Small Private Sector Providers in Water Supply and Sanitation an overview and some experiences from the World Bank and WSP

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1 Small Private Sector Providers in Water Supply and Sanitation an overview and some experiences from the World Bank and WSP Meike van Ginneken Sr. Water and Sanitation Specialist, World Bank With thanks to Ede Ijjasz & Ella Lazarte (WSP) & Mukami Kariuki (World Bank) OECD Global Forum on Sustainable Development Paris - November 29-30, 2006

2 Overview Why bother? What kind of SPSPs are where? What good practices do the World Bank & WSP have working with SPSPs? What are the policy implications of what we have learned?

3 Water PPPs by country income categories Water projects with private participation by income group, Projects Low income Upper middle income China Low er middle income

4 The context: Service levels Urban water supply by type of service by region source: Global Water Supply and Sanitation Assessment 2000 Report

5 Many with house connection still require small providers: India as an example Accessibility to Water Supply in India: In % of the population had access to a piped water supply Water availability is at average of 2.9 hours per day Connections with 24/7 service in Delhi is 1% (compare to 90% in Jakarta, 88% in Manila, 60% in Colombo) Source: Bridging the Gap between Infrastructure and Service, World Bank 2006

6 The water market in an African city

7 Why focus on SPSPs? The ultimate goal - a household connection for all - depends on much more than service expansion. What to do in the meantime or in the long term? Ignoring the problem has not made it go away in some countries coverage/access has declined. Is the best the enemy of the good? Put all the cards on the table you can only regulate it once you recognize it Work with what you have - for the unserved or underserved the gaps is being filled by self provision or SPSPs. Reaching the MDGs through SPSPs?

8 But there is a lot to do.. Price of Water by Type of Service Provider US$ per Cubic Meter $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Public Public Utilities Private Private Networks Piped Point-source Vendors Unitized Tanker Trucks Carters Kariuki, et al, Small-Scale Private Service Providers of Water Supply and Electricity A Review of Incidence, Structure, Pricing and Operating Characteristics, 2004

9 Overview Why bother? What kind of SPSPs are where? What good practices do the World Bank & WSP have working with SPSPs? What are the policy implications of what we have learned?

10 Typology of SPSPs Groundwater/surface water Utility Dependent SPSPs 1.Piped network operator 2.Point source 3.Mobile distributor Independent SPSPs 4. Piped network operator 5. Point source 6. Mobile distributor Consumers

11 SPSP Typology main policy issues Dependent Bulk price from utility? tariff structure/pricing, Ownership of assets - laid at operators cost? Hold contract/licence? regulation by utility Quality of water at point of sale (utility) Authority to connect new customers utility or operator Independent Exclusivity/Monopoly what regulation, who monitors? Develop own source groundwater abstraction permit? Licensed to sell? authority to connect new customers Quality of water testing frequency, monitoring

12 Estimated SPSP Coverage Percentage of households relying on SPSPs Source:Kariuki et al., 2004

13 WSS Coverage Levels and SPSP Activity Source:Kariuki et al., 2004

14 Additional characteristics Motivation? for profit or non-profit, own use (community) or business Organisational form? -cooperatives, self help groups, company, sole proprieter, family business Legal status? license, permit, contract with utility, registration with chamber of commerce Financing? savings, family, commercial bank, loan shark, member fees, customers, micro-credit

15 Overview Why bother? What kind of SPSPs are where? What good practices do the World Bank & WSP have working with SPSPs? What are the policy implications of what we have learned?

