Processes of Reform

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 good Typical reform path environment Possible combinations environment status/utility provider status poor poor good utility

7. 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 How Uganda combisequenced the reforms of NWSC, its national utility Reform of the environment 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. 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 South Africa

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 Utility reform Uganda

13. Russia Alexander Bazhenov Vice-Chairman, Eurasian Water Partnership

14. 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 Russia

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 Political shifts & pressures Droughts, floods & epidemics Unacceptable levels of service financial crises

17. 4 Maintain progress 2 1 The constant challenge to maintain progress…. performance Broad sector reform Pressure to improve 3 Utility reform time

18. Triggers and Obstacles to ReformClick the button to play a 5 minute video clip.(Windows Media;9,421k)

19. Owners Policy makers The unserved? Regulators Financiers Customers Maintaining progress: Balancing external accountabilities

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 ReformClick 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 ReformsClick the button to play a 10 minute video clip.(Windows Media; 15,619k)

24. Existing quantity-targeted subsidies are regressive 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 GovernmentClick 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 LeadershipClick the button to play a 3 minute video clip.(Windows Media; 3,477k)