Irrigation futures - Water governance regimes in australia , implementing the national water...

150 FEBRUARY 2007 Journal of the Australian Water Association

s u s t a i n a b i l i t ytechnical features

refereed paper

WATER GOVERNANCE REGIMES INAUSTRALIA: IMPLEMENTING THE

NATIONAL WATER INITIATIVEJ M McKay

Abstract

Governance is the process of decisionmaking in the community involving bothformal and informal actors at all levels.Government is just one of the formal actorsin governance. The institutions andorganisations it creates by laws andregulations are the formal actors in theprocess of extracting, distributing and usingwater. There are of course many informalinstitutions as well such as customs of thesociety with respect to water use andallocation and in relation to enforcement ofthe law.

After the Council of AustralianGovernment reforms in 1994 there aremany laws creating many types oforganisations to extract, distribute and usewater in each State. This paper reports onwork to examine the formal legal processes.The work established that there are now 14different types of corporate organisationssupplying water in Australia. These formalorganisations and the informal institutionshave different responses to the formalwater law and policy changes. Theresponses of the formal organisations andinformal institutions are instrumental tothe success of the new water law and policyreforms under the National WaterInitiative.

The paper reports on some results from atelephone interview with 183 of the ChiefExecutive Officers of the largest watersupply businesses. The results presented

here look at their responses to the new

water policies in particular evaluating the

effort put into ESD by the CEOs, the

difficulty in pleasing the regulators( both

environment and price ), the amount of

information they have about water policy

and whether they trust the State

government.

Introduction

Governance, not a true scarcity of water, is

the core of the world water crisis according

to the UN 2nd World Water Development

Report released in early 2006. The

Australian Government has initiated the

two waves of CoAG reforms to alter the

governance structures to achieve efficient

and more productive water use. This is seen

as increasingly important over the coming

decades as water issues impact upon the

continued stability of Australia’s rural

sector, urban communities and the nation’s

economic well-being. The Government is

determined to continue increasing

efficiency in water use and implementing

reforms to achieve this national objective.

(DAFF, 2006.)

Water Governance in Australian -Institutions and Organisations

Governance always looks at how power isexercised in the management of economicand social resources for the society, alsohow to mediate disputes between members.Often governance is about creating theconditions for ordered rules and collectiveaction.

International literature has eightcharacteristics in common for goodgovernance -participatory, consensusorientated, accountable, transparent,responsive, effective and efficient, equitableand inclusive and following the rule of law.(UNDP 2001, Global Water Partnership)Australian Standard 8000 defines it …“asbeing concerned with improving theperformance of companies for the benefitof shareholders, stakeholders and economicgrowth. It focuses on the conduct of andrelationships between the board of thedirectors, managers and companyshareholders.”

Governance is considered in any society atany point of time as the sum of formal andinformal and organisations. In a sector such

Only one-third of water

supply chief executive

officers surveyed across

the nation are confident

that their companies or

enterprises can achieve

sustainable water

management.

Figure 1. Representation of the institutions, formal and informal, impacting on watersupply business organisations.


Journal of the Australian Water Association FEBRUARY 2007 151

refereed paper

as water, governance allows differentarrangements of the institutions andorganisations to be mapped and examined.The formal coercive obligations imposed bythe institution of the law in Australiarequire all organisations to achieve ESD.Originally this was done through a varietyof State-based Acts because of section 100and the paramountcy of State law overwater for conservation (impounding) andirrigation (McKay 2005). The States thenceased to co-operate on water, devisedintrospective State policies and formeddifferent institutions and organisations todistribute water for the sole purpose ofeconomic development. Over time butespecially since the early 1990s the aims ofthe State schemes broadened to encompassother goals and include environmental andsocial sustainability as parts of modernwater policies. This was done by theadoption of ESD into the water laws andpolicies and by institutional andorganisational adoption of ESD. In 1990there were more than 100 statutes whichrequired ESD in Australia at local State andfederal level. (Stein 2000) but now therewould be over 400. There are differences inthe coverage of the ESD definitions both

within statutes in each State and betweenthe States. (McKay 2006, Table 2). Whilstthe overarching goals are set federally in theNWI, the means to achieve them is left tothe States which, as in all federations, choseto do things differently. This can create alaboratory of policy experiments whichoffer learning opportunities but also cancreate confusion. (Brandies 1932)

Previous international research hasdescribed how the form of organisation hasa great influence on achievements of anypolicy (North 1990, Young 2000). Theimposition of laws to achieve ESD is anoutcome of societal pressures, bio-diversitycatastrophes and drought. Laws have beenimposed on the organisations in order forthe organisations to maintain theirlegitimacy with some influential sectors ofmodern Australian society. (Di Maggio andPowell 1983). Thus the policy to achieveESD is coercive on each organisation as it ispart of the law of each State.

