Case Studies

1. Argentina. The country has been a pioneer of privatization programmes in WSS since the early 1990s (see Table 2). In the capital city Buenos Aires, a consortium of private companies headed by the French Lyonnaise des Eaux was awarded in 1992 a 30-year contract to take over the state-owned Obras Sanitarias de la Nación (OSN). In addition, a thirty-year concession to run Obras Sanitarias de Buenos Aires (OSBA), the water utility serving the conurbated municipalities of the Great Buenos Aires, was awarded in 1999 to Azurix, a consortium formed by the US oil and gas giant Enron and the British Wessex Water. The privatization of water supply and sewerage services in Buenos Aires in 1992 has been branded as a successful case. However, Argentina has also witnessed dramatic experiences with private involvement in WSS: for instance, in the provincial capital of Tucumán the privatization of the state water utility was cancelled by the private operator (the French company Générale des Eaux) in 1997, after a succession of social and political conflicts with impact at the local (over 80 per cent of the users refused to pay the water fees due to quality problems), national and international levels (the company demanded the national government a compensation of 100 million dollars, although the case was resolved in favor of the Argentinean government in the international tribunal). Similarly, in 2001 Azurix followed the same path and decided to give up the concession awarded in 1999 after recurrent technical, administrative and political problems.

2. Bolivia. Bolivia has experienced one of the most dramatic incidents with private involvement in WSS in recent years. A massive mobilization of well-organized water users in the city of Cochabamba prompted a high-profile political crisis in the country forcing the withdrawal of the entire federal cabinet in April 2000. For many observers, the crisis highlighted one of the crucial obstacles facing private involvement in WSS in developing countries: the implementation of technocratic models with complete disregard for the local conditions, especially in the socio-political and cultural fields. Among other factors it is worth stressing the perceived illegitimacy of a new Water Law passed in October 1999 (due to the lack of political accountability in the legislative procedures) with the active involvement and financial backing of multilateral organizations like the Interamerican Development Bank (IDB), and the disregard for the long-standing and widespread social and political opposition to the privatization of the water utility in the city of Cochabamba. As a result, Aguas de Tunari, an international water consortium led by International Water, a UK-based company, withdrew from the 40-year concession that had been granted only few months earlier and the Bolivian government underwent a far-reaching reorganization.

3. Brazil. The country has a relatively limited experience with private involvement in WSS. During the last decade the institutional framework for WSS in Brazil has undergone a far-reaching redefinition, especially through federal policies directed at fostering decentralization, privatization, and the reconstruction of the regulatory system. However, compared with the pace of change achieved in electricity and telecommunications, progress in the WSS sector has been much slower and very limited. To a large extent, this situation stems from the fact that the decentralizing and privatizing forces are facing the resistance of pre-existent political, juridical and administrative ‘traditions’ prevalent in the Brazilian WSS sector. These factors, that tended to be overlooked by policy planners and reformers during recent years, will have to be taken into consideration more seriously in analysing and conducting the process of change in order to bring about real improvements in the management of WSS in the country. The case studies will include i) a controversial and questioned privatization process in the city of Limeira, in the state of São Paulo, ii) a successful example of privatization in the municipality of Niterói, state of Rio de Janeiro, and iii) a case of intermunicipal concession of WSS to private capitals, involving an association of six municipalities from the Lakes Region in the state of Rio de Janeiro.

4. England and Wales. The present organizational setting of the water sector in England and Wales was introduced in 1989, with the privatization of the existing ten regional water supply and sewage disposal authorities (Scotland and Ireland refused to apply the privatization model and stayed with state-managed water utilities). The privatization followed a succession of institutional and political rearrangements that took place since the early 1970s. Then, a radical reorganization was carried out aimed mainly at rationalizing and centralizing a highly disintegrated public utility sector that had grown over a very long period of time. The intricacies of the reorganization carried out in 1973 and the eventual privatization of 1989 cannot be yet entirely elucidated, as the processes set in motion are still developing and subject to close scrutiny. After a serious drought in 1995-96 exposed the deficiencies of the system, in particular the lack of compliance with investment targets (especially pipe renewal and leakage reduction) and the absence of long-term planning, the water regulators set much stricter controls over the private operators, including a substantial price cut for 2000-2001. As a result, some of the private companies have sought to abandon the model based on private shareholders ownership and adopt alternative organizational models including the partial or total collectivization of the operations. In this connection, the Welsh water utility Glas Cymru has become the first privatized company to abandon the system by adopting a mutualized model of management, which has set a significant precedent. Although the rest of the industry in England and Wales continues to be run on a for-profit basis, there is an ongoing public debate about the future of the sector. This case study will provide an excellent benchmark for the design and functioning of regulatory systems for the control of economic, environmental and quality aspects of WSS, while also offering important lessons about the conditions and barriers affecting successful private involvement in WSS.

