The water sector has certain intrinsic characteristics: natural monopolies, inelasticity of customer water demand, economies of scale, large sunk investments in networks and infrastructure, local scale of service delivery, externalities on health and environment, etc. These imply a low degree of competition, few international players and therefore high risks of abuse of dominant positions, hence the need for a strong regulator to balance the interests of all parties and prevent opportunistic behaviour. That means protecting consumers from private sector abuses, protecting the private sector from politically-driven decisions, enabling the public sector to carry out longterm policy objectives, seeking outcomes consistent with those from competitive markets and guaranteeing sufficient flexibility in contracts, regulations and standards to adapt the form of service delivery.