http://www.adb.org/Documents/ERD/Working_Papers/Wp115.pdf

Herath Gunatilake and Mary Jane F. Carangal–San Jose use the framework of nonmarket failures to explainy why public sector provision of water supply and sanitation is prone to failures. Lessons from private sector participation (PSP) show that the limited success of PSPs is attributed to prevalance of strong demand and willingness to pay, effective regulation, good governance and contract enforcement, and innovative measures to create competition. Therefore, a reasonably well-functioning public sector is a precondition for the success of PSPs.