At the same time, it is worth noting that the survey of Latin American infrastructure concessions implemented in the 1990s cited above found that the incidence of early contract renegotiation was 40 percent in cases where the regulatory framework was embedded in the concession contract compared to 17 percent where the regulatory framework was embedded in law (Guasch, 2004). It appears that there are no universally superior alternatives in this area, and that country circumstances will determine different optimal responses.

Information disclosure can be a tool to encourage self-regulation. Mandatory disclosure requirements in the US regarding toxic releases by firms has been linked to greater emissions reduction efforts, for example (Konar and Cohen, 1997), and a similar approach has worked in developing countries. Related to this, broader measures to improve private sector corporate governance can reduce the supply of bribes –including strengthening disclosure rules of local financial markets and requirements for independent directors and audits. In particular, governments might demand minimum corporate governance standards for companies involved in large public infrastructure transactions (Castalia, 2004).

Furthermore, there is a role for holding company officials criminally liable for regulatory lapses as a tool to encourage self-regulation. The UK allows for conviction of senior company officials in cases where gross negligence leads to death. Cases include fatal accidents arising out of unsafe systems of work or the provision of unsafe goods or services (Kenny, 2007).

Pricing regulation can be a particularly contentious issue, and one which has frequently derailed private participation. Governance reform can improve the likelihood of satisfactory outcomes in this area as well. In a number of West African water concessions, prices paid to operators are set by the regulator at cost-recovery levels, but prices paid by consumers are set by the government, which subsidizes providers for the gap between consumer prices and cost-recovery tariffs. In a transparent system, where both cost recovery and consumer tariffs, as well as the subsidy, are advertised, the costs and benefits of low tariffs will be clear to consumers, operators, and taxpayers alike. Community participation can further ease the political economy of pricing reform which is frequently a key component of the governance agenda (see Box 6).

**<u>Box 6: Community Participation in Sustainable Pricing</u>**

<mark>The local water company in Banjar in South Kalimantan, Indonesia faced water losses of 40 percent, provided water for only 12 hours a day and suffered considerable revenue shortfalls. As part of a restructuring plan to improve the quality and sustainability of provision, the water company proposed price increases which were initially rejected by the local government. The company took the plan to its customers, and entered into a contract with the community promising better customer service in return for higher tariffs. With community support, the local council passed the tariff increase, and water quality and supply</mark> <u><mark>(along with customer service) have increased markedly in the period since then (World Bank, 2005).</mark></u> 14