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Policy Alternatives in Reforming Power Utilities in Developing Countries: A Critical Survey

Discussion paper by Alberto Gabriele / UNCTAD, 2004

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What: Given the importance of energy to all aspects of development, this paper examines the liberalization and privatization of energy utilities before going on to suggest some alternative policies based on the experiences of a number of countries. The paper provides short case studies of energy reforms including Chile, Brazil, Argentina, China and India. The paper also provides a number of reference materials for more in-depth reading. Who: Anyone interested in the impact of liberalization on development in particular key public utilities. How: Could be used as a key reading or the basis of a presentation on reform of the energy sector and the impact of liberalization.





Alberto Gabriele

No. 168
February 2004



Alberto Gabriele*

No. 168
February 2004

* The author is grateful to his colleague, Mehdi Shafaeddin, Officer-in-Charge of the Macro-economic and
Development Policies Branch and Coordinator for ECDC of UNCTAD’s Division on Globalization and
Development Strategies for his comments and suggestions. The author, however, remains solely responsible
for any shortcoming in this study. He also wishes to express his gratitude to the anonymous referee for the
useful observations regarding the contents of the paper, and to Talvi Laev for her editorial assistance.



The opinions expressed in this paper are those of the author and do not necessarily reflect
the views of UNCTAD. The designations and terminology employed are also those of the author.

UNCTAD Discussion Papers are read anonymously by at least one referee, whose
comments are taken into account before publication.

Comments on this paper are invited and may be addressed to the author, c/o the Publications
Assistant,* Macroeconomic and Development Policies, GDS, United Nations Conference on Trade
and Development (UNCTAD), Palais des Nations, CH-1211 Geneva 10, Switzerland. Copies of
Discussion Papers may also be obtained from this address. New Discussion Papers are available at


* Fax: (41 22) 907 0274; e-mail: mdpb-ed.assistant@unctad.org.

JEL classification: O13, O38, O53, O54, O57, P41, P48




Abstract ............................................................................................................................................... 1

INTRODUCTION .................................................................................................................................... 1


1. Liberalization, deregulation and privatization ..................................................................... 2

2. Quality of management and quantity of investment ............................................................ 3

3. Is private capital really additional? ...................................................................................... 4

INDUSTRIALIZED DEVELOPING COUNTRIES .................................................................................. 5

1. Structural reforms of energy utilities in the 1990s and earlier ............................................. 5

2. Latin America: widespread energy sector privatization ....................................................... 6

3. Energy reforms in Chile: early start and gradual implementation ....................................... 7

4. Brazil: electricity privatization and energy crisis ................................................................ 8

5. Argentina: mixed results of energy utilities privatizations .................................................. 9

6. Africa and East Asia: energy sector restructuring under divergent structural conditions .... 10

7. India: a decentralized approach to reform of the energy generation sector ......................... 11

8. China: institutional and regulatory reforms, commercial orientation and

enhanced market access for foreign investors ...................................................................... 12

CONCLUSION ........................................................................................................................................ 14

REFERENCES ........................................................................................................................................ 16


Alberto Gabriele

United Nations Conference on Trade and Development


This paper examines the policy alternatives faced by developing countries in their endeavours to
preserve and develop their electricity and gas systems, two service-oriented industries that – along
with oil and coal – provide the bulk of the energy supply in both developed and developing
countries. Even in very poor countries, industrially generated energy is indispensable for carrying
out most economic activities. Therefore, Governments traditionally recognize that the supply of
gas and electricity entails a fundamental public service dimension. Chapter I presents and defines
the issues of liberalization, deregulation and privatization of energy utilities, and it attempts to
locate energy reforms in a broader historical framework in which developing countries’
Governments have faced increasing financial hardship. Chapter II reviews some experiences in
energy sector reforms, focusing on some of the largest semi-industrialized countries in Latin
America and Asia. A few remarks on the advisability of a flexible approach to reforming energy
regimes in developing countries conclude the paper.


This paper examines some aspects of the policy alternatives faced by developing countries in their
endeavours to develop and enhance their energy systems, keeping in mind the ongoing multilateral
trade negotiations. The focus is on electricity and gas, which, along with oil and coal, provide the bulk
of the industrially generated energy supply to enterprises and households in both developed and
developing countries. It is well known that the vast majority of the population in least developed
countries (LDCs), and hundreds of millions of poor inhabitants of non-LDC developing countries do
not have access to industrially generated energy, especially in rural areas. Even in very poor
developing countries, the few existing export-oriented economic activities, such as tourism or the
production and transportation of agricultural or mining commodities, cannot function without a
minimum supply of industrially generated energy. Therefore, industrially generated energy is
indispensable for carrying out virtually all “modern”1 productive and consumption activities,
especially tradeable ones.2 Governments have traditionally recognized that, because of its crucial
enabling function, the supply of gas and electricity has a fundamental public-service dimension, quite
independently from the property regime and market structure in which the energy utilities operate.

Chapter I presents and defines the issues of liberalization, deregulation and privatization of energy
utilities, and it attempts to locate the reforms in a broader historical framework characterized by an
increasing inability on the part of developing countries’ Governments to meet the financing needs
involved in the maintenance and expansion of domestic energy supplies.

1 The term “modern” is used in contrast with traditional economic activities such as subsistence agriculture and
petty industry and trade.
2 Electricity and gas are the most widely used technologies employed worldwide to supply energy in nationwide
or local power networks. However, the observations made in the text apply to other technologies – such as
nuclear and renewable energies – frequently utilized as alternative means of producing electrical power. Oil is
also an input for the production of thermal energy. Yet the oil industry as such is chiefly geared towards the
production and transportation of a tradeable commodity, and thus has characteristics quite different from those of
the basically service-oriented industries that are the object of this study.


Chapter II reviews some experiences in energy sector reforms, focusing on some of the largest semi-
industrialized countries in Latin America and Asia. A few remarks on the advisability of a flexible
approach to reforming energy regimes in developing countries conclude the paper.


1. Liberalization, deregulation and privatization

The worldwide trend in favour of trade openness, market regulation, and the retreat of the State from
economic activities, which peaked in the 1990s3 and still informs the reform programs of many
developing countries and the agenda of international financial institutions, did not leave out energy

Liberalization of a sector of economic activity strongly intervened and regulated by the Government
consists, broadly speaking, in shifting it towards market regulation, guided by the principles of free
competition. Deregulation, de-statization and privatization are techniques or instruments utilized for
this purpose. Deregulation is a change from interventionist regulation to pro-libertate regulation,
taking of course into account that once certain norms are abolished, they must to some extent be
replaced by others, with the object of guaranteeing the effective functioning of the market. (For this
reason, some analysts prefer to use the more neutral term “re-regulation”.) De-statization of economic
activities means that those parts of economic activity that used to be considered a public service, and
therefore were left to the State, are open to the intervention of private operators.4 Finally, privatization
means transfer of the ownership of a public enterprise so as to transform it into a private enterprise.
Privatization sometimes requires the “atomization” (i.e., unbundling) of the enterprise.

