part 2: key challenges and potential policy framework leading to clearer, more diverse, more...

Part 2: Key Challenges and Potential Policy Framework leading to clearer, more diverse, more effective public and private roles – Introducing the

discussion

by

Jan G. JanssensSpecial Advisor

Global Water Operator Partnership Alliance (GWOPA)UN HABITAT

16 March 2009

5th World Water Forum – Istanbul 2009

Topic 4.4: Optimizing Public & Private Rolesin the Provision of Urban Water Services

4.4.1: Towards a Vibrant Local Marketplace – Opportunities and Trends

2

Rethinking Utility Structure, Governance and Regulation

Governance

Ownership

Alignment with

Government

Regulation

Service Provider

3

Autonomy ~ being independent to manage professionally without arbitrary interference by others.

Accountability ~ being answerable to another party for policy decisions, for the use of resources, and for performance.

Customer orientation ~ Reporting and “listening” to clients.

Market orientation ~ making greater use of markets and the introduction of market-style incentives.

Critical dimensions of a well run (public or private) utility – basis for reform

4

Beyond the public – private debate …

It is NOT about ownership of assets, but INDEED about good governance and management

Mimicking a “private sector” corporation with respect to: decision making autonomy, accountability, incentives, professional management, commercial outlook.

5

CentralGovernment

LocalGovernment

Service providerUtility

1. Performance based Inter-governmental transfers

2. Performance based agreements

1

2

Contractualization ?

6

Public- public contracts in the WSS sector: Why bother?

Public-public contracts have

intrinsic limitations

Properly designed contracts can be a useful tool…

All contracts in the WSS sector have their limitations

A challenge to make

public-public contracts in the water supply sector

work

7

Necessity to improve approach in emerging economies and fragile countries?

Regulatıon, functıon or ınstıtutıon?

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Three “guiding” principles of regulation

1. Benefits of Regulation must exceed its Costs

2. Regulation is a Means to an End, not an End in Itself

3. What ultimately matters are outcomes – sustainable water supply and sanitation services – not regulatory rules(“performance not processes ”)

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Two more guiding principles …

4. Quality of service standards must be realistic, affordable, monitorable and enforced

5. Whenever possible, use benchmarks rather than actual costs for prices or subsidies

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Regulation– Melding two traditions

Government

Customers

Services

Utility

Tariffs

Government

Utility

Regulator

Customers

Services

Sets Tariffs and service standards

Tariffs

Appoints

Asset holding company

Contract monitoring committees

ContractSets Tariffs and

service standards

Regulation by institution(Anglo-American tradition)

Arbitrator

Regulation by contract(French civil law tradition)

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Necessity to improve approach in emerging economies and fragile countries?

Often the process of change and reform will take from 15 to 30 years to achieve development objectives, depending on the system’s size and level of actual performance.

No contractual model can cover this duration without flexibility and applying transparency

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Figure 1: Basic modes of water sector organization

Source: Blokland et al.(1999)

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Necessity to improve approach in emerging economies and fragile countries?

From a menu of contractual models to a logic of process?

The lack of participation of users/citizens and access to information have contributed to the rejection of several projects despite the technical and commercial results

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The ultimate objective is to improve quality of service and sustainability of the ‘system’,and not of one particular PPP model …

By using an approach with progressive obligations, a continous sequence of flexible models

By applying transparency and introducing flexibility

By actively engaging with all stakeholders and civil society, in a participatory approach

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A Proposed 3-step Engagement

Technical Assistance

Performance-basedManagement Contract

Enhanced Affermage/Leaseor

Subsidized Concession

Tender &Contract Award

Tender &Contract Award

1

2

3

contract of means, input based

results contract, output based

trigger: independent audit

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Necessity to improve approach in emerging economies and fragile countries?

Innovative thinking should be set out on the process of competitive bidding for phased contracts with progressive obligations, addressing in particular issues of transparency and, underbidding and overbidding.

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Successful Change and Reform requires a personal touch …

Personal leadership was an element of success in all of case studies studied (and all other successful reform processes)

Scaled up efforts to improve and expand WSS services requires leadership development

There is a critical shortage of change management skills in the WSS sector

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Manager or Leader ?

direction

support

55

1

1

Leader

Manager

interdependentindependent

dependent

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CoreCompetences

Efficiency

Effectiveness

Financial Sustainability

Knowledge Areas

Operational Areas

…

…

…

…

CHANGE

Leadership

Senior Management

Junior Management

Staff

WSS Utility

Capacity Building for Change

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Summary

1. Rethinking Utility Structure, Governance and Regulation

Beyond the public-private debate? Contractualization?

2. Necessity to improve approach in emerging economies and fragile countries?

Regulation, function or institution? From a menu of contractual models to a logic of

process?

3. Capacity Building for Change

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Thank you