Almost all developing—and many developed—economies face a similar conundrum: rapidly growing demand for roads, power, and telecommunications, but markedly insufficient public funds. As the experience of many such countries indicates, closing this infrastructure gap—that is, implementing a properly-structured infrastructure privatization program—can be a critical catalyst for economic development while also providing highly attractive investment opportunities for both foreign and domestic companies.

A tremendous amount of attention has been focused lately on the privatization of state-owned enterprises. Infrastructure privatization can, however, have an even greater economic impact, since infrastructure determines the availability of essential industrial inputs like power, as well as providing the means to reach both domestic and global markets via roads, ports, airports, and telecommunications networks.

The recent experience of various countries in Latin America and Asia indicates that successful programs require governments and investors to operate as partners in a "win-win" joint endeavor. Indeed, the conventional "zero sum" view of privatization—that either the government will gain at the investor’s expense, or vice versa—eventually dooms infrastructure privatization to failure.

Without a balanced partnership, either the effort will attract insufficient investment, or political pressure will push government to renege on...