16 good practices from the World Bank & WSP Fostering subdelegation from utilities to SPSPs Kisumu, Kenya; Medellin, Colombia; Manila, Philippines SPSPs for construction & operation of sanitation facilities Ulaanbatur, Mongolia; Mumbai, India Fitting SPSPs in longer term sector policies Paraguay Using consumer surveys to inform reform choices Sri Lanka Fostering SPSP associations

17 Subdelegated management models in Kisumu, Kenya Water Services Coverage Nyalenda

18 Existing situation in Kisumu, Kenya Spaghetti Network Water contamination risks Metered Connections Illegal Connections Unaccounted for Water

19 Situation after project in Kisumu, Kenya 600m Secondary branch Private master operator Utility network Bulk supply, metered Household Meter Chambers Focus on interface between SPSP & utility: Utility sells bulk water to a community private operator The selected operator acts as agent for utility Performance-based contract Profit-making social enterprise Reduced tariffs/fees

20 Initial results include increased access to water and decreased prices Estimated 2,000 people served by the new operators Monthly consumption is high at 30 cubic meters due to HH reselling Fees have been reduced significantly Household meter rents Household meter deposit Connection fees Cost of water to end consumer Old charges or 1.41/cu.m New Charges or.92/cu.m in US$ (1USD=71KES) Project developed jointly by WSP and AFD, in support of 20M infrastructure project

21 Key lessons emerge for scaling up the model in Kenya and rest of Africa Institutional: financial and technical support to operators Increase confidence among stakeholders: utility-master operatorcommunity Marketing and (utility) communication strategy crucial Encourage prepayments from community to minimize risk

22 The Contratación Social Program of Medellin public utility Model: Institutional: direct relationship between utilitycommunity - contract managed by newly-formed local organization that is run like a firm Social: intensive capacity building Financial: partly financed by the municipality s Social Funds Results (after 5 years): Approximately 41,400 users in five years 149 Contracts with community organizations Total investment from : USD11.4 M 16,900 hours of training to the communities 6,900 jobs with an average duration of four months Source: WSP-LAC Seven Cities Project

23 10 years of experience in subdelegation in Manila 1997: two concession contracts signed for Manila metropolitan area 2005: 80% piped network coverage (12 million people) Since 1997, 1.1 million reached through sub networks (third party provision) 2005 survey of 183 small providers and 271 of their customers in 5 locations within Manila: 60% had access to piped water supply (38% of these rely on utility network); 6% neighbors; 7% deep wells Prices are 1.4% - 6.2% higher (compared to 10-20% in literature) Prices have fallen since 1997 (tankers from $4/m3 to $2/m3) Small piped networks offer lowest price Water reselling business is on the rise - treated (bottled) water Most small providers licensed 58-68% SPSPs feel they ll still be operating in 5 years Source: World Bank/BNWP report, forthcoming

24 World Bank support to water and sanitation SPSPs in Ulaanbatar, Mongolia Ulaanbaatar Services Improvement Project ( ) resulted in more reliable water supply services to about 140,000 people by connecting water kiosks to the network Second project (from 2004) broaden approach to sanitation: Social assessment showed on-site sanitation is very high on the list of priorities for residents in the Ger areas World Bank sponsored city wide sanitation plan based on stakeholder consultation (a novelty) Now pilot in some Ger areas: support to create enabling environment for scaling-up of implementation of low cost sanitation by community groups Source: World Bank, 2006a

25 Going to scale in Mumbai, India: CBO operated community toilet blocks 55% of Mumbai 14M population lives in slums IBRD/IDA $192 million Bombay Sewage Disposal Project ( ) with 6% to Slum Sanitation component provided sanitation services for 400K slum dwellers Model: municipality provide capital to build blocks, community groups pay for O&M Community Based Organizations (CBOs) were created; Municipality issues a building permit after 50% of the community contribution collected and sound plan endorsed by the community MOU municipality - CBO as service provider: defines standards CBOs can decide: direct user involvement or use private operator Most of the CBO are performing well, raising enough funds within their communities to efficiently manage the toilet blocks Source: World Bank, 2006b

