Public-Private Private partnerships for Urban Water Utilities in Developing Countries: A Review of Experiences in Developing Countries

Transcription

1 Public-Private Private partnerships for Urban Water Utilities in Developing Countries: A Review of Experiences in Developing Countries IWA Vienna September 10, 2008 Philippe Marin, Sr. Water & sanitation specialist The World Bank 1

2 Why another PPP study? Series of highly publicized contract cancellations, doubts about suitability for developing countries During last 15 years, more than 250 PPPs for water utilities were awarded in 61 developing countries Failures get more publicity than successes. What is the true story? 2

3 Assessing PPP is challenging The debate has often been more on ideology than objective data, partly due to methodological difficulties: Performance indicators are more complex than they appear at first sight (coverage, water losses) Public water utilities often do not report performance data, or if they do those are unreliable This makes comparing public and private utilities, as well as assessing progress under a PPP (lack of baseline), challenging Performance data on PPP are not always easy to get either (depending on cases/countries) 3

4 Scope of this study Historical trend: statistics on contract awards and population served: is water PPP in retreat or gaining market share? Performance: focus on the impact of water PPPs i.e. net improvement instead of contractual compliance Four dimensions: coverage expansion, service quality, efficiency of operations, average tariff 4

5 Scope of this study (2) Large amount of project data collected: More than 15 individual consultants across the world 65 PPP projects representing a served population of about 100 million people (half of total, 85% before 2003) Diversity of data source, not complete for all projects, opportunistic approach PPP projects where a private operator took over the management of utility services: Concessions, divestures, leases/affermage, mixed- ownership companies (with management control) and management contracts No BOTs, urban utilities with more than 25,000 people served where private operator took over. 5

6 Historical trends: Is water PPP in retreat in developing countries? 6

7 The period: booming enthusiasm for water PPPs Water utility PPPs in developing countries until 2000: Urban population served by private water operators (in millions) and new PPP awards MENA ECA Latin America Asia Sub-Saharan Africa New PPP awards

8 The period: booming enthusiasm for water PPPs Fast growth of population served by private operators: 92 million in 45 developing countries (2000) Latin America was the main region High visibility projects in megacities: Buenos Aires, Manila, Jakarta Dominance of the concession model: Access to private financing was major goal Large foreign operators raising limited recourse financing in foreign currencies 8

9 Evolution since 2001: Contract awards dropped in 2002, then concentrate on a few countries (Chile, Colombia, Russia, China) But total population served kept growing! Water utility PPPs in developing countries: Urban population served by private water operators (in millions) and new PPP awards Population in millions MENA ECA 30 Latin America 25 As ia Sub-Saharan Africa 20 New PPP awards Number of contracts awarded

10 Low tide? Rather, a new market for urban water PPP Population served went up from 92 millions in 2000 to 160 millions by 2007 Market share: from 1% of urban pop. in 1997, to 4% in 2001 and 7% by 2007 New countries since 2001 include China, Russia, Algeria, Armenia, Saudi Arabia, Ghana, Cameroun Surge of new players from developing countries 10

11 Most of market growth since 2001 came from developing countries operators Private water operators in developing countries: Urban population served (in millions) by country/region of origin Developing countries Other international Spain UK France In 2007: 40% of the market, more than 30 national private operators serving each more than 400,000 people 11

12 What is the performance of water PPPs? 12

13 Most water PPP projects have passed the test of time Water utility PPP: number of projects active, expired and terminated (2007) active 84% expired 7% terminated 9% 84% of PPP projects awarded for water utilities since 1991 are still active, 9% were terminated early (15% up to 1997) Only two PPP contracts in distress by the end of

14 Access: more than 24 million people connected to piped water with PPP projects Based on 36 large PPP projects for which data was collected, an under-estimate estimate of the total figure Many PPP projects performed well in expanding access to piped water: Colombia, Guayaquil, Brasil, Argentina, Western Africa, Casablanca, Manila even La Paz El Alto But many also did not and/or failed to meet targets for access expansion and private investment 14

15 Assessing performance for access expansion is a complex issue Access to financing is a major determinant of outcome: Impact of financial design of PPP: who finances investment, financial equilibrium Public comparator is easily biased because of conditions of access to financing for public utilities Many elements are beyond the scope of the operator (whether public or private) Serving illegal settlements Connection fee levels and obligation to connect 15

16 Impact on service quality: reduction of water rationing Colombia sample shows remarkable performance to solve water rationing Colombia: Evolution of number of hours of service in 5 early water PPPs awarded in Santa Marta (1997) Tunja (1996) Marinilla (1997) Cartagena (1996) Baranquilla (1997) The PME approach: public grants to accelerate rehabilitation Colombia: Evolution of average number of hours of service in 5 water PPPs awarded since 2000 under PME program Monteria (2000) Soledad (2001) Sincelejo (2003) Baranoa (2003) San Marcos (2002)