5. Finland. This case will study in detail the key principles and practices of public-private partnership in water services based largely on local government (municipality) owned utilities which cooperate with the private sector. Such systems have a long tradition in larger Finnish cities and townships though many of them are fairly small compared with other European countries. In any case, this is the most common management model of water services in the EU member countries. It is important to note that the public involvement includes not only the state level, but also the regional and municipal (local) levels. This option of municipality-owned utilities has several alternatives like the traditional municipal utility, an autonomous utility, a company owned by the municipality or an inter-municipal utility. In sparsely populated areas, joint water service systems are managed by private water cooperatives while funding and operation are nevertheless in most cases supported by municipalities. First, the study will look at the development and long-term changes of the public-private partnership in water services. How have these roles changed and what are the factors that explain these relative changes of roles over the years? To what extent and how are non-core operations of utilities outsourced to the private sector in terms of various services and cash flow? How and to what extent have utilities reached their autonomy? In addition, the study will find out how have the roles of the various key stakeholders changed over the years. Second, the study will analyze the practices of consumer-managed water and sanitation cooperatives in dispersed rural areas and small villages. These systems are largely private in their nature. What kind of roles have the key stakeholders of these systems, how have the roles changed over time and what kind of private involvement is there in terms of enterprises and individual customers? The third part of the study will focus on the various options of inter-municipal cooperation, which is an increasing trend in the country. What are these options and what kind of relationships have these with municipal-owned utilities and rural cooperatives. What are the advantages and disadvantages of the various options? How do the roles of various stakeholders differ in each option? How are the interests of customers and people safeguarded? Fourth, a short analysis will be made on public-private partnership is some European countries (excluding England and Wales, Greece and Portugal, which are already involved in this project). Finally, the study will discuss on potential practices and principles that could in one form or another be applied in the conditions of developing economies.

6. Greece. The institutional structure of the water supply sector in Greece is undergoing a major transformation as best reflected by recent changes in the Athens water supply company, responsible for serving 40% of the country’s population. Under the new regime the state retained the full control and ownership of the reservoir/conveyance infrastructure, while the Athens Water Company has been partly privatized (49% available to the shareholders market) and assumed the responsibility for the network. The impacts from the new institutional structure of the water sector have only been discussed "intuitively": on the positive side, a modernization/privatization-related new spirit is reflected in increased attention to new managerial approaches (e.g. a pilot project for assessing network leakage, the preparation of a software model for integrated management of resource abstractions, and a commissioned study to develop an institutional framework for the integrated protection of drinking water sources from pollution). More concretely, the establishment of a long-term investment programme will activate planning procedures and safeguard a budget for network improvement (replacement and leakage control). On the other hand, the new institutional framework shields the service provider from resource-side costs (i.e. new reservoir/aqueduct projects, marginal costs by operating the Yliki branch and extra costs in drought periods are to be covered by the state) providing a disincentive for water conservation. Thus, the system ensures the continued subsidization of the sector, a questionable practice both in terms of regional and social equity, as the benefits will accrue to a partly-private company. In this respect, we propose to carry out a comparative study which will assess the pros and cons of the emerging trends with respect to sustainability standards.

