This report is commissioned by the Asian Development Bank (ADB) to identify and recommend the best practices to be followed by developing member countries to encourage both private sector investment and competition in infrastructure development. This particular report focuses on the water sector. Water is an important resource that is essential for human existence. An efficient and competitive water sector reduces water losses and improves the quality of water supply. The report examines the features of water supply, the need and options for private sector participation, and the institutional structures and incentives. It also recommends framework for moving to private sector participation in water supply. It is hoped that the report will help ADB’s developing member countries attract well managed and cost-effective private investment in the water sector.