Transcript Privatization and regulatory reform in the water sector

Private Sector Participation and Regulatory Reform
in Urban Water Supply:
The Middle East and North African Experience
Edouard Perard, Sciences-Po
[email protected]
OECD Experts’ Meeting on Access to Drinking Water and Sanitation in Africa
Paris, December 1st, 2006
Understanding Privatisation Policy: Political Economy and Welfare Effects
A European Project Supported within the Sixth Framework Programme
http://www.privatizationbarometer.net/upp
I.
Introduction:
The scope of private sector participation
in water supply in the world
Source: Edouard Perard “The Future of Public-Private Partnerships in Water Supply”, Yale University Water-Health-Environment
Seminar, February 2006. Based on data updated from Pinsent Masons 2006, PSIRU, literature review and direct interviews.
II.
The increase of private sector participation
in water supply in urban areas
Urban population served by public-private partnerships
35%
30%
25%
20%
15%
10%
5%
0%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Low Income Economies
Lower Middle Income Economies
Upper Middle Income Economies
High Income Economies
Source: Based on IWE, Cranfield PPP Database, Franceys 2003.
III.
The importance of urban issues
in the Middle East and North African region
Population
growth from
2005 to 2030
Percentage of
Percentage of
Urban population
population living population living
growth from
in urban areas in in urban areas in
2005 to 2030
2005
2030
Algeria
36.1%
64.8%
60.0%
72.6%
Egypt
44.6%
85.0%
42.3%
54.1%
Jordan
52.1%
62.2%
79.3%
84.6%
Lebanon
23.8%
29.4%
88.0%
92.0%
Morocco
33.5%
64.7%
58.8%
72.5%
Syrian Arab
Republic
57.4%
87.2%
50.3%
59.8%
Tunisia
22.5%
41.7%
64.4%
74.4%
Palestinian
Territory
93.7%
116.9%
71.9%
80.5%
World
26.8%
56.9%
49.2%
60.8%
Source: Calculations based on the 2004 estimates of the United Nations Population Division
IV.
The scope of private sector participation
in water supply
in the Middle East and North African region
Source: E. Perard, based on data from PSIRU, Pinsent Masons 2006, Institutional communication of water
operators, Press releases.
V.
Options
Forms of private sector participation
in water services
in the Middle East and North African region
Setting
Asset
Capital
performance
ownership investment
standards
Design
and
build
Operation
and
maintenance
Commercial
risk
Oversight of
performance
and fees
Duration
(years)
Service
contract
Public
Public
Public
Public
Shared Public
Private
Public
Public
1–2
Management
contract
Public
Public
Public
Public
Private
Public
Public
3–5
Lease
contract
Public
Public
Public
Public
Private
Shared Public
Private
Public
10–12
BuildOperateTransfer
Public
Private
Bulk
services
Private
Private
Private
Private
Public
20–30
Concession
contract
Public
Public
Private
Private
Private
Private
Public
25–30
Joint
Venture
Public
Shared
Public
Private
Shared
Public
Private
Shared
Public
Private
Public
Indefinite
Divestiture
Public
Private
Private
Private
Public
Indefinite
Shared Public Shared Public
Private
Private
Private
Private
Location in the
MENA region
Algeria,
Tunisia…
Algeria
(Algiers)
Jordan
(Amman)
Lebanon
(Tripoli)
West Bank and
Gaza
(Bethlehem,
Gaza)
Algeria, Egypt,
Jordan
Lebanon,
Morocco
Morocco
(Rabat,
Casablanca,
Tangiers and
Tetouan)
Source: Model: adapted from Bradford Gentry, Yale-UNDP Collaborative Program, 1998. Data: Institutional communication and press releases.
VI.
Promising regulatory reforms
in the water sector in Algeria

The management of water supply and sanitation has been
rationalized and centralized with the creation in 2001 of two
independent water supply and sanitation agencies.

Municipalities have the possibility to delegate water supply to
financially independent public operators “régie publique” (2005).

Private sector participation was legalized as early as 1995.

The first management contract was awarded in 2005 for the water
supply of Algiers.

The tariff structure has been reformed. Tariffs are now progressive,
set locally, with cost recovery objectives. Water metering practices
have increased.
VII.
Decentralization trend
and concession contracts in Morocco

The major water producer and distributor, the National Office of
Potable Water (ONEP) is legally and financially independent and
does not longer receive subsidies.

Recent decentralization trend:


The water law of 1995 creates River Basin Organizations. Legally and
financially independent, their mission is to finance local water
investments through users’ fees “redevance” and lending.
Since 2002, municipalities have the full responsibility of water supply and
sanitation services. They can operate directly or under a "regie publique"
contract or delegate to ONEP or delegate to the private sector.

The first concession, for Casablanca, was awarded in 1997 to Lydec.

Tariffs are progressive and set locally. The effective pricing of water is
emphasized in the water law of 1995.
VIII. Recent regulatory reforms in Egypt

Since 2004, all drinking water and sanitation entities of the country
have been regrouped under one single Holding Company.

In practice, water supply administration in Egypt is highly centralized.

Operation and maintenance costs of water services are mainly
funded by public sources.

Revenues cover only 40% of costs because of subsidies, high levels
of leakage, and non-paying state customers.

Cost recovery problems and low tariffs discourage financial investors
and private sector participation.
IX.
Successful public management in Tunisia

In Tunisia, the water and sanitation sector is totally public
and is managed by two independent government agencies.

Impressive performance:



Very low rate of unaccounted for water: 18.2% in 2004.
Tunisian cities have usually continuous water supply.
The bill collection rate is very high: over 99%.

However, water management in Tunisia is highly centralized
and very much politicized.

Problems of low tariffs set nationally and of high level of cross
subsidies among customers: 90% of users pay water below the real
economic cost.

Moderate private sector participation has been recently introduced in
sanitation through service contracts and a BOT contract in Tunis.
Edouard Perard, Sciences-Po
[email protected]
Understanding Privatisation Policy: Political Economy and Welfare Effects
A European Project Supported within the Sixth Framework Programme
http://www.privatizationbarometer.net/upp