Get documents about "Drinking water, sanitation, and electricity
Document Sample
Drinking water, sanitation,
and electricity
9
Drinking water, sanitation, sewage disposal, In rural network and non-network set-
electricity, rural roads, and urban transport tings, community and self-provision domi-
influence human development outcomes nate. The policymaker as standard setter
chapter (crate 1.1). As with education and health and capacity builder in support of the client
services, the impact of infrastructure ser- is missing. To avoid ensuing problems, such
vices on human development is direct (e.g., as arsenic in Bangladesh’s rural drinking
reducing water-related diseases, which rank water, policymakers need to support clients
among the top killers of children). The in ensuring service quality and access.
impact is also indirect, through economic Externalities in sanitation in rural, non-
growth.452 But like education and health, network settings are best contained within the
these services are failing poor people. village or community. So supply-side support
Focusing on water, sanitation, and elec- at the household level should be comple-
tricity services, this chapter uses the Report’s mented with interventions at the community
service delivery framework to find out why level—be it information about hygiene or
and to show how things might be improved. subsidization of latrines—that are designed to
The reform lessons from these services, rep- spur household demand and create commu-
resenting both network and non-network nity peer pressure for behavior that internal-
services, are also likely to apply to other izes the externalities. In urban settings, where
infrastructure services. demand for sanitation services may be greater,
For networked services, such as urban property rights and facilitating private
water and electricity, regulating providers response can support collective efforts.
and ensuring that poor people have access to
affordable services are the main reasons for
government intervention. This brings the The state of water
long route of accountability into play. But and sanitation services
poor citizens have a weak voice because water About 2 of every 10 people in the developing
and electricity are particularly vulnerable to world were without access to safe water in
patronage politics. Providers end up being 2000; 5 of 10 lived without adequate sanita-
more accountable to policymakers than to tion; and 9 of 10 lived without their waste-
clients, which breaks the long route of water treated in any way.453 There have been
accountability. gains, but despite the many global commit-
The solution is to separate the policy- ments, notably the U.N. Decade for Water
makers from the providers—and to make and Sanitation, access to water and sanitation
providers more responsive to clients. Dis- lags far behind the milestones set in the
persing ownership through decentraliza- 1980s. Nor do aggregate trends in the 1990s
tion and private participation, promoting give comfort (figure 9.1). The share of people
competition through benchmarking, ensur- with access to these services in Africa and
ing alternative access by using independent Asia—where the world’s poor are concen-
providers, and charging for services are trated—has fallen, remained constant, or
ways of separating policymakers from increased only slowly.
providers and strengthening compacts, Innumerable city and town studies con-
client power, and voice. firm the UN-Habitat Report’s key message
159
160 WORLD DEVELOPMENT REPORT 2004
Figure 9.1 Little progress in access to improved water and sanitation, 1990 and 2000 Infrastructure and the
Water supply coverage by region Sanitation coverage by region accountability framework
Percent Percent for service delivery
100 100
Countries are trying different approaches to
Urban Urban
75 75 address failing water, sanitation, and electric-
ity services. These include decentralizing to
50 50 local governments, private sector participa-
Rural Rural
tion, regulatory reform, community-driven
25 25 development, and small independent
providers. Some approaches try to make ser-
0 0 vices work for poor people through targeted
1990 2000 1990 2000 1990 2000 1990 2000 1990 2000 1990 2000
interventions. Others seek to improve ser-
Africa Asia Latin America Africa Asia Latin America
and the and the vices overall—on the premise that making
Caribbean Caribbean services work for all is necessary for making
Source: WHO, UNICEF, and Water Supply and Sanitation Collaborative Council (2000). them work for poor people. The same
approach has worked in one setting and
failed in another, and different approaches
have worked in seemingly the same setting.
that water and sanitation services are too What is needed is a way to think about the
often failing communities.454 Full-pressure, institutional and political characteristics of
“24-7” water supply remains a pipe dream infrastructure services to understand what
in many cities. Because a quarter to half works where and why.
(and more) of urban water supply remains
unaccounted for, many cities are turned Accountability in infrastructure
into leaking buckets (figure 9.2). The lim- services
ited number of network access points must Chapters 3–6 of this Report develop a frame-
be widely shared, which dramatically work for analyzing how well the actors in ser-
increases waiting times and often simply vice delivery—clients and citizens, politicians
overwhelms the system. Rural infrastruc- and policymakers, and service providers—
ture often goes to seed: more than a third of
existing rural infrastructure in South Asia is
estimated to be dysfunctional.455 Figure 9.2 24-hour water: a pipe dream
Poor people bear a disproportionate
Karachi
share of the impact of inefficient water and
sanitation services. Fewer poor people are Delhi
connected to a network. When they do have Chennai
access, the installation has to be shared Nakuru
among many more people (figure 9.3). And Kathmandu
the prices they pay are among the highest, Calcutta
generally more than those paid by more Phnom Penh
affluent households connected to the piped Dhaka
system (figure 9.4). The price differential is Manila
partly a result of inefficiencies—the Jakarta
inequitable practice of subsidizing piped
Nairobi
water, lack of scale economies for indepen-
Colombo
dent providers, or worse, providers taking
Bangkok
advantage of poor people’s lack of choice.
But some of the price differential can also Hong Kong
reflect the flexibility and convenience of Beijing
services offered by independent pro- 24 16 8 0 20 40 60
viders—no connection charges or access to Hours of water Percent of water
quantities of water that are more affordable available in a day unaccounted for
for poor people. Source: Human Settlements Program (2003).
Drinking water, sanitation, and electricity 161
Figure 9.3 Water and sanitation by Short route of accountability. In a simple
poorest and richest fifths
market transaction, the buyer holds the
Accra seller accountable for the product bought,
Percent rewards the seller by repeating business, or
80 penalizes the seller by choosing another
Poorest fifth provider. This accountability is “short”
60
because the client can hold the provider
directly accountable, without any interme-
40
diaries. Small, independent providers in
20
water and sanitation and their clients are
Richest fifth usually in such a market relationship.
0 In Dar-es-Salaam, Tanzania, a cholera
outbreak in 1996 forced the sewerage and
Jakarta sanitation department to loosen its
80
monopoly on cesspit cleaning and allow
private providers in. There is now an
60
emerging competitive private market for
40
cesspit cleaning—households can choose a
provider based on price and (easy-to-mon-
20 itor) performance. Besides allowing entry
and implementing regulations on sewage
0 disposal, the city’s role has been small.456
~ But service and market conditions that
Sao Paulo
automatically give clients power—through
80
choice, ease of monitoring, and market
60
enforceability—are not always present for
infrastructure services. So the route of
40 accountability has to be long.
20
Long route of accountability. Govern-
ments worldwide deem it their responsibil-
0 ity to provide, finance, regulate, and in
No water at Sharing toilets other ways influence infrastructure services.
residence with 10 or more They do it for two good reasons: market
households
failures and equity concerns. First, net-
Source: Human Settlements Program (2003).
worked infrastructure services exhibit
Figure 9.4 Alternative sources of water: poor people pay more
Price of water per liter, U.S. dollars
hold each other accountable within four rela-
tionships (figure 9.5): 0.010
Bicycle
water
• Client power connects service users with vendor
providers. delivering
to non-
• Voice connects citizens with politicians service
Handcarts
and policymakers through the political area
0.005 delivering to
process. homes
Water
• Compacts connect policymakers through
Water
vending
Standpipes
implicit or explicit contracts with providers trucker drawing
responsible for services. Kiosks House water from
Utility connection mains
• And management connects provider
organizations with frontline across-the- Lima Kampala Bandung Dar es Salaam
counter providers. Source: Human Settlements Program (2003).
162 WORLD DEVELOPMENT REPORT 2004
Figure 9.5 Accountability in infrastructure services Board, a corporation owned and operated
by government.
The state
The short and long routes of accountabil-
Politicians Policymakers
ity need to work together. Indeed, even for
of accounta cesspit services in Dar-es-Salaam, govern-
ro u te bili
Com
ng ty pa
ment regulation was necessary to ensure that
Lo c
ce
t
Voi
the small private operators complemented
S h o rt r o u t e the public provider and complied with
Citizens/clients Public and private utilities sewage disposal guidelines. Effective solu-
and providers
tions are likely to be a strategic mixture of the
Coalitions/inclusion Client power Management short and long routes of accountability as a
Nonpoor Poor Frontline Organizations system in which the clients, the policymaker,
and the provider are linked in accountability
relationships that make services work for
Wate s
r, sa nitation, other service poor people.
economies of scale, or network externali- Why infrastructure services fail poor
ties, that make it technically more efficient people: patronage
to have a single distributor of the service. In Because the family has been without daytime
sanitation the externalities come literally water for the past decade, the children have never
from spillovers. Yes, households in Dar-es- seen water come out of their home faucets. . . . The
Salaam were willing to pay for improved faucet flows only between midnight and 4 a.m. in
sanitation with larger health benefits to the most of Baryo Kapitolyo. MWSS, you know that.