7. Kenya. Private involvement in WSS is very limited in the country. The Ministry of Water Resources (MWR) is the lead actor in the management of most urban water supplies and all public rural water supplies. Currently, the ministry runs 67 urban water supplies spread all over the country. Other major actors in urban WSS include the National Water Conservation and the Pipeline Corporation (NWCPC), which manages 30 urban water utilities, and 11 Local Authorities which manage their own WSS utilities. Private sector participation is limited to Nairobi City, where there are three private water undertakers serving Runda Estate, Rosslyn Estate and Wilson Airport, while there has also been a growing interest to venture into the sector by other groups. Management of the water sector in Kenya has undergone far-reaching transformations recently, especially looking at the promotion of private involvement, including Public Private Partnerships (PPP). This, however, is not an entirely new situation in Kenya, as private involvement in WSS can be traced back to the colonial days when several undertakers participated in the management of the water systems. In Mombasa, for instance, there existed a private company known as the Nyali Wells Water Company, which supplied water to the residents of Nyali area as a purely private enterprise. During the same period, a private water company in Karen Langata area of Nairobi, also known as Karen Properties was involved in the supply of water to the local residents on a commercial basis. These were just but a few of the private institutions, active in the management of the water sector at the time. Notwithstanding these precedents, the extension of private involvement in the country, and in the whole Sub-Saharan region, in recent times has been very limited in scope (see Table 1) and the prospects for further participation of private investors are still unclear.

8. Mexico. The country has undergone a revolutionary institutional transformation in the water sector during the 1990s, which has also attracted a flow of private investment (see Table 2). In 1992, substantial reforms were introduced in the constitution to promote private sector participation, and a new Water Law was passed that year. The Federal District, which houses over 8 million people, was divided into four zones, which were allocated in 1993 to four transnational consortiums led by the French Lyonnaise des Eaux and Générale des Eaux, and the British Severn Trent and North West Water International. Later on, certain areas of the conurbated municipalities in the State of Mexico were also offered in concession to private water operators. In Mexico WSS are a key socio-political issue and an object of state paternalism, popular mobilization, and recurrent conflicts. Unsurprisingly, here private participation has been limited to the contracting out of some services such as the distribution and metering of water while the state has retained control over the system. Like in Argentina and Bolivia, Mexico has also gone through negative experiences with private involvement in WSS: in the state capital of Aguascalientes, the contract for the privatized water service successfully run by the same company that was involved in Tucumán was not respected when new elected authorities took office in 1996, though the governor responsible for the move belonged to the pro-privatization policies PAN party (recently elected for the first time to govern the country).

9. Tanzania. Tanzania started a slow process of economic liberalization in 1990, which had among other targets the reversal of the highly centralized government structure that concentrated economic and human resources in the capital, leaving an acute lack of capacity, resources and autonomy at the district and village levels. The first democratically elected government (1995-) has demonstrated its commitment to seriously addressing the nation’s complex problems, among other issues by establishing a policy of decentralization and undertaking civil service and local government reforms and pledging adherence to the principles of sustainable development. At the national level, this has meant the devolution of power and decision-making from central government in Dar es Salaam to the regional, district, ward and village levels is currently under way. One of the key problems has been the chronic lack of private investment in the country, with most funding for development and infrastructure originating from other sources. For example, between 1992 and 1997 Tanzania received assistance from more than 100 bilateral and multilateral donors. However, because lack of capacity at the local level was perceived as the most urgent need, most of these programmes were local level projects and, although many were excellent, lack of coordination among them was a major shortcoming. In addition, capacity building for sustainable development was not a feature of most of these programmes. In this context, one of the candidate case studies for our research is Zanzibar, which currently has 800 000 people. The economic situation in Zanzibar has changed tremendously due to the liberalization measures in general trade and business during the past few years. More private investments are being undertaken in response to the government’s dedicated efforts to mobilize and encourage private sector participation to economic activities. The Government of Zanzibar has recently given high priority to the development of public utilities and services, among them water supply and sanitation. However, projects in the sector have been developed since the late 1980s: in 1989 the Government of the United Republic of Tanzania and the Government of the Republic of Finland agreed to cooperate in developing the urban water supply sector in Zanzibar, eventually producing the Zanzibar Urban Water Supply Development Plan in 1990. The Development Plan provided comprehensive institutional and technical plans for urban water supply development until year 2015. Among these, the Zanzibar Urban Water Supply Project (ZUWSP) covers improvement of water supply in Zanzibar town and nearby areas housing a total population of about 300 000 people and a projected population growth of about 3.8 % annually. In the new context, the Zanzibar Water Supply Authority is expected to reach financial self-sufficiency after 2000, including the funding of new investments, with a long-term goal of having a single authority covering urban WSS and rural water supply. Likewise in the Kenyan case and in the whole Sub-Saharan region, the extension of private involvement in WSS is still very limited in scope (see Table 1) and the prospects for further participation of private investors are still unclear.

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