Download Shifting Governance Models in Urban Water and Sanitation

Shifting Governance Models in
Urban Water and Sanitation
Paper prepared for the “The 21st Century Indian City:
Developing an Agenda for Urbanization in India”
March 22-24, 2011
Alison Post
Assistant Professor
Political Science and Global Metropolitan Studies
U.C. Berkeley
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Outline of presentation


Place Indian case in comparative perspective
through discussion of reform initiatives in
other countries in developing world
Will focus on two main reform initiatives:
◦ Decentralization
◦ Institutional reforms designed to isolate service
providers from political pressure
◦ Argument: both initiatives based on unrealistic
assumptions about politics of service provision
and hence did not solve problems
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Historical backdrop to reforms
During import substitution (ISI) era,
national agencies managed systems in
many developing countries
 In periods when governments had good
access to finance  important gains in
coverage, esp. under democratic regimes

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Problems emerged with the national
provision

Several problems emerged by the 1970s
and 1980s
◦ Focus on new infrastructure rather than
system maintenance and commercial
management
◦ Difficult politically to raise tariffs in line with
inflation  system financing via general tax
revenue
◦ Model difficult to sustain in the wake of the
1980s debt crisis
◦ Led to “low level equilibrium”
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Diagnosis: Incentives Problems

Common diagnosis in policy circles and
international financial institutions 
problems of sector derive from two
incentive problems:
◦ Systems managed at too far a distance from
the citizens who consumed their services
◦ Systems deprived of tariff revenues leaving
little money for maintenance because of
influence of politicians with short-run
concerns
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Decentralization

Decentralization would ensure service
provision more responsive to local
conditions in two senses:
◦ managers would have better information
about service needs
◦ would be held more accountable to local
populations
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Insulation from Politics
Incentive problem: politicians’ electoral and
patronage concerns prevent them from enforcing
payment and levying sufficient tariff revenue to
finance maintenance and system expansion
 Low tariffs in short-run interest of consumers,
but in long run detrimental to health of
population
 Proposed solution: shield systems from the direct
influence of elected officials through:

◦ Delegation of services to ring-fenced special purpose
agencies
◦ “Contracting out” to private service providers
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Experiences with Decentralization

During the 1980s and 1990s, a large number
of developing countries decentralized
services
◦ International financial institutions promoted this
shift through lending programs
◦ National politicians decentralized when it was
consistent with domestic political incentives
(fiscal motives common)

Trend particularly strong in Africa, Latin
America, Eurasia, and the Asia-Pacific region
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Responsibility for Urban Water and
Sanitation Systems in 2008
Region
Local or
Intermediate
Tier of
Government
Africa
Algeria, Benin,
Cameroon, Egypt,
Gabon, Ghana,
Guinea, Cote
de’Ivoire, Kenya,
Madagascar, Mali,
Morocco,
Mozambique,
Niger, Nigeria,
Senegal, South
Africa, Togo,
Tunisia, Uganda,
Zambia
National
Government
Data source: United Cities and Local Governments (2008).
Percentage of
Countries with
Local
Management
(Full or Partial)
100%
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Responsibility for Urban Water and
Sanitation Systems in 2008
Region
Local or
Intermediate
Tier of
Government
Asia-Pacific
Australia, China,
India, Indonesia,
Japan, Malaysia,
New Zealand,
Pakistan,
Philippines, Korea,
Thailand,Vietnam
National
Government
Percentage of
Countries with
Local
Management
(Full or Partial)
100%
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Responsibility for Urban Water and
Sanitation Systems in 2008
Region
Local or
Intermediate
Tier of
Government
Eurasia
Armenia,
Azerbaijan,
Belarus, Georgia,
Kazakhstan,
Kyrgyz Republic,
Moldova, Russia,
Tajikistan,
Turkmenistan,
Ukraine,
Uzbekistan
National
Government
Percentage of
Countries with
Local
Management
(Full or Partial)
100%
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Responsibility for Urban Water and
Sanitation Systems in 2008
Region
Local or
Intermediate
Tier of
Government
National
Government
Latin America
Argentina, Bolivia, Costa Rica, El
Brazil, Chile,
Salvador, Panama
Colombia,
Dominican
Republic, Ecuador,
Guatemala,
Honduras,
Mexico,
Nicaragua,
Paraguay, Peru,
Uruguay,
Venezuela
Percentage of
Countries with
Local
Management
(Full or Partial)
83%
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Effects of Decentralization I

Nascent literature suggests that
decentralization is not a panacea
◦ Incentives to keep tariffs low and refrain from
punishing customers for nonpayment of bills
are stronger at the local level
◦ Pressures to devote firm revenues to
patronage employment and new household
connections rather than basic maintenance
◦ “Accountability” achieved is one that focuses
on short-term, rather than long-term
consumer interests
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Effects of Decentralization II

National and intermediate tiers of
government retain important financial and
regulatory roles following decentralization
◦ Local systems often remain dependent upon
higher tiers of government for the financing of
key pieces of infrastructure
◦ Presence of shared responsibility makes it
difficult for voters to attribute blame or credit
to the right political actors
◦ “Shared governance” also leads to
coordination problems
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Reforms to Shield Providers from
Politics

Publications and lending programs
launched by international financial
institutions outlined reforms designed to
insulate utility managers from political
pressures
◦ This would free providers from political
pressures for patronage employment, low
tariffs, low collection rates
◦ Would allow managers to consider long-run
objectives such as system maintenance
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Institutional Reforms for Public
Entities
Publicly-owned providers could be
improved through institutional changes
that gave providers greater operational
independence
 Would allow service providers to
implement a series of controversial
policies designed to help them to cover
both operational costs and investment
through tariff revenue.

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Private Sector Participation
International financial institutions and
academic analysts promoted a more
dramatic variant of these institutional
reforms during the 1990s in the context
of the Washington Consensus reform
package
 Range of responsibilities could be
“contracted out,” and contract
compliance monitored by regulatory
agencies

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Effects of Institutional Changes I

Existing case studies suggest that
institutional reforms have increased,
rather than decreased, politicization
◦ De jure independence is not the same de facto
independence
 Utility directors appointed by elected officials
 “Independent agencies” can be heavily dependent
upon subsidies for operations and/or the
construction of basic infrastructure
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Effects of Institutional Changes II

Cost recovery measures introduced by both
public and private increase the salience of
and level of political controversy
◦ NGOs and other groups attack such policies
◦ Cost recovery measures have, understandably,
elicited stronger attention and controversy when
private firms manage services
◦ Firm threats to sue their government partners in
international tribunals if governments violate
contract provisions have added further to tension

Result: uptake of governance reforms and
cost recovery policies has been uneven
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Effects of Institutional Changes III

Many governments now opting hybrid
“public-private partnerships” that include
less visible roles for private capital
◦ Ex.: SABESP, the water and sanitation
provider for the São Paulo metropolitan area,
49% equity sold on New York Stock Exchange
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Conclusions
Institutional reform initiatives in the water
and sanitation sector in developing countries
promised to correct incentive problems that
trapped service providers in a “low level
equilibrium”
 Rather than improve accountability,
decentralizing reforms have created complex
systems of “shared governance”
 Efforts to insulate service provision from
electoral politics have done anything but that

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