ABSTRACT
South Asia has achieved impressive economic growth and poverty reduction in the past decade, thanks mainly to economic reforms begun in the 1990s (Devarajan and Nabi 2006). But sustaining rapid economic growth and thus reducing poverty requires substantial increase in both quantity as well as quality of its infrastructure. Across the South Asian region, infrastructure projects — roads, railways, airports, seaports, power and public utilities — have traditionally been established, owned and managed by the state. Generally, projects are financed through taxes and by borrowing from public, banks and financial institutions. The role of the private sector has been relatively limited, usually restricted to subcontracting during the construction phase. This model of finance has never been fully satisfactory, as attested by the large and growing infrastructure deficits in most South Asian countries. The magnitude of the infrastructure gap may be illustrated by the Mumbai slum of Dharavi, where nearly half a million people have access to only a few hundred public water taps and public toilets, many of them unusable. In fact, no city in the region has water available at all times of the day. Choked sewerage systems pose serious health hazards in many cities of South Asia. Neglected road maintenance causes congestion, accidents and excessive wear and tear on vehicles. Power cuts and shortages impose a huge cost on society, with the biggest burden on industry and poor people. Further, congested ports and poor quality highways hamper trade. Given the fiscal health of governments and budgetary constraints faced by them,1 South
Asian countries are no longer able to finance infrastructure projects solely or even predominantly from the public purse. Now governments are looking to the private sector not only to finance the infrastructure projects but also to build and operate the same. However, there are various issues relating to institutional set up, financing, regulation, tariffs and publicprivate partnerships (PPP) which need to be tackled adequately and expeditiously to attract private investment in the infrastructure sector.2
