Toolkit: Approaches to Private Participation in Water Services

1. Toolkit: Approaches to Private Participation in Water Services Module 3 Involving Stakeholders in the design of the Arrangement.

2. Introduction: Navigating through this E-Learning Module E-learning design: davidstiggers@comcast.net

3. Elements of the Toolkit 1 ConsideringPrivate Participation 2 Planning the Process 9 Selecting an Operator TOOLKIT Appendix A Examples of PP Arrangements 8 Designing Legal Instruments 3 Involving Stakeholders Appendix B Policy Simulation Model 4 Setting Upstream Policy 7 Developing Institutions 5 Standards, Tariffs, Subsidy, Financials 6 Responsibilities & Risks Additional Material CD-ROM

4. Module 3 General Outline of Toolkit 1 ConsideringPrivate Participation 2 Planning the Process 9 Selecting an Operator Module 3 Involving Stakeholders in the Design of the Arrangement TOOLKIT Appendix A Examples of PP Arrangements 8 Designing Legal Instruments 3 Involving Stakeholders Appendix B Policy Simulation Model 4 Setting Upstream Policy 7 Developing Institutions 5 Setting Service Standards, Tariffs, Subsidies & Financial Arrangements 6 Responsibilities & Risks Additional Material CD-ROM

5. What is the best strategy for involving Stakeholders? How will we identify important Stakeholders? How should we deal with different Stakeholder groups? Who will ‘win’ or ‘lose’ under the Arrangement? Module 3 - What will we learn?

6. IDENTIFY Stakeholders DEVELOP Communication Strategy INTERACT with Stakeholders Satisfactory outcome THE ARRANGEMENT Module 3Involving Stakeholders in Design • In this Module we look at the issues that Governments need to address in order to involve Stakeholders in Private Particpation Arrangement design. • Government needs to consider the interests of the different stakeholders • Government will benefit from engaging with the Stakeholders: • through better Arrangement design, • through the fact that Stakeholders have participated in the design, and their views have been sought and understood.

7. Module 3Involving Stakeholders in Design “In designing the Arrangements the Government needs to consider the interests of different Stakeholders”

8. Module 3Involving Stakeholders in Design Some Examples: What level of service do people want? How much are people willing to pay for new connections? Given different costs, what type of connections do they want? “In designing the Arrangements the Government needs to consider the interests of different Stakeholders”

9. Module 3Involving Stakeholders in Design “Engaging with Stakeholders offers two additional advantages………” • Analysis based on the consultation may show Government better ways to design, with a more equitable distribution of costs and benefits • Perhaps too many costs imposed on poorer groups the Government wants to protect • Perhaps too many costs imposed on groups that could block the reforms • Not all groups will benefit as well as they hope for. Their support is more likely if they feel that the design and implementation of the Arrangement is ‘Legitimate’. One way is if they see through the consultation process that all is transparent and fair, and peole understand the objectives of the reform • Note: Legitimacy is an issue covered in Modules 7 (Tariff resets) and 9 (Contractor selection)

10. Module 3Involving Stakeholders in Design IDENTIFY Stakeholders IDENTIFY Stakeholders • Examples of some potential Stakeholders: • Consumers • NGO’s • Workers • Private Firms and Financiers • Alternative Providers • Opinion Leaders and other Politicians • Media DEVELOP Communication Strategy DEVELOP Communication Strategy INTERACT with Stakeholders INTERACT with Stakeholders THE ARRANGEMENT THE ARRANGEMENT Identifying Stakeholders “The first step is to identify important Stakeholders” • Any group that asserts an interest can be a Stakeholder, but only some groups will do so. Other groups that might be overlooked will need to be sought out, including: • Unconnected poor, women, alternative providers ( such as standpipe operators) • Women’s groups and community organizations may open the path to other consumers with special needs • International specialist water operators are obvious contacts, but local financiers, firms and agencies should be considered • A communications needs assessment may be required to further identify the stakeholders • It may help to extend Government consideration beyond the obvious contacts • It can help to identify prevailing concerns about privatization and water services, and possibly offer ideas on potential ways forward Satisfactory outcome

11. Module 3Involving Stakeholders in Design IDENTIFY Stakeholders IDENTIFY Stakeholders • Examples of some potential Stakeholders: • Consumers • NGO’s • Workers • Private Firms and Financiers • Alternative Providers • Opinion Leaders and other Politicians • Media DEVELOP Communication Strategy DEVELOP Communication Strategy Examples – more detail La Paz & Cochabamba INTERACT with Stakeholders Stakeholder Identification & Composition “Can more Consultation help?” THE ARRANGEMENT Identifying Stakeholders “The first step is to identify important Stakeholders” • Any group that asserts an interest can be a Stakeholder, but only some groups will do so. Other groups that might be overlooked will need to be sought out, including: • Unconnected poor, women, alternative providers ( such as standpipe operators) • Women’s groups and community organizations may open the path to other consumers with special needs • International specialist water operators are obvious contacts, but local financiers, firms and agencies should be considered • A communications needs assessment may be required to further identify the stakeholders • It may help to extend Government consideration beyond the obvious contacts • It can help to identify prevailing concerns about privatization and water services, and possibly offer ideas on potential ways forward Satisfactory outcome

12. IDENTIFY Stakeholders DEVELOP Communication Strategy DEVELOP Communication Strategy INTERACT with Stakeholders Satisfactory outcome THE ARRANGEMENT Developing Strategy for Involving Stakeholders Module 3Involving Stakeholders in Design “Consultation may show better ways to design, and get support”

