Blogs

Arab countries have yet to adopt the legal and regulatory framework necessary for municipal water and sanitation services. In most countries, central governments are both the service providers and regulators. Few countries are implementing water and wastewater treatment infrastructure facilities under public-private partnership (PPP) arrangements. Irrespective of service providers, public or private, citizens deserve the right to universal access to water and sanitation services. These services should be provided, of acceptable quality, by utilities and at socially acceptable tariffs.

The regulatory approach consists of two major areas of intervention: structural regulation of the sector and oversight of the performance of the utilities. The components of structural regulation are: primary and secondary legislation at the central and local (municipal) government level. Regulatory oversights require institutional capacity among regulatory agencies to monitor the service quality, technical and financial performances, tariff regulation, and consumer protection.

There are four institutional roles, which ideally should be performed by different organisations. These include: sector policy, corporate governance, service delivery, and regulation.

Sector policy is a role that can only be performed by central government and encompasses establishing the institutional framework for the sector, including the duties and powers of the institutions. The public policy objectives of the sector and the institutions should also be clarified in appropriate legislation to avoid overlap of functions. A mechanism should also be established to ensure that the performance of the sector and the institutions are reviewed periodically to assess whether or not it is achieving the desired objectives.

Corporate governance is comprised of the care of the service delivery assets. This role should be performed by the owners of the assets. In the case of public ownership, this would be the central or local government. In the case of private ownership, the role will be performed by the shareholders of the owning company.

The role of service provision may be carried out by either a public enterprise or a private operator. In the event of a private operator, there will be a formal contract between the asset owner and the operator to ensure that the role of service provision is legally based and clear. Where the service delivery role is carried out by a public enterprise, clarity as to what is expected of the operator may be set out in a performance agreement between the parties.

The regulatory institution for the water and sanitation sector is generally comprised of an environmental regulator, and a drinking water quality regulator, in addition to the economic regulator. There may also be provisions made for establishing customer-focused consultative bodies, either integral to the economic regulator or independently.

As a first step towards developing broad strategies that facilitate the regulatory oversight of utilities’ performance and duties, it is helpful to establish a set of corresponding shared high-level objectives including:

• Achieving supply continuity and quality regulations,
• Addressing customer non-payment and disconnections with annually decreasing targets,
• Reducing operational and capital maintenance costs by at least 2% annually for at least five year, and
• Instituting systems for penalizing poor-performing service providers/rewarding those that perform well to increase efficiency.

Regardless of which broad strategies are established, transparency and codification will be necessary for enforcement and tracking progress to targets. Tools available include the necessary laws and amendments governing water use, regulatory guidelines, codes of practice and public reporting systems. Only once a government’s strategies and tactics for improving water sustainability are fully understood can the private and public sectors engage in ensuring that the strategies come to fruition.

Shibu B. Dhar provides consulting services to multilateral banks (The World Bank, Inter-American Bank, Asian Development Bank and European Development Bank), bilateral development agency, USAID and private infrastructure clients. He has extensive experience in the reform of water companies in the developing countries, including the management of regulation, the development of commercial targets, and performance management systems. His experience includes design of institutional frameworks, design and review of appropriate regulatory bodies in the water sector, which has been gained through assignments in Cape Verde, Zambia, Latvia, Vanuatu, Mongolia, India and USA.