Foreign Direct Investment In Infrastructure In Developing Countries:

Since the mid-1980s, governments around the world have pursued policies to encourage private sector participation in the financing and delivery of infrastructure services. The natural monopoly characteristics of infrastructure utilities mean, however, that the privatization of these industries risks the creation of private-sector monopolies. Therefore, governments need to develop strong regulatory capabilities to police the revenues and costs of the privatized utility firms, while, at the same time, establishing regulatory credibility among investors. This provides an empirical examination of the relationship between the quality of the regulatory framework and Foreign Direct Investment (FDI) in infrastructure in middle and lower income developing countries during the period 1990 to 2002.