17 Improving service continuity with management contracts Significant improvement in 9 out the 12 MCs for which data was available Performance of 12 Management Contracts to improve water service continuity: Evolution of average number of hours of service per day (years of MC) Gain with private operator Before start of MC Kosovo (4) Kampala (3) Lara (3) Zambia (4) Trinidad (4) Mozamb. (5) Monagas (4) La Rioja (3) Albania (4) Yerevan (5) Gaza (6) Amman (6) 17

18 Improving operational efficiency Complex issue, but can be captured broadly by looking at three indicators: NRW reduction (as proxy of variable costs savings when starting from high NRW level) Billing collection ratio (revenues into cash) Labor productivity (main fixed cost) 18

19 PPP and reducing water losses: the evidence from Morocco Morocco: Comparison of NRW % for 4 concessions and 6 large public utilities 60% 45% 30% Start year Last year 36% 28% 47% 49% 43% 36% 33% 33% 34% 33% 34% 25% 23% 23% 19% 20% 21% 28% 49% 46% 15% 0% Casablanca ( ) Rabat ( ) Tangiers ( ) Tetouan ( ) Marrakech ( ) Fez ( ) Agadir ( ) Meknes ( ) Kenitra ( ) Oujda ( ) Morocco: Evolution of water losses per connection (m3 per day) under private concessionaires Morocco: Evolution of water losses per connection (m3 per day) for the 6 largest municipal utilities Casablanca Rabat Tangiers Tetouan Marrakech Fez Agadir Kenitra Oujda Meknes

20 improving collection rates Positive performance in most cases More complex than just enforcing strict cutting policy, linked to t service improvement but also cultural behavior which are hard to change (e.g. South Africa), and legal constraints (Argentina) Wide evidence of improvement even under short term MC 100% Performance of 14 Management Contracts to improve collection ratio (%): Comparison before the entry of private operator, and end of contract By the end of the MC Before start of MC 80% 60% 40% 20% 0% Amman (6) Joburg (5) Guyana (3) Kosovo (4) Zambia (4) Gaza (6) Mozam. (4) Trinidad (4) Lara (3) Albania (3) Monagas (4) La Rioja (3) Tripoli (3) Yerevan (5) 20

21 PPP and labor Labor productivity improved in large majority of cases Often accompanied by massive lay-offs, depending on extent of over-staffing but not always: several private operators relied on natural attrition as in Morocco and Western Africa Impact on labor goes well beyond the staffing issue Radical change for previous civil servants Sub-contracting Impact on salary and working conditions remains to be assessed 21

22 PPP and tariff: a complex issue In most cases, PPP projects have been accompanied by tariff increases But PPPs tends to happen in failed public utilities with initial tariff below cost recovery Tariff increase necessary under any reform Recent econometric study by Gassner (2008) on a sample of about 1000 utilities found that the impact of PPP on tariff is neutral when compared with similar public utilities operating under a tariff framework that foster financial sustainability 22

23 PPP and tariff: case of West Africa Tariff reductions in real terms achieved in 4 PPPs, modest increase in Niger which was very low by regional standards Tariff index (%) in real terms West Africa PPPs: Evolution of the average customer tariff since entry of private operator (constant term) Cote d'voire Senegal Niger Gabon Mali

24 Looking forward 24

25 Water PPP is a viable option for the developing world Conclusion of performance review: Many cases of positive contribution for expanding coverage: 24 million people gained access to water Evidence that private operators can carry out major turnarounds, improving service quality and oper.. efficiency It does not always work, but successes have received much less publicities than failures Most PPP contracts are still active Water PPP is expanding, not retreating It made inroads in several large countries in recent years Population served by private operators constantly growing Population served by private operators constantly growing 25

26 Outcome of water PPPs: distribution by population served Water PPPs during last 15 years: project outcome by population served (million) No Data available, 30 Mixed outcome, still active, 20 Recent projects (since 2003), 60 Clearly successful, 50 Early termination, 25 Expired, not renew ed, 20 26

27 A new generation of Water PPPs: not about tapping private money The large concession model has worked in some place, but seems unsuited to most developing countries Many successful water PPP schemes were largely based on public financing (leases or hybrid schemes), combined with efficient private operation The biggest financial contribution from a private operator is not direct private investment, but lies in improving the financial viability of the WSS services: Virtuous circle: service quality increasing cash- flow for investment and creditworthiness access expansion 27