The most widespread argument in favour of these reforms is that state-owned enterprises are
intrinsically inefficient and are bound to be mismanaged, and that therefore a change of property rights
will in itself lead to improved performance.5 In a complementary fashion, liberalization is seen as a
tool aimed at the creation of markets through the promotion of free competition (Trillo-Figueroa,

Notwithstanding the partial validity of these theoretical arguments, empirical evidence on the
comparative performance of publicly and privately owned enterprises (especially in the case of

3 The radical neoliberal position epitomized by the Washington Consensus was weakened in the late 1990s by a
number of previously unforeseen and interrelated events, among them the Asian crisis, the failure of the Seattle
round of World Trade Organization (WTO) negotiations, and the surge of a mass opposition movement in many
developed countries. As a result, the dominant orthodoxy is presently more nuanced; it has been dubbed the
“enlightened standard view” by a leading international economist (Rodrik, 2001).
4 Naturally, to the extent that they do embody a public service component, they are still bound to be subject to
new forms of public regulation.
5 This argument is further developed by more sophisticated analyses exploring the underlying theoretical and
practical reasons: under a public property regime, enterprise managers face an inadequate incentive structure,
while privatization forces them to focus on a clear-cut and unequivocal goal, the maximization of shareholder
value. Another, related argument maintains that senior managers in state-owned companies are locked into the
contradictions and distortions implied by the principal-agent relationship and by the asymmetry of information
between them and their supervisory bodies, and that they are therefore far less accountable than they would be
under a private property regime. According to the theory of public choice, managers of state-owned enterprises
are thus likely to engage in rent-seeking behavior, resulting in suboptimal provision of public goods and services
and in multiple allocative and productive inefficiencies (Peacock, 1992; Vickers and Yarrow, 1989).


utilities bound by public-service obligations) is inconclusive, as ownership of an enterprise matters
little to its performance. Of far greater importance is the context in which the enterprise operates.
Therefore, to improve the performance of energy utilities, a number of measures might be taken,
largely independently of the property regime as such. The degree of competition of energy markets
could be increased, forcing firms to achieve production efficiencies, ruling out the possibility of
realizing extra profit at the expense of consumers, and thus driving prices down. Signals to
management and incentives could be improved and made more transparent, increasing management’s
autonomy in day-to-day operations and correspondingly reducing government interference. In some
cases, even in a public or partly public property regime, the constraints and opportunities stemming
from capital markets can play a role in improving financial discipline and – along with adequate
incentives – in inducing virtuous behaviour on the part of managers. Unfortunately, in many real-life
attempts to implement the aforementioned measures, and especially to effectively enhance the degree
of competition in which an energy utility operates, are greatly hampered, particularly in the developing

2. Quality of management and quantity of investment

As a general rule, the power sector in developing countries performs poorly. Plant availability is
scarce (on average less than 50 per cent, versus 80–85 per cent in the United States),6 transmission
losses are high (over 30 per cent against 7–8 per cent in the United States), blackouts and brownouts
are common, and many state-owned power utilities are in serious financial hardship (Stevens, 1998:1;
see also Barnett, 1992; Munasinghe, 1992; Schram, 1993). However, it is difficult to determine to
what extent these problems are specific to state-managed power sectors rather than a byproduct of the
very (relative) underdevelopment dimension, which would in any case affect the State’s regulatory
capacity owing to multiple institutional shortcomings. Moreover, many government-owned power
systems in developing countries do function efficiently, as for instance in Jordan and Thailand and in
some Indian States (Sullivan, 1990). The bottom line is that the demand for energy in the developing
world, driven both by economic activities and by the legitimate aspiration of large numbers of poor
people to achieve the minimal comfort levels to which their counterparts in the North have been
accustomed for a long time, tends to grow much faster than Governments’ abilities to finance the
expansion of supply capacity. This gap has grown much more dramatic since the 1970s, as the
weakening of the State’s economic power in many developing countries has been accompanied by a
progressive drying up of the multilateral financing sources that were relatively abundant in the first
development period after World War II. In other words, rather than facing a problem of quality of
energy management, Governments in developing countries often face a problem of quantity, since the
money needed for investments in energy capacity and facilities is lacking.

This tension was acknowledged as early as 1990 by one of the staunchest and most influential
advocates of neoliberal reforms in the developing world, the United States Agency for International
Development. One of its officers, in an article on the early experiences and perspectives of developing
countries in developing private power supplies, observed that the growth rate of installed capacity in
the developing world averaged 6.5 per cent, against 3–5 per cent in Organisation for Economic
Co-operation and Development (OECD) countries, pointing to a $100 billion per year financing bill
over the 1990s: “These funds are not, and will not be, available from public treasuries” (Sullivan,

6 Plant availability measures the ratio between the effective working hours of a power plant over a year and the
theoretical maximum possible working hours (24 hours multiplied by 365). A plant availability of 50 per cent
means that the plant was inoperative, on average, half of the time.


Box 1

Alternative institutional and legal settings for energy regimes

In the international commercial terminology, privatization usually corresponds to Buy-build-operate
arrangements (BBO): a private agent buys existing assets from the State (often with an engagement to
upgrade them), retains ownership and is guaranteed the right to exploit it for an indefinite period of time. In
many cases, however, the main problem with energy utilities in developing countries is not one of hopeless
inefficiency (which would suggest privatization as a radical solution) but rather one of insufficiency: the
Government lacks the financial, managerial, and institutional resources to build up and run new facilities at
the speed required by development needs. It can let a private operator build the facility, choosing one of the
following policy options:

• Build-own-operate (BOO): The private agent retains the ownership of the facility and the right
to operate it for an indefinite period of time. A similar arrangement is the independent power
producer (IPP), under which the private operator sells power to the government grid, without
formal previous obligation to limit its profits or to eventually surrender ownership of the

• Build-transfer-operate (BTO): The private agent transfers ownership of the facility to the State
after completing the construction stage, and operates it thereafter.

