Explorations 01

Seven categories of PPPs distinguished on the basis of their ‘change logic’

Observations and issues for discussion and follow-up

A portfolio scan of the Sustainable Water Fund (FDW)

PPPLab Explorations 01

2 This working document presents an initial analysis of the portfolio of projects approved under the first and second call of the Sustainable Water Fund (FDW), and seeks to get to grips with the basic ‘change logic’ of these projects from a public–private partnership perspective. The main objective of this study is to investigate the types of PPP dynamics that have been created in the FDW portfolio, thereby especially focusing on the engagement of private partners.

The document defines several groups of projects within the overall portfolio. The change logic of each category is described in terms of the type of lead private partner, the other partners engaged, the core focus, the type of projected benefits, and the ongoing business or financial proposition. In addition, specific observations and questions are raised for each category. The document concludes with some overarching insights and questions about the FDW portfolio as a whole.

Abstract

Colophon PPPLab Food & Water is a four-year action research and joint learning initiative (2014-2018) to explore the relevance, effectiveness, and quality of Dutch supported public-private partnerships (PPPs). PPPLab is commissioned by the Dutch Ministry of Foreign Affairs and is driven and implemented by a consortium of the Partnerships Resource Centre (PrC), Aqua for All (A4A), the Centre for Development Innovation at Wageningen UR (CDI), and the SNV Netherlands Development Organization (SNV).

Comments and updates about this report are welcome. Please send them to: info@ppplab.org. For more information, please visit our website: www.ppplab.org.

Any part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form and by any means, electronic, mechanical, photocopying, recording or otherwise, with proper referencing. © 2016, PPPLab Food & Water

PPPLab Explorations 01

1. Introduction 4

2. The ‘change logic’ of PPPs, key concepts and research methods 6

3. The FDW portfolio: three sub-themes and seven specific 8 categories of PPPs 0

A. Improved access to drinking water and sanitation 10 A1.Improvedtechnicalandfinancialperformanceofwaterutilitiesandoperators

A2.Innovativetechnologyforwaterharvestingandstorage 12 A3.Financingmechanismsforwaterandsanitationdelivery 13 A4. Improved WASH governancethroughM&Edata

13 B. Efficientandsustainablewateruse,particularlywithinagriculture 13 B1. Improved irrigation and irrigation management 14 C. Safedeltasandimprovedbasinmanagement 15 C1.Safedeltas 1 C2.Improvedbasinmanagement/IWRM 17

4. Overall observations and issues emerging from this analysis 18

4.1OverallfindingsonthePPPportfolio 19

4.2Emergingpolicyissuesandquestions 20 Appendix I: The FDW in context 21

Appendix II: List of FDW projects (1st and 2nd call) by category 22

Contents

PPPLab Explorations 01

4 In 2012, the Ministry of Foreign Affairs (MoFA) of the Netherlands initiated two new financing instruments that aim to stimulate Public–Private Partnerships (PPPs) for development. The Sustainable Water Fund or FDW (an abbreviation of its Dutch name) focuses on stimulating public–private collaboration in the water sector in order to contribute towards water safety and water reliability in developing countries. The Facility for Sustainable Entrepreneurship and Food Security (FDOV, again after its name in Dutch) focuses on stimulating public–private partnerships within the sphere of food security and private sector development. The creation of these two financing mechanisms is seen as an innovation in Dutch development financing. It is based on the assumption that PPPs can play a role in achieving development objectives, and perhaps do so in different and more effective ways than other instruments used before. The two financing mechanisms are run by the Netherlands Enterprise Agency (RVO).

Tolearnabouttherelevance,effectiveness,andqualityofDutch-supportedPPPs,insummer2014theMinistrydecidedtofundPPPLabFoodandWater,afour-year(2014–2018)actionresearchandknowledge initiative. Its mission is to extract and co-createknowledgeandmethodologicallessonsthatcanbeusedtoimprovebothimplementationand policy.

Aninitialanalysisofthe13FDWprojectsunderthefirstcallwasundertakeninthefirsthalfof2015togettogripswiththebasic‘changelogic’oftheseprojectsfromapublic–privatepartnershipperspective.ItdelineatedsixcategoriesofPPPswithinthatportfolio.Thesecategoriesappearedtohaveclearanddistinctprofilesonthebasisofa)thedevelopmentalissuestheyseektoaddressandrelatedbenefitstheyseektoproduce,andb)thekindofbusinessdrivers,businesscases,andfinancialsustainabilitythatpropelthem.Thus,thisportfolioscancreatedanoverviewoftypesofPPPsthattheFDWhadattractedorfunded.