Did you care?
city. But free-rider problems, where one
Dahli Aspillera, a citizen of Manila, on the
person’s behavior hurts others with eve of the privatization of Manila’s public
impunity—as in the case of runoff from water agency, Metro-Manila Waterworks
open defecation in many parts of Asia and and Sewerage System (MWSS), in 1997
Africa—require community or government
intervention. Second, societies care about Where water, sanitation, and electricity are
equity, and governments often redistribute publicly managed, the accountability to cit-
resources—such as a lifeline water sub- izens is achieved when the state ensures that
sidy—to ensure the minimum equitable utilities, boards, and government depart-
service access that markets cannot. ments provide efficient and equitable ser-
Network externalities, collective action vices for all citizens, including the poor.
problems, and distributional goals thus When the state is unsuccessful and the voice
provide powerful reasons for the govern- relationship is not effective, the long route
ment to be involved. The arrangements of accountability has failed.
then are no longer primarily between the In 1997 the MWSS was typical of service
client and the provider, and new account- utilities, boards, and government depart-
ability relationships become important. ments that consider politicians and policy-
The first of these arrangements is voice— makers as their real clients. Politicians—
citizens delegating to politicians the respon- responding to equity concerns or, more
sibility to ensure the infrastructure ser- likely, to short-term political gain—often
vices they want. The second is through the keep prices for infrastructure services well
compacts between policymakers and below those for cost recovery. This makes
providers—to design the service delivery service providers dependent on politically
framework, choose a provider, and ensure motivated budget transfers for survival—or
that it meets citizen expectations. Voice and when transfers are not forthcoming, on ser-
compacts together become the “long route” vice cutbacks that attract no penalties from
of accountability. In Bangladesh the prime policymakers.
minister and her power minister are, in State-owned water and electricity pro-
principle, accountable to citizens for the viders then cease to function as auton-
performance of the Power Development omous service providers.457 They become
Drinking water, sanitation, and electricity 163
BOX 9.1 Clientelism in service delivery
Patronage weakening accountability in the citizen-provider chain
Politicians
Operational
subsidies/
Appointment Political
of directors favors
Untendered
Employees Overstaffing Utility company contracts Contractors
Poor
quality of
service Artificially
depressed
Unconnected population
tariffs
High prices
Connected population
With patronage, the compact between the politician vice quality, and precarious finances.The scarcity of
and provider—the utility or board—is neither trans- resources for investment leaves much of the popu-
parent nor determined by universal client needs. lace without adequate services and forces them to
Politicians exert their control by appointing (and dis- rely on expensive or inconvenient alternatives.
missing) company directors and by providing public The clientelist model broadly describes the poli-
subsidies to finance investments and prop up ailing tics of urban and rural regional utilities in both water
enterprises. In return for this patronage, water com- and electricity sectors. It also applies to local admin-
panies are often obliged to supply political favors in istrations in charge of urban or village-based
the form of excess employment, the depressing of services (funding of piped networks or community
tariffs, political targeting of new investments, and toilets or even public investment in deep tubewells).
the distribution of contracts on the basis of political
criteria.The consequences: spiraling costs, low ser- Source: Foster (2002).
extensions of policymakers. The policy- system, such as tubewells. Citizens or their
maker and provider begin to fuse into one groups respond to rationed access by sup-
role. When this happens, policymakers can porting politicians who favor them as their
no longer hold providers accountable for clients over politicians who push for uni-
delivering to all citizens, services deterio- versal access. This strengthens the ability of
rate, and poor citizens as clients are left politicians to use patronage. The account-
powerless. ability linking clients, politicians, policy-
The dynamics of this relationship can be makers, and providers is displaced by
even more debilitating for poor clients. patron-client relationships—clientelism—
Over time providers become a strong polit- on both legs of the long route of account-
ical force, influencing the policymaker. In ability (box 9.1).458
effect, providers capture the policymaking In such settings, the breakdown in voice
process, exerting pressures through orga- for poor citizens is reinforced by their loss
nized labor or their ability to control service of client power. Dahli Aspillera’s question—
delivery for the politician. With deteriorat- did you care?—reflects both a sense that the
ing service levels, policymakers and client cannot penalize the provider for poor
providers ration access. This has an impor- service and a deeper reality that the long
tant implication when lumpy investments route of accountability has failed the citizen.
are needed to gain access to services— If failure of voice is at the root of weak ser-
whether through an electricity grid, a vil- vice delivery in water, sanitation, and elec-
lage water network, or even a stand-alone tricity, what are the options for reform?
164 WORLD DEVELOPMENT REPORT 2004
Urban water networks vide incentives to remove patronage and com-
pensate for the weak voice of poor people.
Who is the Water Board accountable to?
Question asked of the Managing Director Strengthening the compact:
of the Hyderabad Water Board by a consumer,
Hyderabad, September 2002 decentralizing assets
Devolving responsibilities to different tiers of
In cities and towns, where scale economies policymakers and separating powers between
prevail, water systems have major network them can create the right incentives to
suppliers—generally a public sector provider, improve service delivery. First, by having ser-
such as the Lagos water board in Nigeria, or a vice and political boundaries better coincide,
small municipal water department, as in Cha- decentralization can strengthen voice and
pai Nawabganj in Bangladesh. Some of these accountability. Second, when the center is in
providers belong to local governments—as in charge of both regulatory and service delivery
the case of the Johannesburg water utility; responsibilities, it has few incentives to hold
some to a state government—as is common itself accountable. Devolving services to
in India; and some—like MWSS in Manila— another tier of policymaker triggers incentives
to central governments. For all, the relevant more compatible with having the center (or an
questions are whether there is a clear delin- upper-tier government) oversee the regulatory
eation of roles between the policymaker and framework. Finally, devolution creates an
the provider—and whom the provider is opportunity to benchmark performance and
accountable to, the policymaker or the client? use fiscal resources and reputation as rewards
When voice and politics fail, the distinction to support efficient service provision. The con-
between the two is blurred, and the provider is testability for resources in this context requires
accountable to the policymaker. a tier with fiscal capacity and without service
Four reform strategies can potentially sep- provision responsibilities—appropriate for
arate policymakers and providers: decentral- the center (or a state in a federal system).
izing assets, using private participation in Devolving responsibilities to local gov-
operations, charging for services, and relying ernments has had mixed results in water
on independent providers to give clients and sanitation, often leading to the loss of
choice. The first two aim to influence com- scale economies, eroding commercial via-
pacts, the second two to strengthen client bility by excessive fragmentation, and even
power. All are politically difficult to imple- constitutional conflicts between municipal-
ment. That is not surprising, since strong ities and upper-tier governments.459 The
political forces—not technocratic failures— historical experience of industrial countries
blur the roles of policymakers and providers. offers lessons for addressing these problems
The issue is whether these strategies can pro- (box 9.2).
BOX 9.2 Decentralization and the water industry—in history
In France water assets have historically been Examples include Elizabeth and Hackensack, under company structures, mostly owned and
devolved to the commune—the lowest tier of both in New Jersey. run by municipalities, but many were under pri-
government. Clusters of communes have inte- Interestingly, for France and some areas in the vate operation if not ownership. In England the
grated the industry by delegating water and United States, the limited capacity of the smaller national government consolidated the local
sanitation services “upward” to private or semi- local governments provided the incentives for pri- water systems into regional bodies, moving
public companies.The functional boundaries of vate companies to serve clusters of political juris- from 1,400 in World War II to 187 in 1974 and 10
the companies cut across several communes, dictions. In both France and the United States the in the 1980s, all eventually privatized. In the
which continue to own the assets but contract multijurisdictional coverage prevents the water Netherlands, also under central government
out the management of services. provider from being captured by any one local mandate, the municipal companies were con-
In the United States water and sanitation body—thus maintaining the separation from verted to regional companies to support the
assets are also devolved to local governments. local policymakers. expansion of services to rural areas. But the
Where local governments have been carved up The approach was different in England and companies remained under the ownership of
into small political jurisdictions and individual the Netherlands. At the outset of the 20th cen- municipalities and provinces.
water works are impractical, privately owned tury in both countries, oversight and direct pro-
companies have emerged to provide regional vision of water services were in the hands of Sources: Lorrain (1992); Seidenstat, Haarmeyer, and
services covering several local governments. local authorities. In the Netherlands these were Hakim (2002); Jacobson and Tarr (1996).