• Build-operate-transfer (BOT): he private agent builds the facility and retains ownership and the
right to exploit for a specified period of time, thus recovering construction, operating, and
financial expenditure. At the end of the period, ownership reverts to the State at a symbolic

It is also possible for a Government, on the one hand, to consider that existing state-owned facilities might be
more efficiently run by a private operator, but, on the other hand, to be reluctant to permanently surrender
ownership rights. The Government has the option of granting temporary exploitation rights to a private
operator, whether through a concession (which entails full commercial risks and responsibility for new fixed
investments), a service contract (which covers more limited operation and maintenance functions), or a lease
contract. In the latter case, the private company is given the right to the revenue stream from the service in
return for full operation and maintenance responsibilities. It pays a rental fee to the Government but does not
engage in new investments.

3. Is private capital really additional?

Thus, developing countries are left with the option of courting private investors. Here they can opt for
privatization/divestiture, according to the classical United Kingdom example, or foster the
development of newly established independent power generating facilities (see box 1). In the late
1980s the first reform path was pioneered in the developing world by Chile, and the second by China,
which were subsequently followed by many other countries. Mixed and intermediate approaches are
also common, with private utilities coexisting with public ones in many countries, among them India
(Sullivan, 1990:337). Whatever option is chosen, and leaving aside for the moment the crucial
question of the respective long-term strategic development implications of the two reform paths,
policy makers need to keep in mind that the most pressing goal of providing the energy industry with
more financing in the short to medium term is not likely to be achieved automatically. This will
happen only if “private capital is truly additional” (Sullivan, 1990:338). If, on the other hand,
sovereign guarantees are needed to obtain equity or debt in foreign exchange, private capital may
actually become a substitute for existing funds, because of the country’s international credit exposure.
Local currency availability may also be scarce, especially in countries with poorly developed capital
markets. Moreover, private capital tends to be more expensive than public capital.


Therefore, in the case of divestiture of a state-owned monopolistic utility, financial benefits are likely
to accrue to the reforming country only if the hoped-for benefits stemming from competition and,
possibly, other efficiency gains related to private management counterbalance at least the additional
financial costs typical of international private capital markets. This condition, however, is necessary
but not sufficient for the reform to be considered welfare-enhancing from the point of view of the
general public.7 For this purpose it is also necessary that the efficiency gain be large enough to be
shared by the private utility operator and the consumers, and that an adequate institutional and
regulatory mechanism be enacted to assure that the benefits are actually distributed according to policy
goals.8 The ability to undertake such policy design and implementation, while not unheard of, should
not be taken for granted in the developing world, as will be made clearer in Chapter II.9


1. Structural reforms of energy utilities in the 1990s and earlier

Until the early 1990s, significant reforms of traditional state-owned energy monopolies were
infrequent in OECD countries (being virtually confined to Anglo-Saxon members), and even more so
in the developing world.10 The pioneering experiences of Chile and China in the 1980s, which have
been rightly considered as paradigmatic and – especially with the benefit of hindsight – more
successful than the norm, will be examined in Chapter II.3 below. As was mentioned earlier, Chile and
China pioneered power market-oriented system reforms in the developing world. Both countries’
reform strategies were gradual and rather successful, but they differed markedly in nature. Chile
pointed towards divestiture, privatization, and the progressive withdrawal of the State from
management of the power industry (albeit without forfeiting its regulatory function). China, on the
other hand, saw the role of private investors as complementary and additional with respect to that of
public enterprises.

7 This observation is static and would not, of course, apply in practice to extreme cases where the only realistic
alternative to divestiture would be the collapse of a bankrupt and moribund state-owned facility.
8 On the importance of regulation, see, for instance, Wälde and Gunst, 2003.
9 As in most economic sectors, push the tendency towards deregulation and privatization of energy systems too
far can have unintended negative technological and environmental consequences in the long run (Vickers and
Yarrow, 1989; Peacock, 1992). An enhanced market orientation on the part of utility operators – which
constitutes one of the main goals of the reforms – can lead towards exclusively profit-oriented short-term
behaviour, while goals such as combating pollution or pursuing long-term research and development (R&D)
projects aimed at the realization of clean and environmental technologies are sidelined. Actually, in the United
States as in other OECD countries, the level of public support for energy R&D programs has declined
dramatically in recent years. In the United States, in particular, private R&D funding also fell (Dooley, 1998).
10 The partial or total liberalization/privatization of an important and traditionally state-dominated sector such as
energy is likely to be easier to implement in a developed than in a developing country. In a developed country, in
fact, the energy sector tends to be rather mature and well-established, and thus less pivotal and strategic from the
point of view of economic sustainability and national security than in earlier development stages. The maturity
of a sector, in fact, implies that its technology is not a frontier one and hence can be mastered with some ease by
national private agents. The actual and perspective market for energy, moreover, is likely to be large enough to
create at least the potential for a certain degree of competition. Yet, in the developing world, the above
arguments can be overshadowed by other arguments, among them the frequency of quasi-emergency situations
caused by economic imbalances and the decay of basic infrastructure, and the perennial hunger for finance and
technology. In developing countries endowed with ample and still largely untapped natural resources,
furthermore, this potential wealth can have an ambiguous impact on energy policies. On the one hand, it
enhances the strategic character of the energy sector, strengthening the rationale for strong state intervention. On
the other hand, it increases the urgency of acquiring updated technology to adequately exploit the energy
potential, thus arguing in favour of leaving ample room for the operations of advanced transnational


Most structural energy sector reforms took place in the 1990s. The energy sector has been one of those
most affected by privatization worldwide, with a global value of property transfers estimated at US$37
billion in 1996, corresponding to around one-fourth of all privatization exercises carried out in that
period (Lutz, 2001:25). According to another estimate, between 1992 and the late 1990s – the golden
era of the Washington Consensus – about 20 privatizations of state-owned oil and gas industries took
place all over the world, involving 15 countries. In eight cases, the Government retained a majority
holding. Electricity industry reforms followed a similar path, and in most reforming countries most
changes consisted of deregulation and the promotion of new private investments, rather than in the
divestiture of state-owned utilities (Stevens, 1998; Thomas, 1997). These figures, albeit impressive,
amount to less than what might have been expected taking into account the ideological climate of the
time, reflecting the array of problems and constraints implied by energy privatization.

