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This World Bank and PPIAF funded water toolkit discusses the main advantages and disadvantages of using private firms to help expand access to safe water and sanitation services at a reasonable cost. The toolkit aims to provide advisers and policy makers the information they need to make a decision, while taking into account local circumstances and the policy maker’s objectives. The focus of the toolkit is on arrangements that involve a private firm in the delivery of services to households and businesses, including management contracts, leases, affermages, concessions and divestitures.
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A series of peer-reviewed discussion papers that present knowledge and best practices of the World Bank. Topics include urban water supply and willingness to pay in Kenya, utilizing risk mitigation instruments to finance water supply, water reform in Latin America in the 1990s, and how the application of franchising principles might help improve water supply and sanitation.
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WaterAid has produced a series of reports on private sector participation in water and sanitation. Among the documents available at this Web site are case study reports on the water sectors of Uganda, Mexico, Manila and Kathmandu. The site also features an advocacy guide for private sector involvement in water services.
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This document provides guidance to governments for commissioning and executing technical assistance in the water and sanitation sectors. The areas of reform identified for pro-poor transactions include the design of flexible, legal and contractual frameworks. Recommendations are offered for designing pro-poor tariffs and targeted subsidies, with a focus on subsidizing access (e.g. water connections) over consumption. The publication also addresses the importance of timing the reform process so as to properly coordinate information collection, consultation and stakeholder engagement. (PDF, 892KB)
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This paper provides two case studies of private sector participation (PSP) in water and wastewater services. The case studies have been presented in an attempt to portray an objective summary of the facts related to the two cases, in hope that the reader will be able to draw their own conclusions. The focus of the paper is the regulation of PSP arrangements and the important and complicated interplay between formal institutions and informal influences. (PDF, 215KB)
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This paper analyzes the reform of the Senegalese water sector that led to the signing of an affermage contract and the establishment of an asset-holding company, deemed to be successful overall. Detailed aspects of the contract are reviewed, including provisions for gradually moving to cost-recovery using a financial model for the sector, the remuneration formula based on performance and the pro-poor features of the contract. (PDF, 329KB)
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This case study describes the 20-year concession contract concluded in 1997 with a private company, involving both water and electricity service for Gabon. The contract is mainly output-driven, with an emphasis on expansion of coverage to small towns and rural areas. The study discusses some of the possible advantages of the multi-utility arrangement. It is part of a broader review of emerging lessons for private provision of infrastructure in rural areas, which also includes a case study of water services in Senegal and Ivory Coast, and a comparison across infrastructure sectors. (PDF, 1.6MB)
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In 1997, twin concession contracts were awarded for water and sanitation services in Manila, the Philippines. This paper focuses on decisions leading to the privatization of MWSS, the required reduction in the labor force, and financing the cost of advisers. This paper presents a unique government view of the details and challenges of the concession process, and identifies best practices, such as sustained high-level political commitment, a strong government team supported by experienced advisors, a transparent bidding process, and broad-based consultation. (PDF, 6.01MB)
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Private sector participation in water and sanitation goes back a long way in Africa, starting with SODECI in Cote ? Ivoire in the early 1960s. This paper draws out the lessons of this combined experience, setting out a road-map for sector reform and examining why the enhanced lease/affermage model appears to be the model of choice in the continent. A second volume presents a series of case studies linked to a roadmap. (PDF, 401KB)
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Market Structure and Competition
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This paper summarizes the key findings and conclusions of a literature review of small-scale private service providers (SPSPs) of water supply and electricity. These providers are most common in countries with low coverage levels, ineffective public utilities that provide inadequate or partial services, and remote, difficult-to-access regions. They are especially prevalent in post-conflict countries and others with weak or failed states. The majority of small-scale private service providers have fewer than 50 employees and are constrained by a lack of affordable financing. (PDF, 596KB)
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Small-scale water service providers play an essential role in extending access to water and sanitation services to the underserved. This paper reviews the role of small-scale providers in the water sector in Paraguay, Argentina, Colombia, Guatemala, Peru, and Bolivia. It emphasizes that sector practitioners should remain open to options that increase access to water supply services to all consumers. Working with private, small-scale providers is offered as an effective way to accomplish this. (PDF, 1.93MB)
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This paper argues that a few myths prevent expanding access to the urban poor. On a wide range of topics, including access, service levels, tariff design and regulation, this paper conveys strong and clearly expressed messages for carrying out comprehensive sector reform. The role of small-scale providers is emphasized, as opposed to that of the international private sector, which is seen as limiting competition. Based on ample evidence in Asia that can be used for benchmarking, those messages are widely applicable. (PDF, 5.28MB)
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Service Levels and Access
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This study investigates issues related to the aggregation of small and medium-size towns for the provision of water supply and sanitation services. Seven case studies are presented from: Brazil, England, France, Hungary, Italy, the Netherlands, and the Philippines. The main driver for aggregation is usually the potential to realize economies of scale by providing services to a larger customer base and therefore to render services more efficiently and at a lower cost. Aggregation tends to fail if political will is lacking, the potential benefits are not clearly understood, or the aggregation process is perceived as being too complex. (PDF, 1.08MB)
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This paper draws on best practices from Sub-Saharan Africa and around the world in suitable service levels for rapidly expanding access to water and sanitation. The paper identifies private connections as the service level of choice, but also recommends ways of improving standpipe supplies. It reviews ways of reducing the costs of private and standpipe connections and offering flexible payment methods. (PDF, 1.76MB)
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The BPD Water and Sanitation Cluster focuses on improving access to safe water and effective sanitation for the urban poor in developing countries by mobilizing private sector initiatives. This Web site provides information on its broad approach and examines developing country focus projects in Africa, Latin America, the Caribbean and East Asia. Of particular interest are papers on ways to improve cost recovery and on making regulation better suited to the needs of the poor via the establishment of tri-sector partnerships.
