Institutional approach to service provision partnerships in South Asia

1
Institutional approach to service provision
partnerships in South Asia

• Prepared for workshop on service provision
  governance in the peri-urban interface of
  metropolitan areas

2
Background

• Urban population growth in South Asia almost 13
  million per annum
• Backlog of services
• Many low-income areas poorly served.
• Many peri-urban areas outside the limits of
  formal networked systems.

3
Background (2)

• Limited government capacity (both financial and
  managerial)
• Ineffective planning systems, particularly in
  peri-urban areas
• Investment required in India US13 billion per
  year against availability US3.5 million per
  year. (World Bank 1996)

4
Examples of the existing situation
Sewage pumping Tandlianwala Pakistan Showing
ad-hoc arrangements and poor maintenance
Faisalabad, Pakistan - The road to an area that
had been the focus for a DFID-funded upgrading
project
5
Examples of existing situation (2)
Area laid out by government as EWS (Economically
Weaker Section) housing project
Drain cleaning a constant need in flat towns
Machilipatnam, Andhra Pradesh, India
6
Responses to government failure

• Radical approach based on concession contracts
  with large scale private sector providers.
• This has made little process because of
• Lack of political will
• (and opposition from non-government groups)
• Fear of political interference
• Lack of information
• Faced with uncertainty, contractors are not
  prepared to take on risk and the approach has
  stalled.

7
Other forms of private sector involvement in
infrastructure provision

• Many low income households and small-scale
  enterpreneurs already procure/ provide services
  informally.
• NGOs have often promoted and assisted such
  efforts.
• Municipalities enter into low-level PSP
  arrangements with private sector providers
  (Service contracts and management contracts for
  specific facilities)

8
Examples of low-level PSP

• Service contracts for water tankering (Chennai
  best known but common elsewhere)
• Service contracts for street sweeping and solid
  waste collection some larger but many small
  scale and some involve womens groups.
• Management contracts for OM of pumping stations,
  tubewells, water treatment etc.
• Provide and operate contracts with NGOs for the
  communal toilet blocks Sulabh, Pune (SPARC and
  Shelter Associates).

9
The key questions

• Do these informal and small-scale PSP initiatives
  provide scope to improve service provision in
  peri-urban areas?
• Can they lead to lasting change?
• Can focusing on them help to create the
  conditions required for more radical reform?
• Paper takes a broadly institutional approach
  to answering these questions.

10
What we mean by institutions

• The humanly devised constraints that shape human
  interaction (North 1990)
• Include both mental models that underpin the
  structure of a society and organizational forms
  that express relationships between individuals
  and groups (Jenkins and Smith 2001).
• Institutional approaches recognise that decisions
  are path dependent (Hodgson 1999)
• Useful to consider how systems might solve
  problems and what might go wrong (Dudley 1993)

11
Barriers to increased informal sector involvement

• Informal systems depend on direct user provider
  contract and so only provide private goods.
• Difficult to ensure that services (a) are
  sustained and (b) cover all areas.
• Different mental models and procedures of
  formal and informal sectors mean that
  coordination between the sectors is different.
  (Important when local services link with higher
  order services)

12
Formal/informal institutional comparison

• Formal
• Works in accordance with plans (at least
  officially)
• Works in accordance with written standards and
  procedures
• Formal contracts
• Bureaucratic and hence inflexible

• Informal
• Demand led with little or no formal planning
• No written standards and procedures
• Informal, often unwritten contracts
• Opportunistic and flexible

So perhaps best to focus on initiatives that
already involve partnerships
13
Issues with current partnerships with private and
NGO sectors

• How can these initiatives be regulated?
• What importance should be given to competition?
• Are there options for moving towards higher
  forms of PSP?
• l

14
Options for regulation

• Develop formal regulatory framework Likely to
  be difficult to have genuinely impartial
  regulation.
• Improved contract documentation (Chennai tighter
  than Kurnool and Warangal scope for action to
  provide standard improved documents.
• Give monitoring role to service users
• Could light regulation (or no regulation) work
  when service provider has public service ethos
  and/or financial incentive to continue to provide
  a good service?

15
How important is competition?

• Conventional wisdom is that competition leads to
  reduced charges.
• In India is that service contracts offer savings
  of 40 and more compared with same services
  provided directly by municipalities.
• But many are based on standard rates. Even where
  this is not the case, investigations suggest that
  institutional arrangements involve cooperation
  rather than price competition.

16
Competition and institutions

• Contractors may prefer stability with lower
  profits to higher risk and lower profits.
• Without changes in attitudes and assumptions,
  relationships are likely to be different from
  those assumed by planners.
• Collusion may triumph over competition.
• Is the best response to encourage and facilitate
  collaboration, at least in the first instance.

17
Possible steps on the road to reform?

• As contractors gain experience, move from
  management contracts to local lease contracts
  with contractor taking more risk but with an
  incentive to invest money to improve service
  delivery and hence improve revenue.
• Gradually develop changed attitudes so that
  people expect better service and are willing to
  pay for it.
• Then look at alternatives for further management
  improvement, perhaps involving the private sector.

18
Role of government/ international agencies

• Fund research to develop a more holistic
  understanding of how existing systems work. (How
  they solve problems and how reality differs from
  rhetoric).
• Provide funding to test new approaches.
• Produce realistic assessments of initiatives and
  publicise what works and what does not work.