water supply is characterized by large capital investments in infrastructure, such as wells, pumps, and storage facilities, which generate market power (Fabri and Fraquelli 2000). Empirical evidence shows economies of scale in water supply across countries (Romano and Guerrini et al. 2011, 2018; Carvalho and Marques 2014; Nauges and van den Berg 2007; Shih et al. 2006). In addition, some sewerage and waste management activities are associated with positive externalities, as they control the spread of diseases and pests, including diarrheal incidence, a leading cause of mortality among children in developing countries (Kresch et al. 2020; Fewtrell et al. 2005; ; Wolf et al. 2014; Prüss-Ustün et al. 2019; Motohashi, 2022), but could also lead to negative externalities in case the private sector were to underinvest and possible pollution were to be created, with potentially to create permanent damage to soil, air and water (Grimm & Mbavarira, 2021). The classification for each disaggregated sector in this industry is provided in Appendix 2, Table A.5.

_Table 11_ **_. SOE taxonomy in water supply and sewerage_**

|**Water Supply, Sewerage, Waste Management, and Remediation Activities (E)**<br>_Distribution of disaggregated sectors by category_<br> <br> <br>|
|---|
|**Competitive**<br>**Natural Monopoly**<br>**Partially Contestable**|
|4<br>2<br>3|
|44%<br>22%<br>33%|

Source: Authors’ elaboration _Table 12._ **_Non-competitive disaggregated sectors in water supply, sewerage, waste management, and remediation activities_**

|**Water Supp**|**ly, Sewerage, Waste Management,**<br>**Remediation Activities(E)**|**and**|**P**|**artially contesta**|**ble**|**Natural**<br>**Monopoly**|
|---|---|---|---|---|---|---|
||**NACE Code Classification**||**Market**|**(+)**<br>|**(-) **<br>||
||||||||
|**Sector**|**Disaggregated sector**|**Code**|**power**|**externaities**|**externaities**||
|(36) Water<br>collection,<br>treatment and<br>supply|Water collection, treatment and<br>supply|3600||||X|
|(37) Sewerage|Sewerage|3700||X|X|X|
|(38) Waste<br>|Collection of hazardous waste|3812||X|X||
|collection,<br>treatment and<br>|Treatment and disposal of non-<br>hazardous waste|3821||X|X||
|disposal<br>activities;<br>materials<br>recovery|Treatment and disposal of<br>hazardous waste|3822||X|X||

Source: Authors’ elaboration

# F. Construction (F)

The construction industry encompasses all kinds of construction and development projects, including residential and infrastructure projects, as well as site preparation and demolition, and all other activities related to construction, such as plastering, roofing, wall painting, and so on. Of the 22 sectors in the construction industry, all are classified as competitive (Table 13), as it is economically viable for several providers to operate and barriers to entry are generally low. At the same time the number of operators capable to carry out large construction projects, such as roads and motorways, is limited (De Valance 2011). Yet, evidence collected by the World Bank (Iimi and Benamghar 2012) suggests that even large road contracts attract multiple bidders. In Nepal, for instance, an average of six bidders participated in public procurement related to the construction of roads. Since the government is a major buyer of 22