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Measuring financial performance in infrastructure : an application to Europe and Central Asia

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  • Ebinger, Jane O.
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    Abstract

    Unintentional implicit subsidies (hidden costs) to public utilities can be considered an illegitimate claim on public resources. This paper examines the role and sources of hidden costs in the energy and water sectors in the Europe and Central Asia (ECA) region. It reviews available data and introduces a model-the Hidden Costs Calculator-that can be used to quantify the burden on governments of infrastructure policy and implementation decisions. This simple-to-apply model provides insight into three key components of hidden costs that affect infrastructure-poor bill collection rates, excessive losses due to inefficient operations or theft from the networks, and tariffs set below cost-recovery rates. The major advantage of this model is that, using existing data, it can provide a single measure for hidden costs that can be easily calculated, tracked, and reported. Therefore it can monitor and benchmark trends across sectors and countries without extensive or costly data collection. The model compares the difference between actual revenues and revenues that could be anticipated in a well-functioning system operating with cost-covering tariffs, bills paid, and losses normative for networks of a certain age and design. The underlying premise is that quantifying the order of magnitude of each component of hidden costs has potential for strengthening infrastructure policy dialogue and influencing decisionmakers who allocate scarce budgetary resources.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3992.

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    Date of creation: 01 Aug 2006
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    Handle: RePEc:wbk:wbrwps:3992

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    Related research

    Keywords: Town Water Supply and Sanitation; Energy Production and Transportation; Water Use; Economic Theory&Research; Infrastructure Regulation;

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    Cited by:
    1. World Bank, 2010. "Republic of Lebanon - Water sector : public expenditure review," World Bank Other Operational Studies 2877, The World Bank.
    2. World Bank, 2009. "Cape Verde - Enhancing Planning to Increase Efficiency of Public Spending : Background chapters," World Bank Other Operational Studies 3024, The World Bank.
    3. Anton Eberhard & Vivien Foster & Cecilia Briceño-Garmendia & Fatimata Ouedraogo & Daniel Camos & Maria Shkaratan, 2008. "Underpowered : The State of the Power Sector in Sub-Saharan Africa," World Bank Other Operational Studies 7833, The World Bank.
    4. World Bank, 2011. "Challenges to Enterprise Performance in the Face of the Financial Crisis : Eastern Europe and Central Asia," World Bank Publications, The World Bank, number 2316, October.
    5. Sharify, Nooraddin, 2013. "Input–output modelling of the effect of implicit subsidies on general prices," Economic Modelling, Elsevier, vol. 33(C), pages 913-917.

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