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Regulation and the Privatisation of Water Services in Developing Countries: Assessing the Impact of the General Agreement on Trade in Services (GATS)

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  • Kirkpatrick, Colin
  • Parker, David

Abstract

Trade liberalisation of environmental services under the current WTO General Agreement on Trade in Services (GATS) has been widely advocated as a means of increasing private sector participation in the water sector in developing countries. The liberalisation of water services in lower income countries is expected to promote more efficient operation, increase investment and improve service coverage. At the same time, these proposals have been widely criticised, and there has been growing resistance to the liberalisation of water services. This study reviews the evidence on the impact of private sector involvement in the provision of water services in developing countries. A number of reasons why water privatisation may prove problematic in lower-income countries are identified, including transaction costs and possible regulatory weaknesses. Recognising that effective regulation is needed to ensure that the potential gains from private involvement are fully realised, the paper then considers the relationship between national regulatory autonomy and GATS liberalisation. The study concludes that developing countries with limited regulatory resources should adopt a cautious approach to public services liberalisation, by sequencing market liberalisation measures to match the development of their regulatory institutional capacity. The paper also argues for improved clarity in the interpretation of the GATS provisions on the right of members to exercise national regulatory policy.

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Bibliographic Info

Paper provided by University of Manchester, Institute for Development Policy and Management (IDPM) in its series Centre on Regulation and Competition (CRC) Working papers with number 30600.

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Date of creation: 2004
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Handle: RePEc:ags:idpmcr:30600

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Keywords: water services; GATS; developing countries; privatisation.; Resource /Energy Economics and Policy;

References

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  1. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
  2. Roland, Gerard, 1994. "On the Speed and Sequencing of Privatisation and Restructuring," Economic Journal, Royal Economic Society, vol. 104(426), pages 1158-68, September.
  3. Sebastian Galiani & Paul Gertler & Ernesto Schargrodsky, 2005. "Water for Life: The Impact of the Privatization of Water Services on Child Mortality," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 83-120, February.
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  5. Bayliss, Kate, 2002. "Privatisation and Poverty: The Distributional Impact of Utility Privatisation," Centre on Regulation and Competition (CRC) Working papers 30663, University of Manchester, Institute for Development Policy and Management (IDPM).
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  7. Estache, Antonio & Kouassi, Eugene, 2002. "Sector organization, governance, and the inefficiency of African water utilities," Policy Research Working Paper Series 2890, The World Bank.
  8. David Parker & Colin Kirkpatrick, 2005. "Privatisation in Developing Countries: A Review of the Evidence and the Policy Lessons," Journal of Development Studies, Taylor & Francis Journals, vol. 41(4), pages 513-541.
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  13. Kirkpatrick, Colin & Parker, David & Zhang, Yin-Fang, 2004. "Price and Profit Regulation in Developing and Transition Economies, Methods Used and Problems Faced: A Survey of the Regulators," Centre on Regulation and Competition (CRC) Working papers 30596, University of Manchester, Institute for Development Policy and Management (IDPM).
  14. Pargal, Sheoli, 2003. "Regulation and private sector investment in infrastructure - evidence from Latin America," Policy Research Working Paper Series 3037, The World Bank.
  15. Mitlin, Diana, 2002. "Competition, Regulation and the Urban Poor: A Case Study of Water," Centre on Regulation and Competition (CRC) Working papers 30606, University of Manchester, Institute for Development Policy and Management (IDPM).
  16. Spiller, Pablo T, 1996. "Institutions and Commitment," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 421-52.
  17. Antonio Estache & MartÌn A. Rossi, 2002. "How Different Is the Efficiency of Public and Private Water Companies in Asia?," World Bank Economic Review, World Bank Group, vol. 16(1), pages 139-148, June.
  18. Clarke, George & Menard, Claude & Zuluaga, Ana Maria, 2000. "The welfare effects of private sector participation in Guinea's urban water supply," Policy Research Working Paper Series 2361, The World Bank.
  19. Clarke, George R.G. & Wallsten, Scott J., 2002. "Universal(ly bad) service - providing infrastructure services to rural and poor urban consumers," Policy Research Working Paper Series 2868, The World Bank.
  20. Menard, Claude & Clarke, George, 2000. "Reforming water supply in Abidjan, Cote d'Ivoire : mild reform in a turbulent environment," Policy Research Working Paper Series 2377, The World Bank.
  21. Estache, Antonio & Rossi, Martin A., 1999. "Comparing the performance of public and private water companies in the Asia and Pacific region : what a stochastic costs frontier shows," Policy Research Working Paper Series 2152, The World Bank.
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