Making sure that the desired option is of interest to the private sector

A government's preferred option may not be attractive to the private sector. Where regulatory capacity is weak, political commitment low, the regulatory environments uncertain, and information poor, a concession or a BOT would be difficult to implement. Table 7.5 summarizes the enabling conditions that a private sector operator/investor would need to see fulfilled to agree to a given arrangement at a reasonable cost.

Table 7.4 Private sector options and objectives

For a private sector option to be feasible, sustainable, and best suited to mobilize private sector skills and resources, it has to make sense technically, financially and politically. A technically sound arrangement is well targeted to the problem to be solved and is compatible with the existing legal framework - or includes supporting changes in that framework. A financially sound proposal is one that can be financed at a tariff that consumers are willing to pay - or with the aid of a fiscally responsible and politically viable government subsidy scheme. A politically sound proposal enjoys political support, both within government and among interested stakeholders. Experience around the world demonstrates that political commitment is absolutely crucial. To succeed, a political champion needs to provide support throughout the process of bringing in a private sector operator and/or financier in order to address sufficiently the concerns of key stakeholders. Political commitment is also essential to attract private sector interest. Potential private sector partners - and their financiers - will be looking for signs that the present government is willing not only to sign a contract but also to put in place regulatory arrangements that will protect their legitimate future interests. Unless there is a sense of political commitment, the private sector will provide less attractive bids or decide not to get involved.

Table 7.5 Private sector options and enabling conditions