# **Introduction**

Governance of infrastructure is hardly a new topic for developing countries or donors. The 1994 World Bank _World Development Report_ on infrastructure tackled a range of issues including public and private roles in provision, regulation and management of state owned enterprises. It highlighted the vital importance of governance and suggested many approaches repeated in this paper --most of the differences between the two are a matter of degree rather than direction. This suggests caution in assuming we can speed progress in infrastructure rollout or efficiency gains based on dramatic new insights from the last thirteen years. Indeed, given the complexity of institutional reform and the slow pace of improvements in governance, progress is likely to be incremental. Nonetheless, a new pragmatism regarding market structures combined with evidence from approaches tried over the last ten years does provide some guidance. And precisely because many approaches are yet to be rigorously evaluated and our knowledge base still remains limited, we should promote risk-taking in and evaluation of projects. This paper discusses what we have learned about the role of governance in infrastructure, provides some recent examples of reform efforts and project approaches, and suggests an agenda for greater engagement primarily at the sector level to improve governance and reduce the development impact of corruption.

# **A New Pragmatism in Infrastructure**

The last twenty years has seen considerable change in the delivery of infrastructure services worldwide. The 1980s and 90s saw developing countries, the World Bank and other donors disappointed with the sustainability of their investments in state-owned infrastructure --concerned that investment was not having a long-term impact of the quality and extent of utility and transport services that they desired. Privatization and competition were proposed responses to this situation, and they have had some successes. In some sectors, private competitive provision has become the norm. 80 percent of the world’s countries have three or more competing providers of mobile phone services, for example (World Bank, 2005). Across sectors, there is evidence that private provision can provide a boost to quality of services and extent of provision (Estache, 2006).

But at the same time it appears that many of the institutional weaknesses underlying poor provision and low sustainability are not magicked away by allowing private investment, and in some sectors private provision is likely to have a comparatively minor role. In developing countries, only 5 percent of private investment in infrastructure has flowed to water and sanitation over the last ten years, for example. Across infrastructure as a whole, governments and donors still account for around four fifths of sector investment.<sup>2</sup> And while private providers have, on average, improved service quality and access, overall impact has been limited compared to initial hopes, there are numerous examples

> 2 It is worth comparing estimated annual investment needs for energy, transport, water and sanitation infrastructure in developing countries of $131bn a year to private investment commitments in those sectors in developing countries estimated at $35 billion in 2005.  Private investment figures from the PPI database, investment needs from Fay and Yepes (2003).

2