Optimizing Public and Private Roles in the Context of Evolving Needs & Marketplace

World Water Forum 5 – IstanbulSession 4.4.1 March 16, 2009

Paul Reiter IWA Executive Director

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What Have We Learned?

1. The problem of urban water and sanitation service provision in lower and middle income countries is growing rapidly, not shrinking

2. In meeting these challenges, experience over the past 15 years reveals that while real progress was made, PPPs alone are not likely to be the solution for lifting public utility performance world wide

3. Reaching the 93% of public utilities will therefore require a different and more complex approach

4. The traditional private sector marketplace has matured and evolved in a way that could provide additional tools for strategic outsourcing

• New service offerings• More local and regional participants from developing countries

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New Types of Services:• Increasing use of management contracts• Turnkey treatment and network management• Performance based outsourcing of specific functions (e.g.,

leakage reduction)• Build-out of connections through output-based aid contracts

Growing Share of Participants from Dev CountriesPrivate water operators in developing countries: Urban population

served (in millions) by country/region of origin

0

25

50

75

100

125

150

175

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Developing countries

Other international

SpainUK

France

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What Have We Learned?

1. The problem of urban water and sanitation service provision in lower and middle income countries is growing rapidly, not shrinking

2. In meeting these challenges, experience over the past 15 years reveals that while real progress was made, PPPs alone are not likely to be the solution for lifting public utility performance world wide

3. Reaching the 93% of public utilities will therefore require a different and more complex approach

4. The traditional private sector marketplace has matured and evolved in a way that could provide additional tools for strategic outsourcing

• New service offerings• More local and regional participants from developing countries

5. At the same time, non-traditional resources are emerging • Public sector utility service providers • Contributions through Water Operator Partnerships

6. Taken together, a new and promising environment is emerging

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Moving On:Elements of an Agenda for the Future

Develop a common understanding that• Recognizes that water is special – • Acknowledges that in the ”grey zone”, both public and private operators have role

to play• Acknowledges that high performance public or private control • Broadens the discussion beyond utility management to the entire supply chain

Between Black and White:Operating in the Grey Zone

Full- scaleFull- scalecontract for contract for operations operations and CIPand CIP

Public ownership of assets and control of policyPublic ownership of assets and control of policy

Strategic outsourcing:Strategic outsourcing:-- CIP-- CIP-- Treatment-- Treatment-- Separable specialties-- Separable specialties

Purely Purely municipal municipal operations operations and CIPand CIP

PrivatePrivate

Private Private operations operations and CIPand CIP

Construction

Major Design

Other Activities

Degree of PSPHigh

Low

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Moving On:Elements of an Agenda for the Future

Develop a common understanding that• Recognizes that water is special – • Acknowledges the reality of life in the ”grey zone”• Acknowledges that high performance public or private control • Broadens the discussion beyond utility management to the entire supply chain

Make needed commitments• Promote high performance standard for all utilities and mechanisms for monitoring and

rewarding performance• Ensure sufficient institutional underpinnings are in place for change• Addresses financing needs including those for capacity development

Recognize and foster the unique nature of the optimization process for each venture

Facilitate capacity development to support this process• Understanding of different modes of private participation and when/where each are

appropriate• Risk management• Alternative procurement models and techniques

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The Sessions• 4.4.2 Focus on utilities Enhancing utility performance under various

circumstances including PSP variants -Setting performance standards -Interfaces with donor programs -Linkages with regional banks/lending

• 4.4.3 Focus on supply chains Creating more vibrant local and regional supply

chains -Cascading supply relationship

-Establishing new niches in the marketplace

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The Sessions

• 4.4.4 Exploring a policy framework Is it possible to develop consensus on a generalized

policy framework for regional tailoring and implementation addressing both utility performance and supply chain issues?

-Parties, process, timing

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Why is This Important …

• Water and wastewater utilities are the engines of the economic well being of cities

• In developing countries, the potential contribution of private sector support in the form of specialized knowledge and general know-how is significant

• This discussion of PSP has been overshadowed for 15 years by one form of private sector participation – full delegation of responsibility to the private sector in the form of concessions or affermage arrangements

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…Why is This Important

• Full delegation approaches to PSP have been controversial in part because of real/perceived lack of control of the local utility and their community

• With the emergence of new offerings from the private sector, we are now in a position to thoughtfully broaden consideration of PSP to include other forms of private participation – forms which leave the nearly 93% of public utilities with more managerial control

• In addition, the advent of Water Operator Partnerships further expands the possibilities for strategic engagement with external operators