The analysis in the remainder of this chapter will focus on the cases of large, semi-industrialized
countries, for two reasons. First, these are the experiences for which the most information is available.
Second, in these countries the challenge of preserving and developing a national energy industry
currently constitutes a strategic priority.11 However, a few remarks will be made regarding other
developing countries in Africa, Asia and Latin America.12

2. Latin America: widespread energy sector privatization

Total or partial privatization of energy subsectors has proceeded quite fast in many countries in Latin
America, as the region has been the most consistent follower of the Washington Consensus policies
promoted by international financial institutions.13 In fact, Latin America contributed to about 40 per
cent of the total value of energy privatizations worldwide (Lutz, 2001:26). Energy reforms in Chile
and Argentina were the deepest and most radical. In Bolivia, Colombia and Peru, electricity markets
were restructured and opened to competition. Reforms in Brazil and Mexico were more cautious and

11 Improving and expanding access to reliable energy sources is a necessary condition for development in every
country. However, for historical reasons, semi-industrialized countries are particularly well placed to reap the
potential synergic gains (in terms of overall industrial and technological upgrading) stemming from development
of the energy sector.
12 Since this paper focuses on developing countries, experiences in structural reforms in energy services in
developed and transition countries are not covered in the short review of case studies presented in this chapter.
Rather, they are very briefly referred to in this note.

The pioneering British experience with electricity and gas privatization has been studied and variously
evaluated by numerous analysts (see, for instance, Stern, 1997; Rutledge and Wright, 1998; Yarrow, 1986 and
1996; Vickers and Yarrow, 1989; Hunt and Shuttleworth, 1996; Weir, 1999; Thomas, 1999, 2000a and 2000b).
Arguably, the heavy requirements in terms of regulatory complexity constitute its most durable lesson. The still-
embryonic energy market of the European Union, which holds the potential for significant welfare gains, still
requires for its smooth functioning a series of converging market-friendly changes in the respective national
energy regimes, which are occurring at different paces in the various member countries (Sioshansi, 2000; Lutz,
2001). Among extra-European reform experiences in the industrialized world, California's ill-fated electricity
liberalization has been the object of particularly wide attention by both scholars and the media (Sioshani, 2001;
Economist, 2001).

Energy sector reforms in those European and Asian transition countries that formerly belonged to the
COMECON are not covered in this paper. Energy reforms in former COMECON countries took place after the
collapse of those mutually integrated centrally planned economies, in a crisis or post-crisis setting characterized
by the transition towards a completely different market-based system. Therefore, more than from the vantage
point of improving the efficiency and the effectiveness of energy utilities per se, they should be seen and
evaluated as components of a broader strategy aimed at the total rebuilding of the economy as a whole. (On
energy-sector reform in transition countries and the severe problems faced by energy regulators see, for instance,
World Bank 2000; Von Hirshhausen and Vincentz 2000; Yekhanurov 2000; Dahl and Kuralbayeva 2001;
Bannikov 2000.)
13 For a critical balance of the results of the New Economic Model in Latin America, see, for instance, a special
issue of World Development (World Development, 2000).


gradual.14 Venezuela is considering partial reforms of the gas and electricity sectors that would
maintain a strong role for the State in designing and implementing a competitiveness-enhancing and
development-oriented energy strategy.

The reforms were instrumental in facilitating two important structural developments that profoundly
changed the energy landscape in the region: the increase in the absolute and relative role of foreign
investors and the surge of natural gas as a new, abundant energy source made particularly competitive
by the availability of modern and relatively less capital-intensive technologies (Lutz, 2001). However,
from one country to another, the reforms achieved uneven results with respect to the goals of
increasing efficiency, boosting productivity, relieving public budgets and fostering capacity
expansion. Especially in those countries where privatization is furthest along, the structural
contradiction caused by the attempt to promote competition in oligopolistic service-oriented sectors,
where powerful transnational corporations often face weak national States and poorly organized
consumers, has not withered. Consequently, the tensions between private efficiency and profitability,
on the one hand, and public service and development goals, on the other hand, have not been fully
overcome either.

3. Energy reforms in Chile: early start and gradual implementation

In Chile, during the 1970s, subsequent steps were undertaken to reduce the presence of the State in the
power industry. The electricity industry developed a rational planning sequence: distribution
companies were the first to be privatized, followed by power generation, according to the pragmatic
criterion of proceeding first with the most profitable enterprises. ENDESA, the largest state-owned
enterprise that had a dominant role in the sector, was maintained under State control. After the
progressive privatization of distribution companies, the Government proceeded cautiously with
(mostly partial) offerings in power-generating companies, opening them up as well to foreign
investment. The privatization process was carried out over a long period of time, and the first shares of
ENDESA were sold only in 1987. ENDESA shares were sold through the stock market, and an effort
was made to present it as a model of “broadened ownership” and “popular capitalism”: A small part
was reserved for employees and sold at a discount, and a larger one was reserved to a special class of
“small-scale “ purchasers, who enjoyed very favorable financial and fiscal advantages (Sullivan,

While private firms were welcome to enter the energy sector, the Government of Chile remained in
charge of most regulatory functions. Tariff and regulatory issues have been handled rather effectively
by the National Commission of Energy, and the overall performance of the privatized energy system
was relatively satisfactory up to the late 1990s (Bernstein, 1988). However, the regulatory bodies were
still not endowed with sufficient powers and capabilities to achieve a fully satisfactory degree of
control of the operations and strategies of powerful private companies. Moreover, unbundling and
privatization of the power sector were not accompanied by adequate restrictions on ownership
concentration. The result was a less-than-optimal degree of competition, with the transfer to private
operators of significant monopolistic advantages (Lutz, 2001:12). The Chilean power sector remained
a highly oligopolistic, vertically integrated industry acting in a very imperfect competitive context,
while the legal and regulatory framework (still one of the most effective in the developing world,

14 While Brazil underwent a privatization process (see below), Mexico, like Central American countries,
maintained vertical integration in the power sector, while allowing private electricity generators to set up new
additional capacity and sell it to the national electricity utility.


thanks in part to a national tradition of almost non-existent corruption and of high professionalism
among Chilean public servants), was slow in adapting to the evolving situation.

