h production costs, which make it more difficult to eliminate subsidies. The cost of producing electricity in many developing countries is higher than in the OECD area, usually because of low plant efficiency (because of poorly maintained equipment), poor fuel quality, high network losses (because of poor technical performance or theft), high capital costs (because of non-competitive and non-transparent purchases of equipment), high unit transmission and distribution costs (because of low consumption density) and high operating costs (because of poor management and low productivity). Exchange rates also adversely affect a utility's costs when loan servicing and purchases of fuel and equipment have to be made in a foreign currency. Many utilities have accumulated large debts and incur heavy interest charges, which increase their overall costs. The 1990s saw an increasing number of countries turning to the private sector for part of the investment needed to finance the electricity sector. That trend is set to continue, because of the limited availability of public funds - as the call on government budgets for other forms of spending such as education and welfare increases - and rising electricity investment needs. Governments are also increasingly looking to expand the role of the private sector as a way of improving INFRASTRUCTURE TO 2030: TELECOM, LAND TRANSPORT, WATER AND ELECTRICITY - ISBN 92-64-02398-4 © OECD 2006 3. OUTLOOK FOR GLOBAL INVESTMENT IN ELECTRICITY INFRASTRUCTURE economic efficiency. Yet, obtaining adequate private sector funding will be difficult (see next section). The private sector, while in principle welcoming business opportunities in rapidly growing developing economies, will invest only if it perceives a sufficiently stable and attractive legal framework, and if it can expect returns high enough to compensate for the risks. While most investment in the developing world is carried out by public utilities or by independent power projects, another source has been direct investment by private 