finally into tariffs.<sup>28</sup> In other words, public-private partnerships end up being more expensive than they need to be.

**_Market structure_** _:_ Strategic decisions about market structure can be particularly difficult to predict if the club leadership is based on wealth from natural resources. If based on radical populism, on the other hand,

> 27 See Khemani and Wane (2008) for results on how inequality among voters can intensify private agenda tendencies, populist as well as the ‘club leadership’-form.

> 28 Political risk partly explains cross-country differences in net present value for private investors in similar sectors.

11