By the end of 1998 a serious energy crisis erupted. The proximate cause was a drought, but its impact
was compounded by technical failures, delays in the operational setting of combined-cycle natural gas
plants, and problems with coordination and transparency in the activities of power-generating
enterprises. The crisis revealed a number of structural shortcomings, among them the inadequacies of
the regulatory and institutional framework, the relative weakness of public bodies in dealing with
short-term profit-oriented private firms, and the lack of a long-term energy strategy. According to a
study by the UN Economic Commission for Latin America and the Caribbean (ECLAC), the crisis
showed that economic efficiency criteria were not sufficient to guarantee satisfactory performance of
the energy system. Market mechanisms should be improved and made more transparent, correcting the
imperfections stemming from imperfect competition and asymmetry of information, while the
regulatory bodies are to be revamped and strengthened (Rozas Balbontin, 1999). Notwithstanding
these problems, the Chilean experience still stands among the most successful on the subcontinent. It
is also made particularly interesting by the exceptional role played by cross-border energy trade,
which has allowed Chile to overcome a crisis in the domestic coal industry, as consumption shifted
towards natural gas imported from Argentina. The latter change in energy sources also contributed
significantly to progress in the domain of environment protection.15

4. Brazil: electricity privatization and energy crisis

Brazil managed to increase its electricity supply capacity by 500 per cent in the last half-century under
the traditional public-monopoly regime. The electricity system was complex, formed by several state-
based generation and distribution companies. It ran into trouble in the 1980s, as the Ministry of
Treasury imposed price caps on tariffs as a macroeconomic anti-inflationary tool. The utility’s
financial crisis and the subsequent decay in investment activity prompted calls for British-style reform,
which was initiated in 1993. However, the creation of a truly competitive market for power generation
in Brazil was bound to be extremely difficult, given that over 90 per cent of electricity is accounted for
by hydropower (Schaeffer and Salem Szklo, 2001). Hydropower technology, especially in a semi-
industrialized country, implies production conditions characterized by huge economies of scale, and
therefore a regime close to that of a natural monopoly.

Nevertheless, privatization was a particularly attractive option in heavily debt-ridden Brazil, more for
financial than for economic reasons (Mendonca and Dahl, 1999:81). From this point of view, it can be
argued that the Government was successful in privatizing most assets of the industry, as it raised more
than US$15 billion by mid-1998. The reform plans envisaged that foreign investors and independent
power producers would operate in the newly opened electricity market. An independent transmission
grid and a new regulatory agency were also set up. Yet the regulatory regime proved inadequate.
Tariff and price policies, in particular, were ill conceived, as they allowed monopolistic rents to be
captured by distribution companies while failing to offer sufficient incentives to potential new
investors in new capacity generation, who were already penalized by high interest rates (Mendonca
and Dahl, 1999). As a result, generation capacity grew much less than reformers had hoped. This
setback was particularly disappointing in a country where electricity demand tends to increase almost

15 Building on its more than two decades of experience in reforming energy utilities, Chile tabled a proposal on
energy services in the framework of ongoing WTO negotiations. The proposal aims at “reinforcing the
development of energy services in competitive and transparent markets; embracing the whole spectrum of
energy services in the negotiations; ensuring marketing access, while respecting domestic regulations; and
analyzing the issue of subsidies in the energy sector” (WTO, 2003).


three times faster annually than the gross domestic product (GDP). The risk of blackouts increased16
and, partly because of poor rainfall, a severe energy crisis erupted in 2001. In June the Government
launched official instructions to the population to achieve a much-needed 20 per cent decrease in
usage through voluntary energy savings (Dyer, 2001). This measure could not, however, bring more
than partial and temporary relief. By early 2002, the Government was proposing sweeping reforms
that would increase State regulation and intervention (Financial Times, 2002).17 In the long run, the
Government’s tackling of the energy issue will be further complicated by the need to upgrade and
reconvert power generation capacity using technologies compatible with environmental-protection

The sobering warning stemming from the multiple flaws in the privatization of utilities and the
emergency of power emergencies in Brazil, along with the partially analogous experience of the power
crisis in California, was not lost on participants in the UNCTAD Expert Meeting on Energy Services
in International Trade (held in Geneva in July 2001). According to the Chairperson’s Summary, the
debate showed that

The lesson which can be drawn from these (power emergencies in California and Brazil) is that
before creating a new framework for the energy sector, each country has to study carefully the
features of its market and the related needs. The possibility of adopting solutions existing in other
countries is limited since conditions vary greatly between countrie … (UNCTAD 2001b:11–12)

5. Argentina: mixed results of energy utilities privatizations

In Argentina, the gas sector, which is particularly important for its role as a primary source of
electricity generation (Campodonico, 1999), underwent thorough regulatory and structural reforms in
the early 1990s. The reforms were market-oriented, according to the United Kingdom model, and
aimed to increase efficiency and foster private investment in the gas industry. Both the downstream
gas company, Gas del Estado (GdE), and the upstream oil and gas company, Yacimentos Petroleros
Fiscales (YPF), were privatized. GdE was also broken up into two transmission companies and eight
(later nine) distribution companies. An open-access regime was established, price controls were
removed, and an independent regulatory agency (ENARGAS) was created. The functions of the
agency were very complex: they covered the preservation of market competition, the protection of the
public service functions of gas supply and distribution, the prohibition of vertical integration among
privately operated utilities, the monitoring of wholesale gas prices, the approval of gas transportation
and distribution tariffs, and the supervision of fiscal subsidies. Analogous regulatory functions are or
should be fulfilled by regulatory agencies in other Latin American countries that implemented similar
gas-industry reforms, notably Chile and Bolivia (Campodonico, 1999).

In the case of Argentina, where structural conditions were favourable to the emergence of a certain
degree of true competition, even taking for granted that ENARGAS would have had a hard time
fulfilling all its multifaceted regulatory obligations, the first stages of gas industry reform appear to
have been relatively well planned and successful. Gas drilling and investment have increased and
supply reliability has improved, while prices have remained competitive (IEA, 1999). However, after
10 years of reform, the gas and electricity industries in Argentina still faced an array of problems,

16 According to an estimate, the loss of load probability in three large Brazilian regions in 2000–2001 was about
12 per cent (Schaeffer and Salem Szklo, 2001:358).
17 Pedro Parente, the minister heading Brazil's energy task force, stated: “The market is not enough to ensure an
increase in the power supply; you need a bigger state role in regulation and supervision” (Financial Times,


typical of privatized energy utilities in developing countries. In the rapidly developing gas sector, the
market was oligopolistic, dominated by a small number of vertically integrated suppliers obtaining
extraordinary benefits. Tariffs increased noticeably in dollar terms, while consumers did not show
strong opposition, as they were largely spared price increases in pesos due to the progressive
overvaluation of the dollar-pegged Argentinian currency (Kozulj, 2000). In the long run, however, this
phenomenon contributed to the development of the present, severe financial crisis. In the electricity
sector, conversely, the degree of competition has been higher, mainly because of the effective vertical
and horizontal de-integration introduced by the reforms. Still, part because of a lack of comprehensive
planning, private operators appear to have over-invested in generating capacity and under-invested in
transportation. By the end of the decade, as in many other countries, long energy breakouts occurred in
Argentina, re-opening the issue of the reliability of supply and of the essential public service function
of electrical utilities (Kozulj, 2000; Pistonesi, 2000).

