Infrastructure can deliver major benefits in economic growth, poverty alleviation, and environmental sustainability but only when it provides services that respond to effective demand and does so efficiently. Service is the goal and the measure of development in infrastructure. Major investments have been made in infrastructure stocks, but in too many developing countries these assets are not generating the quantity or the quality of services as demanded. The costs of this waste-in foregone economic growth and lost opportunities for poverty reduction and environmental improvement-are high and unacceptable. The causes of the past poor performance, and the source of improved performance, lie in the incentives facing providers. To ensure efficient, responsive delivery of infrastructure services, incentives need to be changed through the application of three instruments-commercial management, competition and stakeholder involvement. The roles of government and the private sector must be transformed as well. Technological innovations and experiments with alternative ways of providing infrastructure indicate the following principles for reform: manage infrastructure like business, not a bureaucracy. The provision of infrastructure needs to be conceived and run as a service industry that responds to customer demand. Poor performers typically have a confusion of objectives, little financial autonomy or financial discipline, and no ‘bottom line’ measured by the customer satisfaction. The high willingness to pay for most infrastructureservices, even by the poor, provides greater opportunity for user charges. Private sector involvement in management, financing or ownership. will, in most cases, be needed to ensure a commercial orientation in infrastructure. Introduce competition-directly if feasible, indirectly if not. Competition gives consumers choices for better meeting their demands and puts pressure on suppliers to be efficient and accountable to users. Competition can be introduced directly, by liberalizing entry into activities that have no technological barriers, and indirectly, through competitive bidding for the right to provide exclusive service where natural monopoly conditions exist and by liberalizing the supply of service substitutes. Give users and other stakeholders a strong voice and real responsibility where infrastructure activities involve important external effects, for good or bad or where market discipline is insufficient to ensure accountability to users and other affected groups, governments need to address their concerns through other means. Users and other stakeholders should be represented in the planning and regulation of infrastructure service. In some cases, they should take major initiatives in design, operation and financing. Public-private partnerships in financing have promise. Private sector involvement in the financing of new capacity is growing. The lessons of this experience are that the governments should start with simpler projects and gain experience, investors returns should be linked to project performance, and any government guarantees if needed should be carefully scrutinized. Governments will have a continuing, if changed, role in infrastructure. In addition to taking steps to improve the performance of infrastructure provision under their direct control, governments are responsible for creating policy and regulatory frameworks that safeguard the interests of the poor, improve environmental conditions, and coordinate cross-sectoral interactions-whether services are produced by public or private providers. The government is also responsible for developing legal and regulatory framework to support private involvement in the provision of infrastructure services.