Making Services Work for Poor People:

Water and SanitationDecember 18, 2004

Junaid Ahmad

OECD, Paris

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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?

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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 O&M Sanitation

Open defecation Little waste water treatment (less than 8-10%)

Decaying infrastructure: no O&M Scale without sustainability

30-40% not connected Use of infrastructure for patronage and politics!!

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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: it’s 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

Don’t fix the pipes, fix the institutions that fix the pipes

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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?

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A framework of relationships of accountability

Poor people Providers

Client power: short route of accountabilty

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Poor people Providers

Policymakers

A framework of relationships of accountability

Long route of accountability

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Poor people

Policymakers

A framework of relationships of accountability

Providers

voice

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Mexico’s 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

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PRONASOL expenditures according to party in municipal government

Source: Estevez, Magaloni and Diaz-Cayeros 2002

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A framework of relationships of accountability

Providers

Policymakers

Poor people

compact

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Policymaker-provider:Contracting 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 government12 districts randomly assigned to each category

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Contracting for Outcomes: health services in Cambodia

Source: Bhushan, Keller and Schwartz 2002

Use of facilities by poor people ill in previous month

Applying the framework to water and sanitation

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Urban water networks: politics and patronage

Policymaker

Client

Provider

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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

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CENTRAL GOVERNMENT

SERVICE PROVIDERS

POOR PEOPLE

REGULATORY AGENCY

LOCAL GOVERNMENT

customer complaintsuser charges

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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

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Rural areas: the problem

Policymaker

Client Provider

Donors, NGOs

Rural Areas

Low density areas

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Center/State

LG

Communities

Public AgencyCapacity SupportTransition Costs

Monitoring & EvaluationSociety

SRP

Rural Drinking Water

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Rural sanitation: A problem of demand

price

quantity

D2: Optimal demand

D1: Private demand

D2

D1

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Measure rural sanitation outcomes correctly

Usually measured as building latrinesCreates incentives to construct, not to use

latrinesOutcome to measure: extent of open

defecationOrients accountability correctly

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What does a latrine subsidy do?Sanitation is a community outcomeSo, co-production of sanitation is keyHousehold subsidy distorts community

participation and co-productionPaves the way for patronage

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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

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Poor people Providers

National and Local policymakers

Total sanitation

Communities

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Implications for urban sanitationSupply of sanitation, not demand, the

problem for networksProperty rights and regulation

Dar-es-salam cesspit cleaners Orangi style co-production linked to networks Community toilets in Pune

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Donors and service delivery

Global funds

Community driven development

Project implementation

units

Poor people Providers

Policymakers

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Poor people Providers

Policymakers

Services work for poor people when accountability is strong

http://econ.worldbank.org/wdr/wdr2004

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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 < 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

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Reforming Institutions

Which path?

Through local governments: South Africa

Through the WSS: Chile

Which path for India?

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Reforming Through Local Government: South Africa

City towns

towns

towns

State

capital

operating

capacity

incentives

Utilities,Departments,

Regional systems

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Reforming Through Utilities: Chile

City towns towns

State

City Utility Regional Utility

consumers

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Co-locating Reforms: 74th Amendment

City Utility towns

towns

State

City Regional Utility

consumers