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Since 1998, the Water and Sanitation Program has been engaged in an initiative to document the role of independent providers in water and sanitation service delivery, in order to understand who they are, what range of services they offer, and the key factors for their successful operation. This web site provides background information on the initiative and access to related publications and videos.
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Tariff, Subsidies and External Financing
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Average water tariffs in low-income countries stand at about a tenth of the level applied in high-income countries. This book brings together empirical evidence on consumer subsidies for water and electricity across a wide range of countries. It documents the prevalence of consumer subsidies, provides a typology of the many variants found in the developing world, and presents a number of indicators useful in assessing the degree to which such subsidies benefit the poor, focusing on three key concepts: beneficiary incidence, benefit incidence, and materiality. The authors find that geographic targeting and means testing are much more effective consumer subsidies than quantity targeting when it comes to reaching the poor.
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Water pricing, and the subsidies which are often delivered through water tariffs, can be a source of major inefficiencies and are a frequent target of reformers. From the viewpoint of the poor, tariff structure can be as important as tariff level. This paper examines the tariff structure and billing patterns in six large South Asian cities and finds that poorly designed tariff structures have resulted in ineffective targeting. In some cases, the poor wind up paying even more for water than their richer neighbors do. (PDF, 467KB)
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This landmark paper formulates nearly 50 practical recommendations for increasing financing to the water sector to meet the Millennium Development Goals. Stressing the need to attract private investment, it suggests ways to better allocate risks among stakeholders, with new tools such as a proposed Devaluation Liquidity Backstopping Facility. An executive summary is also available. (PDF, 235KB)
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This paper contains a practical and detailed description of the tools that can be used to meet the financing challenge of the water sector, including tariff reform, the design of targeted subsidies, special funds for channelling external subsidies and leveraging private sector finance. The need for strong regulation to improve financing is emphasized.
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The Water and Sanitation Program has an active publications program on issues in improving services to the urban and rural poor. This page lists publications on demand and willingness to pay, many based on case studies, particularly in South Asia. A series of papers on tariff and subsidy design provide an excellent framework for analysis, starting with tariff design principles to the examination of how subsidies could be better targeted.
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This Web site contains presentations from a seminar on water pricing experiences of the World Bank and the European Union, in the context of implementing the Water Framework Directive in Europe. Of particular interest is the presentation by the Office of Water Services (Ofwat) of England and Wales on methods of regulation, and by Jan Janssens on principles for tariff design.
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Where water tariffs have historically been well below costs, raising tariffs to a level that makes service provision financially viable poses a major political challenge. In the late 1980s the World Bank began supporting a pioneering contract for a private operator to deliver water services to urban consumers in Guinea. An International Development Association (IDA) credit subsidized a declining portion of the operator's supply costs for the first six years of the contract, during which time the water tariff was raised until it recovered costs. The subsidy jump-started the move toward cost recovery and more sustainable water service. (PDF, 95KB)
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Ongoing Regulation and Benchmarking
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This data book presents the results of the benchmarking program financed by the Asian Development Bank and undertaken by the Southeast Asia Water Utilities Network. The book includes an analysis and profiles of the 47 water utilities in Thailand, Laos, Cambodia, Malaysia, Indonesia, the Philippines, and Vietnam that participated in the benchmarking program. (PDF, 5.62MB)
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Though official records show an increase in access to infrastructure in South Asia, access to reliable, sustainable, and affordable water and sanitation services remains poor. The poor quality of urban water services is due largely to inefficient and financially weak service providers whose performance on important parameters falls significantly short of internationally accepted best practices. Limited availability of reliable performance information across the region presents a significant challenge to any performance improvement and institutional reform. (PDF, 1.78MB)
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This paper explores the potential for contracting out utility regulation to external parties. It is based on case studies in the water sector, including binding determination of performance payment in the Gaza management contract, arbitration panels in Chile and the explicit provision of external experts for an access study in Gabon. An online discussion on the paper’s findings is also available along with links to other related articles. (PDF, 1.33MB)
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This Web site gathers resources relating to benchmarking the performance of water and sanitation utilities. Of particular interest is a toolkit that enables the user to compare the performance of a given utility with others in the data set for a number of key indicators. An accompanying paper provides an analysis of the dataset for developed and developing countries.
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Papers
Web Sites
Case Studies