Governance derives from society and ismade up of formal and informalinstitutions and organisations. Such actorsreflect local political, cultural andadministrative traditions and arerepresented in Figure 1 in relation to Water

Supply businesses. There are institutionssuch as the general law which are coercivei.e. structures of property rights to waterand informal aspects such as the willingnessof person entrusted to enforce the law suchas local police to actually use their powers.All of these have an impact on the eventualperformance of the organisations

Figure 1 expresses the arrangementsbetween the formal and informalinstitutions and the water supply businessorganisations and Catchment ManagementBoards (Natural Resources ManagementBoards in South Australia). There isinterplay within and between all theseorganisations and the institutions.

Typology of Australian WaterSupply Businesses

In the past in Australia, the mainorganisations were public sector but sincethe 1994 Council of AustralianGovernment Reforms the organisationsinvolve more private sector roles in allaspects and place government in aregulatory role on price and environmentalimpacts. Governance arrangements forwater in Australia are complex with over 14different types of legal forms of water

Table 1. Corporate Governance legal types of major Water supply businesses in each State.

ACT NSW1 NT QLD SA TAS VIC WA Total

Local Government Regional Council (LGRC) 0 2 0 0 0 0 0 0 2Shire Council (LGSC) 0 46 0 92 0 17 0 14 169City/Town Council (LGCC)2 0 0 0 15 0 5 0 0 20Local Government Owned Corporations (LGOC) 0 14 0 4 0 0 0 0 18Joint Local Government Organisation (JLGG)3 0 5 0 1 0 3 0 0 9Water Boards {Includes Rural Water & Drainage Boards} (WB) 0 0 0 0 0 0 0 2 2Government Departments Licenser (GD) 0 0 0 1 0 2 0 0 3Government Owned Corporation (GOC) 1 5 1 1 1 0 6 1 16Statutory Bodies (SB) 0 0 0 0 0 0 18 0 18Corporations Law Companies (CLC) 0 3 0 1 2 0 0 1 7Irrigation Trusts (IT) 0 2 0 0 4 0 0 0 6Undetermined4 0 0 0 0 0 2 0 4 6Hybrid – (SB/CLC)5 0 1 0 0 0 0 0 0 1Hybrid – (IT/CLC)6 0 1 0 0 0 0 0 0 1Total 1 74 - 797 1 115 7 29 24 22 278

1. NSW councils that generate turnover of > $2m are classified by the National Competition Policy and Local Government Act 1993 (NSW) as category1 businesses. If < $2m then category 2. Category 1 businesses are subject to more stringent reporting/auditing requirements and must be privatisedcorporations. In effect, category 1’s are/may be semi autonomous subsidiaries or completely autonomous privatised corporations. Thus, the level ofturnover is crucial to the character of the entity and its classification.

2. Includes Local Government Town Councils and Local Government City Councils. 3. Includes Organisations that are owned by a collective of LGAs and organisations owned by a collective of LGAs with State Government. 4. Typology has not been determined due to insufficient materials to make a definitive assessment.5. West Corurgan Irrigation apparently exists as both a Statutory Body and a Corporations Law Company. 6. Western Murray Irrigation Ltd is identified as an Irrigation Trust within legislation but is structured and operating as a Corporations Law Company. 7. NSW had extensive council mergers and redrafting of Council boundaries during the period that this research examines. As such, the materialcollected reflects the rapidly shifting face of the NSW Water Industry. At the beginning of the researched period, there were 79 distinct WSBs, within theyear; however, amalgamations had reduced this number to 74.


supply businesses (Table1). The mosaic of differentforms each have multiplereporting arrangements asdetermined by the relevantActs. The different Actsalso create an informalinstitution around whatcould be called ’reportingculture’. For example, thereporting cultures fororganisations empoweredunder a Local GovernmentAct are very different from those existing fora body reporting to the Australian Securitiesand Investment Commission (ASIC).