Attheendof2014,anadditional10projectswereapprovedunderFDW’ssecondcall.Thisworkingdocumentservesasanupdatetotheinitialanalysisofthechangelogicofthefirst13projects.Ithastested,validatedandupdatedtheinitialcategorizationofFDWandpresentsanupdatedversionoftheportfolioscan,nowcoveringatotalof23projects.1

ThedistinctionofcategoriesofPPPsinthisdocumentcanbeusefultobetterunderstandtheoverallcompositionofthePPPportfolioaswellastobetteraddressproposals,progress,sustainabilityandimpactdimensionsof(groupsof)individualPPPs.ItmayhelptheactorsengagedinPPPsandthebroaderprofessionalcommunitytolocatetheirownprojectswithinthatlandscape,todeepenkeystrategies,toposequestionsontheeffectivenessofone’sownproject,ortoopenupperspectivesonalternativestrategiesorprojects.Thefindingsmayalsobeofdirectinteresttoboththefundingandsupervisingagencies(MoFAandRVO)inguidingandmonitoringthecurrentprojects,inshapingtheFDWinstrumenttowardsthefutureandindiscussingprioritiesforfuturefunding.

ThefindingspresentedinthisworkingdocumentwillalsobeusedbyPPPLabforanextseriesofmorespecificresearchandlearningquestions.Thefollowingstudiesaredirectlylinkedtothisdocument,andprovideafurtheranalysis:

•AparallelanalysisoftheFDOVportfolio(expectedtobefinalizedinsummer2016).Whererelevant,inthisanalysisofFDWsimilaritieswiththeFDOVportfolioarealsoreferredto.

•AMid-TermReview,initiatedbytheDutchMinistryofForeignAffairs,whichhasfedthegeneraldevelopmentoftheinstrumentandthepreparationsforthethirdFDWcall.TheMTRwasundertakeninsummer/autumnof2015andexecutedbyanindependentconsultancyteam.

•WhilePPPLabdoesnothaveanevaluationmandate,itisinlinewithitsobjectivestoprovideinputtothatMTR.PPPLab’scontributionstotheMTRwerefourfold:thisportfolioscan,a

1. Introduction

1 It is important to note that the observations and findings in this document are based on approved projects of the FDW: the 13 projects from the first call and the 10 project from the second call. For an analysis of all proposals, see the broader study on non-approved projects that was undertaken as a contribution to the Mid Term Review of FDW in autumn 2015.

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2 The FDW has developed a specific set of definitions of private, public, NGO, and knowledge partners. See the list of definitions of the Ministry of Foreign Affairs at http://english.rvo.nl/sites/default/files/2014/04/Begrippenlijst_Fonds_Duurzaam_Water%202013-2014%20v2.pdf. 3 Although the own financial contribution for the ‘Safe deltas and improved basin management’ subtheme was lowered from 40% (first call) to 30% (second call), the total number of projects under this subtheme has remained low. Also see the study on ‘weakly represented segments of FDW’ by PPPLab from autumn 2015. 4 All in all, this means that in the FDW the actual private participation in projects can be limited to 15% or 20% (half of the required own contribution) and that this percentage can also be covered by private grants from CSR or foundation sources.

systematicroundofinterviewswithallongoingFDWPPPs,ananalysisofnon-approvedprojectproposals,andananalysisofareasinwhichFDWonlyapprovedlownumbersofprojects,theso-called‘weaklypopulated’sub-themeswithinFDW.Thesestudieswereundertakenparalleltotheextensionofthisportfolioscan.Whererelevant,theportfolioscanwillrefertothesestudies.

AnextbatchofPPPLabactivitieswerestartedintheautumnof2015,includingstudiesonbusinessmodelsandfinancestrategies,scalingandsystemchange,theroleofpublicpartnersinPPPs,andatoolfortrackingpartnershipprocesses.

Key parameters of the first and second call of FDW •ThefirstcallforFDWprojectstookplacein2012,leadingtotheapprovalof13projects.Asecondbatchof10projectswasapprovedattheendof2014.

•Forbothcalls,threeFDWsubthemesweredefinedbytheMinistryofForeignAffairs:

-Improvedaccesstodrinkingwaterandsanitation.

-Efficientandsustainablewateruse,particularlywithinagriculture.

