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1 Processes of Reform Capacity Building Module 2 Overview Introduction Key steps in reforms Balancing progress in utility and environment Video interviews with three speakers Triggers and obstacles to reform Key success factors in reform Taking care of the poor in reforms Role of central government in reforms Leadership 3 Planning reforms Identify what the problems are… Inefficient planning and project implementation Water availability, water quality, energy supply Staff motivation, capacity, efficiency Tariff level and structure Corruption Commercial operation 4 Key steps for successful reforms Planning the process of introducing reform Involving stakeholders Setting upstream policy Setting service standards, tariffs, subsidies, and financial arrangement Developing institutional model Utility: public or PSP Non-utility services: small scale providers ‘Environment’: policy maker; asset holder; regulator Legal instruments for the arrangement 5 Involving stakeholders Politicians: local and national levels Management and staff of public utility Consumer associations NGO: national and int’l (service to the poor, environment, governance…) Financiers: multi and bi-lateral Alternative suppliers (tankers, drilling companies…) Media: national and int’l Private sector: local and int’l 6 Sustainable utility reform and reform of the environment have to go hand-in-hand Our goal environment good Typical reform path Possible combinations environment status/utility provider status poor poor good utility 7 Reform of the environment How Uganda combisequenced the reforms of NWSC, its national utility 03 staff performance contracts 02 automatic tariff indexation 00 ext & int performance contracts 98-00 service & revenue enhancement programs 98 new MD 97 new Board 97 corporate plan 95 new statute end 80s & 90s Major rehab mid 80s new government 70s political turmoil Utility reform 8 Overview Introduction Key steps in reforms Balancing progress in utility and environment Video interviews with three speakers Triggers and obstacles to reform Key success factors in reform Taking care of the poor in reforms Role of central government in reforms Leadership 9 South Africa Mike Muller Former Director General, South African Department of Water Affairs &Forestry 10 South Africa Total pop - 45.2 Million (2005) Urban pop (% of total) – 59% Surface area - 1,221,037 sq miles Life expectancy – 45 years GDP (US$ billions) – 240.2 Access to water supply – 88% Access to sanitation – 65% Trigger: the end of apartheid Vertical unbundling: bulk utilities and end providers Most utilities are corporatized Subisidies: Free basic water 25 l/p/d Basic water supplies to nearly 15 million people in 10 years; Sanitation much slower ‘applying good old-fashioned public finance principles’ Ongoing decentralization process – after establishment of democratic municipalities in 2001 11 Uganda Dr. William Muhairwe Managing Director, National Water and Sewerage Corporation, Uganda 12 Total pop - 28.8 Million (2005) Urban pop (% of total) – 13% Surface area - 241,038 sq miles Life expectancy – 49 years GDP (US$ billions) – 8.7 Access to water – 60% Access to sanitation – 43% Reform of the environment Uganda Utility reform 13 Russia Alexander Bazhenov Vice-Chairman, Eurasian Water Partnership 14 Russia Total pop - 143.2 Million (2005) Urban pop (% of total) – 73% Surface area - 17,075,200 sq miles Life expectancy – 65 years GDP (US$ billions) – 763.7 Access to water – 97% Access to sanitation – 87% Trigger: the end of communism Subsidies: l’goti and maximum % expenditure WSS part of broader Housing and Communal Services sector – centralized billing and collection Mostly municipal departments with little autonomy History of focus on infra: low efficiency Regulation is regional ‘oblast’ responsibility Boom & bust of PSP in 03/04; now 2nd generation PSP 15 Overview Introduction Key steps in reforms Balancing progress in utility and environment Video interviews with three speakers Triggers and obstacles to reform Key success factors in reform Taking care of the poor in reforms Role of central government in reforms Leadership 16 The first challenge: how to trigger reform Droughts, floods & epidemics Political shifts & pressures Unacceptable levels of service financial crises 17 The constant challenge to maintain progress…. performance Maintain progress 2 1 Pressure to improve 4 Broad sector reform 3 Utility reform time 18 Triggers and Obstacles to Reform Click the button to play a 5 minute video clip. (Windows Media;9,421k) 19 Maintaining progress: Balancing external accountabilities Policy makers Owners The unserved? Regulators Financiers Customers 20 Overview Introduction Key steps in reforms Balancing progress in utility and environment Video interviews with three speakers Triggers and obstacles to reform Key success factors in reform Taking care of the poor in reforms Role of central government in reforms Leadership 21 Key Success Factors in Reform Click the button to play a 5 minute video clip. (Windows Media; 9,208k) 22 Overview Introduction Key steps in reforms Balancing progress in utility and environment Video interviews with three speakers Triggers and obstacles to reform Key success factors in reform Taking care of the poor in reforms Role of central government in reforms Leadership 23 Taking Care of the Poor in Reforms Click the button to play a 10 minute video clip. (Windows Media; 15,619k) 24 Existing quantity-targeted subsidies are regressive % of poor hhs receiving subsidy vs. benefit targeting performance Hungary (S), 0.98 Share of poor hhs receiving subsidy 100.0% 90.0% India, State IB Ts, 0.56 80.0% 70.0% 60.0% 50.0% Electricity Guatemala, 0.20 40.0% 30.0% 20.0% 10.0% 0.0% 0.00 Water Kathmandu, 0.56 Ho nduras, 0.49 P eru, 0.82 B angalo re, 0.66 Sri Lanka, 0.83 Cape Verde, 0.48 Sao To me, 0.41 Rwanda (S), 0.35 Cape Verde, 0.24 0.20 0.40 0.60 0.80 1.00 1.20 Benefit targeting perform ance indicator Source: Water, Electricity, and the Poor: Who Benefits from Utility Subsidies? – Komives et al. 25 Who are the urban poor? Typically use multiple sources and differentiate drinking from other uses - purchase small quantities if a free source is available: May share a house or yard tap with multiple families – design standards underestimate number of users May purchase from a neighbor – poor households are often heterogeneous; differentiate demand as slums may have mixed densities, income levels May use a public standpipe/standpost/kiosk – the level of consumption is constrained by distance traveled, time spent collecting water May rely on small-scale private sector when services do not meet their needs – choose to have water delivered to house rather than walking to and queuing at the standpipe BUT: poor households do pay for water often at higher rate (per cubic meter) than wealthy households 26 How to improve services for the poor? The long term utility solution: a private house/yard -connection for all Standpipes – from free to paid service Augmenting small-scale service providers How to deal with self provisioning? 27 Overview Introduction Key steps in reforms Balancing progress in utility and environment Video interviews with three speakers Triggers and obstacles to reform Key success factors in reform Taking care of the poor in reforms Role of central government in reforms Leadership 28 The Role of the Central Government Click the button to play a 4 minute video clip. (Windows Media; 7,526k) 29 Overview Introduction Key steps in reforms Balancing progress in utility and environment Video interviews with three speakers Triggers and obstacles to reform Key success factors in reform Taking care of the poor in reforms Role of central government in reforms Leadership 30 The political economy of reform Reforms must provide returns for the political decision makers who are willing to make the changes…. Initiate reform where there is a powerful need, and demonstrated demand, for change Nothing succeeds like success Best fit rather than best practice Realistic goals and timeline Develop a sequenced, prioritized list of reforms… Match available human, financial and knowledge resources Take one step at a time, but lock in progress 31 The Importance of Leadership Click the button to play a 3 minute video clip. (Windows Media; 3,477k)