Private Participation in Infrastructure: Considerations for Colombia

Abstract

This paper provides an analysis of issues the Colombian government faces with regard to increasing private participation in infrastructure. Although Colombia has ambitious plans for private participation in infrastructure and has started to build the legal and regulatory framework to support this objective, thus far progress has been mixed. Colombia is not yet capturing the full benefits of competition in infrastructure services –which are already evident in Colombia's ports sector– and not yet achieving the private investment levels envisaged in the 1995 Development Plan. Several measures must be taken, therefore, to accelerate private participation in infrastructure. Failure to do this will not only defer realization of benefits from better and expanded infrastructure services but also jeopardize the sustainability of the recent legal and regulatory reforms. As mentioned in a number of CONPES documents, the Colombian government has been moving away from the outright ownership of infrastructure towards an approach that emphasizes private provision and competition. As of now, in pursuit of this new role, the government has created a series of semi-independent regulatory entities and pushed hard in the development of project financing of new infrastructure assets like gas pipelines and power generation plant. Private operators provide cellular telephony service and private companies, through joint ventures, are providing financing and installation for thousands of new phone lines. Private concessions are operating in ports, railways, airports and roads and these are set to grow in number. The main message of this paper is that the government should push harder in three areas: divestiture of existing infrastructure assets, developing the regulatory and competitive environment within which infrastructure services are provided, and ensuring that where the government does play a role in mitigating risks in private infrastructure deals, it does so in a way which minimizes the potential distortion.