-Safedeltasandimprovedbasinmanagement.•FDWpartnershipsmustconsistofatleastonecompany,onepublicbody,andonenongovernmentalorganisation(NGO).Itmayalsoincluderesearchinstitutions.2AtleastoneofthepartiesmustbebasedintheNetherlands,andatleastoneinthecountrywheretheprojectwillbeimplemented.Theapplicantcanbeanykindofpartner.

•Theminimumfinancialcontributionofthepartnersis40%.3 With the aim to attract more projects,theownfinancialcontributionforthethirdsubtheme(safedeltasandimprovedbasinmanagement)hasbeenloweredto30%duringthesecondcall(therestremaining40%).4 At least halfoftheowncontributionsshouldcomefromprivate actors.

•TheextenttowhichprojectsaresustainableisassessedagainsttheFIETScriteria(financial,institutional,ecological,technological,andsocialsustainability).

•Theprojectshouldbefinanciallysustainablebut,asawhole,theprojectorpartnershipdoesnotneedtobebasedonabusinesscase(i.e.onarevenuemodel).Seefurtherexplanationinchapter 2.

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6 Inthisstudy,theterm‘PPPchangelogic’standsforthekeylogicthroughwhichthePPPseekstoachievedevelopmentobjectives.Itisacombinationoftwomainparameters:thedevelopmental issue(s) thatthePPPseekstoaddress;andthekind of business drivers and models bywhichtheyarepropelled.Inthisreport,thischangelogicofeachprojectisanalysedthroughfivespecificelements:

•Thetypeoflead private partner driving or supportingtheproject.

•Thetypesofother partners engaged.•Thecore focus or intervention in relation to the waterandsanitationvaluechain.

•Theanticipated (pro-poor) benefits ofthePPP.•Theunderlyingmediumorlong-termbusiness

and financial case.

Withthesefiveelements,theanalysisdoesnotlookatthespecifictheoryofchangefortheissueconcerned(forexample,managinganirrigationsystemincountryAorprovidingsanitaryservicestohouseholdsincityB);rather,theinterestisonthe‘metaTheory-of-Change’level:howisaPPPusedtocreatedevelopmentresults?

TogettogripswiththesePPPchangelogics,ninespecificquestionswithsub-questionswereaskedforeachproject.Onthatbasis,thekeyelementsofeachindividualprojectweredescribed.Fromthebriefprojectlogicsextracted,an‘emergent’analyticalprocessofsimplylistingkeycommonelementsanddifferencesbetweentheprojectswasstarted.Theprojectswithsimilarcharacteristicsweregroupedtogether.Forthefirstcallofprojects,itappearedthatarelativelycleargroupingofprojectsalongthewaterandsanitationvaluechains5withrelatedbusinesslogicswaspossible.Duringtheanalysisoftheprojectsofthesecondcall,thisgroupingturnedouttobestillapplicableandwasonlyslightlyadjusted.

Inthefollowingchapter,thekeyelementsmentionedaboveareusedtodescribethe

categories.However,firstafewconceptsneedtobeclarified.

The term lead private partner isusedfortheprivatepartnerwithakeyroleinthebusinesscaseorfinancialsustainabilityoftheproject(thus,notnecessarilytheapplicantorthepartnerthatprovidesthelargestfinancialcontribution).AccordingtothebroadFDWdefinition,aprivatepartnerorbusinessis“any kind of entity that pursues economic activities, no matter how the entity is financed. Economic activity involves the supply of goods or services on the economic market. Entities that engage in economic activities on a ‘not for profit and not for loss’ basis can also qualify as a ‘business’ in the partnership”.6

Consideringthisbroaddefinitionforbusinesses,theprivatecontributionstoPPPsalsovaryinnature.Inthisworkingdocument,adistinctionismadebetweenfourtypesofprivatecontributions:

•CorporateSocialResponsibilityorfoundationmoney;contributionsofthiskindoftenconsistofgrantmoneybasedonphilanthropicmotives,forwhichnoreturnoninvestmentisexpected.However,itmustbenotedthatCSRmoneyisincreasinglyusedstrategicallybycompanies,forexampletoimproveone’sreputationorlicensetooperate.

•BusinessdevelopmentandR&Dmoney;contributionsusedasinvestmentstopilotordevelopproducts/servicesofthecompanyconcerned,withtheultimatepurposeofmarketing/introducingthisproducttothemarket.Nodirectreturnoninvestmentisexpected,buttheinvestmentismadetodevelopbusinessforthecompanyonalonger-term.