At the ground level, different legal forms foradjacent water supply businesses make co-operation and data sharing more difficult.Furthermore, the culture of the organisationguides its implementation of the NWI in aprofound way and its understanding ofsustainability and the procedures it canplace in its strategic planning framework toimplement Environmentally SustainableDevelopment (ESD). The fundamentalpremise of ESD is that economicdevelopment must be balanced against theprotection of biological diversity, thepromotion of equity within and betweengenerations, and the maintenance ofessential ecological processes The culture isoften guided by the way the organisation isrun, e.g. some water supply bodies are runby grower/users elected from regions in thearea, yet others (most of the big urban andrural bodies) have board membersappointed by the State Government(McKay 2005) Local governments whichsupply much water have elected officials andtheir region may cover urban and ruralareas.

This typology was created from the AnnualReports of the bodies for 2003/4, classifyingthem according to legal type. The decisionwas made to look only at major watersupply businesses i.e. those supplying morethan 250 customers. There was very littleother research to guide this process at thetime and subsequent data confirms theVictorian figures and suggests that there are125 bodies in Queensland and 120 in NSWin 2005 (Australian Government 2006).The forms of the bodies listed here excludethe small mining company or indigenouswater supply schemes which exist underspecial acts.

Table 1 shows that Government at Stateand local level still has a major role in thewater industry and the State-ownedcorporations contribute significant amountsto revenue of the State and the localgovernments in the forms of dividends.Hence these bodies have an important role

at the macro state level financially but also ahuge role with respect to the achievementsof NWI. These State bodies and others suchas Catchment Management Boards are thefront line implementers of NWI.

The aim was to determine if theorganisational type was a factor in attitudesto selected NWI reforms and hence whetherimplementation of selected NWI goals wasmore or less likely in different organisationtypes. This process has been defined asEvaluation of law and policy by implementers(McKay 2006) is a strategic way to conductprocesses of law reform. In Australia, theprocesses of law reform rarely take thissystematic approach often responding toacute crises (Opeskin 2001)

The goals selected were aimed at evaluatingthe effort put into ESD by the CEOs, theirability to please the regulators( environmentand price ), the amount of information theyhave about water policy and if they trusttheir State government.

An earlier part of this study assessed thecontent of annual reports for all watersupply bodies under 10 themes includingESD actions. The results suggested that the24 Victorian utilities (all single missionwater suppliers) reported the most ESDactions. The vast majority of other watersupply businesses are empowered by a LocalGovernment Act, and have water as onlyone of many missions. (Gray and McKay2006)

Evaluation of selected NWI policiesby CEOs

The method was to identify the relevantpolicies and laws from State and federalinstruments and from conversations withCEOs and others. After the issues wereidentified the next step was design aninstrument to evaluate (on an eleven pointscale) perceptions, understandings andattitudes to the policies and laws by the keyactors. As the respondents weresophisticated, the interview schedule waslong with 100 questions and respondentswere contemporaneously emailed lists ofitems to rank order.

The CEOs were firstcontacted to make a timeto have 30 minutes free todo the interview. Theinterviews took placebetween September 2005and January 2006 and wereconducted by 3 trainedprofessional interviewers atEhrenberg Bass Institute atUniversity of SouthAustralia. The respondentswere all sent a project

information sheet and advised that theirresponses were confidential. There wereover 100 questions and the average time forinterview was 27 minutes with no-onestopping the interview. Respondentsreported that they liked the survey as theyhad a chance to explore issues and report onissues that concerned them. The results forall but the first questions are reported byState (as there is only a single authority inthe ACT and NT, their responses will notbe published to protect confidentiality) andcorporate governance type.

The respondents were selected to representthe types of organisations listed in Table 2.The CEOs were distributed as such; 86 outof 115 from Queensland, 38 from 78 inNSW, 24 from 29 in Tasmania, 13 from 24in Victoria, 20 from 22 in WA and the onlyone from each of the ACT and NT. Thedistribution by typology type reflected theproportions with local governmentpredominating. In the charts below theresults for the two single authorities in theNorthern Territory and Australian CapitalTerritory have been omitted.

All the sample CEOs were male and all hadbeen in the job for at least 6 months. Over50% has been in the same organisation for5 years or less, with 15% there for between6 months and 1 year, 20 % for between 1and 2 years and 14% for 5 years or less. Justover one third 34% had been CEO forbetween 5 and 11 years i.e. post CoAG1994 and 22% for greater than eleven yearswhich means pre and post CoAG 1994.However it was found that the time ofservice was not significantly related to theanswers to the questions.

