Transcript No Slide Title

PPPs and Water: International Experiences
Hyderabad
May 17, 2008
Water & Sanitation Sector
PPP Experiences
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Water & Sanitation Sector – The Challenge
 Annual investment required to meet MDGs* - $25-30 billion
 At present, $15 bn, of which 75% public, 14% ODA**, 11% private
 Public spending on water and sanitation halved between 1980s and
1990s. ODA has declined since the mid 1990s
 Private investment did not compensate as expected. Current
private investment is only about $1-2 billion per year
Extensive need for support of private investment
in the water industry
*UN Millennium Development Goals - http://www.un.org/millenniumgoals/
**Official Development Assistance. The term applies to aid from the members of Development Assistance
Committee of the OECD to developing countries.
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Complexities of the water and sanitation “market”
 Politically sensitive tariffs – “profit is bad”
 Capital intensive, slow asset turnover requiring long-term
finance
 Local and disaggregated resource
 Unreliable base line information
 Local currency revenues
 Sub-national and regulatory risks
 Higher than anticipated operating risks
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Need to build on key lessons learned
 Depoliticizing tariffs - affordability, willingness to pay and cost
recovery
 Smart risk allocation between private investors, government
and end-users
 Public money support to PPPs - managing the contingent
liabilities
 Building adequate institutional capacities
 Decentralization of service provision
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Water & Sanitation Sector
PPP Experiences
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Investments in water and sewerage in middle and low
income countries
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Selected management and lease/ affermage contracts
Country
Period
Years
Status
Type
Amman
Jordan
2000/05
6
Extended twice,
soon to be
completed
M
Antalya
Turkey
1996/01
6
Terminated
A
Baranquilla
Colombia
1990/05
16
Ongoing
L/A
Cartagena
Colombia
1995/05
11
Ongoing
L/A
Gaza
West Bank
1995/05
11
Ongoing
M
Gdansk
Poland
1992/05
14
Ongoing
A
Dakar + 55 towns
Senegal
1996/05
10
Completed,
recently
extended
A
Mining townships
Zambia
2000/04
5
Completed, not
extended
M
Source: World Bank, 2006
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Why management and lease/affermage contracts?
 Well adapted to address main problems most South Asian
Water Sewerage & Sanitation (“WSS”) utilities are faced
with:
 Poor quality of service and inefficiency of operations
 Private operators less willing to take the risk of financing
extension of WSS infrastructure
 Within the framework of long term concessions
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Conclusion 1: coverage and quality of service have
generally improved
 Connection ratios have improved
 Benefiting the poor (Cartagena, Senegal…)
 Per capita consumptions have usually increased
 Permanence of water distribution has always improved
 But Gdansk still supplies 24/7 water with half the quantity
of water
 Bacterial quality of water has usually improved
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Conclusion 2: efficiency has always improved
 NRW have decreased
 Not always in a spectacular manner
 Metering ratios have always increased
 Staffing ratios have usually become optimal…
 Staff reduced only in 1 utility – Barranquilla (where the
operator is jointly owned by municipality and private
company)
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Conclusion 3: sustainability has always improved
 Collection ratios have always increased
 Working ratios have always improved
 Tariffs (always set by public authorities) have
 Increased in 2 cases
 Increased moderately in 2 cases
 Decreased in 3 cases!
 Financial efficiency gains for the owner of the contract
have often been substantial
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Learning from Concessions
Manila - Objectives
 Reduction of system leakages
 Improve service delivery
 Expansion of service to low income residents
 Investment in the water and Sanitation system
 Deliver international standard water quality to the users
 Improve Public Health by providing Sanitation
 Change in the management approach
 Establish a water regulatory authority
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Manila- Lessons Learned
 There was no national water / concession law but, with diligent legal
work, it was possible to proceed with a PPP / PSP transaction without
prior national sector reform
 Two concessions provide benchmarking of one concession vs. another,
easing monopoly concerns and facilitating regulatory oversight
 The Regulator frequently ignored/delayed their responsibilities in the
contract. Failure to provide penalties for ignoring contract provisions
on the part of the public sector can lead to failure of the concession /
transaction
 Interface of public / private investments, project timing, and
infrastructure connections should be anticipated and appropriate
penalties applied
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