Making Services Work for Poor People: Water and Sanitation

1
Making Services Work for Poor People Water
and Sanitation

• December 18, 2004
• Junaid Ahmad

OECD, Paris
2
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?

3
Ground RealitySouth 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 OM
• Sanitation
• Open defecation
• Little waste water treatment (less than 8-10)
• Decaying infrastructure no OM
• Scale without sustainability
• 30-40 not connected
• Use of infrastructure for patronage and
  politics!!

4
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 its 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
• Dont fix the pipes, fix the institutions that
  fix the pipes

5
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?

6
A framework of relationships of accountability
Poor people
Providers
Client power short route of accountabilty
7
A framework of relationships of accountability
Long route of accountability
Policymakers
Poor people
Providers
8
A framework of relationships of accountability
Policymakers
voice
Poor people
Providers
9
Mexicos 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

10
PRONASOL expenditures according to party in
municipal government
Source Estevez, Magaloni and Diaz-Cayeros 2002
11
A framework of relationships of accountability
Policymakers
compact
Providers
Poor people
12
Policymaker-providerContracting 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

13
Contracting for Outcomes health services in
Cambodia
Use of facilities by poor people ill in previous
month
Source Bhushan, Keller and Schwartz 2002
14
Applying the framework to water and sanitation
15
Urban water networks politics and patronage
16
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
• Information and benchmarking

17
(No Transcript)
18
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

19
Rural areas the problem
20
Rural Areas

• Low density areas

21
Rural Drinking Water
Center/State
Monitoring Evaluation
Society SRP
LG
Capacity Support Transition Costs
Public Agency
Communities
22
Rural sanitation A problem of demand
price
D1 Private demand
D2 Optimal demand
D2
D1
quantity
23
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

24
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

25
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

26
Total sanitation
National and Local policymakers
Communities
Poor people
Providers
27
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

28
Donors and service delivery
Policymakers
Project implementation units
Global funds
Poor people
Providers
Community driven development
29
Services work for poor people when
accountability is strong
Policymakers
Poor people
Providers
http//econ.worldbank.org/wdr/wdr2004
30
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 lt 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

31
Reforming Institutions

• Which path?
• Through local governments South Africa
• Through the WSS Chile
• Which path for India?

32
Reforming Through Local Government South Africa
State
capital
capacity
incentives
operating
City
towns
towns
towns
Utilities, Departments, Regional systems
33
Reforming Through Utilities Chile
State
City Utility
Regional Utility
City
towns
towns
consumers
34
Co-locating Reforms 74th Amendment
State
towns
City
Regional Utility
City Utility
towns
consumers