•Investmentsthatcoveradditionaloperationalcostsforstafforforactivitiesthatthecompanyisdeployinganyhow.Oftenthesearereflectedin‘inkind’contributions.Theseareneverthelesscommerciallyweighedbythecompaniesintermsoftheircost/benefitandthustherationaleofindeedputtingextraeffortin.

2. The ‘change logic’ of PPPs, key concepts and research methods

5 The water value chain is often referred to as a ‘water management cycle’. An agricultural value chain is rather linear, bringing and transforming the product from producer via various steps to the consumer. Water management is a more cyclical and interconnected process, in which various types of water use and re-use can follow each other in different sequences. Moreover water flows can be part of diverse natural cycles. 6 See the list of definitions of the Ministry of Foreign Affairs at http://english.rvo.nl/sites/default/files/2014/04/Begrippenlijst_Fonds_Duurzaam_Water%202013-2014%20v2.pdf.

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7 •Financialinvestmentsinpursuitofimprovingthecorebusinessofthecompany.Forsuchcommercialinvestment,adirectreturnoninvestmentisexpectedandtheprivateactorrunsmorefinancialriskascomparedtousingCSR/foundationmoneyasacontributiontotheproject(asforthistypeofmoneynoreturnoninvestmentisrequired).

Inthisworkingdocument,theabovementioneddistinctionisusedwhenanalysingprivatecontributions.Thoughnotatopicforfurtherinvestigationinthisscan,itcanbeexpectedthatthedifferenttypesofprivatecontributionshaveimplicationsforthedegreeofprivateengagement,thenatureofthebusinesscasesandthefinancialsustainabilityperspectivesoftheprojects.AccordingtotherequirementsoftheFDW,theprojectsshouldbefinancially sustainable but,asawhole,aprojectorpartnershipdoesnotneedtobebasedonabusiness case (i.e.onarevenuemodel).AprojectisfinanciallysustainablewhenallactivitiesthataresupposedtocontinueafterterminationofthePPPcancontinuewithoutsubsidyofforeigndonors.Pleasenotethatthiscontinuationdoesnothavetobebasedoncommercialmoney,butcanalsocontinuewiththehelpofpublicfunding.7

Abusinesscaseisaspecificwayofcreatingfinancialsustainabilityinthesensethatitisbasedonarevenue/earningmodel.Abusinesscasethereforeusuallycontainstheengagementofaprivateactortocommenceandcontinueanactivitygeneratingaproductoraservicethatcreatesvalueandservesthemarket.Thetermbusinesscaseiscloselyrelatedto,butmoredetailedthana business model.Thelatterconstitutestheoverallideaofhowanentrepreneurorpartnershipexpectstocreatevalue.8

Inthisreport,thefocusisonaninitialscanofthefinancialfeasibilityorthebusinesscasedescribedin the proposal. A deeper look at these dimensions ofprojectswillbeundertakeninaseparatePPPLabstudythatexplicitlyfocusesonbusinessmodelsandfinancingstrategies.

7 Please note that the difference between public funding and (indirect) donor funding may be difficult to make. 8 See for example the ‘Business Model Canvas’ invented by Osterwalder. Based on this, PPPLab has created a specific ‘PPP Canvas’ that can be used to design, review or reorient PPPs.

PPPLab Explorations 01

8 Togainaninitialsenseoftheoverallplayingfield,firstsomegeneralobservationsontheprojectsofthefirstandsecondcall:

The projects:• There are large differences in scale oftheprojects,rangingfromanirrigationprojecttargeting1,200sugarcanefarmerstoimprovingthewaterdeliveryofanareainSantaCruz,Boliviawith1millionwaterconsumers.

•Theportfolioisclearlyinvestinginlonger-term collective action issues-forexampleinwaterutilitiesandimprovedbasinmanagementprojects.

•Thereareinterestingexamplesofprivate sector contributions to a public good,suchasintegratedwaterresourcesmanagement.

Representation in the PPPs• The privatesectorconstitutesabout41%9 ofthetotalnumberofpartners,whileNGOsandresearchinstitutionsformabout34%ofallpartners,andpublicactorsabout25%.

•OftheprivatepartnersintheFDWsomearerealcommercialplayerswhileothersaresemi-publiccompanies.Somecommercialplayersprovideasignificantfinancialcontribution.Othersparticipate as paid service providers.