6. Africa and East Asia: energy sector restructuring under divergent structural conditions

In Africa and Asia the approach to energy sector reforms so far has been less radical than in Latin
America. Most countries have pursued mixed energy regimes that maintain an important role for the
State. Results, however, have been uneven. Apart from the specific features of each country’s unique
experience, a major difference tends to hold between the two developing regions.

In Africa, during the first post-independence period, many countries managed to achieve a certain
development of their power industry, which was starting almost from scratch, under the then-dominant
model of integrated state-owned monopoly. When economic crises erupted in the 1980s, African
energy systems were not immune to the systemic long-run decay that hit the whole of their economic
and social fabric. Public services and the economic functions of the State were particularly affected.
The power industry and its inefficiencies were criticized, and Governments came under strong
pressure on the part of international financial institutions to privatize and liberalize the industry. Most
countries initiated reform plans, but so far few have enacted major changes in their statutory system.
The others are at different stages of the reform process, but they show little enthusiasm and
determination in this endeavour, as it implies serious social and political risks, besides being difficult
to implement from a technical and institutional point of view. Countries are more eager to authorize
foreign private firms to initiate new independent power production and interconnection development
projects (Girod and Percebois, 1998).

In a quite opposite development, East Asian energy systems, which performed rather well in the past,
underwent a “growth crisis” as demand for energy ballooned, fuelled by the very rapid growth of the
economy as a whole, and had to search for additional sources of financing for their ever-increasing
investment needs. East Asian electricity industries, traditionally dominated by vertically integrated
state-owned utilities, are changing into ones in which multiple agents interact in a partially
competitive environment. The ever-increasing need for financing, rather than the perception of
inefficiencies in the public utilities, is the engine of the present restructuring drive. As demand for
energy grows faster than gross national product (GNP), financing needs for power generation increase
almost exponentially,18 pushing Governments to seek additional funds from domestic and international
private sources. Previously existing public monopolies are being opened to private investors. Most
countries are implementing independent power producer (IPP) programmes, encouraging private
operators to develop new power projects. Build-own-operate (BOO), build-own-transfer (BOT), and

18 Because Asia is the fastest-growing region in the world, demand for electricity has been skyrocketing, at a rate
of 10 per cent a year in many countries.


build-transfer-operate (BTO) arrangements are also popular. Thus, there are now several players in the
power-generation business.19 Usually, the public transmission agency buys the privately produced
energy under a power purchase agreement (PPA).20 In a parallel development, power ministries or
authorities are being restructured in a more commercially oriented fashion, and their status is being
changed into that of corporations (e.g. in China, Indonesia and Viet Nam). In some countries (e.g.
Malaysia, Pakistan, the Philippines and Thailand), existing state-owned assets in the electricity
industry have been partially or totally privatized. The reforms require complex regulatory changes in
order to adequately prepare the regulatory regime for the challenges of a pluralistic yet only partially
competitive market, while at the same time preserving the strategic and planning functions of the State
and fulfilling social and public service obligations.21 The experiences with power-industry reforms
carried out in the two most populous developing countries in Asia and in the world, India and China,
are briefly reviewed in the two following sections.

7. India: a decentralized approach to reform of the energy generation sector

India’s coal-dominated power industry developed quickly after independence, with generation
capacity increasing from 1400 megawatts in 1947 to around 90,000 megawatts by the end of the
century (Singh Yadav and Jain, 1999). However, per-capita power consumption in India is still among
the world’s lowest, at 300 kilowatt-hours against 13,000 kilowatt-hours in the United States, with
supply chronically unable to match demand. More than 50 per cent of total energy demand proceeds
from the industrial sector, and the demand is growing steadily, about 5 per cent yearly. Besides the
inevitable growth in energy consumption resulting from the industrialization process itself, energy
demand has increased particularly fast because of the lack of progress in total factor productivity22 in
energy-intensive industries.23

The Indian power industry has traditionally been fully controlled by individual States. By the early
1990s, it was plagued by the conventional problems of monopolistic public utilities in developing
countries – insufficient capitalization and investments, politically determined low tariffs, overstaffing,
suboptimal management – aggravated by interstate rivalries. The main problems were the low share of
(renewable) hydroelectric power in total capacity (in spite of India’s high potential), the skewed tariff
structure that excessively subsidized domestic and agricultural energy consumption, and – partly as a
result of the former – the enormous losses of most State Electricity Boards (SEBs). Reforms fell short
of outright full-scale privatization, offering generous financial incentives to private investors to
contribute to the construction and management of new generation capacities to be sold to the
(monopolistic) State electricity board grids. This strategy, which was geared to mobilize additional
financial resources rather than to improve the efficient use of already existing capacity, was mired in a
contradiction. On the one hand, it was bound to imply considerable financial costs for commercially
produced private power, as government policies permitted producers high depreciation allowances and

19 Transmission tends to remain under exclusive public control.
20 These important developments do not happen overnight. By the late 1990s, only a small fraction of negotiation
processes had led to PPAs (Caruso and Chen, 1997:9).
21 Many countries, for instance, still face a huge task in completing rural electrification.
22 The concept of total factor productivity is controversial in economic theory (see Felipe, 1999). Here it is
mentioned to refer in broad terms to productivity gains attributable not to increases in capital and labour, but
rather to technological and managerial improvements.
23 Taking into account the size of India's industry and thus its present and, a fortiori, future contribution to global
carbon emission, the urgency of improving the energy efficiency both of the power industry and of energy-
intensive industrial subsectors is also of concern for the international community, as it is the case for other large
semi-industrialized developing countries such as Brazil and China (Mongia, Schumacher and Sathaye, 2001). It
may be worth remembering that one of the main reasons the Bush administration in the United States gave for
rejecting the Kyoto covenant on global carbon emission was the lack in that agreement of any specific target for
emissions reductions on the part of developing countries.


indebtedness levels, while private operators, although likely to be more efficient and better placed to
acquire the latest technologies, were generally too small to achieve economies of scale (Ranganathan,
1993). On the other hand, the lack of political determination in imposing financial discipline and
commercial orientation on loss-making SEBs made the risk of financial default on their part quite
high, discouraging potential investors. The reforms fell short also in the areas of institutional and
regulatory capacity and policy coordination, while anxiety about securing international financing did
not contribute to the creation and maintenance of a competitive environment in electricity generation
(Ranganathan, 1996).

