1 Processes of Reform Capacity Building Module

2 Overview  Introduction  Key steps in reforms  Balancing progress in utility and environment  Video interviews with three speakers  Triggers and obstacles to reform  Key success factors in reform  Taking care of the poor in reforms  Role of central government in reforms  Leadership

3 Planning reforms  Identify what the problems are…  Inefficient planning and project implementation  Water availability, water quality, energy supply  Staff motivation, capacity, efficiency  Tariff level and structure  Corruption  Commercial operation

4 Key steps for successful reforms  Planning the process of introducing reform  Involving stakeholders  Setting upstream policy  Setting service standards, tariffs, subsidies, and financial arrangement  Developing institutional model  Utility: public or PSP  Non-utility services: small scale providers  ‘Environment’: policy maker; asset holder; regulator  Legal instruments for the arrangement

5 Involving stakeholders  Politicians: local and national levels  Management and staff of public utility  Consumer associations  NGO: national and int’l (service to the poor, environment, governance…)  Financiers: multi and bi-lateral  Alternative suppliers (tankers, drilling companies…)  Media: national and int’l  Private sector: local and int’l

6 Sustainable utility reform and reform of the environment have to go hand-in-hand Our goal utility poorgood poor good Typical reform path environment Possible combinations environment status/utility provider status

7 How Uganda combisequenced the reforms of NWSC, its national utility Utility reform Reform of the environment 70s political turmoil mid 80s new government end 80s & 90s Major rehab 95 new statute 97 new Board 98 new MD service & revenue enhancement programs 00 ext & int performance contracts 02 automatic tariff indexation 03 staff performance contracts 97 corporate plan

8 Overview  Introduction  Key steps in reforms  Balancing progress in utility and environment  Video interviews with three speakers  Triggers and obstacles to reform  Key success factors in reform  Taking care of the poor in reforms  Role of central government in reforms  Leadership

9 South Africa Mike Muller Former Director General, South African Department of Water Affairs &Forestry

10 South Africa  Total pop Million (2005)  Urban pop (% of total) – 59%  Surface area - 1,221,037 sq miles  Life expectancy – 45 years  GDP (US$ billions) –  Access to water supply – 88%  Access to sanitation – 65%  Trigger: the end of apartheid  Vertical unbundling: bulk utilities and end providers  Most utilities are corporatized  Subisidies: Free basic water 25 l/p/d  Basic water supplies to nearly 15 million people in 10 years; Sanitation much slower  ‘applying good old-fashioned public finance principles’  Ongoing decentralization process – after establishment of democratic municipalities in 2001

11 Uganda Dr. William Muhairwe Managing Director, National Water and Sewerage Corporation, Uganda

12 Uganda  Total pop Million (2005)  Urban pop (% of total) – 13%  Surface area - 241,038 sq miles  Life expectancy – 49 years  GDP (US$ billions) – 8.7  Access to water – 60%  Access to sanitation – 43% Utility reform Reform of the environment

13 Russia Alexander Bazhenov Vice-Chairman, Eurasian Water Partnership

14 Russia  Total pop Million (2005)  Urban pop (% of total) – 73%  Surface area - 17,075,200 sq miles  Life expectancy – 65 years  GDP (US$ billions) –  Access to water – 97%  Access to sanitation – 87%  Trigger: the end of communism  Subsidies: l’goti and maximum % expenditure  WSS part of broader Housing and Communal Services sector – centralized billing and collection  Mostly municipal departments with little autonomy  History of focus on infra: low efficiency  Regulation is regional ‘oblast’ responsibility  Boom & bust of PSP in 03/04; now 2 nd generation PSP

15 Overview  Introduction  Key steps in reforms  Balancing progress in utility and environment  Video interviews with three speakers  Triggers and obstacles to reform  Key success factors in reform  Taking care of the poor in reforms  Role of central government in reforms  Leadership

16 The first challenge: how to trigger reform Droughts, floods & epidemics Unacceptable levels of service Political shifts & pressures financial crises

17 The constant challenge to maintain progress…. time performance Pressure to improve Broad sector reform Utility reform 2 1 Maintain progress 4 3

18 Triggers and Obstacles to Reform Click the button to play a 5 minute video clip. (Windows Media;9,421k)

19 Owners Customers Regulators Policy makers Financiers Maintaining progress: Balancing external accountabilities The unserved?

20 Overview  Introduction  Key steps in reforms  Balancing progress in utility and environment  Video interviews with three speakers  Triggers and obstacles to reform  Key success factors in reform  Taking care of the poor in reforms  Role of central government in reforms  Leadership

21 Key Success Factors in Reform Click the button to play a 5 minute video clip. (Windows Media; 9,208k)

22 Overview  Introduction  Key steps in reforms  Balancing progress in utility and environment  Video interviews with three speakers  Triggers and obstacles to reform  Key success factors in reform  Taking care of the poor in reforms  Role of central government in reforms  Leadership

23 Taking Care of the Poor in Reforms Click the button to play a 10 minute video clip. (Windows Media; 15,619k)

24 Existing quantity-targeted subsidies are regressive Source: Water, Electricity, and the Poor: Who Benefits from Utility Subsidies? – Komives et al.

25 Who are the urban poor? Typically use multiple sources and differentiate drinking from other uses - purchase small quantities if a free source is available:  May share a house or yard tap with multiple families – design standards underestimate number of users  May purchase from a neighbor – poor households are often heterogeneous; differentiate demand as slums may have mixed densities, income levels  May use a public standpipe/standpost/kiosk – the level of consumption is constrained by distance traveled, time spent collecting water  May rely on small-scale private sector when services do not meet their needs – choose to have water delivered to house rather than walking to and queuing at the standpipe BUT: poor households do pay for water often at higher rate (per cubic meter) than wealthy households

26 How to improve services for the poor?  The long term utility solution: a private - house/yard -connection for all  Standpipes – from free to paid service  Augmenting small-scale service providers  How to deal with self provisioning?

27 Overview  Introduction  Key steps in reforms  Balancing progress in utility and environment  Video interviews with three speakers  Triggers and obstacles to reform  Key success factors in reform  Taking care of the poor in reforms  Role of central government in reforms  Leadership

28 The Role of the Central Government Click the button to play a 4 minute video clip. (Windows Media; 7,526k)

29 Overview  Introduction  Key steps in reforms  Balancing progress in utility and environment  Video interviews with three speakers  Triggers and obstacles to reform  Key success factors in reform  Taking care of the poor in reforms  Role of central government in reforms  Leadership

30 The political economy of reform  Reforms must provide returns for the political decision makers who are willing to make the changes….  Initiate reform where there is a powerful need, and demonstrated demand, for change  Nothing succeeds like success  Best fit rather than best practice  Realistic goals and timeline  Develop a sequenced, prioritized list of reforms…  Match available human, financial and knowledge resources  Take one step at a time, but lock in progress

31 The Importance of Leadership Click the button to play a 3 minute video clip. (Windows Media; 3,477k)