Drinking water, sanitation, and electricity 165
Fragmentation and the loss of scale The bottom line: upper-tier governments
economies can be partly addressed by permit- can influence the design of compacts at the
ting interjurisdictional agreements. In the local level through legislation and incentives.
French syndicat model, municipal jurisdic- However, as demonstrated by experience in
tions can cede the right to provide water and Latin America, decentralization processes
sanitation services to a company jointly owned have not always been designed with suffi-
by several local authorities. Bolivia’s water law cient care to allow these kinds of benefits to
explicitly allows for multi-municipal compa- be reaped. The success of managing service
nies. Colombia empowered its regulator to reforms during decentralization will depend
enforce mergers of nonviable local water agen- on whether broader decentralization policies
cies, but ironically exempted the smallest of can ensure that local politicians and policy-
the municipalities that would have benefited makers bear the consequences of policy deci-
most from this rule. Brazil’s state companies sions. Ensuring that decentralization can
were created through voluntary agreements separate policymakers and providers at the
with municipalities, financed by central funds. local level requires that it also separate roles
These examples suggest an important and responsibilities of the different tiers of
approach for aligning general decentraliza- government (chapter 10). Without that sepa-
tion with sectoral priorities. When authority ration, decentralization may simply transfer
is being decentralized, a window usually patronage to local levels.
opens for central government to influence
the restructuring of local services. Decentral- Strengthening the compact:
ization gives the center the ability to negotiate using private participation
the restructuring of devolved assets through in operations
fiscal incentives—say, by deciding to retain Over the past decade, private participation
the liabilities while devolving only the assets. has grown significantly in water, sanitation,
Where devolution has already happened, and electricity in different forms and across
the center can provide incentives such as many regions (box 9.3). In general, private
fiscal grants to subnational governments participation in infrastructure has been
that are dependent on milestones of institu- advocated for many reasons, including
tional reform. Australia’s federal govern- accessing management expertise and private
ment provided grants to states to reform the investment and introducing incentives in the
water sector. The South African govern- operations of infrastructure services. Private
ment is also using central fiscal incentives to participation is also a direct way of separat-
support municipal restructuring and to ing policymakers and service providers
influence reform of urban services, includ- through two aspects of the accountability
ing water and sanitation. India’s federal chain—compacts and voice.
government is exploring a similar policy In the design of compacts, private pro-
instrument—the City Challenge Fund—to viders generally require explicit contracts
create incentives for general urban reform, that define up front the service responsibili-
including municipal services. ties of the provider and the policymaker, the
Such fiscal incentives are more effective if regulatory and tariff parameters, and issues
allocated competitively to local tiers of gov- of access by poor households. In addition,
ernment. But this requires information so the the process of contracting private providers
center can compare the performance of dif- can strengthen the voice channel, particu-
ferent local governments, promoting compe- larly if advocacy groups and public informa-
tition and accountability. It also requires that tion mechanisms are involved in the process.
the policy and legal framework enable local Indeed, service delivery standards and ser-
governments to have the flexibility to reform vices for poor people are often explicit in the
service delivery—to form regional compa- policy debate on private participation in
nies and use contracting, for example. Coun- water and sanitation.
tries such as Pakistan and South Africa that In many industrial countries the involve-
have recently embarked on decentralization ment of the private sector in service deliv-
have adopted such legislation. ery enabled governments to develop the
166 WORLD DEVELOPMENT REPORT 2004
BOX 9.3 Trends in private participation: water, sewerage, and electricity
Investment commitments in projects with private participation in developing countries, 1990–2001
Water and sewerage projects Electricity projects
2001 U.S. dollars (billions) 2001 U.S. dollars (billions)
10 Manila water system concessions 60
Brazil
8 Chile
Aguas privatization All other
Argentina 40 developing
6 concession countries
4
20
2
0 0
1990 1991 1992 1993 1994 1995 1996 1997 19981999 2000 2001 1990 1991 1992 1993 1994 1995 1996 1997 19981999 2000 2001
Cumulative investment, water and sewerage Cumulative investment, electricity projects
projects (total $40 billion) (total $213 billion)
Middle East and Middle East and
North Africa North Africa
South Asia 0% 0%
1% Sub-Saharan Sub-Saharan
Africa South Asia Africa
Europe and
1% 10% 2%
Central Asia
8% Europe and
Central Asia
9%
Latin
America
Latin and the
East Asia East Asia
America Caribbean
and Pacific and Pacific
and the 43%
38% 32%
Caribbean
52%
Water and sewerage projects by type (total 202 projects) Electricity projects by type (total 832 projects)
Divestitures
8%
Divestitures Greenfield
39% projects
Greenfield
Concessions 56%
projects
44% 28%
Concessions
Management and 4% Management and
lease contracts lease contracts
20% 1%
Private investment has been far higher in electricity than in water and vate investment. Finally, in electricity privatization dominates; in water,
sanitation. Not surprisingly, the decline in private investment in the late management contract and concessions—public ownership—remains
nineties was more pronounced in electricity. In both sectors, the impact the norm.
of “large deals” and country specific changes are visible—reflected also
in the geographic concentration—East Asia and Latin America—of pri- Source: World Bank, PPI Project Database.
Drinking water, sanitation, and electricity 167
BOX 9.4 Private participation—in history
England. In London private companies sup- companies, which were then progressively ing led to conflicts over fiscal transfers from
plied water for more than 400 years with little taken over by municipalities and operated as municipalities to companies. Not surprisingly,
government restriction on entry. Companies public utilities.The amalgamation was public ownership increased, and with it the pub-
competed against each other, invested in promoted by central regulation and facilitated lic system inherited the tradition of managing
service and quality innovations, and increased by municipal politics. A major motivation was to and regulating water as an economic good.
household connections. By the 19th century use the companies to deliver services more
London’s extensive water system helped make regionally to rural areas. By the time the public France. Starting with private provision of
that city “one of the best housed and healthiest sector took over, principles of economic man- water at the local government level and main-
cities in Europe, with a death rate lower than agement of water services had become well taining it from the mid-1600s onward, France
birth rate by about 1800, at a time when most embedded in the political system. Arms-length evolved toward public ownership and private
European cities were devourers of men.” Ninety- management of public utilities by municipalities provision through different types of
five percent of London residents received piped became the norm. management and lease contracts.The reasons:
supply from the private companies, and a major- scale issues (small local authorities), the history
ity had direct home connection. United States. Between 1800 and 1900, U.S. of the French legal system, and the role of voice
Technological change led to significant cities experienced a tremendous growth of in controlling policymakers.The issue of fire
price competition, industry consolidation, and water works. Initially dominated by private own- fighting did not come up in France, perhaps
higher prices. And the improved water supply ers, half of them were public by 1900.The shift because cities were built with vastly different
increased demand for flush toilets, which to public ownership emerged because of con- materials and densities.
created problems of sewage removal. tracting problems between municipalities and
Parliament responded with regulation, and by companies over water for fire fighting.The diffi- Sources: Tynan (2002), Schwartz and Maarten
1908 the private system was nationalized. (In the culties of establishing contracts when cities (2002), Crocker and Mastens (2002), and Lorrain
(1992).
1980s England shifted back to private were growing rapidly, and several urban confla-
provision.) grations, offered opportunities for both private
companies and governments to evade perfor-
Holland. Between 1853 and 1920 the water mance targets or force renegotiations of
sector was dominated by private water supply contracts. A lack of metering and direct charg-
capacity and political setting to regulate, Ulitmately, like decentralization, private
price, and manage water in public and pri- provision offers an opportunity to influence
vate contexts (box 9.4). But in today’s devel- the relationships of accountability. And like
oping countries private participation is being decentralization, its success depends on
flung into a context of institutional rigidity, design and implementation (box 9.5). Experi-
not necessarily conducive to the organic ence so far suggests that regulation and infor-
growth of formal private participation. mation—two interlinked parts of overall sec-
Using private provision to drive a wedge into tor reform—are important in successfully
patronage makes managing private partici- implementing private sector participation in
pation intensely political—but potentially water, sanitation, and electricity sectors and in
powerful for increasing accountability. promoting greater voice in service delivery.
