sustainable basis. An effective and equitable tariff system for water and sanitation is a real priority in most of the countries studied.
The main issues coming out of these two case studies are the division of responsibilities between the government and the private sector. Ideally the government sector would set the framework. In practice there is often a market failure and the government got involved and finds it difficult to pull out. Secondly, the type and scale of technology is important and has consequences for the management and financing. The larger the scale, the bigger the financial implications. In that case governments will also be more inclined to involve the private sector. The private sector may find it easier to arrange the financing and may be better equipped to manage the facilities. It is desirable to think of water supply, sanitation and wastewater in an integrated way. The cost of an integrated solution will be much lower than a solution at a later stage by a separate institution based on different cost recovery system. In big cities the integration between dealing with wastewater and offsite sanitation is often the case. However, from the Indian case we also learned that this tends to be limited to the area of the Municipal Corporation, leaving the rest of the city to the development authorities or even district authorities, who tend to have less money and no money raising responsibilities.
The role of the private sector
An important issue is what is the role of the private sector in infrastructure development? The Indian government creates and has created SLFIs, which will eventually compete with the private sector, unless further privatisation is envisaged as we have recommended (Van Dijk and Schulte Nordholt eds, 1994). In many states the lack of project preparation capacity is the real issue. If enough good urban infrastructure projects would be prepared, and real 'cost recovery' would be introduced, financing through the private sector, and through international capital flows would come forward, in particular in the present situation where the rate of interest is relatively high and state governments often provide guarantees for repayment of the loans or bonds (Van Loon and Van Dijk, 1995). A situation that should not be continued once real commercial infrastructure projects are prepared as is happening in Rajasthan for example.
It is good to stimulate the involvement of private financial institutions for infrastructure development in India. In the course of our research we gradually became convinced that governments couldn’t do a number of the things it did in the past (Roth, 1989). This certainly applies for complicated and expensive infrastructure, which also needs to be maintained afterwards. The government does not have the money, but should also not be involved heavily in infrastructure development, but rather create the conditions for private sector involvement. At the same time it may be necessary to strengthen and leverage certain existing government organisations, in particular if they monitor the process of private sector involvement.
The conclusion about private sector involvement in infrastructure activities (telecommunication for example) is that the development of new technologies, combined with unbundling and more competition has led to much lower prices for consumers (Van Dijk, 2003). The government would still play an important role as the supervisor, who