Making Services Work
for Poor People:
Water and Sanitation
December 18, 2004
Junaid Ahmad
OECD, Paris
The Traditional
Approach
Pricing services
Level
Chilean subsidy
Colombian subsidy
Johannesburg mechanism
Pricing services
Transition
Guinee-Conakry
Time path for price increase
– Linked to service improvement
– IDA financing
Access
Lower connection cost
welfare losses arising from higher utility tariffs triggered by the reform, are
more than compensated for by the welfare gains associated with expanding
access to services (McKenzie and Mookherjee, 2002).
But subsidy and access for what? 2
Ground Reality
South Asia as an example
Not one city or town in South Asia has 24 hour, 7 days a
week water supply
Hyderabad and Karachi : 3 hours every two days
Delhi and Dhaka: 6-8 hours a day
Intermittent supply: health implications
Unaccounted for water: over 50%
Cities in South Asia: leaking bucket
Cost recovery: very low --- 20% of O&M
Sanitation
Open defecation
Little waste water treatment (less than 8-10%)
Decaying infrastructure: no O&M
Scale without sustainability
30-40% not connected
Use of infrastructure for patronage and politics!!
3
Re-defining the problem
The “ground realities” suggest that “pricing of services” is
not the problem of making a system “pro-poor”
Making services work is essential to making services work
for poor people
Going from 15-16 hours of water a day to 24 hours (or
increasing access by 10%) is a matter of money and technical
solutions: it’s a managerial problem
Going from 3 hours every other day to 24 hours (or increasing
access by 40%) is not a matter of money and technical
solutions, it is an institutional problem
Don’t fix the pipes, fix the institutions that fix the pipes
4
Messages of the WDR
What kind of institutional reforms? Ones that ensure that
the institutional relationships between key players in
service delivery chain are such that they:
Empower poor people to
Monitor and discipline service providers
Raise their voice in policymaking
Strengthen incentives for service providers to
serve the poor
Pricing/subsidies/access are the tails that wag the dog
So, what are these institutional relationships?
5
A framework of
relationships of accountability
Poor people Providers
Client power: short route of accountabilty 6
A framework of
relationships of accountability
Long route of accountability
Policymakers
Poor people Providers
7
A framework of
relationships of accountability
Policymakers
voice
Poor people Providers
8
Mexico’s PRONASOL, 1989-94
Large social assistance program
(1.2 percent of GDP)
Water, sanitation, electricity and education
construction to poor communities
Limited poverty impact
Reduced poverty by 3 percent
Even an untargeted, uniform per capita transfer would
have reduced poverty by 13 percent
9
PRONASOL expenditures according to
party in municipal government
10
Source: Estevez, Magaloni and Diaz-Cayeros 2002
A framework of
relationships of accountability
Policymakers
compact
Poor people Providers
11
Policymaker-provider:
Contracting NGOs in Cambodia
Contracted out: NGO managed & could hire, fire, &
transfer staff, set wages, procure drugs
Contracted in: NGO managed and could transfer but
not hire and fire staff
Control group: Services run by government
12 districts randomly assigned to each category
12
Contracting for Outcomes:
health services in Cambodia
Use of facilities by poor people ill in previous month
13
Source: Bhushan, Keller and Schwartz 2002
Applying the framework to water
and sanitation
Urban water networks:
politics and patronage
Policymaker
Provider
Client
15
Strengthening the compact in
urban water networks
Government owns assets, sets policy, regulates,
delivers: judge and the jury are one and the same
For accountability: Separate the policy maker and
the provider
Decentralize assets
Service and political jurisdictions fit each other better
Regulation & service delivery can be separated by tiers
Centre can use legislation & fiscal incentives to shape well-
benchmarked local compacts and capacity growth
Freed of responsibility for service delivery, centre has incentives
to ensure local service delivery works
Use private sector participation
Direct, powerful way of separating roles
But information, good regulation, parallel sector reform needed
Third-party regulation may be required
Multi-tiered government provides further opportunities 16
Information and benchmarking
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POOR customer complaints SERVICE
PEOPLE user charges PROVIDERS
17
Strengthening client power in
urban water networks
User charges: back to where we started
can increase accountability of providers
strengthen voice
Help separate policy maker and provider
Small independent providers can offer choice &
competition
Legalize
No exclusive service contracts for formal providers
Enable contracting between formal provider and independent
provider
Allow poor people to use subsidy to pay independent
providers
18
Rural areas:
the problem
Policymaker
Client Provider
Donors,
NGOs
19
Rural Areas
Low density areas
Rural Drinking Water
Center/State
Monitoring & Evaluation
Society
SRP
LG Capacity Support
Public Agency Transition Costs
Communities
21
Rural sanitation: A problem of
demand
price
D1: Private demand
D2 D2: Optimal demand
D1
quantity 22
Measure rural sanitation
outcomes correctly
Usually measured as building latrines
Creates incentives to construct, not to use
latrines
Outcome to measure: extent of open
defecation
Orients accountability correctly
23
What does a latrine subsidy do?
Sanitation is a community outcome
So, co-production of sanitation is key
Household subsidy distorts community
participation and co-production
Paves the way for patronage
24
How to create community
outcomes and co-production?
Techniques and mechanisms of mobilization of
communities
VERC in Bangladesh
NGO Forum and others
Reward the community and co-production
community subsidies for outcomes
Nirmal Gram Purashkar program in India
Use local governments to facilitate community
participation
25
Total sanitation
National and Local policymakers
Communities
Poor people Providers
26
Implications for urban sanitation
Supply of sanitation, not demand, the
problem for networks
Property rights and regulation
Dar-es-salam cesspit cleaners
Orangi style co-production linked to networks
Community toilets in Pune
27
Donors and service delivery
Policymakers
Project
Global implementation
funds units
Poor people Providers
Community driven
development 28
Services work for poor people
when accountability is strong
Policymakers
Poor people Providers
29
http://econ.worldbank.org/wdr/wdr2004
Targeting Poor People: Minimum
Service Delivery
Minimum standards and cost (India)
40 lpcd – 120 lpcd
Choice of technology: hand-pumps to piped network
Target uncovered areas, special groups, 90 percent capital costs
Expenditure on basic services (Chile)
Below poverty level
Expenditure < than 5%
Through service provider
Monitored by Local Governments
Support to poor people (South Africa)
Grants to municipalities
Based on number of people below poverty level
Lump sump grants: service choice left to local governments
In the context of India, poor people are better served by making
services work: focus fiscal transfers on institutional reform rather
than poverty targeting 30
Reforming Institutions
Which path?
Through local governments: South Africa
Through the WSS: Chile
Which path for India?
31
Reforming Through Local
Government: South Africa
State
capital capacity
operating incentives
City towns
towns
Utilities, towns
Departments,
Regional systems 32
Reforming Through Utilities: Chile
State
City Utility Regional Utility
City towns towns
consumers
33
Co-locating Reforms: 74th
Amendment
State
towns
City Regional Utility
City Utility
towns
consumers
34
