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serve the poor directly can alter this negative loop. Giving ammunition to critics,
unfair privatizations breed popular discontent, which indirectly increases poverty
by deterring future investment, and drives investors to nations where the risk of
policy reversal is less prevalent. Unless the social risks engendered by
privatization are eliminated, sound economic policy reform will be repudiated.
7. One reason for the unpopularity of privatization is that there is considerable
suspicion that large-scale privatization is tainted by collusion between private
bidders and government officials. The expected bonanza of jobs and higher
growth often does not materialize because governments fail to prevent
mismanagement. Investments in infrastructure sectors are characteristically up-
front with a high degree of asset specificity and risky returns over a long period of
time. Thus, reforms in infrastructure sectors require judicious government
intervention and specific institutional arrangements. These interventions must
address specific project, macro, and financial risk management and regulatory
issues in order to ensure long-term commitment by both private parties and the
government. When infrastructure services are privatized, contracts between
governments and private operators are, by definition, incomplete, hence
underlying the importance of consistent, rule-based contract adaptation. In such a
situation, the access to information and the existence of sound regulatory
oversight is critical for the success of infrastructure reforms. Whether in the
context of privatization or greenfield investments, the need for enhanced
accountability, transparency and procedures for addressing allegations of
corruption in the award of concessions is of the highest importance. The existence
Convention