The proof of this potential is already evi-
dent. Formal private participation in water Regulation. A regulatory system in this
and sanitation has led to greater demand for Report’s framework is best defined along the
accountability—this, despite accounting for a dimensions of accountability between the pol-
small part of total investment in water and icymaker and the provider—delegation of
sanitation. During the 1990s private invest- responsibilities and finance, information
ment accounted for only 15 percent of total about the performance of the provider, and
investment in water and sanitation, covering enforcement (chapter 3). The regulator could
less than 10 percent of the world’s population. be responsible for specific elements of the
Even in Latin America, where private provi- accountability chain—just providing informa-
sion has made the greatest inroads in the tion on performance or also ensuring enforce-
water sector, it only covers 15 percent of the ment. Sometimes the policymaker is the regu-
continent’s urban population.460 In addition, lator, and sometimes a dedicated third party
in contrast to electricity, for example, public has this responsibility. Sometimes even an
ownership and not divestiture of assets association of providers can self-regulate.
remains the norm in the sector. Whichever method is followed, the regulatory
168 WORLD DEVELOPMENT REPORT 2004
BOX 9.5 Private participation in water and sanitation can save poor people’s lives, and money
In the 1990s Argentina embarked on one of the Distribution of new connections following Responding to the need for alternatives for
largest privatization campaigns in the world as private sector participation in water and reaching poor people, one of the Manila conces-
part of a structural reform plan.The program sanitation services sionaires has developed a system for water deliv-
included local water companies covering ery in densely populated, hard-to-reach slum
approximately 30 percent of the country’s New Connections areas. In the Bayan Tubig (“Water for the Commu-
municipalities. Child mortality fell by 5–7 Percent nity”) program, the use of appropriate technologi-
percent in areas that privatized their water ser- 35 cal standards, client participation in maintenance,
vices.The largest gains were seen in the poorest 30 and community-based organizations in interme-
municipalities, where child mortality fell by 24 diation and mapping of the network reduced
percent. Overall, privatization of water services 25 water costs for poor families by up to 25 percent.
prevented approximately 375 deaths of young 20 To increase affordability, the concessionaire has
children each year. 15 introduced an interest-free repayment scheme
Aggregate data from other sources on the Argentina over a period of 6 to 24 months. Between 1991
distribution of new water connection by 10 and 2001, the program provided water connec-
Bolivia
income quintile from three countries in Latin 5 tions to more than 50,000 households—this
America confirm the results of the pro-poor 0 Chile despite the fact that the contract of one of the
impact of private sector services. As the data Poorest 2 3 4 Richest Manila concessionaires is under review.
show, 25–30 percent of the network expansion
Income quintile
was targeted at the lowest 20 percent of the Source: Galiani, Gertler, and Schargrodsky (2002);
income profile. Source: Foster (2002). Water and Sanitation Program (WSP-AF) (2003).
process has to separate policymaker and national level, or at the state level if policymak-
provider and preserve its own independence. ing and provision are done at the local level.
Another option in a multi-tiered government
Organizing regulation: one size does not fit is to use local regulation but have the appeals
all. Where voice is strong and supported by process at a different level. In the United States
an effective legal system, the policymakers the Constitution provides an overall frame-
and the judiciary do the regulating. In France, work for property rights while state regulatory
where the compact for water is between commissions oversee the operations of pri-
municipal policymakers and a private com- vately owned local utilities. Local governments
pany, regulation is done primarily through regulate public utilities directly.
municipal monitoring of contracts, with
some support from central authorities. Regulation and sector reform. The account-
In countries without a tradition of sepa- ability framework clarifies the conditions
rating policymakers and providers and with under which a regulator will be effective in
discretionary policymaking, credible regula- supporting sector reforms. Just as account-
tion requires a third party—an agency—to ability is blurred if any one of its relationships
set or interpret regulatory rules. Several for- is broken (see chapter 3), the effectiveness of
mal safeguards can support the indepen- a regulator is abridged if delegation of
dence of a regulatory agency from political responsibilities and finance between the state
influence.461 Some examples: earmarking and the provider is incomplete. That is the
funds for the regulatory agency, hiring staff case in the electricity sector in some states in
from the market without being restricted by India. In other words, an independent regula-
civil service rules (competence and capacity tor is needed to enforce the separation
are important elements of gaining credibility between policymaker and provider, but if the
and independence), ensuring that the hiring separation is not initiated through general
and firing of regulators are protected from reform to begin with, the regulator may well
the political interference of the executive and be ineffective. A regulator cannot substitute
legislative branches, and not linking the for broader sector reforms.
terms of staff to electoral cycles. At the same time an effective regulator can
A multi-tiered governmental structure help sustain sector reform. A recent study of
offers additional scope for protecting the inde- about 1,000 concessions in Latin America
pendence of a regulator by placing it at the showed that even a moderately well-func-
Drinking water, sanitation, and electricity 169
tioning regulator can temper opportunistic communities, labor unions, and other interest
renegotiations of contracts.462 The study con- groups. Neither process was flawless, but both
cludes that where a regulatory body exists in a opened the door to greater accountability. An
country, the probability of a renegotiation is open process is needed to broaden the partici-
17 percent; where none exists, the probability pation of communities in the policy debate
is 60 percent. on private provision—otherwise narrow
interest groups can capture the information
Regulating the public sector. Sector regula- and representation.
tion is often discussed in the context of pri- Community involvement is also essential
vate sector participation. But issues of in the regulatory process—but it has not been
monopoly behavior and service performance sufficiently encouraged. A review of urban
are also relevant for public sector provision— water utilities in Latin America and Africa
perhaps even more, because the contracts concludes that giving consumers little infor-
between the policymaker and the public mation about the process of reform and tariff
provider are often not explicit. Independent setting—and limiting their opportunity for
regulation of public providers is therefore comment before taking regulatory deci-
equally important. But unless public sions—weaken the regulatory process and
providers have operational flexibility and are the credibility of reform, and make tariff
brought under explicit compacts—and changes—however justified—difficult to
unless all the relationships of accountability implement.465
are applied—it is not clear how regulation of Organizing consumers is, however, not an
the public providers would have an impact easy task. There are major free-rider (and
on service standards. In particular, because related financing) problems in developing
most of the instruments of modern regula- countries that prevent consumers from orga-
tion are based on financial incentives, in the nizing themselves to a degree where they can
absence of user charges regulation of public be an articulate voice in the regulatory
providers would be ineffective. In Chile pub- process. The problem is even more severe for
lic sector regulation was introduced in the poor consumers. In industrialized countries,
context of sector reforms, which included relatively well-developed consumer associa-
greater provider autonomy in operations and tions perform this role reasonably effectively.
economic pricing of water. This helped cat- Where competent and effective consumer
alyze regulatory capacity in the public sec- associations are absent, the asymmetry
tor—an important asset, now that Chile has between consumers and providers becomes
privatized water services. more acute, and the regulator risks being cap-
tured by the provider.
The role of information. With private provi- Examples exist of regulatory bodies engag-
sion more needs to be done to deliver on the ing communities—especially poor communi-
demand for greater voice—informing com- ties—more actively. In Jamaica the regulator
munities about the why and how of private reaches out to communities through local
sector contracting. A public opinion poll in churches; in some cases in Brazil special con-
Peru found support for privatization of elec- sultative or advisory bodies have been created;
tricity among only 21 percent of the citizens. and in Peru regulators have made extensive
But when informed that privatization was to use of the radio to engage and communicate
be undertaken through a transparent process with communities.466 But these are few exam-
and tariff increases would be regulated, sup- ples only—much more needs to be learned
port increased to 60 percent.463 In Manila the about how to organize and access communi-
concession process was preceded by a wide- ties in the regulation of services.
spread public campaign by President Ramos, Managing private participation also re-
who convened “Water Summits” to bring quires information on how private players
together different stakeholders.464 In South are performing relative to their contract
Africa Johannesburg’s water management and the performance of other public and
contract was also undertaken after signifi- private providers. This information, which
cant—and often difficult—consultation with is critical for regulators, also strengthens the
170 WORLD DEVELOPMENT REPORT 2004
relationship between citizens, politicians, and Strengthening client power:
policymakers. For private provision to have a charging for services
catalytic impact on the sector, information is User charges provide operational autonomy
essential on the performance of both the for the provider, support client power, and
public and private sectors. But too little infor- elicit greater accountability from the state (box
mation has been available on the perfor- 9.6). Without access to enough revenues from
mance of the public sector and through few the clients, service providers depend on the
credible sources. Leveling the playing field policymaker for fiscal resources to maintain
between public and private providers—as service provision. In addition, if the seller is
discussed later—and benchmarking their not dependent on the buyer for at least some
performance are essential in getting the best part of revenues, the provider will have little
out of private participation in the sector. incentive to respond to the client. At the same
Overall, the impact of private sector partic- time, given the politics of water pricing, imple-
ipation is best leveraged within a broader menting user charges can quickly elicit a con-
reform context—greater separation of policy- sumer response—as in Johannesburg, Manila,
makers and providers for all public providers; and very visibly in Cochabamba, Bolivia.
