investors are increasingly active in the water and sanitation sector and this is therefore an important addition in our dataset compared to the next best existing resource: the World Bank PPI database.<sup>3</sup> Data collection on PSP in water is usually complicated by the municipal structure of the sector. In most countries, the provision of water services is the responsibility of local government and local decisionmakers may take the lead in engaging the private sector. This contrasts to the centralized structure of the power and telecoms sectors and the central-government led nature of privatization in those sectors. As a result, information on PSP projects is not necessarily collected at the national level and multiple data sources need to be used to fill in the gaps. Indeed, the nature of the sector also means that performance data is more patchy and less accurate than for other utilities.<sup>4</sup> As a result, the data is patchy and inconsistent across countries.

Sufficient, reliable data is not currently available on investment volumes for water sector projects to allow us to analyze the determinants of investment volumes. This is largely due to the divergence between investment commitments made by private firms and levels of investment realized. Until more reliable data becomes available on realized investment for a large sample of projects in the water sector, rigorous analysis of investment volumes is unfortunately not possible. The analysis is also restricted by the absence of reliable, comparable data on sector-level institutions.<sup>5</sup> Several attempts have been made to put together data on regulatory institutions in the water sector (Estache and Goicoechea 2005; Foster 2005), including by the authors of this paper, but as yet no complete dataset exists covering enough of our sample countries to pursue the analysis (Estache and Goicoechea 2005)<sup>6</sup> . The addition of sector-specific regulatory variables would be an interesting extension to the analysis that we intend to pursue when sufficient data have been assembled.

3 The World Bank’s PPI (Private Participation in Infrastructure) Database is the usual reference point for information on private sector investment in infrastructure sectors. It tracks information on infrastructure projects with private investment in the energy, telecommunications, transport, and water and sewerage sectors in low- and middle-income countries. It is updated annually using commercial news databases, specialized and industry publications and internet resources. See: <u>http://ppi.worldbank.org/. However, the World Bank recognizes that the database is not complete,</u> especially in its coverage of the water sector where project size tends to be smaller: “The Private Participation in Infrastructure (PPI) Project Database lacks good coverage of small-scale providers of water and sewerage services because projects involving such providers usually are not reported by the sources it uses.” ((Izaguirre and Hunt 2005) Another source, the Water and Sanitation Sector Public Private Partnerships Database, maintained by IWE, at the University of Cranfield (UK) contains information on 1,300 PPP contracts announced up to 2003 using a broad definition of PPP, The database contains a large number of small scale partnership contracts. The data is not publicly available. (See <u>http://www.silsoe.cranfield.ac.uk/iwe/cws/pppdatabase/pppdatabase.htm). PSIRU, University of</u> Greenwich (UK), also maintains a database of PSP. The database is not publicly available (See <u>www.psiru.org</u> ) 4 For water, international coverage data for access to “improved water supply” and “improved sanitation” is collected by the WHO-UNICEF Joint Monitoring Programme using national sources, but it is updated irregularly as and when national censuses are carried out. The WHO-UNICEF Joint Monitoring Program collects data on ‘access to improved water supply’ and ‘access to improved sanitation’ for a large sample of countries. Cross-country data is available for two years: 1990 and 2002. The figures are based on data collected in national surveys or censuses in preceding years. See http://www.wssinfo.org/en/welcome.html 5 A distinctive characteristic of the water sector is that PSP contracts are often agreed at the local level in the absence of a national regulatory framework defined in law. Instead, a set of contracts is agreed on ad hoc basis that govern the relationship between public authorities, state enterprises and the private sector. The details of these transactions are often not recorded systematically at the national level. The regulatory framework and agency are frequently based on contractual provisions rather than primary legislation. In effect, the regulatory regime is specific to a city or region. In these cases, it would be inaccurate to describe the _country_ as having an economic regulator for the water sector. This raises difficulties in establishing consistent categories for comparison as well as for data collection. Comparing water once again to other infrastructure sectors, it is evident that structural reform of the sector and the establishment of a regulatory agency is much rarer than in the telecoms and power sectors (Estache and Goicoechea 2005) 6 The Estache and Goicoechea review is a preliminary review of PSP and regulation in three infrastructure sectors. The authors describe it as a ‘rough snapshot’ and the results should be taken only as an indication of the spread of reform in infrastructure. In the sample of countries covered in the, 21% of countries have an independent regulatory agency for the water sector, compared to 51% for electricity and 66% for telecoms.

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