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Do state holding companies facilitate private participation in the water sector? evidence from Cote d'Ivoire, the Gambia, Guinea, and Senegal

Listed author(s):
  • Kerf, Michel
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    When the Gambia, Guinea, and Senegal decided to involve the private sector in the provision of water services, they also established state holding companies - state-owned entities with exclusive or partial responsibilities for: a) owning infrastructure assets; b) planning and financing investments (replacing assets and expanding networks); c) regulating the activities of the private sector; and d) promoting public acceptance of private participation in the sector. In Cote d'Ivoire, by contrast, when private participation was introduced (in 1960), no state holding company was established. To determine whether state holding companies help private participation in the water sector succeed, the author reviews the four functions these entities are expected to perform in the Gambia, Guinea, and Senegal. In light of experience in all four countries, he examines whether, and under what circumstances, state holding companies might be the entities best suited for carrying out such functions. He concludes that creating a state holding company is often not the best solution. A state holding company might be better suited than other entities for planning and financing investments when (and only when): a) investment responsibilities cannot be transferred to the private operator; b) tariffs are insufficient, at least for a time, to cover investment needs, so it is crucial that a public entity has access to other sources of finance; and c) the holding company's financial strength and accountability, or its incentives and ability to promote the gradual adoption of cost-covering tariffs, are superior to those of a ministerial department. When one or more of these conditions are not met, the main investment responsibilities should be transferred to the private operator or, if that is not possible, left to the government itself. The other three functions should not, as a general rule, be performed by a state holding company.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2513.

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    Date of creation: 31 Dec 2000
    Handle: RePEc:wbk:wbrwps:2513
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    1. 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.
    2. Antonio Estache, 1994. "World Development Report: Infrastructure for Development," ULB Institutional Repository 2013/44144, ULB -- Universite Libre de Bruxelles.
    3. 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.
    4. Triche, Thelma, 1990. "Private participation in the delivery of Guinea's water supply services," Policy Research Working Paper Series 477, The World Bank.
    5. Kikeri, Sunita & Nellis, John & Shirley, Mary, 1994. "Privatization: Lessons from Market Economies," World Bank Research Observer, World Bank Group, vol. 9(2), pages 241-272, July.
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    7. Kerf, M. & Smith, W., 1996. "Privatizing Africa's Infrastructure: Promise and Challenge," Papers 337, World Bank - Technical Papers.
    8. Klein, Michael, 1996. "Economic regulation of water companies," Policy Research Working Paper Series 1649, The World Bank.
    9. Gisele Silva & Nicola Tynan & Yesim Yilmaz, 1998. "Private Participation in the Water and Sewerage Sector : Recent Trends," World Bank Other Operational Studies 11540, The World Bank.
    10. Menard, Claude & Clarke, George, 2000. "A transitory regime : water supply in Conakry, Guinea," Policy Research Working Paper Series 2362, The World Bank.
    11. Kumar, A., 1992. "The State Holding Company; Issues and Options," World Bank - Discussion Papers 187, World Bank.
    12. Stewart-Smith, Martin C., 1995. "Industry structure and regulation," Policy Research Working Paper Series 1419, The World Bank.
    13. Emanuel Idelovitch & Klas Ringskog, 1995. "Private Sector Participation in Water Supply and Sanitation in Latin America," Reports _017, World Bank Latin America and the Caribean Region Department.
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