CEOs and ESD implementation

What does sustainable development reallymean? Sustainable development as aconcept is notable for its lack of consistencyin its interpretation (Sharachchandra 1991).It dates from 1987 (Brundtland 1987)Whilst on the political level the fact that itis so broad is appealing but that is also itsweakness as the problems of poverty,environmental degradation, economicgrowth and participation are not well


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Table 2. Relative ranking of width of ESD definition in four AustralianStates and through MDBC template legislation in each State.

Rank of ESD definition width

MDBC Template* 1 (Equal)SA (downstream) 10% in MDB area 1 (Equal)Qld (upstream) 25% in MDB area 2NSW (upstream) 90% in MDBC area 3Vic (midstream) 60% in MDB area 4

*Legislation inserted into State law of Queensland, New South Wales, Vic, SA.


articulated. Such a lack of clarity mayhamper the debate and certainly theimplementation.

In Australia, Intergovernmental agreementson the environment imposed the 7principles of ESD (National Strategy onEcologically Sustainable Development 1992,1993)

Despite the above, each State has definedESD in a number of acts, totalling about400 in the whole nation. These acts apply toall actions of the Water Supply businessesand other institutions and organisations.The definitions of each of these spans overmany sections of each of the Acts/ The rulesof interpretation of Acts (in each State) arealso different. Table 2 ranks the width of thevarious definitions of ESD.

The fundamental premise of ESD is thateconomic development must be balancedagainst the protection of biological diversity,the promotion of equity within and betweengenerations, and the maintenance ofessential ecological processes. TheCommonwealth Government workinggroups on ESD drafted these principles toguide ESD in 1992 (Hamilton and Throsby1998). Namely:

Decision making processes should effectivelyintegrate both long and short termeconomic, environmental,social and equityconsiderations, in seven principles:

1. Lack of full scientific certainty should notbe used as a reason for postponing measuresto prevent environmental degradation (thePrecautionary Principle),

2. The global dimension of environmentalimpacts of actions should be recognised andconsidered,

3. The need to develop a strong, growingand diversified economy which can enhancethe capacity for environmental protectionshould be recognised,

4. The need to enhance and maintaininternational competitiveness in anenvironmentally sound manner should berecognised,

5. Decision making processes shouldeffectively integrate both long and shortterm economic, environmental social andequity considerations,

6. Cost effective and flexible policyinstruments should be adopted; and

7. Broad community involvement should befacilitated.

This statement has been accepted by CoAGand reflects that economic efficiency is notthe main goal of water institutions butrather that there is a need to achieve ESDand balance between the social, economic,and the environmental needs. These sevenprinciples have accordingly guided the

collective thinking of governments in theformulation of contemporary water policy.

The first two questions reported here wereemailed to the respondents so they could seethe full text and they were asked to rate eachone from 1 not at all difficult to 10 extremelydifficult. In the second question, they wereasked to rate them according to the effortthey have put in from 1 least effort to 10most effort. In all the questions #11 was‘don’t know and refused’ but there were very

few of these. The votes were then tallied asshown in the figures.

Responses to the first question indicate thatthe CEOs thought that it was most difficultto achieve global dimensions and leastdifficult to achieve broad communityinvolvement.

In relation to effort, most effort went into 3dimensions broad community involvement,cost effective policies and integrated decision making processes.

Figure 2. Effort and difficulty in achieving ESD.

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refereed paper


In relation to the transparency of the ESDprocess Figure 3 indicates that mostorganisations have a neutral view. All hadheard of the process. Hence they wereneutral at to whether the process in theirState is transparent. The Water Boardsperceive the process as transparent. Localgovernment are clearly of the neutral view.

In relation to ability to achieve ESD,(Figure 4) the local governments were mostlikely to be neutral; Water Boards andGovernment Owned Corporations weremore likely to agree that they could achieveit. In relation to work on local governmentand participation in Regional NRM Plandevelopment it was reported that mostcouncils were not active because of a lack ofresources with 56 per cent of councilshighlighting a lack of human or financialresources to effectively participate. Only 31per cent of councils believe they have a goodor comprehensive capacity to develop andimplement the regional plans. (AustralianLocal Government Association 2005)

The Environmental and PriceRegulators

Social capital theory in relation toenvironmental matters has often focussed onunderstanding how various actors interactwith one another in relation to the waterpolicy environment. By understanding thesocial capital of different environmentalactors, for example water users and waterpolicy implementers, we can understandwhy some policies end up beingimplemented and why noble aims often fail.

