Abstract
The aim of economic regulatory policy in private infrastructure development is to protect utility users while ensuring that private concessionaires have incentives to develop and operate infrastructure projects more efficiently. Setting an adequate governance by economic regulation is very important because when the regulatory control is too lax, users will have to bear the risk of higher prices. Contrarily, excessive control may cause reluctance of the private sector to participate in infrastructure development. This paper discusses three alternatives in economic regulation: Price regulation, ROR (rate of return) regulation, and No regulation. It analyzes both the incentive effects to improve efficiency and the degree of risk to which concessionaires are exposed under the different economic governance. Finally, it makes suggestion for improving economic regulation in developing countries.
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