4 when, to regulate which sectors, at least nominally, and to make cross-country comparisons using those data. The establishment of an IRA is often taken as a strong signal of the government’s commitment to end self-regulation and to replace political considerations by economic concerns.<sup>10</sup> It is rarely that simple, however, as we shall see.

The second and third most common infrastructure reforms of the last 15 years—a wider role for the private sector and the opening of infrastructure markets to competition—are highly correlated. Technological progress and better management know-how made the introduction or increase of competition in a sector and the associated opening to the private sector serious options in sectors that had been dominated by national public monopolies. As a result, many reform programs separated state-owned giants into several smaller companies. These were then sold, bid out as concessions, or licensed to private operators, which were expected to compete with the incumbents and other entrants.

Because there is no reliable measure of the degree of competition in a large sample of countries over a long period of time, the existence of private participation may well be the best proxy for the commitment of a government to increase competition in a given sector. The proxy requires very little information and yet gives a reasonable sense of a government’s willingness to open the economy. Moreover, it does so for the largest possible sample of countries and in a way that is comparable across sectors. Clearly it is not a perfect indicator.<sup>11</sup> Opening to the private sector is necessary but not sufficient to increase effective competition. But for countries for which more detailed information is available for both variables, the correlation between private participation and the more detailed information is extremely high. The main apparent exception is the water sector, where the presence of the private sector is associated with ex-ante competition (that is, competition _for_ the market) and very little ex-post competition (competition _in_ the market among several providers).<sup>12</sup> As in the case of independent regulation, the definition of private participation is a challenge. There are indeed many possible definitions.<sup>13</sup> The definition of _private participation in infrastructure_ (PPI) used here varies according to the sector to reflect differences in technology and market structure across sectors. In electricity, we focus on 10 Initially, most monopolistic state-owned utilities were self-regulated or government regulated. Thus, regulation was not service-oriented, but rather related to fiscal or employment concerns. Tariffs were designed to generate fiscal revenues rather than to reflect costs and cross-subsidy schemes. 11 In telecoms, PPI in fixed lines probably gives a lower bound of the extent to which competition prevails. Indeed, in Africa, for instance, even if about 50% of the fixed lines are still operated publicly, all providers, including the public ones, are subject to competition from mobile providers. In energy and in water, in many countries, the large scale private sector picked up by our PPI variables is also subject to competition from local small and medium scale providers around the world as discussed in Kariuki and Schwartz (2005).

12 The data on competition raise other issues. For example, international databases on the existence of competition often refer to the “legal” status but not to the “de facto” situation.

13 Budds and McGranahan (2003) present a very useful classification of private participation in terms of the responsibilities of the private parties, which helps to make the definition less arbitrary. They argue that different degrees of private participation can be identified by assessing the involvement of private parties in asset ownership, capital investment, commercial risk, and/or operations and maintenance. Today, there is no database on the market that reports this kind of detail for any country, for any sector.