The questions asked aimed at finding whichof the regulators was the more difficult toplease. Figures 5 and 6 show that theenvironmental regulator is seen as harder toplease in New South Wales and also forlocal governments. The price regulator isseen as hardest in Victoria and by StatutoryBoards.

Relationship with Relevant StateGovernment

Question 12 asked whether they felt theywere kept informed by their StateGovernment: the results are shown inFigure 7.

The results differed markedly between theStates. Water supply businesses in Victoriawere most likely to trust and the lowest trustlevel was found in the NSW A study inQueensland of stakeholders in smallcatchment found that there was little trustof the State government over NRM.(Rickson 2006)

The CEOs also reported low levels of trustin relation to the relevant State government.There was also a massive variation between Figure 5. The Environmental Regulator.

Figure 4. Ability to achieve ESD.

Figure 3. Is the ESD Process Transparent?


refereed paper


Corporate governance types as well withStatutory Boards and Government-ownedcorporations most trusting and localgovernment least.

In support of the above the CEOs alsoreported that they don’t generally feelnested in a mutually supportive policyenvironment except in Victoria and thisrelated directly to the corporate governancetype of Government owned corporations,as shown in Figure 8.

Summary and Conclusions

There have been massive reforms of Statewater laws, policies, institutions andorganisations in Australia over the last 12years. These reforms have created manynew bodies and completely restructuredownership of assets and management in allWater Supply businesses. The reforms aimto achieve ESD but each State defined itdifferently and has implemented it indifferent ways. There are 14 types of watersupply businesses in Australia with NSWhaving 9 types spread over 79 major watersupply businesses. The different types oflegal organisation means that there aredifferent organisational cultures processesand regimes to satisfy from coerciveinstitutions such as the plethora of lawswithin and between States.

Most reforms require partnerships betweenCommonwealth and State agencies and alsopartnerships between different sectors ofthe community to achieve ESDimplementation, as defined by the relevantacts. This paper has shown that the ESDpolicy implementers, the CEOs, have madeconsiderable effort. However, thepartnerships between sectors of thecommunity and between them and Stategovernments are impaired by a lack of trustand a perception that the water policies arenot mutually supportive. Many of them arealso puzzled as to how to achieve ESD andwith acute differences between the States indefinitions there is a limited scope for themto learn from each other. Notably theenvironmental regulator is seen as harder toplease in New South Wales and also forlocal governments. The price regulator isseen as hardest in Victoria and by StatutoryBoards.

Acknowledgments

This work was conducted as part of aproject for the CRC Irrigation Futures. Itwas supported in kind by members of theCRC especially Matthew Durack, GlenStarkey, John Bourne, Eddie Parr, PeterSmith, John Williams, and BernadetteZerba.

The project was also supported by theUniversity of South Australia, School of

Commerce and benefited from feedbackgiven by the respondents and also fromcomments by George Warne (NSW), GeoffParish (SA), Tony Thompson (SA) and theopportunity to present some of this tomeetings organised by ACIAR and ANCID.

Other support was made available fromJolyon Burnett, Irrigation Association ofAustralia, and Stephen Mills, AustralianNational Committee on Irrigation andDrainage and Chris Davis of the AustralianWater Association.

Figure 6. The Price Regulator.


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The project employed Adam Gray who dida great job in liaising with manyorganisations and drawing these charts.Michael Griffin and Fiona Partingtonchecked the typology by reference to theAnnual Reports of the water supplybusinesses. Kirsty Willis co-ordinated theinterviewing with good humour despite thisbeing one of the longest and technicallychallenging surveys in the experience of theEhrenberg-Bass Research Institute. RexJones and Kathryn Pickering providedmuch support in the financial managementand other members of the Centre collectedarticles and checked the results especiallyGanesh Keremane, Anna Hurlimann,Arthur Spassis and Diwakara Halanaik.

The Author

Jennifer Mackay is Professor of BusinessLaw, School of Law, University of SouthAustralia. Email:[email protected]

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Figure 8. Mutually supportive policy environment.

Figure 7. Relations with State Governments.


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