Asian Water

Institutions matter for service delivery

Public water sector institutions in many developing countries have inherited archaic policies that are ineffective. A change in mindset is imperative to revive decaying water utilities.

 

By K.E. Seetharam

 

At the Fourth World Water Forum in Mexico in March 2006, the Asian Development Bank was one of the few institutions to raise the flag on the need for good governance in the water sector. Although policy aspects are important for development, ADB's concept of good governance focuses on the effective management of water infrastructure to ensure proper delivery of services.

 

In essence, good governance is about changing attitudes and behaviour to ensure that water sector institutions actually deliver to their citizens what they say they will deliver. Institutions have two dimensions—the policies, and the persons who are responsible for implementing them. A basic issue that arises in relation to good governance is how well the government is playing its part in economic management.

 

Experiences within the region show that successful delivery of water services is possible irrespective of the political system in a country. The common features of any high-performing water utilities are stability in broad policy directions, flexibility in responding to market signals, and discipline in sticking with measures necessary for meeting long-term objectives despite short-term difficulties. These hallmarks of sustainable delivery of water services form good governance.

 

Governments decide the policies they adopt to deliver water services to the public. Once those policy choices are made, good governance will make sure that implementation is effective and consistent. Public water sector institutions (water utilities) in many developing countries have inherited archaic policies that are ineffective. The bureaucrats who implement them act as custodians of these irrelevant policies, without realizing that these policies are the very cause of the problems on the ground.

 

In many developing countries, the delivery of water supply and sanitation services has suffered from this "type-2 syndrome." Simply put, a type-2 syndrome conveniently accepts repeating what others have done in the past, even though it may result in a failure.

 

Cost recovery is crucial to deliver any public service in a sustainable manner. Nevertheless, municipal governments have been consistently reluctant to charge consumers for the delivery of water and sanitation services. Consequently, water utilities have entrenched themselves into a vicious cycle of poor performance, due to very low revenues, and dilapidated facilities. The water utilities often incur up to 60% loss of the water produced. Their revenues are insufficient to cover even day-to-day operation and management costs. Therefore, the water utilities have no funds to replace the decaying facilities.

 

Lack of accountability has also diminished local governments' credibility as a provider of the service. It has undermined the capacity of governments to sustain the long-term business confidence essential for growth-enhancing private sector investment. The litmus test for many public water utilities is whether they can change this vicious cycle into a virtuous cycle.

 

The change agents can come from within the government or outside. In Phnom Penh and Metro Manila, for example, change agents have demonstrated their skills to turn around a dwindling water utility into a profit making one, within a short period of time.

 

Champions such as Mr. Ek Sonn Chan, the managing director of the Phnom Penh Water Supply Authority (PPWSA), affected such change through sacrifice and persistent effort. In 1993, PPWSA's non-revenue water (NRW) rate was as high as 72%. This level of loss was significant, as the cost of producing water was expensive due to the high electricity tariff. On the other hand, the water tariff rate was low. The total revenue did not even cover half of the day-to-day operating expenses.

 

Mr. Chan used a strategy that concentrated on boosting staff morale, giving incentives for good performance, and investing in physical leaks. Within seven years, he was able to turn around PPWSA into a model public sector water utility that provided 24-hour safe drinking water to Phnom Penh. The PPWSA experience has been heralded as exemplary in Asia and the Pacific. PPWSA received the ADB Water Prize in 2004 for its achievements, leadership and innovation in project financing and governance. In recognition of his work, Mr. Chan also received the Ramon Magsaysay Award for Government Service in 2006.

 

PPWSA staff morale has risen significantly and staff played a major part in the achievements. The collection ratio in 1993 was 48%, compared to 99.9% of its water bills now. In 1993, PPWSA served only 25% of the population, while now it serves 90%. Between 1993 and 2006, the connections have grown 5 times. PPWSA's NRW dropped from 72% to just 8%.

 

Reducing NRW is not technically difficult. However, it requires a change of mindset. Illegal connections can only be eliminated when the utilities have autonomy and discipline. In addition, utility employees need genuine incentives to do their jobs. The Manila Water company, one of concessionaires operating in Metro Manila, provided stock options to staff that eliminated corrupt income from illegal connections, false meter reading, and other practices.

 

With autonomy, utilities will also be required to be accountable to regulators and the public. Comprehensive audits of water and service levels are needed to promote accountability. We can only manage what we measure. ADB is supporting an annual benchmarking program on the performance of water utilities among members of the South East Asian Water Utilities Network. The successful programme posts the key performance indicators of all water utilities on a website. When proper information is publicly available, consumers and regulators will automatically put pressure on the water utilities to eliminate leaks and chase illegal connections.

 

But champions alone cannot make a sustainable change. A champion needs to inspire others to emulate him or her. When Mr. Chan took over, PPWSA's employees were underpaid, under-utilized, disinterested, and indisciplined. With the right motivation from Mr. Chan and investments in their development, they also became PPWSA's champions. Discipline and desire to deliver results are parts of such motivational exercises. The staff is the best resource of any institution. This requires that managers change their attitude towards their subordinates. They must invest in developing staff capacity, and give them the right incentive or punishment as necessary.

 

Water utilities should also get the civil society behind the efforts made. Civil society can include all stakeholders—development agencies, consumers who are connected to the utility, the urban poor that is not yet connected, the private sector, civil servants, politicians, nongovernment organizations, journalists, and academics. These stakeholders are important change agents. Ultimately, the pressure (on governments) for necessary reforms will come from civil society, not development agencies. The first step in this process is for civil society to become much better informed. The public should be treated as customers of products delivered and not consumers of services. The customers should be made active partners of the water business instead of passive recipients of water services.

 

The Internet helps civil society become better informed about the world. With better information, civil society in Naga city in the Philippines has created the necessary public awareness to change attitudes.
They pressure governments to take the right policies (those that will ensure that water is provided equitably) and encourage leaders to use the right strategy to implement these (for example, tariff reforms).

 

Consumers will be in control when they pay the full cost of the water service delivery, as in Male. As active stakeholders of Male Water and Sewerage Company they ensure that corruption is minimized, there is more accountability for finances and water, and there is more efficiency in water service delivery. They also ensure that there is more transparency regarding information, more staff responsibility, and service is more equitable. When the consumer society active, the service levels will be reviewed, and performance benchmarking will be effective, as there is constant pressure to improve service.

Governance is at the core of all solutions to Asia's water challenges. It may be a gradual process, but examples have shown that where there is a will there is a way.