Concessions - The Way to Privatize Infrastructure Sector Monopolies

Abstract

Under concession arrangements, the state delegates to the private sector the right to provide a service, yet retains some control over the sector by incorporating in a concession contract or license the terms and conditions that will govern the infrastructure project or company. This approach is well suited for privatizing sectors with monopolistic characteristics. This Note outlines the concession-type approach and some of its operational implications. Designing a concession that strikes the balance among the interests of the investors, the consumers, and the public authorities and that fits the conditions of both the sector and the country requires a clear identification of the objectives and tradeoffs. Each concession is likely to be a special case requiring special attention and unique features.