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CHARACTERISTICS OF WELL- PERFORMING …

water supply & Sanitation Working Notes Note No. 9, May 2006. CHARACTERISTICS OF well - PERFORMING public water UTILITIES. Aldo Baietti William Kingdom Meike van Ginneken water supply & Sanitation Working Notes are published by the water supply and Sanitation Sector Board of the Infrastructure Network of the World Bank Group. Working Notes are available online at Working Notes are lightly edited documents intended to elicit discussion on topical issues in the water supply and sanitation sector. They disseminate results of conceptual work by World Bank staff to peer professionals in the sector at an early stage, that is, "works in progress." Comments should be emailed to the authors. Contact details Aldo Baietti, Senior Finance Specialist, World Bank, (202) 473-2750, water supply & Sanitation Working Notes are available online at Acknowledgments The authors wish to gratefully acknowledge the generous time and valuable inputs from many people involved in the development of the ideas in this paper.

Water Supply & Sanitation Working Notes Note No. 9, May 2006 CHARACTERISTICS OF WELL-PERFORMING PUBLIC WATER UTILITIES Aldo Baietti William Kingdom

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1 water supply & Sanitation Working Notes Note No. 9, May 2006. CHARACTERISTICS OF well - PERFORMING public water UTILITIES. Aldo Baietti William Kingdom Meike van Ginneken water supply & Sanitation Working Notes are published by the water supply and Sanitation Sector Board of the Infrastructure Network of the World Bank Group. Working Notes are available online at Working Notes are lightly edited documents intended to elicit discussion on topical issues in the water supply and sanitation sector. They disseminate results of conceptual work by World Bank staff to peer professionals in the sector at an early stage, that is, "works in progress." Comments should be emailed to the authors. Contact details Aldo Baietti, Senior Finance Specialist, World Bank, (202) 473-2750, water supply & Sanitation Working Notes are available online at Acknowledgments The authors wish to gratefully acknowledge the generous time and valuable inputs from many people involved in the development of the ideas in this paper.

2 Klaas Schwartz and Meine-Pieter van Dijk, UNESCO-IHE Institute for water Education, developed the analytical framework and oversaw the case study research. Sixto Requena, Jim Lamb, and Jacques Rey drafted parts of the paper at various stages of the project. Special thanks to David Field, Eric Groom, Jonathan Halpern, Jan Janssens, Alain Locussol, Phillip Marin, John Nellis, and Walter Stottmann for providing valuable peer review inputs during the various phases of the project. A workshop on interim results of the project was organized by WaterAid in August 2004 in London; thanks are due to those who attended the workshop as well as a number of smaller sessions discussing various rounds of ideas for the paper. This report was funded by the Bank-Netherlands water Partnership, a facility that enhances World Bank operations to increase delivery of water supply and sanitation services to the poor (for more information, see ).

3 Disclaimer The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank neither guarantees the accuracy of the data included in this publication nor accepts responsibility for any consequences of their use. TABLE OF CONTENTS. Acronyms and Abbreviations .. v 1 INTRODUCTION .. 1. Background .. 1. The Taxonomy of public water Utilities .. 2. Objectives, Audience, and Scope of the 3. 4. How the Report Is Organized .. 4. 2 OVERVIEW OF public water UTILITY 5. Sample of Case Studies .. 5. Summary of Case Studies.

4 6. 3 CASE STUDY FINDINGS .. 10. External Autonomy .. 10. External 13. Internal Accountability for Results .. 15. Market Orientation .. 16. Customer 18. Corporate Culture .. 20. Conclusions on public Utility Cases .. 21. 4 LESSONS LEARNED INSTILLING GOOD PERFORMANCE AMONG public 23. The Reform Process Is Inherently Political and Requires the Full Commitment of Its Policy Makers to Correctly Balance Financial and Political Objectives .. 23. Success Is Often Unattainable without Reforming the External Environment, with Emphasis on the Role of the 24. Fundamental Reforms Are Not a Quick Fix and Cannot Be Substituted by Private Sector Participation .. 25. There Must Be an Adherence to Financial Sustainability Objectives .. 25. Other External Stakeholders May Be Important to Balance Potentially Conflicting Objectives of 26.

5 Certain Decisions Must Be Left to Utility 28. Separating Functions and Arm's Length Transactions Are Important Elements of the Institutional 29. Customers Can Be an Important Voice for Improving 30. 5 ACTIONS FOR ALIGNING OWNER 30. Creating a Central Policy and Oversight Body for water supply and Sanitation Services .. 30. Establishing a National Benchmark System to Monitor Performance .. 31. Creating Incentives through Intergovernmental 31. Promoting Arrangements with Multiple Stakeholders .. 32. Establishing Governments as Guarantors for Utility 32. Establishing Performance-Based Agreements between the Owner and the Utility .. 32. 33. iii ANNEXES. A public Utility Analytical Framework ..36. B The Aqua Production-Trade-Service Enterprise Stock Corporation (Aqua ), Bielsko-Bia a, Poland.