• There is strong public and semi-public engagement inwaterutilityandimprovedbasinmanagementprojects,butlessintheirrigationandsanitationprojects.

•In13outofthe23cases,aprivateactoristheapplicant.10 In6PPPstheapplicantisaNGO,mostlytakinguptheroleofprojectmanager.In3casestheapplicantisapublicactor(ofwhich2arelocalpublicwaterauthorities)andin1casetheapplicantisaknowledgeinstitute.

•Inatleast14projects,‘service providers’ (whetherfromcommercial,civic,orknowledgebackgrounds)havealeadfunctionininitiatingand/ormanagingthePPPs.Theyhavesignificantown(commercialornon-commercial)‘business’interestsintheseprojectsastheirparticipationis(partly)fundedfromtheprojectbudget.

Contribution of partners•AfterthecontributionoftheMinistryofForeignAffairs,itistheprivatesectorthatinalmostallcasesbringsinthelargest financial contribution totheproject.Theexceptionsarefourcasesinwhichlocalwaterauthoritiesareresponsibleforthesecondlargestfinancialcontribution.

•Asmentionedbefore,theseprivatecontributionsvaryinnature(CSR/businessdevelopment/commercial).Notmanyrealcommercialprivateactorsareengaged(whetherinternationallyorwithinthecountriesconcerned);similarly,thereislittle non-grant money involved.

Differences between the projects of call 1 and projects of call 2•Overall,no striking differences havebeenfoundbetweentheportfolioofthefirstcallandtheportfolioofthesecondcall.Bothcallshavemostlyattractedprojectsfirstlyinthefieldofwaterutilitiesandsecondlyinthefieldofirrigation(seethecategoriesonthenextpage).

Thedistributionofprojectsacrossthethreemainsub-themesoftheFDWis16underImproved access to drinking water and sanitation (A),5underEfficient and sustainable water use,particularly within agriculture (B)and2underSafedeltasandimprovedbasinmanagement(C).11

IntheanalysisforthisscanacloserlookhasbeentakenatthePPPlogicsoftheseprojectsandthusamoreprecisedistinctionhasbeenmadebasedontwomainparameters:thedevelopmental issue(s) thateachprojectseekstoaddress-ormoreparticularly,theirpointofinterventioninthewatercycle;andsecondlythekindofbusiness drivers and models bywhicheachprojectispropelled.Inthisway,withinthethreethemes(andthe23projectsofthe1stand2ndcall)atotalofsevencategoriesofPPPscanbedistinguishedintheportfolio.Thesesevencategorieseachhavetheirownspecificcombinationofdevelopmentgoal(s)andbusiness/financialdriver.

3. The FDW portfolio: three sub-themes and seven specific categories of PPPs

9 This percentage reflects the decision to regard the international cooperation branches of Dutch drinking water companies as ‘private actors’ based on the broad definition discussed in the previous section. If these would not be counted as private, the percentage of private sector partners would be much lower, namely 31%. 10 It should be noted, however, that the broad definition of ‘private’ in FDW means that this also includes (semi-)public companies and the (noncommercial) international cooperation wings of these. 11 During the second call, PPPs were allowed to apply for more than one subtheme. However, after approval, one focus subtheme was chosen. Also see http://english.rvo.nl/sites/default/files/2015/01/Overview%20FDW%20projects%20tender%202014_0.pdf.

B.

Efficient and sustainable water use, particularly within agriculture

A.

Improved access to drinking water and sanitation

C.

Safe deltas and improved basin management

Improved technical and financial perfor-mance of water utilities and operators

(12)

Improved irrigation and irrigation management

(5)

Innovative technology for water harvesting and storage

(1)

Financing mechanisms for water and sanitation delivery

(2)

Safe Deltas (1)

Improved WASH governance through M&E data

(1)

Improved basin

management/IWRM

(1)

B1.

A1. A2. A3. A4.

C1. C2.

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Figure 1: Categories of projects in the FDW portfolio on basis of their change logic

ThesevencategoriesareamorerefineddistinctionthanthethreesubthemesofFDW.ThisservestobetterreflectthefundamentaldifferencesinunderlyingPPPlogicsanddrivers.GiventhelimitednumberofPPPs,someofthesecategorieshaveonlyonePPP.Nonethelesstheydoindeedrepresentafundamentallydifferentleadbusinessdriveandrelatedlonger-termbusinesscaseorfinancialsustainabilityperspective.