In spite of these and other problems, participation in energy generation in India increased during the
1990s. India presently permits a variety of ownership structures, and foreign investment in the energy
sector has been greatly facilitated. In the various States, which had very different problems to begin
with, reforms are at different stages of implementation (Arun and Nixson, 1998).

8. China: institutional and regulatory reforms, commercial orientation, and enhanced

market access for foreign investors

Steady and rapid expansion of the power sector is particularly crucial in China, a very large
developing country with an exceptionally fast pace of industrialization and overall economic growth.
Moreover, the future of the power industry in China is extraordinarily relevant to the outside world
because of the sheer size of the country’s electrical power sector and the opportunities it presents to
foreign investors and suppliers, on the one hand, and the relevance of China in international
endeavours to protect the global environment and reduce carbon dioxide emissions24 in particular, on
the other hand.

The Government of China has traditionally placed a high priority on the development of the power
sector,25 and early on it initiated experiments with innovative public-private ventures. Actually, the
first power project properly developed as a build-own-transfer (BOT) venture in a developing country
was carried out in South China under the initiative of Hopewell Holdings Ltd., a Hong Kong (China)-
based private company (Sullivan, 1990).

In global terms, however, the overall structure of the power sector changed little until the mid-1990s.
China’s coal-dominated power industry was quite decentralized, with Provincial Power Companies
and a number of lower-level entities (more than 10,000) playing important operating roles and
interacting in a complex web of relations. Therefore, it was particularly difficult for the Government to
reform and regulate the overall power system. In practice, rather than formal indirect

24 Until a few years ago, it was commonly forecast that by the year 2020 China would become the first culprit of
this major form of global pollution, bypassing the United States. This event now looks unlikely: according to a
study by the Lawrence Berkeley National Laboratory in California, and to data from the United States
Department of Energy, carbon emissions in China actually declined in absolute terms by 17 per cent in the last
four years, while GNP grew by 36 per cent. This unexpected improvement resulted mainly from drastic cuts in
coal price subsidies and from an array of programs aimed at energy conservation and at curbing urban air
pollution (Eckholm, 2001). However, the magnitude, albeit not a sign of a correspondingly dramatic
improvement in energy efficiency, has been subsequently questioned, and even Chinese official sources
acknowledge the likeliness of statistical inaccuracies. In the long run, anyway, the continuation of the present,
favourable trend cannot be taken for granted, and continuous policy attention by the Government of China and,
indirectly, the international community will be needed to the importance of reducing carbon emissions and other
forms of pollution in the energy sector.
25 Generating capacity increased from 47 GW in 1976 to 250 GW in 1997 (Andrews-Speed and Dow, 2000),
putting China in second place in the world after the United States.


Box 2

FDI in the Chinese power sector

Since the early 1990s, China has progressively increased opportunities for foreign direct investment (FDI) in
electricity generation. China needed FDI mainly because it lacked both the financial resources and the
manufacturing capacity to produce the quantity of generating equipment needed for the projected expansion
of the energy sector. Advantages of FDI, apart from those related to financing, relate to the potential for
improvements in technology, management, and the reduction of pollutant emissions. The Government has
stressed that the improvement of generating efficiency is an utmost policy priority.

Up to the mid-1990s, foreign financing provided about 10 per cent of investment funds in the power sector,
but over 80 per cent came from foreign Governments and multilateral lending institutions. By mid-1998,
24 FDI plants were in operation, and 12 others were in construction, most of them operated by US
companies. Plants in construction tend to be larger than already operational ones, as well as being more
advanced technologically and more evenly distributed geographically, owing to changes in government
policies and investor behaviour (Blackman and Wu, 1999).

FDI in China’s power sector can be carried out in the framework of various institutional arrangements:
cooperative joint ventures, wholly owned foreign ventures, equity joint ventures, BOT and BOO projects,
loans, and stock in existing Chinese enterprises. For foreign investors, cooperative joint ventures constitute a
practical, middle-of-the-road solution, and they tend to be preferred to wholly owned foreign ventures. They
allow investors to retain adequate control over the project, while facilitating political and institutional
alliances with Chinese public entities and access to inputs and foreign exchange. BOT contracts – which can
be joint, cooperative, or wholly owned ventures – are becoming increasingly popular.

The most effective way to improve the institutional climate for FDI is to codify and streamline the approval
process. However, it would be unwise to eliminate it altogether and rely exclusively on market-based
mechanisms such as the competitive bidding procedures, because so far the approval process has allowed a
certain degree of central control, creating strong incentives to improve energy efficiency and to transfer
advanced generating technologies (see Blackman and Wu, 1999; Andrew-Speed and Dow, 2000).

regulation, direct supervision by higher-level government bodies, as well as horizontal and vertical
inter-agency negotiations leading to consensus solutions, were the norms. This system weakened the
ability of the centre to effectively supervise the provinces, and it was not without costs. With respect
to the key task of constructing new generating capacity, in particular, it tended to provoke long delays
in the approval process, or its outright avoidance, while encouraging the construction of small and
inefficient plants to skip the need of approval from the centre.

Increasing awareness of the seriousness of these systemic weaknesses led to a series of reforms, which
culminated in 1996 in the approval of a new Electricity Law that created the State Power Corporation
of China (SPCC) as an entity separate from the Ministry of Electric Power (MOEP). The law was the
first step in a complex reform process, to be seen at its stage as an integral part of the wider
restructuring and overhauling of state-owned enterprises, which in its turn constitutes the core of
industrial reforms.

The main goals of the Government are: to increase the capacity to generate, trade and effectively
deliver power across the whole nation; to attract FDI into the energy sector in order to alleviate the
State’s financial burden in financing ever-increasing investment needs (see box 2); to raise productive
efficiency, reducing costs and passing benefits to the consumer; to improve the energy efficiency of
end users, using increases in average tariffs along with other policy tools; and to reduce the negative


environmental impact of the energy industry, diminishing the presently excessive weight of small
thermal-power generation units.

These goals are being pursued in the context of enhanced – albeit far from exclusive – reliance on the
progressive creation of a properly regulated and competitive market for electrical power. Since the
introduction of market mechanisms inevitably involves significant transitional costs and institutional
hurdles, reformers are trying to promote competition first in the domains of plant construction,
operation and management. Regulation of competitive tendering for plant construction has been
introduced, and competition is in fact strong even when confined purely to publicly owned Chinese
firms. Progress in achieving transparency and competition in operation and management appears to be

The ownership regime in the power industry is undergoing progressive changes, although total
privatization (as in Chile, New Zealand or the United Kingdom) is out of the question. Ownership
rights are reallocated in order to increase the autonomy of power-generating companies, and to create
new local generating enterprises. A certain degree of control, however, remains in the hands of the
State Power Corporation as the ultimate owner of a majority holding in many of these companies.

