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Water & Sanitation

Clean, accessible water for all is an essential part of the world we want to live in. Today at least 663 million people lack access to safe drinking water and 2.4 billion lack access to improved sanitation, such as a toilet or latrine. By 2050, at least one in four people is likely to live in a country affected by chronic or recurring shortages of fresh water.

Improving the way we conserve, manage, and deliver water is fundamental to solving this water crisis and achieving universal and equitable access to water and sanitation services. Effectively addressing these challenges will require that the skills and resources of both public and private sectors be brought to bear.

While evidence shows that public-private partnerships (PPPs) can and do deliver improved services, introducing 24/7 supply and improving utility performance, water is a challenging sector to introduce private participation.  Entrenched ideologies, can make water PPPs a very tough sell to government and public alike. The water sector lags behind other infrastructure sectors in private sector participation. Over the last 10 years, there were 545 water projects involving private participation in emerging markets, less than a third of the number of energy projects over the same period. Investment in these same projects represent only six percent of investment in the energy sector.

Despite the relatively low participation of the private sector, there has been innovation in the past 10 years: new private parties are emerging, with local and regional players in both the rural and urban sub-sectors, and there are three areas in which PPPs have showed significant promise in the water sector. 

Sub-sectors

  • Irrigation

    Over the last 50 years, the irrigation and drainage sector has played a vital role in food production, rural economies and in meeting the world’s fast-rising demand for food. But with population growth and water becoming an increasingly scarce resource, irrigated agriculture will need to continue to rapidly expand and become more productive and efficient to produce ‘more crop per drop’. Yet irrigation and drainage systems have seen a decline in investment since the 1980s and schemes...

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  • Small-Scale Water & Sanitation

    Across the developing world, millions of people rely on the private sector for their daily water and sanitation needs. In the majority of cases, the providers of these essential services are not the large multinational corporations often associated with private participation in the water sector. They are local entrepreneurs operating on a small scale, who see selling water and sanitation services to the poor as market opportunities like any other.

    These “base-of-the-pyramid” markets...

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  • Urban Water & Sanitation

    The world’s towns and cities are growing rapidly. By 2050, 70 per cent of the world’s population, some 6.4 billion people, are expected to live in towns and cities, almost doubling the current urban population. Water utilities struggle to keep pace with this rapid urbanization with urban utility water coverage in many low and middle income countries declining in recent years as they fail to keep pace with growth. Governments and utilities face the constant challenge of balancing the...

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Issues

  • PPPs as part of, and not a substitute for, sector reform

    There are often underlying issues that prevent customers receiving water and sanitation services that require structural reform of the sector, and often these issues go far beyond the mechanism of delivery of the service, whether public or...

    There are often underlying issues that prevent customers receiving water and sanitation services that require structural reform of the sector, and often these issues go far beyond the mechanism of delivery of the service, whether public or private. For example, if governments are unwilling to reform tariff structure or finance investment, engaging the private sector without addressing these issues is setting a PPP up for failure.

    Many governments have reformed their utilities without private participation through restructuring, technical assistance, appointment of new board members and managers, development-agency assistance, and so forth. However, engaging a private firm and giving it defined responsibilities for the provision of water services, can offer governments a wider range of reform options.

    A private operator may be able to bring ideas and systems that have proven successful in other utilities. This can speed up improvements in a utility. But perhaps the greatest value of engaging a private firm can be in transforming decision-making and accountability by better aligning the interests of all parties, government and private, with the public interest. PPPs can also help introduce market economics mechanisms into this monopolistic sector, bringing in competition and transparency and ensuring accountability for results. 

  • Understanding risk and opportunities/getting the basics right

    When considering PPPs in the water sector, regardless of the scale or the services being delivered a number of overarching issues and principles apply. Often the cause of PPPs falling short of expectations can be found in a lack of understanding...

    When considering PPPs in the water sector, regardless of the scale or the services being delivered a number of overarching issues and principles apply. Often the cause of PPPs falling short of expectations can be found in a lack of understanding of the risks and opportunities involved in a complex sector, as well as inadequate institutional frameworks. Policy makers need to ensure clarity of the ultimate objective of a project and the contribution the private sector can realistically make to meet that objective. This needs to be coupled with high-quality oversight and commitment from the public sector, strong accountability mechanisms and, clear and consistent contractual arrangements if a PPP is to succeed in delivering sustainable services in the long term.  

  • Regulation

    Water is a natural monopoly due to the capital intensive nature of the sector, if customers are unhappy with the quality or cost of service they cannot turn to a different provider. Therefore regulation, whether through an independent regulator...

    Water is a natural monopoly due to the capital intensive nature of the sector, if customers are unhappy with the quality or cost of service they cannot turn to a different provider. Therefore regulation, whether through an independent regulator or through contractual agreement, is required to compensate for lack of competition and to ensure good service at a reasonable tariff.  

  • Tariffs

    Political pressure in tariff setting can result in undervaluing the cost of (even efficient) production and distribution of clean water and can trap a service provider in a vicious cycle of under investment and poor quality of service. As there...

