Regulation and private participation in the water and sanitation sector

Private sector participation is generally seen as being the solution to the failure of many publicly owned and managed water utilities to operate efficiently and make the investments required to meet community needs. However, there are no guarantees that privatization will actually yield the desired performance improvements. It is argued, that given the nature of the water and sanitation sector, some form of continued public regulation of private companies will be necessary. The regulatory burden can be reduced if a competitive form of privatization is adopted, choosing a more competitive sector structure and devising an appropriate regulatory regime. Some trade-offs, between making a venture attractive to private firms and introducing a notionally ideal regulatory system, will be needed. Regulation in practice is as much about creating the conditions under which private firms can operate effectively and efficiently as it is about protecting specific customer and public interests.