6 43. C Haiphong water supply Company, D Johannesburg water , Johannesburg, South E National water and Sewerage Corporation, Uganda ..61. F public Utilities Board, Singapore ..67. G Philadelphia water Department, United States ..73. H water supply and Sanitation Company, Campinas, Brazil ..78. I Municipal Drinking water and Sewerage System, Guanajuato, J Scottish water , Scotland ..90. K National water supply and Sanitation Company, Onea, Burkina L National water supply Authority, Tunisia ..102. Note: All annex case study material was derived from primary company information. List of Boxes 1 How Private Sector Participation in water supply and Sanitation in Developing Countries Evolved from 1990 to 2003 ..1. 2 Unique Features that Make the Sample Utilities a Good Informative Case Study.

7 6. 3 water supply Services in the State of Guanajuato, Mexico, A Cross-Country Case ..9. 4 How the Bond Holders Balance External Accountabilities of the PWD ..14. 5 How the NWSC Involves Its Customers in Its Decision Making ..19. 6 How PUB Has Increased Its Efficiency through a Combination of 7 How Performance Improvements in Peru Were Hindered by the Absence of a Few Critical Measures ..25. 8 How the HPWC and NWSC Balance Their Accountabilities ..27. 9 How the Australian Central Government Played a Strategic Role in Stimulating and Sustaining Reform ..31. 10 How the Ecuadorian Government Creates Incentives for Its Municipalities ..32. List of Tables 1 Basic CHARACTERISTICS of Three Types of Organizations in Government ..3. 2 Summary Comparison of Case 3 Indicators of External 4 Indicators of External Accountability.

8 13. 5 Indicators of Internal Accountability for Results ..15. 6 Indicators of Market 7 Indicators of Customer Orientation ..18. 8 Indicators of Corporate List of Figures 1 The Vicious Spiral of Performance Decline of Utilities ..2. 2 Factors that Influence Effective Autonomy of a Utility ..10. 3 Split of Function among Various Organizational iv Acronyms and Abbreviations ADB Asian Development Bank AQUA, Poland City of Bielsko-Bialav water Utility, Poland ATM automatic teller machine BOT build-operate-transfer CEAG Comisi n Estatal de Agua de Guanajuato (State water Commission, state of Guanajuato), Mexico CEF Federal Economic Bank (Caixa Econ mica Federal), Brazil CNA National water Commission (Comisi n Nacional del Agua), Mexico D dong (Vietnamese currency).

9 DWQR Drinking water Quality Regulator, Scotland EPA Environmental Protection Agency EPNA tablissement public caract re non administratif ( public nonadministrative entity). FINNIDA Finland International Development Agency FRAP Financial Recovery Action Plan FX risks Foreign Exchange Risk GASC General Assembly of State Companies, Burkina Faso GDP gross domestic product HPPC Haiphong Provincial People's Committee, Vietnam HPWSC Haiphong Provincial water and Sewerage Corporation ICT information and communication technologies IFI international financial institution IMF International Monetary Fund ISO International Standardization Organization JNB water Johannesburg water Utility, South Africa JOWAM Johannesburg water Management (JOWAM) company MAERH Ministry of Agriculture, Environment, and Hydraulic Resources, Tunisia MAEWR Ministry of Agriculture, Environment, and water Resources, Tunisia MWLE Ministry of water , Lands and Environment, Uganda NEA National Environmental Agency, Singapore NEMA National Environment Management Authority, Uganda NGO nongovernmental organization NPM New public Management NWSC National water and Sewerage Corporation, Uganda ODA Official Development Assistance OECD Organization for Economic Co-operation and Development ONEA Office National d'Eau et d'Assainissement [National water and Sanitation Company]

10 , Burkina Faso PaDEP Pennsylvania Department of Environmental Protection PDAMs water public Utilities, Indonesia PHARE The PHARE programme is one of three pre-accession instruments financed by the European Union to assist countries in Central and Eastern Europe in their preparations for joining the Union. PLC public limited company PLN Polish zloty (currency). PPIAF public -Private Infrastructure Advisory Facility PPWSA Phnom Penh water supply Authority v PRAGUAS National Program of water and Sanitation, Ecuador PROSANEAR water and Sanitation Program for Low-income Communities, Brazil PUB public Utilities Board, Singapore PUC State's public Utility Commission, United States PWD Philadelphia water Department, United States SANASA water supply and Sanitation Corporation (Sociedade de Abastecimento de Agua e Saneamento), Campinas, Brazil Scottish water Scotland water and Sewerage Corporation, UK.


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