Do State Holding Companies Facilitate Private Participation in the Water Sector? Evidence from Cote d'Ivoire, the Gambia, Guinea, and Senegal
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 infrastruc...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2000/12/828362/state-holding-companies-facilitate-private-participation-water-sector-evidence-cote-divoire-gambia-guinea-senegal http://hdl.handle.net/10986/19731 |
| Summary: | 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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