greater participation of communities in the
process of private participation and in the Implementing user charges. Drawing on the
regulatory framework; and greater use of power of user charges to leverage accountabil-
benchmarking of both public and private ity in service delivery requires, as discussed
providers. The Australian approach is in- earlier, effective regulation to address mono-
structive. An enabling framework and a poly provision. But more importantly, the crit-
national competition law level the playing ical policy issue is how to increase tariffs. There
field for all public and private providers. Sec- are two implementation issues: the first is syn-
toral legislation provides guidelines for service chronizing tariffs with quality improvements,
provision. The central government provides and the second is ensuring that there is a safety
fiscal incentives to support change at the state net to safeguard basic affordability.
level. A variety of delivery approaches are sup- In many countries, bringing the tariffs to
ported—corporatization (Melbourne), man- cost-recovery levels would require significant
agement contract (Adelaide), vertically inte- adjustment and rebalancing of tariffs among
grated public utility (Sydney), multi-utility residential, business, and industrial cus-
(Canberra). Regulation differs between states tomers. In Indian cities the charges on resi-
and is backed by independent regulatory dential users are less than a tenth of the oper-
agencies as well as benchmarking done ating and maintenance costs. Industrial users
through an association of water providers. pay ten times more but are below the bench-
mark for operating and maintenance costs in
two-thirds of the metropolitan cities and 80
BOX 9.6 Charging for percent of smaller cities.467 Even if there is a
water—in history willingness to charge, how can the transition
Treating water as an economic good and charg-
to prices be managed?
ing for services enabled France and the Nether- Charging cannot be assessed independent
lands to use private provision to jump-start the of the broader policy framework and the
sector’s development. In France the private sec- credibility of service providers. Policymakers
tor remains the major service provider of water
and sanitation services. In the Netherlands the
are obviously concerned that services will not
system shifted from the private to the public improve enough to justify the price increases.
sector. But in both countries charging users for Central to a price increase is what comes
water remained the norm, which enabled first—the increases or service improvement?
providers to sustain service delivery at arm’s
length from local government and gave them Guinea entered a lease contract for water ser-
greater incentives to be responsive to the needs vices in its major towns and cities in 1989.
of the clients. During the first six years of the contract, the
Sources: Lorrain (1992); Blokland, Braadbaart, and
government subsidized a declining share of
Schwartz (1999). the private operator’s costs while tariffs were
adjusted gradually toward cost recovery,
Drinking water, sanitation, and electricity 171
which avoided a major tariff shock. This of a competitive market, and in others they
jump-started the move to cost recovery and are controlled by a few groups.
better service delivery. It also gave the reform Enhancing the role of independent
credibility in a region that had little experi- providers as part of the short route of
ence with private provision.468 For various accountability is a key policy challenge. How
reasons the lease contract expired in 1999 and can this be achieved?470 By recognizing inde-
was not renewed, but the pricing strategy pendent providers and giving them legal sta-
remains relevant for other countries. tus, by ensuring that network providers are
Similarly, subsidies to poor people could not given exclusive supply, by enabling
be better targeted and designed, which greater partnership between formal public
would enable user charges to be imple- and private network providers and small
mented overall. Chile has a nationally independents, by ensuring that the regulatory
funded household water subsidy. Colombia framework for network providers gives the
uses geographic targeting. South Africa has a flexibility to enable contracting with inde-
national lifeline tariff system that guarantees pendent providers, by enabling small-scale
each household 6 kiloliters of water a provider associations and working with these
month.469 Given the substantial divergence umbrella bodies to introduce appropriate
between piped water prices and the high cost levels of regulation, and by enabling poor
of the inferior alternatives that many of the people to gain access to multiple independent
poorest are forced to use, there is often a providers while keeping their regulation
strong case for giving highest priority to con- more focused on health and issues related to
nection subsidies rather than subsidizing the groundwater depletion.
use of water by those who already enjoy Of particular concern is the effect of
access to the piped network. Connection bringing in a formal private provider in an
subsidies also have the advantage that they area dominated by independent providers.
are easier to target (since lacking access to This issue was not addressed in the design of
service is already a strong indicator of the Cochabamba contract—where the pri-
poverty) and cheaper to administer (since vate provider was given exclusivity rights—
relatively large one-time payments are and it contributed to the contract’s cancella-
involved). Generally it is more efficient to tion.471 In reality, if coverage targets are
subsidize the connection costs for low- defined in such a way that they can be met
income households, but there are alternative with the services of small independent
options for designing connection and con- providers, the operator will have an incentive
sumption charges that benefit poor people. to encourage their involvement.
Ultimately, tariff adjustment and subsidy
mechanisms are technocratic tools that can Rural areas: network
be designed and applied in many ways. What and non-network systems
is critical is to turn payments for services into Rural settings are complex in their settlement
a political tool for reducing patronage and patterns, ranging from dense settlements in
strengthening client power of poor people. South Asia to dispersed communities in many
African countries. Suppliers include house-
Strengthening client power: relying hold systems in Bangladesh, water vendors in
on independent providers Laos, and community-managed local piped
As the example of pit operators in Dar-es- water systems in Ghana. Across all situations,
Salaam suggests, small independent pro- the client-provider link is the norm. Under-
viders are a common feature in providing standing why the long route of accountability
water and sanitation services across income is needed to support this client power, and
groups. Their organization varies from how this can be done, are the main service
household vendors of water, small network delivery challenges in rural areas.
providers, and private entrepreneurs to coop-
eratives. In some cases they are the primary Community-managed networks
suppliers, and in others they supplement the In countries as diverse as India and Kenya,
formal provider. In some cases they are part water boards or engineering departments
172 WORLD DEVELOPMENT REPORT 2004
have traditionally been responsible for provide examples of institutional mecha-
delivering water services to rural communi- nisms for supporting community-based sys-
ties. Top-down in their approach, with little tems. They are all “works in progress,” and
skill in community mobilization, and learning from them will offer insights on
backed by fiscal support from central gov- how to advance rural community-based sys-
ernment, the boards scaled up physical tems of delivery.
investment. But they had little success in Local governments can form the institu-
ensuring sustainable operations and main- tional and financial support for expanding
tenance. Indeed, these boards face the same community-based systems. With access to a
problems of state capture inherent in the tax base, local governments can provide
patronage model of service delivery. resources to cover periodic capital expendi-
Given the failures of top-down institu- ture, provide temporary fiscal support to
tions, some countries are shifting to com- communities to adjust to economic shocks,
munity-managed systems—often supported and facilitate access to technical assistance.
by donors, as in India and Ghana. Commu- Uganda and South Africa provide examples
nities are involved in the design and man- of arrangements in which local govern-
agement of their water systems, paying for ments are part of a larger fiscal decentral-
operations and maintenance costs. Govern- ization program with own resources and
ments, generally central governments, pay a greater autonomy. Local governments thus
significant part of the capital costs. Donor- strengthened can support community-
funded project management units, backed based programs. Even in India, where local
by not-for-profit organizations, often form panchayats do not have as much autonomy,
the technical and organizational backbone the relations between local governments
of these systems. and user groups are evolving. Where neigh-
The client-based model puts the client at boring small towns have effective providers,
the center of the accountability relation- these can be contracted in by rural local
ship, but many challenges remain in scaling governments to support their communities.
it up.472 In Côte d’Ivoire a national utility run by
a private partner has responsibilities for
• Communities require technical support
urban centers and smaller towns. The
in the medium to long run to manage
national utility uses cross subsidies—with
water systems, and donor-funded pro-
the capital city providing the fiscal sur-
ject management units are not well
plus—to support the smaller urban centers.
suited for this.
Expansion of its responsibilities to rural
• Communities pay for current operating areas is now being tried. The early lessons
costs, but replenishing capital invest- have not been successful but the approach is
ments and covering higher tariffs—to still evolving.473
pay for rising power costs, for example— Finally, communities can contract with a
are not easily managed through group third party or an independent provider to
contributions. manage local network systems. In China
• Communities are not homogeneous— formal cooperatives (rural companies) run
problems of exclusion and elite capture on commercial principles with very high
can be the same as in government sys- cost recovery.474 In several African countries
tems. And different communities may village entrepreneurs manage water systems
have differing abilities to form cohesive under contract. In East Asia small indepen-
groups. dent providers are being organized to take
• Efficient technologies that require scale on operational responsibility on a conces-
economies are not selected because of sion basis. In each case, the process is orga-
the focus on village-level associations. nized through group consultation and
endorsement. While small systems can be
Supporting client provision contracted by community organizations,
Three approaches—local governments, re- villagewide systems may again require the
gional utilities, and independent providers— support of policymakers at the local level.
