part 2: key challenges and potential policy framework leading to clearer, more diverse, more...
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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
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Rethinking Utility Structure, Governance and Regulation
Governance
Ownership
Alignment with
Government
Regulation
Service Provider
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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
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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.
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CentralGovernment
LocalGovernment
Service providerUtility
1. Performance based Inter-governmental transfers
2. Performance based agreements
1
2
Contractualization ?
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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
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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
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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
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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