Financial Aspects of Arab Power Development

Few areas of development economics have witnessed such a sharp correction to received wisdoms in a space of a few years as has infrastructure finance. Until the 1980s, especially in developing countries, the prevailing trend had been for governments and state monopolies to assume responsibility for the provision and finance of power. By the mid-1980s, championing policies to attract private finance to power sectors took precedence, mainly on the back of two major factors. First, the disappointing ability of public entities to deliver and maintain power supplies, and secondly, fiscal pressures that undermined the availability of public funds to the sector. The commercialisation of power markets, it was hoped, would bring the dynamism and investments these markets were lacking. Indeed, many – albeit not all – developing countries received billions of dollars in infrastructural investments during the 1990s. However, several shocks put an end to this upturn and to the underlying optimism. Consequently and conversely, it is now widely accepted that privatisation and regulatory changes can be accompanied by a number of serious problems along with the funds they provide.

By: Randa Alami

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