Drinking water, sanitation, and electricity 173
Self-provision. Households managing wells and providers will not suffice; policymakers
and hand pumps are common in large parts are needed to support communities
of rural Asia and Africa. Nowhere is self-
provision more dramatically showcased Sanitation
than in Bangladesh, where shallow aquifers Policy issues in sanitation need to be dis-
and the market provision of hand pumps cussed in the context of the private and pub-
enabled households to directly manage lic goods dimensions of the sector. To the
water services and replace pathogen-conta- extent it is primarily a client-provider rela-
minated surface water with groundwater. tionship, households invest in sanitation
Service delivery improved—less waiting systems and contract independent providers
time, no quantity limits, and the conve- for the removal of excreta. To the extent the
nience of household connection. And the public goods dimensions are dominant, pol-
health impact, which included a decline in icymakers need to support collective action
diarrhea-related deaths, was remarkable. to change behavior at the household and
Missing was any attempt to monitor community levels, and organize common
water quality. Finding arsenic in the infrastructure for excreta removal.
groundwater caught everyone by surprise. Access to sanitation services has often
The government had withdrawn from the been seen as an issue of subsidizing latrines
rural water sector, assuming that access was and prescribing latrine technology. This
now fully addressed by the private market supply-driven approach, emphasizing the
and household efforts directly. In addition, fiscal and engineering aspects of sanitation,
in a unitary system of government, there has failed. In response, some countries have
was no local government to respond to the been shifting toward “complete sanita-
crisis. In rural Bangladesh today, a policy- tion”—focusing on community and house-
maker is needed to support communities, hold behavior and sanitation practices.475
manage externalities, and understand the This involves breaking the fecal-oral chain
technological choices for addressing the by encouraging households to change
arsenic crisis (box 9.7). More broadly, for a behavior—shifting away from open defeca-
collective good such as the monitoring of tion, washing hands, keeping food and
water quality, a partnership between clients water covered, using safe water, focusing on
BOX 9.7 Fighting arsenic by listening to rural communities
The arsenic contamination of shallow aquifers aquifers are contaminated. Government, donors, wells, well-sharing, and other mechanism may
may be undoing the success of rural drinking and NGOs are advocating several options: shift- not work. Indeed they have not yet been
water provision in Bangladesh. While the num- ing to alternative water sources, including some successful as solutions.
ber of individuals showing symptoms of arsenic surface sources; sharing of uncontaminated Communities strongly indicated a
poisoning is still low—despite the high concen- tubewells in villages; sinking deep tubewells in preference and willingness to pay for
tration of arsenic in the water—between 25 and public areas; and promoting household filtering centralized, community-based filtering systems,
30 million people may be at risk in the future. technologies.The latter, if successful, would pre- such as local piped-water systems with a central
The first response to the crisis by serve the use of shallow tubewells—decentral- filtering point for chemical and biological conta-
government and many donors was denial.This ized, household means of water access—that minants.The piped water network systems
was followed by an effort to test all water have defined the “water miracle” of Bangladesh. introduced in the Bogra area by the Rural Devel-
sources and hand pumps.There were various In all of this, little effort was made to understand opment Academy suggest the potential of such
technological and logistical problems—which is the preferences of rural households. systems in Bangladesh.This has been confirmed
not surprising in view of the fact that arsenic A WSP-BRAC (Water and Sanitation by preliminary data, which show the cost effec-
contamination of this scale has not been faced Program–Bangladesh Rural Advancement Com- tiveness of piped water in settlements that have
anywhere in the world.These problems were mittee) team undertook a comprehensive sur- 300 or more households. If implemented
further complicated by a lack of coordination vey of household preferences for different broadly, this approach would dramatically
and blurring of roles among government, approaches to arsenic mitigation in selected change the nature of water institutions in rural
donors, and nongovernmental organizations areas of rural Bangladesh.The results reveal that Bangladesh—a change that communities are
(NGOs). communities place a high premium on conve- willing to undertake.
The efforts so far have revealed that surface nience. Unless the alternatives are as convenient
water does not contain arsenic and that not all as the current hand pumps, the shift to dug Source: Ahmad and others (2002).
174 WORLD DEVELOPMENT REPORT 2004
children’s hygiene behavior and maintain- But even if a subsidy is required, the fis-
ing a clean environment. The use of cal contribution could be delivered to the
hygienic latrines is a result of this process of community, rewarding collective action,
changing behavior. self-regulation, and the elimination of
Because the health impact of a house- open defecation. Take one of India’s
hold’s sanitation practices is affected not largest states—Maharashtra state, with 97
only by the household’s behavior but also by million people. It subsidized latrine con-
the practices of the community, there is a struction by households below the poverty
collective action problem. The provider’s line only to discover that close to 45 per-
role in ensuring information and social sup- cent of the latrines were not being used.
port to households through community So it shifted its subsidy to a competitive
structures becomes critical. Success depends scheme (the Gadge Baba scheme) that
on making people see themselves as a com- rewarded communities for good sanita-
munity, where every member’s behavior tion practices, using an information cam-
affects the other—a daunting challenge and paign to define the principles of sanitation
perhaps the reason why sanitation has and publicizing the names of winning vil-
always lagged behind demand for water. lages. Reputation, recognition, and com-
munity rewards became the catalyst. Over
A participatory focus in rural areas a short period an estimated 100,000
Because communities need to manage sani- household latrines were built, and for
tation collectively, innovative participatory every rupee of state resources, local
approaches are required to generate spending on sanitation and related infra-
demand for it, especially in dispersed settle- structure increased by 35 rupees.
ments. The shift from open to fixed-point
Local compacts. Making the shift to better
defecation may be motivated by health,
sanitation practices is the first objective—
safety, and privacy concerns—issues of
but sustaining the shift is equally impor-
importance to women, who bear much of
tant. The local externalities and the need to
the burden of poor sanitation practices. In
understand and draw on local conditions
the approach practiced by Village Educa-
and knowledge suggest that local govern-
tion Resource Center (VERC) and Wat-
ments are the appropriate policymaker tier.
erAid in Bangladesh, an external group trig-
In Vietnam and West Bengal, India, local
gers community-wide recognition of the
governments have supported community
need for better sanitation practices. The
participation and ensured its continuity by
community then takes responsibility for
financing the work of the service provider,
self-regulation—motivating households to
usually a not-for-profit organization. In
strive for complete sanitation. In East and
Vietnam some local governments have used
South Asia this has even led to innovations
a program similar to Maharashtra state’s
in latrine technology and micro-credit
Gadge Baba scheme to acknowledge village
financing for investments in latrines and
and individual achievements.
associated infrastructure.
Subsidies. The community focus also Responding to demand
changes the approach to latrine subsidies. In in urban areas
Bangladesh, villages in the VERC/WaterAid Households in urban settlements with high
project did not require any external subsidy. population densities often show a greater
To assist low-income households, higher- demand for better sanitation facilities. The
income households provided resources. condominial systems in São Paulo, Brazil,
Once communities focused on the need for and the community sanitation systems of
collective responsibility, assisting individual Orangi in Karachi, Pakistan, and Parivartan
households to reach community goals was in Ahmedabad, India, suggest that informal
more readily accepted. In Vietnam the par- urban communities may be willing to man-
ticipatory approach was supported by a sub- age and pay for efficient systems of sanitation
sidy targeted at poorer households. and waste disposal. Small independent
Drinking water, sanitation, and electricity 175
providers serving households directly, as in Electricity
Dar-es-Salaam, show that urban households Like water, electricity has urban and rural
do invest in sanitation. So what are the components—and issues of managing grid
impediments to expanding these approaches? and off-grid systems. In the grid setting, the
The answer may lie outside the realm of issues of separating the policymaker from
water and sanitation—and in the regulatory the provider, charging for services, using
domain of urban centers. First, the formal private providers, and developing effective
recognition of informal communities by gov- regulatory systems are similar to water net-
ernments and the provision of some form of work issues (box 9.8).477 A key difference is
tenure have strongly influenced community unbundling (rather than decentralizing)
willingness to invest in household infrastruc- services.
ture and to work collectively on community For electricity in rural settings, the
infrastructure (La Paz in Bolivia, Ahmedabad extension of the grid network provides
in India). Research on garbage collection in lessons for managing non-network systems
informal settlements in Indonesia provides in water. And the emerging use of off-grid
empirical evidence of the negative relation- electricity systems can draw on lessons from
ship between incomplete property rights and community-managed water in rural set-
community investment in local public tings.
goods.476 It suggests that improving tenure
security increases the probability of garbage Grid systems. The experience from Latin
collection by 32–44 percent. America, Eastern Europe, and South Asia
Second, in dense urban areas the munici- suggests that unbundling the electricity
pal government’s willingness to allocate some chain into generation, transmission, and
public land to sanitation systems has enabled
communities to develop community facili-
ties, contracting them with a third party to
maintain and operate them (Pune in India). BOX 9.8 Are pipes and wires different?