13. Developing Strategy for Involving Stakeholders “Governments need to think about the types of interaction, and expertize needed” Types of Interaction with Stakeholders Acquiring expertise for the engagement • Many ways to involve stakeholders, depends on objectives, type of Arrangement and other factors • 5 main types of interaction: Collecting and providing info, consulting, deciding and acting together • Several different ways of communicating with shareholders, according to situation

14. 4 Ways of Communicating 5 Main Types of Interaction Developing Strategy for Involving Stakeholders “Governments need to think about the types of interaction, and expertize needed” Types of Interaction with Stakeholders Acquiring expertise for the engagement • Many ways to involve stakeholders, depends on objectives, type of Arrangement and other factors • 5 main types of interaction: Collecting and providing info, consulting, deciding and acting together • Several different ways of communicating with shareholders, according to situation

15. DIFFERENT SKILLS: Community Development Specialists can help engage poor communities Survey Experts gather facts in a quantifiable way Communications Experts help to publicize and explain proposals Depending on project size, several specialists may be employed • COMMUNICATIONS MANAGER: • Acts as focal point • Needs to be well briefed by the Team • Ensures effective communication about objectives and Government policy • Alerts Team to potential problems or benefits of the proposed Arrangement • Ensures sequence and method of communications Developing Strategy for Involving Stakeholders “Governments need to think about the ……………….. expertize needed” Types of Interaction with Stakeholders Acquiring expertise for the engagement • Specific skill sets needed, that may not exist within Government • Different kinds of interaction needs depend on type and scale of the project • Designating a communications manager as focal point is of advantage

16. IDENTIFY Stakeholders DEVELOP Communication Strategy DEVELOP Communication Strategy INTERACT with Stakeholders INTERACT with Stakeholders Satisfactory outcome THE ARRANGEMENT Interacting with Stakeholders • The appropriate approach with each group of Stakeholders depends on a number of variables, including: • The Group’s capacity • Understanding of Private Participation • The ways that social, political and economic climate affect Group

17. Interacting with Stakeholders “The appropriate approach with each group of Stakeholders must be varied” • Some potential Stakeholder Interactions: • Customers • NGO’s • Workers • Private Firms and Financiers • Alternative Providers • Opinion Leaders and other Politicians • Media

18. Interacting with Stakeholders “The appropriate approach with each group of Stakeholders must be varied” • Some potential Stakeholder Interactions: • Customers • NGO’s • Workers • Private Firms and Financiers • Alternative Providers • Opinion Leaders and other Politicians • Media

19. IDENTIFY Stakeholders DEVELOP Communication Strategy INTERACT with Stakeholders Satisfactory outcome Satisfactory outcome THE ARRANGEMENT THE ARRANGEMENT Involving Stakeholders in Design Government can use the information from Stakeholders to make estimates of the effects of Arrangements on the different groups. Whilst net benefits may be expected, it is necessary to review the effect on each of the different groups, and balance the interests of the ‘winners’ and ‘losers’ in the final design It is possible to establish a quantitative ‘policy model’ approach to help in this task.

20. Winners & Losers under different options “Winners & losers can be identified and gains & losses estimated. If necessary the Arrangement can be redesigned to take account of this.” • Introduction of Private Participation reform is on the basis that there will be net benefits to the community. This means that benefits for the ‘winners’ outweigh costs borne by the ‘losers’. • In principle, it may be possible to distribute benefits so that no group loses. • In practice, Governments may wish to support one or more groups such as the disadvantaged poor or politically influential groups (water workers, major water users etc.) • Example: Unconnected poor expected to gain from service expansion. Existing customers might be expected to pay increased tariff and, unless services improve, they will ‘lose’. Government needs to quantify the situation, and use the information to adjust the design as necessary. In this case, the redesign could include a subsidy to the poor. “A quantitative approach may be used to evaluate the social and economic impact of the Arrangement, and help to simulate the potential effects ”

21. Winners & Losers - Policy Simulation • Step 1- Identify current parameters for various Household/Stakeholder types. • Might include: • Middle class household / registered pipe connection • Low income household / registered pipe connection • Low income household / illegal connection • Unconnected household / water standpipe • Workers • Taxpayers funding any subsidies • Other important groups Service Scenarios Tariff Scenarios Typical households/stakeholders Predicted change in welfare • Step 2 – Model Service and Tariff Scenarios. • For each Scenario the model predicts net impact on the welfare of each typical Household or Stakeholder types • Estimates additional value placed on each service • Subtracts any increase in bills from the Scenario’s tariff increases “Social impact modeling can establish the different stakeholders. The ToolkitPolicy Simulation Model quantifies the effects with different scenarios” • Step 3– Evaluate change in welfare across the different Groups The Toolkit Policy Simulation Model uses a simplified and stylized form of this analysis. It considers: • The currently connected • The currently unconnected Assumes: • How much the unconnected have to pay for their water • Willingness to pay for better services The model predicts the effects of reform on both Groups • Household Survey • Current Service • Willingness to pay • Income

22. Identify Stakeholders Develop Communication Strategy Interact with Stakeholders Satisfactory outcome The Arrangement Reviewing Module 3 ‘The Module has looked at the whole range of Stakeholder communication issues in Arrangement design………….’

23. More Information: Module 3

24. Supporting Material • The Toolkit Financial Model • Toolkit Case Study material • Toolkit Website: http://rru.worldbank.org/Toolkits/WaterSanitation/ • For comments or further details contact Cledan Mandri Perrott at cmandriperrott@worldbank.org

25. Toolkit: Module 3 End of Module

26. Toolkit: Module 3 Return to Start