    Political pressure in tariff setting can result in undervaluing the cost of (even efficient) production and distribution of clean water and can trap a service provider in a vicious cycle of under investment and poor quality of service. As there are only three basic sources for finance i.e. tariffs, taxes and transfers (commonly referred to as the “3Ts”), the burden of lack of appropriate tariff setting often falls on national government or development assistance.

  • Serving the poor

    Two main criticisms that are often leveled at private participation in the water sector is that the cost of water to customers will rise, affecting poor customers the worst, and that the private sector will have no interest. Experience and...

    Two main criticisms that are often leveled at private participation in the water sector is that the cost of water to customers will rise, affecting poor customers the worst, and that the private sector will have no interest. Experience and evidence shows that poor households are disproportionately impacted by lack of access to safe drinking water. In urban areas those living in low-income, informal or illegal settlements tend to have lower levels of access to an improved water supply and pay a far higher price for their water.

    Again it is a question of getting the incentives right and a number of countries have employed pro-poor policies, tariff structures and setting contractual service coverage targets to increase affordable access to the poor, such incentives have been used in countries as diverse as the Philippines  and Cameroon .  The private sector will deliver to the poor if it is obliged and incentivised to do so.

Resources

    • 2009
    • Organisation for Economic Co-operation and Development (OECD)

    Private Sector Participation in Water Infrastructure

    OECD Checklist for Public Action

    This book provides a set of guidance, building on the OECD Principles for Private Sector Participation in Infrastructure, to inform decision makers on some of the prerequisites when considering private sector participation in the water sector.

    • 2009
    • Philippe Marin
    • PPIAF, World Bank Group (WBG)

    Public-Private Partnerships for Urban Water Utilities

    A Review of Experiences in Developing Countries

    This study reviews the performance of PPP projects in urban water utilities in developing countries over a 15 year period and seeks to respond to the questions of whether and how they have helped to improve services and to expand access for the populations concerned.

    • 2011
    • Organisation for Economic Co-operation and Development (OECD)

    Meeting the Challenge of Financing Water and Sanitation

    Tools and Approaches - OECD Studies on Water

    This document sets out the key challenges of financing global the water and sanitation needs and outlines tools and approaches the best mobilize the three basic sources of funding for the sector (3Ts - tariffs, taxes and transfers) and methods of financing, including market-based financing to ensure sustainable cost recover for the sector

    • 2014
    • Jemima Sy and Robert Warner, with Jane Jamieson
    • World Bank Group (WBG)

    Tapping the Markets

    Opportunities for Domestic Investments in Water and Sanitation for the Poor

    This book examines private sector provision of piped water services and on-site sanitation services in rural areas and small towns drawing lessons for policy makers on the potential role of private sector participation in this sector.

    • 2006
    • PPIAF

    Approaches to Private Participation in Water Services: A Toolkit

    This toolkit assists developing country governments that are interested in using private firms to help expand access to safe water and sanitation services at reasonable cost.

    • 2009
    • Water Resources Group

    Charting Our Water Future

    Economic Frameworks to Inform Decision-Making

    This report focuses on how, by 2030, competing demands for scarce water resources can be met and sustained and examines the cost implications of action. The report discusses the role that both policy makers and the private sector can play in addressing these challenges.

    • 2009
    • World Bank Group (WBG)

    Output-Based Aid in the Philippines

    Improved Access to Water Services for Poor Households in Metro Manila

    A project brief on the Metro Manila water project that aims to provide access to water services through individual household connections to several low-income communities in Rizal province (Antipolo City, Baras, Rodriguez, and San Mateo) and Taguig City in the Manila Metropolitan Region through a collaboration with the concessionaire for Manila’s east zone, the Manila Water Company (MWC). The GPOBA intervention supports Manila Water’s flagship program, launched in 1998, the Water for the Community” or Tubig Para sa Barangay (TPSB) program, which provides a regular supply of clean, safe, and affordable drinking water to the urban poor. The scheme builds on the successful track record of the TPSB program and seeks to speed up rollout of...

    • 2010
    • World Bank Group (WBG)

    Subsidizing Water Connections in Cameroon

    How to Apply Output-Based Aid to an Affermage

    A project brief on the Cameroon water connection scheme, the first GPOBA project to be implemented under an affermage contract. It is also the first subsidized water connection program in West Africa to be implemented through an output-based aid (OBA) mechanism.This note highlights the emerging lessons learned from the design of the project, summarizing the challenges and opportunities in applying OBA to the affermage model and how they were dealt with. A second note will share lessons from the project’s implementation.

    • 2014
    • World Health Organization (WHO), UNICEF

    Progress on Drinking Water and Sanitation

    2014 Update

    This report presents a comprehensive overview of access to water and sanitation in developing countries.

    • 2006
    • Eric Groom, Jonathan Halpern, and David Ehrhardt
    • PPIAF

    Explanatory Notes on Key Topics in the Regulation of Water and Sanitation Services

    This series of notes gives a succinct summary of economic regulation in the sector, in particular Note 4 covers regulation and private participation contracts and Note 5 deals with the issue or regulation and tariffs.

For legal and regulatory resources go toPPPIRC

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