A tale of two concessionaires: A natural experiment of water privatisation in Metro Manila

10.1177/0042098007085108Urban Studies451207-22

Competition, Contracts, and Regulation in Water and Sanitation

this paper highlights the importance of incentive mechanisms for encouraging efficient operations and investment. Three mechanisms to discipline private providers of infrastructure services are competition, regulatory oversight, and monitoring by financial markets (Mody 1996). Private water and sanitation service providers face little direct competition and, except in the United Kingdom, private providers have not used capital markets as sources of funds. As such, performance incentives require effective competition for the right to provide services backed-up by a regulatory system that enforces the contractual terms of service. Where regulation is not credible, supplementary commitments, including from third-parties, are required. This paper draws upon several recent examples of private provision of water and sanitation services to examine how the various disciplining mechanisms are being use