Policy caution is, however, warranted. If pursued to the end, market-oriented reforms would imply
loss by the State (which in China has traditionally been stronger than in most other developing
countries) of its ability to use the power sector as a policy tool – for instance to control inflation, or to
promote rural electrification, or even to foster technological upgrading. Thus, the treatment of
electricity as a purely commercial service, rather than a public one, would not necessarily bring overall


The energy sector is one of the most strategic ones from a development perspective. Energy utilities,
moreover, are characterized by a public-service component and have traditionally been run as
integrated public monopolies in most countries. Developing and transition countries should strive to
reap the potential benefits of globalization and new technologies, but without underestimating the
risks and problems stemming from market failures, the tendency towards private monopolies, and the
limits of regulatory power (Solanes, 1999). These countries face several policy options in dealing with
their national energy sectors in the ongoing international trade negotiations. On the one hand, the need
to obtain access to financial resources and technologies not available domestically, and, in some cases,
the financial and practical impossibility of maintaining the traditional State monopoly in energy
utilities cannot be ignored. On the other hand, the problems related to outright privatization are being
increasingly recognized both in theory and in practice.

Therefore, Governments in developing and transition countries might find it advisable to adopt a
flexible and multifaceted approach to energy reforms. In their trading relations with international
commercial operators, in particular, they can opt for intermediate institutional arrangements. Some of
these arrangements (e.g. BOT, IPP) are briefly referred to in Chapter II, but it is likely that the
increasing sophistication and flexibility of alternative technological solutions and the accumulation of
legal expertise in a relatively new domain of international trade relations will soon expand the range of
feasible options.


These policy suggestions, drawn from the multifaceted lessons that can be extracted from many
developing countries’ experiences with reforming power utilities regimes, are quite consistent with the
thrust of the debate that took place at UNCTAD’s Expert Meeting on Energy Services in International
Trade (Geneva, July 2001) (UNCTAD, 2001a; UNCTAD, 2001b; Zarrilli, 2003). The background
note prepared by the UNCTAD secretariat recognized, in particular, that

Progressive liberalization of market access conditions for energy services should be pursued,
taking into account differences among countries in their level of development, regulatory
frameworks and market realities. The process of liberalization should be carried out under the
appropriate regulatory framework with a view to ensuring the achievement of national policy
objectives, including public service obligations, and the establishment of fair competition
conditions. Liberalization should not necessarily be equivalent to deregulation. It should entail re-
regulation in order to ensure the attainment of the above-mentioned goals. (UNCTAD, 2001b,
para. 8)

Finally, it is important to remember that the degree of freedom enjoyed by national Governments in
choosing any of these arrangements and in negotiating with transnational corporations is not
independent from the binding liberalization commitments that may be undertaken during present and
future WTO negotiations. This self-evident remark should be interpreted as a plea for particular
caution and vigilance on the part of developing countries’ WTO negotiators in the domain of
international trade in energy services.



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UNCTAD Discussion Papers

No. Date Author(s) Title

167 January 2004 Richard Kozul-Wright and

Robert Rowthorn

Globalization reloaded: an UNCTAD perspective

166 February 2003 Jörg Mayer The fallacy of composition: a review of the

165 November 2002 Yuefen Li China’s accession to WTO: exaggerated fears?

164 November 2002 Lucas Assuncao and
ZhongXiang Zhang

Domestic climate change policies and the WTO

163 November 2002 A.S. Bhalla and S. Qiu China’s WTO accession. Its impact on Chinese

162 July 2002 Peter Nolan and Jin Zhang The challenge of globalization for large Chinese

161 June 2002 Zheng Zhihai and Zhao Yumin

China’s terms of trade in manufactures, 1993–

160 June 2002 S.M. Shafaeddin The impact of China’s accession to WTO on
exports of developing countries

159 May 2002 Jörg Mayer, Arunas
Butkevicius and Ali Kadri

Dynamic products in world exports

158 April 2002 Yõlmaz Akyüz and
Korkut Boratav

The making of the Turkish financial crisis

157 September 2001 Heiner Flassbeck The exchange rate: Economic policy tool or
market price?

156 August 2001 Andrew J. Cornford The Basel Committee’s proposals for revised
capital standards: Mark 2 and the state of play

155 August 2001 Alberto Gabriele Science and technology policies, industrial reform
and technical progress in China: Can socialist
property rights be compatible with technological
catching up?

154 June 2001 Jörg Mayer Technology diffusion, human capital and
economic growth in developing countries

153 December 2000 Mehdi Shafaeddin Free trade or fair trade? Fallacies surrounding the
theories of trade liberalization and protection and
contradictions in international trade rules

152 December 2000 Dilip K. Das Asian crisis: Distilling critical lessons

151 October 2000 Bernard Shull Financial modernization legislation in the United
States – Background and implications

150 August 2000 Jörg Mayer Globalization, technology transfer and skill
accumulation in low-income countries

149 July 2000 Mehdi Shafaeddin What did Frederick List actually say? Some
clarifications on the infant industry argument


148 April 2000 Yõlmaz Akyüz The debate on the international financial

architecture: Reforming the reformers

146 February 2000 Manuel R. Agosin
and Ricardo Mayer

Foreign investment in developing countries: Does
it crowd in domestic investment?

145 January 2000 B. Andersen, Z. Kozul-Wright
and R. Kozul-Wright

Copyrights, competition and development: The
case of the music industry

144 December 1999 Wei Ge The dynamics of export-processing zones

143 November 1999 Yõlmaz Akyüz and
Andrew Cornford

Capital flows to developing countries and the
reform of the international financial system

142 November 1999 Jean-François Outreville Financial development, human capital and political

141 May 1999 Lorenza Jachia
and Ethél Teljeur

Free trade between South Africa and the European
Union – A quantitative analysis

140 February 1999 M. Branchi, G. Gabriele
and V. Spiezia

Traditional agricultural exports, external
dependency and domestic prices policies: African
coffee exports in a comparative perspective

Copies of UNCTAD Discussion Papers may be obtained from the Publications Assistant, Macroeconomic and
Development Policies Branch, GDS, UNCTAD, Palais des Nations, CH-1211 Geneva 10, Switzerland
(Fax: 022 907.0274; Email: MDPB-Ed.Assistant@unctad.org). New Discussion Papers are accessible on
website http://www.unctad.org.