Use is restricted to the community through a
Electrification rates by region Electricity losses, selected countries
monthly charge collected by the community
and paid to the operator. Sub-Saharan 1990 OECD
Africa 2000 China
Third, municipal laws need to support
Ethiopia
flexible standards and ensure that communi- South Asia
Indonesia
ties and households can make arrangements Egypt
East Asia
with independent providers. Laws that per- The Philippines
mit exclusive service provision need to be North Africa Sudan
replaced by laws that permit different Algeria
approaches and standards. Middle East Eritrea
A concluding caveat is, however, neces- Cameroon
Latin
sary on the discussion about sanitation. His- America Zimbabwe
Kenya
torical evidence suggests that demand for Developing
countries Togo
water and sanitation follows a sequencing— India
water first, followed by sanitation and then World
Nigeria
demand for waste water treatment. Experi-
0 25 50 75 100 0 5 10 15 20 25 30 35
ence also suggests that this sequencing is
Percent Percent
influenced by many factors of which service
delivery arrangements in the sector is only Unlike water and sanitation coverage, electricity coverage has increased significantly over the
past decade. But like water and sanitation, electricity faces daunting challenges in South Asia
one. In this context, policymakers must and Africa and rural areas across most regions in the world. And as in the case of water and
remain realistic and patient about how far sanitation, increased electricity coverage does not automatically imply efficient service deliv-
they can catalyze the demand for sanitation ery.The problems of theft, intermittent supply, shared access—captured broadly under the
through external interventions. Unless em- heading of electricity losses—make wires no different from pipes in the context of creating
accountability in service delivery.
bedded in a demand-responsive approach,
throwing subsidies at latrines will not resolve Source: International Energy Agency (2002).
the challenge of scaling up sanitation.
176 WORLD DEVELOPMENT REPORT 2004
distribution components is critical to transfers for a part of the capital costs. This
reforms in the sector—but only if the market would be similar to using regional water util-
is large enough to support multiple electricity ities to support community-managed water
generators, and hence genuine competi- systems. Importantly, the owner of the distri-
tion.478 Unbundling provides scope for com- bution is not the policymaker but the clients.
petition in the relevant sectors, primarily Unbundling the national REB into regional
generation. Separating the components also REBs, with some form of benchmarking,
creates scope for getting better information could support the clients in breaking a possi-
about the cost structure of each part of the ble monopolistic relationship between the
chain. The competition and the information REB and the cooperatives.
add to client power.
But transmission and distribution func- Rural off-grid. Rural provider organiza-
tions are monopolies, and without effective tions—or local governments—can also sup-
regulation it may be difficult to ensure the port off-grid systems in villages, in many
separation of policymaker and provider, and cases using renewable energy to generate
even reduce the scope to introduce competi- power. Donors have traditionally advocated
tion in generation. Unless distribution is solar household systems—not unlike the
transferred to different types of ownership, a technology push in latrines. But today’s
national or regional government as a sole renewable systems can support villagewide
owner will not have much incentive to sepa- grids—similar to villagewide piped water sys-
rate its policymaking responsibilities from the tems—to provide AC electricity for house-
operations of the distribution system. hold appliances of various types. Depending
Privatizing distribution is a common pol- on local conditions the systems can also be
icy approach, but decentralizing electricity wind-powered, solar, tidal, bio-gas, or hybrid,
assets to local governments is not generally with fossil-fueled generators as backup.
considered. Even where local governments
own distribution systems—as in South Moving the reform agenda
Africa—the policy discussion is about con- forward
solidating into regional distribution systems. India is revolting and the Thames stinks.
This is driven by economies of scale and Slogan in London, 1857
scope, and perhaps also by policy decisions to The result: Chadwick and the sanitary
cross-subsidize from urban to rural settings revolution in the United Kingdom.479
and to keep the cross subsidy in the sector.
Interestingly, in Mumbai and Kolkata, India, Given the weak voice relationship between
where electricity is under local governments, citizens and politicians in the water, sanita-
electricity provision has long been under pri- tion, and electricity sectors, deep institutional
vate operation. Even in Delhi—in effect a reform often comes from broader stresses in
city-state—power distribution is now pri- the economic, political, and institutional
vate. machinery of a country. In London pollution
was such a cause. In Johannesburg the city’s
Rural grid. The extension of the grid into bankruptcy was the impetus. In cities in
rural areas offer insights for rural water and Africa and Latin America a core impulse for
off-grid electricity with regard to reestablish- reform of urban water and sanitation is the
ing the relationship between policymaker combination of sector problems and a
and service providers. A model of rural macroeconomic crisis.480
cooperatives has emerged in the United Society’s view of economic development is
States and is being adapted in Bangladesh also important. In Australia, Chile, and Peru,
and the Philippines. A regional or national growth-driven economic development strat-
provider organization contracts with com- egy provided the impetus for improving the
munity cooperatives to be village-level dis- performance of water and power markets. So
tributors. In Bangladesh the Rural Electricity the possibilities for sector reform seem great-
Board (REB) supports the village coopera- est when there is a confluence of natural chal-
tives through technical assistance and fiscal lenge, fiscal crisis, and institutional reform-
Drinking water, sanitation, and electricity 177
mindedness.479 Opportunities for reform may taining the separation and ensuring that the
well arrive only by chance, when broader regulation of public providers is effective. In
changes in turn catalyze sectoral reforms. this context, introducing private players in a
What are the potential interim measures? Can few of the utilities would enhance the effec-
incremental change be strategic? tiveness of benchmarking the public
For urban networks, change will require providers.
separating the delivery functions from those Where this broader approach of making
of benchmarking and regulation. Keeping services work for all is not possible, a targeted
the latter with an upper-tier government— approach for serving poor people using small
central or regional—while dispersing own- independent providers is still an option.
ership of water and sanitation assets to Indeed, increasingly independent providers
lower-tier governments and the private sec- may, at the margin, emerge as a critical lever
tor could create this separation. Without for making services work for poor people.
ownership responsibilities, the upper-tier For rural systems—community-managed
policymaker would have greater incentives systems and self-provision—the challenge is
to use fiscal instruments, benchmarking, to seek mechanisms for the policymaker to
and regulation to promote improvements in support client power, using local govern-
service provision. Such incentives are less ments, regional utilities, and independent
inherent in a model where the regulator, providers. This is similar to the model of the
provider, and owner are one and the same. rural electricity cooperatives supported by a
Charging users for services strengthens this provider organization that provides a techni-
separation by directly involving clients in cal and fiscal hub. Where local governments
the service chain through the short route of provide this hub, the voice channel is direct;
accountability. where utilities are the support mechanism,
Where the introduction of private sector the voice channel is indirect. Where these
participation is tempered by politics or other options are not possible, the approach—
factors, strategic change may have to come however unsatisfactory—of targeted com-
first through changes in ownership and rela- munity projects remains.
tionships of accountability between tiers of For sanitation, the focus is on collective
the public sector. Interestingly, the history of action—to change behavior and mobilize
some industrialized countries suggests that communities to invest in community infra-
local ownership can trigger a more credible structure. To support this, compacts between
path to private sector participation, especially policymakers and NGOs may be more
if local governments are effective in strength- appropriate. In urban areas, where greater
ening voice. demand for sanitation services may exist,
Where local governments exist and water policymakers can support client power by
and sanitation services have been devolved to allowing independent providers to function
local governments, the challenge of improved and by supporting tenure in informal settle-
service delivery would lie in making decen- ments. A more incremental version would be
tralization work. Where local governments similar to that in the rural water sector—with
do not exist, the lever of decentralized owner- a public provider organization supporting
ship would be lost, but benchmarking and NGO delivery in targeted areas.
regulation of the public sector would remain. But if the failure of voice is why infra-
But for such a strategy to be effective, charg- structure services have failed poor people,
ing for water would become even more criti- targeted intervention cannot form the basis
cal. It would enable providers to achieve of institutional reform. Reforming the rela-
some independence in operations, but more tionships of accountability would remain the
importantly it would give clients a role in sus- policy challenge.
spotlight on Johannesburg
Accountability in city services
In 1999 the Transformation Lekgotla, the political body directed to address the financial and institutional crisis of Johan-
nesburg, South Africa, appointed a new city management team. The team’s task was clear: not to fix street lights but to fix
the institutions that fix street lights.482 The solution was a three-year plan—“iGoli 2002”—to reconfigure city services.483
B y most developing world standards
Johannesburg is not a poor city. But
it faces serious development and
service delivery challenges. Apartheid made
sure that exclusive white suburbs were well
They slashed capital and operating budgets,
and even expenditures needed to maintain
minimum service levels. They froze posts,
causing huge increases in workloads as
despairing officials began to drift away. And
independent, single-purpose entities to
overhaul larger municipal services.
