ABSTRACT
Abstract Water supply, irrigation and drainage are all industries which can demonstrate natural monopoly characteristics. While private provision can realise considerable productive and investment efficiency advantages, it is likely to lead to higher water prices than under public provision. Options for economic regulation are examined. Despite varied country experience an apparent trend towards long contracts and the embodiment of the regulatory agency within the contract framework, may be leading to a convergence of apparently contrasting approaches. Keywords: water supply, irrigation, drainage, regulation, water policy, monopoly
Water supply, irrigation and drainage are such important basic needs that they have often been regarded as too important to leave to private firms to provide. And when private firms are involved, it is widely felt that their activities should be strictly regulated to make sure that they work for the public good rather than their own profits. Meanwhile economists tend to stress the advantages of free markets and the problems of regulating effectively. They point out that regulation itself can easily fail to serve the public interest, especially when viewed in a dynamic context where lack of proper incentives can lead to inefficient performance.
