The Unproductive Argument of Public versus Private:The Regulation of Water Services
Throughout the world governments, international agencies, local organisations, community groups and NGOs are seeking means of delivering sustainable water and sanitation services. The traditional municipal approach, although in theory the most politically attractive due to responsibility and service provision resting wholly with elected local bodies, has failed to provide sustainable water services, with many in a spiral of decline. There are fundamental reasons for this decline but attempts have been made to rectify the deficiencies, not by addressing them but through a change to a different form of public sector operation or by use of the private sector. There have been both successes and failures. The use of, or even proposals to use the private sector, are often highly controversial and emotive, diverting attention away from the need for some fundamental reforms.
Content Table
Key Areas for Reform
The required reforms relate to the following:
- the need to separate policy and delivery functions and establishment of sound policies and clear direction to allow operational management to concentrate on delivering the required service without political interference in the delivery processes
- sustainable cost recovery including both full operational and maintenance costs and provision for system refurbishment, through appropriate allocation of grants, subsidies, and revenue from water charges, with effective provisions for the poor.
- integrated and transparent planning with public participation and effective monitoring and reporting
In practice all aspects of reform relate to each other and should be addressed in an integrated way. For example systems deteriorate due to inadequate funding which may be due to a reduction in subsidies or a political unwillingness to raise water service charges. Politicians might use water services income to subsidise other local services, or use water utilities to achieve non-water service related objectives, such as creating employment. Low revenue is generally associated with low pay which limits the employment of good quality staff, and increases the temptation for corruption. Each of the three groups of reform is discussed briefly in turn.
Government’s role is policy making, and those involved in government are generally most suited to a policy function. Elected local government officials are interested in politics and policy, and local authority staff have been trained as administrators, not as operational managers. There are exceptions but governments, either national or local, are not generally good at managing operations, and with policy responsibilities having to take priority, the direction and energy of the officials is inevitably taken up in local political matters, and not in delivering an efficient of water service. The solution is to separate the delivery functions through internal contracts, by formation of publicly owned companies or by contracting out to the private sector. The separation has to be complete and transparent with government officials unable to interfere in operational matters. Each form of separation should be accompanied by transparency of budget and accounts, and effective monitoring of the required deliverables.
Paying for local services is never popular, and unfortunately there are those that advocate that water services should be free. Providing a service costs money and has to be paid for in some way. Unless operations and maintenance costs are fully covered, and provision is made for refurbishment of deteriorating assets, the quality of service will inevitably fall resulting in dissatisfaction with the service, unwillingness to pay and a spiral of decline. See Figure 1 below. Provision has also to be made to extend the service to keep up with expanding communities. There is no magic formula, service provision has to be appropriate and efficient to avoid excessive costs, and cost recovery can only be through grants, subsidies and charges. Much is made of the poor being unable to pay, but in practice those people not being provided with a public service, pay more to private water vendors for less and low quality water. The poor do pay, but they pay ‘day by day’. Generally they are unable to save, and provision should be made for easy payment methods for access and water bills. Financial reform of water service provision should take these factors into account and subsidies should not be used to prop up poor inefficient services, but to provide targeted assistance for the poor.
Fig. 1. The Viscious Circles of Decline. (Source: Presentation by Eero Kontula, Finnida, at World Bank/WaterAid Workshop, London, August 2004)
A number of conditions are required to achieve sustainable water services. For water supply, there have to be reliable water resources based on defined extreme situations, the necessary water treatment processes to achieve the defined drinking water quality standards, and distribution systems that deliver water in the required quantities to the consumers without adversely affecting its quality. On sanitation, there should be an effective collection system and treatment system, whether or not there is a waterborne sewerage system or a community based recovery system, to achieve the specified environmental objectives. As stated early, all aspects have to be funded and costs recovered. Often decisions are taken piecemeal, without consideration of cost implications. An integrated planning process is required so that water and sanitation service decisions can be taken with reference to each other and to financing and cost recovery. An integrated planning approach allows rational decisions on priorities, and on timescales and affordability. Ideally, the planning process should be managed by an independent agency which is able to work transparently and consult and inform the public at all stages.
Resources
The material in this article was taken from a book entitled Institutional Governance and regulation of Water Services published in 2007. The content of the book is based on common-sense principles and what works well in practice.
The book consists of a set of chapters which focus on the essential elements for sustainable water services, including steps for successful public service operations and steps for the successful use of the private sector.