These operating entities were the major
innovation of iGoli 2002.
• Three utilities were established for user
serviced, forcing black residents into they began to explore public-private part-
charge–based services—water and sani-
sprawling underdeveloped slums. Poverty, nerships.
tation, electricity, and waste manage-
unemployment, and homelessness are all
ment.
worsened by the deeper problem of
inequality. The city of gold—iGoli 2002 • Two agencies were established—for
The Johannesburg Metropolitan Munici- The new city management team realized parks and cemeteries, and for roads and
pality was democratically elected in 1995 to that Johannesburg needed a new system of storm water—where expenditure would
address the service imbalances. It quickly accountability for service delivery within a still have to be covered by tax revenue.
found itself in a fiscal and institutional crisis. dramatically different institutional archi- • Smaller corporatized units were set up
Johannesburg was not one institution tecture. To address fragmentation and the for facilities like the zoo and the civic
but five, with an overarching Metropolitan severe moral hazard, the city had to be theater.
Council and four primary-level councils. reunified. Political debate focused on two
models of metropolitan coordination: All were established as new companies,
Each could decide its priorities and approve
with the council as sole shareholder.
its budget. But responsibilities for key ser- • Defining more clearly the rules of bud- Two key units would guide and oversee
vices were split between the two levels, and geting, fiscal transfers, and service deliv- the new entities: a corporate planning
the operating budgets of the councils had to ery between the metropolitan and unit to do citywide strategic planning, and
balance only in aggregate. That meant each municipal tiers, strengthening both. a contract management unit to regulate
council could blissfully spend on the
• Creating a one-tier metropolitan gov- the operating utilities through a range
assumption that its shortfalls would be off-
set by surpluses in another. ernment.484 of new instruments, including licensing
agreements and annual service level
The arrangement was a recipe for disas- Johannesburg chose a hybrid. It central-
agreements.
ter. Each municipality went on a spending ized political authority, treasury manage-
spree, and ambitious infrastructure plans ment, and spatial planning under one met- One size does not fit all
were rolled out without the finance. Deteri- ropolitan government. But it organized Since the operating entities are not bound
orating revenues—due to a service-payment service delivery through decentralized by overarching administrative rules, they
boycott culture left over from anti- structures. This meant merging five sepa- have scope to differentiate. Each could set
apartheid struggles, poverty, and poor credit rate councils into one overarching munici- up different management structures,
control—made the situation worse. The city pality, creating integrated service delivery reporting lines, delegations, job descrip-
was forced to delve into its reserves, but structures with new incentives. tions, performance management systems,
these could go only so far, and by late 1997
Accountability in service delivery and operating procedures. Each could con-
major creditors could no longer be paid. At
figure its internal accountability to suit a
the peak of the crisis, the city had an operat- Under one metropolitan council, iGoli 2002
specific service delivery environment.
ing deficit of R314 million. split the institution for policy formulation
Three examples:
Johannesburg was in serious trouble. and regulation from the institutions for
Having decentralized responsibilities, the implementation. On one side, a core admin- • The water and sanitation departments
national government followed the intergov- istration remained responsible for strategic were merged into one department and
ernmental rules and would not bail the city planning, contract administration, and such under the Company’s Law converted
out. So Johannesburg had to dig itself out corporate services as finance, planning, and into a city-owned utility with a board of
of its own crisis. communication. On the other, two sets of directors. The assets and workers of the
Two years of harsh cutbacks followed. operating entities were established: 11 new departments were transferred to the
Blaming officials for the crisis, politicians regional administrations for libraries, utility, which was put under a five-year
took a much tighter rein over day-to-day health, recreation, and other community management contract with a private
decisions, ending management discretion. services; and financially ring-fenced, semi- company.
Spotlight on Johannesburg 179
• The roads department was converted Figure 1 Getting back to an operating
surplus—thanks to iGoli 2002
Risks and prospects
into a city-owned agency with a profes- Will Johannesburg maintain the separation
sional board and divided into two Millions of rands between policymaking, providers, and reg-
departments—for planning and for 150
ulators? The roles of client and contractor
100
contracts. The contracts department are still evolving. Some implementation
50
operated against specific outcomes set capacity remains within the core adminis-
0
by the planning department, with the tration. As in the past, managers occasion-
–50
threat that failing to meet benchmarks –100 ally get hauled into councilors’ offices to
could lead to contracting tasks out to –150 explain their actions. There are also unre-
the private sector. –200 solved governance debates, with the council
• The gas company was sold to the private –250 arguing for a greater councilor representa-
sector. –300 tion on the boards of operating entities.
–350 Five factors will be critical in sustaining
The reforms gave operating entities 1995 1996 1997 1998 1999 2000 2001 2002 the commitment to the principles of iGoli
management independence. For example, Source: Allan, Gotz, and Joseph (2001). 2002:
salaries have been adjusted to attract top-
flight skills, and new systems have been • Keeping the monitoring and regulatory
procured for everything from human also apparent in the city’s financial stand- unit of the operating entities within the
resource management to remote water- ing, with dramatic improvement in both city administration; they are not legally
pressure metering—increasing productiv- operating and capital budgets (figure 1). and administratively independent.
ity and service efficiency. And they have • Maintaining the contract management
introduced innovative staff development Engaging other stakeholders unit’s operational autonomy and capac-
programs and performance-linked pay Labor: Despite protracted negotiations ity—and thus the independence of the
schemes. with organized labor, iGoli 2002 did not get operating entities.
The entities operate at arm’s length from its endorsement. According to labor groups, • Benchmarking service delivery stan-
the council, but accountability has been the city’s crisis was not a result of a failure dards, monitoring these over time, and
strengthened because the primary mecha- of institutional design. Instead it was a making the information available.
nism is no longer the impossible-to-digest result of “a lack of skills and experience,
and management’s unwillingness to • Ensuring that fiscal and financial decen-
committee report on everyday operational
[establish] functional organizations and . . . tralization remains binding. Municipali-
matters. Now councilors focus on strategic
financially unsound decisions.”485 ties relying primarily on their own rev-
oversight, and officials are responsible for
enue sources to fulfill their democratic
outcomes clearly defined in service-level
duties without national guarantees are
agreements. Reporting goes through struc- National government: The team ne-
more likely to be accountable to their
tured channels, either to the contract man- gotiated a R500 million restructuring grant
citizens. The current intergovernmental
agement unit or to company boards of with the National Treasury to support iGoli
system has devolved authority and
directors, which include external specialists 2002 in exchange for a commitment to
accountability to the cities; this needs to
capable of probing service results. timely and steadfast implementation of its
remain.
The operating entities have also set up key elements. It is a key accountability
user forums allowing communities to com- mechanism between the national and city • Both councilors and officials consistently
municate needs, raise complaints, and even governments and has become an incentive adhering to a clear, courageous, and far-
participate actively in service provision. scheme to catalyze citywide restructuring sighted strategy. Sustaining momentum
Officials are much more sensitive to ever- throughout the country. will require greater citizen voice at all lev-
changing service delivery challenges. els. The decentralized operating entities
These management improvements are Capital markets: On the strength of the and the administrative regions have
already translating into better service deliv- reforms, management sought a new credit mechanisms for engaging citizens. Using
ery. Waste collection has been extended to rating, aiming to win back the confidence them will be critical for sustaining iGoli
poorer neighborhoods for the first time. of the city’s banking community. As the city 2002.
Fleets of new buses now serve outlying shifted from a large deficit to a balanced
communities. In addition, expenditure on budget, capital expenditure financed by the
water infrastructure has increased and markets went from R300 million to well
water services have expanded. Results are over R1 billion in two years.
