1. Part 2: Key Challenges and Potential Policy Framework leading to clearer, more diverse, more effective public and private roles – Introducing the discussion by Jan G. Janssens Special Advisor Global Water Operator Partnership Alliance (GWOPA) UN HABITAT 16 March 2009 5 th World Water Forum – Istanbul 2009 Topic 4.4: Optimizing Public & Private Roles in the Provision of Urban Water Services 4.4.1: Towards a Vibrant Local Marketplace – Opportunities and Trends

2. 2 Rethinking Utility Structure, Governance and Regulation Governance Ownership Alignment with Government Regulation Service Provider

3. 3 S Autonomy ~ being independent to manage professionally without arbitrary interference by others. S Accountability ~ being answerable to another party for policy decisions, for the use of resources, and for performance.  Customer orientation ~ Reporting and “listening” to clients.  Market orientation ~ making greater use of markets and the introduction of market-style incentives. Critical dimensions of a well run (public or private) utility – basis for reform

4. 4 Beyond the public – private debate … S It is NOT about ownership of assets, but INDEED about good governance and management S Mimicking a “private sector” corporation with respect to: decision making autonomy, accountability, incentives, professional management, commercial outlook.

5. 5 Central Government Local Government Service provider Utility 1.Performance based Inter- governmental transfers 2.Performance based agreements 1 2 Contractualization ?

6. 6 Public- public contracts in the WSS sector: Why bother? Public-public contracts have intrinsic limitations Properly designed contracts can be a useful tool… All contracts in the WSS sector have their limitations A challenge to make public-public contracts in the water supply sector work

7. 7 Necessity to improve approach in emerging economies and fragile countries? S Regulatıon, functıon or ınstıtutıon?

8. 8 Three “guiding” principles of regulation 1. Benefits of Regulation must exceed its Costs 2. Regulation is a Means to an End, not an End in Itself 3. What ultimately matters are outcomes – sustainable water supply and sanitation services – not regulatory rules (“performance not processes ”)

9. 9 Two more guiding principles … 4. Quality of service standards must be realistic, affordable, monitorable and enforced 5. Whenever possible, use benchmarks rather than actual costs for prices or subsidies

10. 10 Regulation– Melding two traditions Government Customers Services Utility Tariffs Government Utility Regulator Customers Services Sets Tariffs and service standards Tariffs Appoints Asset holding company Contract monitoring committees Contract Sets Tariffs and service standards Regulation by institution (Anglo-American tradition) Arbitrator Regulation by contract (French civil law tradition)

11. 11 Necessity to improve approach in emerging economies and fragile countries? SOften the process of change and reform will take from 15 to 30 years to achieve development objectives, depending on the system’s size and level of actual performance. SNo contractual model can cover this duration without flexibility and applying transparency

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13. 13 Necessity to improve approach in emerging economies and fragile countries? S From a menu of contractual models to a logic of process?  The lack of participation of users/citizens and access to information have contributed to the rejection of several projects despite the technical and commercial results

14. 14 The ultimate objective is to improve quality of service and sustainability of the ‘system’, and not of one particular PPP model … By using an approach with progressive obligations, a continous sequence of flexible models By applying transparency and introducing flexibility By actively engaging with all stakeholders and civil society, in a participatory approach

15. 15 A Proposed 3-step Engagement Technical Assistance Performance-based Management Contract Enhanced Affermage/Lease or Subsidized Concession Tender & Contract Award Tender & Contract Award 1 2 3 contract of means, input based results contract, output based trigger: independent audit

16. 16 Necessity to improve approach in emerging economies and fragile countries? S Innovative thinking should be set out on the process of competitive bidding for phased contracts with progressive obligations, addressing in particular issues of transparency and, underbidding and overbidding.

17. 17 Successful Change and Reform requires a personal touch … S Personal leadership was an element of success in all of case studies studied (and all other successful reform processes) S Scaled up efforts to improve and expand WSS services requires leadership development S There is a critical shortage of change management skills in the WSS sector

18. 18 Manager or Leader ? direction support 5 5 1 1 Leader Manager interdependent independent dependent

19. 19 Core Competences SEfficiency SEffectiveness SFinancial Sustainability ­Knowledge Areas ­Operational Areas ­ …­ … ­ …­ … ­ …­ … ­ …­ … CHANGE Leadership Senior Management Junior Management Staff WSS Utility Capacity Building for Change

20. 20 Summary 1. Rethinking Utility Structure, Governance and Regulation S Beyond the public-private debate? S Contractualization? 2. Necessity to improve approach in emerging economies and fragile countries? S Regulation, function or institution? S From a menu of contractual models to a logic of process? 3. Capacity Building for Change

21. 21 Thank you