26 Paraguay: how to fit SPSPs into longer term sector strategy Traditionally strong presence: 400 aguateros serving 30% of population World Bank Project in rural & town WSS support transformation of SPSPs to formalized operators Aim to attract private sector managers aguateros, others Competition for small settlements, simplify bidding process/contracts provide financing - output based aid Urban areas: 2000 law ensures that small systems can be integrated in normal grid SPSPs get 10 year license from regulator; at end of license period, state can appropriate infrastructure to include in grid SPSP tariffs are regulated Idea is to provide SPSPs clear framework: Jury still out Source: World Bank/BNWP report, forthcoming

27 Sri Lanka: how consumer surveys can inform reform choices 2003: Government planned PSP in Negombo and Kalutra-Galle study of 1,800 households to inform the design of the transaction Key findings from the study: 60% of poor households rely on wells; 28% on private connection Poor use unsafe sources but treat water, quality not judged a problem Poor do not consume significantly less due to free groundwater source Diversity among the poor necessitates service differentiation Uptake rate (willingness to connect) with connection fee: 50% overall, 27-32% among poor) instead of 95% assumed Without connection fee: 70% uptake among poor Conclusion: Access to and use of alternative to piped water as well as household perceptions and attitudes are critical in determining whether a household will connect to the network Source: Van Den Berg, 2005

28 SPSP associations can play an important role: mutual support, voice to govts, utilities & donors Association of standpost operators in Ouagadougou, BF Provides small grants to its members who are celebrating a wedding or baptism Extends credit to members who temporarily cannot pay their water bill Will help members deal with troublesome clients Organizes members participation in city-wide events Association of tanker drivers in Kathmandu, Nepal first created to help members confront police harassment also supported members involved in accidents assisted tankers to get registered Tried to install a shared borehole and treatment plant but this failed and led to the association dissolving Association of 150 SPSPs in Bandung, Indonesia fee varies according to size association revenues are used to improve road conditions and traffic control ; support members emergency medical care or suffer work-related accidents related accidents; and support community events Source: World Bank/BNWP report, forthcoming

29 Overview Why bother? What kind of SPSPs are where? What good practices do the World Bank & WSP have working with SPSPs? What are the policy implications of what we have learned?

30 Policy implications: Understand the market and consumers preferences Review existing service delivery arrangements What sources do the poor currently use are they likely to move from existing sources to utility service Who provides them with WSS services is the utility well placed to offer better services How well are these services being provided drinking water quality is a priority for poor Assess customer preferences What are they willling to pay for an improved service both consumption and connection What is the nature of improvements they seek (if any) - affordability, volume, service level, reliability, in house facilities utility expansion may not be the logical next step!

31 Policy implications: Understand the utility s supply constraints Review the primary utilities plans and constraints what is a realistic timeframe for meeting the goal of universal piped water supply? Expansion plans need to increase production capacity, extend distribution network Performance with respect to improving cost recovery, revenue generation, achieving 24/7 service, reducing NRW External constraints slum policy, land tenure, subsidy policy, etc., - and options for sidestepping them Financial implications for accelerating service coverage who will pay for expansion

32 Policy implications: Understanding small scale service providers Third party provision can be a useful means of scaling up services As a short to medium strategy, plan for and involve existing service providers, but find ways to improve their efficiency to the benefit of customers Distinguish between various providers: Independent/dependent Motivation? for profit or non-profit, own use (community) or business Organisational form? -cooperatives, self help groups, company, sole proprieter, family business Legal status? license, permit, contract with utility, registration with chamber of commerce Financing? savings, family, commercial bank, loan shark, member fees, customers, micro-credit

33 Policy implications: what can we do more? Sanitation, sanitation, sanitation Establish appropriate country framework Policy, legislation, regulations, standards allow for and regulate SPSPs Build capacity for engaging small-scale providers contract design, training, competition, guarantees Improve quality and use of information collected - household surveys often not qualified (secondary sources) Foster community participation - Adapt to local context, involvement in planning & monitoring, tap local resources Enable monitoring - regulation or facilitation, establish benchmarks to improve service quality

34 Thank you! This is work in process, more info:

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