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10 A. Improved access to drinkingwater and sanitation ThisFDWpolicysubthemefocusesonprovidingaccesstosafedrinkingwaterandimprovedwaterandsanitationinhouseholds,butalsoininstitutionssuchasschools.Incombinationwithattentiontohygiene,ithasasignificantimpactonhealth,andthereforeproductivity.Itemphasizestheimportanceofthepreventionoffailureofsystemsandtopayattentiontowaterqualityatthehouseholdlevel.Whereverpossible,watermanagementandenvironmentwillbeusedastheframeworkforthemanagementofdrinkingwatersupply,sanitation(includingsolidwaste),sewage,and drainage.

Theprojectsthatthispolicysubthemehasattracted,fallintofourdifferenttypesofchangelogic.

A1. Improved technical and financialperformanceofwaterutilitiesandoperators

Thisisthelargestcategory,makingup12outofthe23PPPsapprovedunderthefirstandsecondcalloftheFDW.ThePPPsarelocatedinBolivia,Uganda,Malawi,Rwanda,Ethiopia,Kenya,Tanzania,Mozambique,Vietnam,IndonesiaandthePhilippines.Thekeycharacteristicsoftheprojectsinthiscategoryare:

• Foralmostallprojects,thelead private partner isaDutchdrinking-waterfirmormoreinparticularitsinternationalcooperationbranch.Onlyoneprojectisledbyalocalwatercompany,butalsoworksinclosecooperationwithaDutchdrinkingwaterfirm.

• Other partners: TheDutchleadactorsworkwithapublicorsemi-publicwaterutility,groupofutilities,orauthoritysupervisinglocalutilities.Theyrunthefacilities(orsupervisethem).NGOsarealsoinvolved,butusuallyhavesmallerrolesintheprojects(suchasprovidingexpertiseinworkingwithlow-incomegroups).

• The core focus isonimprovingtheefficientmanagementofpipedwatersystems.Thismaybeaccompaniedbyinfrastructuredevelopment,oranenvironmental,sanitationorIWRMcomponent.Existingperformancewillbeimproved,whichinturnisexpectedtoattractmorefinancingor(soft)investments at later stages.

• The development benefits oftheprojectarea)increasedeffectivenessandefficiencyofwaterdeliveryandb)increasedcoverageof(poor)populationsonthatbasis.

• The business case/financial sustainability underpinningtheprojectsfocusesonthemediumorlong-termimprovementofthefinancialandeconomicviabilityofutilityoperations.Thereisnodirectearningobjective.

Inreviewingtheseprojects,thefollowingfurtherobservationsandconsiderationscometothefore:

The projects:•Mostoftheseprojectsarecontinuationsofalreadyexisting‘wateroperatorpartnerships’(WOPs).

•Ingeneral,theassumptionisthatbysavingwaterandservingnewclients,agreaternumberofpoorpeoplewillbereached,andtheadditionalareasthatwillbeservicedmayalsobetheareaswithpoor(er)inhabitants.Formostprojects,however,pro-pooroutreachortargetinghasnotbeenspecified.Thereisnomentionofeffortstocross-subsidiseservicesforpoorerpeoplefromthebenefitsoftheincreasedservicestoricherconsumersorcompanies.

•Thelevelsofinterventionoftheseprojectsvaryconsiderably.Somefocusononespecificutilityorwatersystem,othersareorientedtowardsimprovingutilitymanagementforawidergeographicarea(ofseveralutilities,workingwithumbrellaorganisationsinthewatersector).Twoprojectsofthislattergroup,forexample,introduceutility-ledbenchmarkingasasystematictesting and adaptation methodology.12 The projectsintroducethismethodologythroughnationalwatersectororganisations,whowillinturnsupportutilitieswhoareresponsibleforwaterdeliveryinregionsofover2millionpeople.

•Ofcourse,differencesinscalehaveimplications

12 TThese two benchmarking projects show similarities with category A4, as these projects also focus on improving the collection and use of data to improve efficiency of water delivery. The projects are classified in category A1 however, as they focus on the data collection and use by water utilities instead of by end users (see A4).

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13 Since 2008, Dutch law allows Dutch drinking water firms to spend 1% of their turnover on international activities related to poverty reduction. This might explain the use of grant money in FDW projects.

fortheinterventionandthefinancialandcapacitydevelopmentapproachesoftheprojectsconcerned.

•SomeprojectscombinethewaterutilityapproachwithIWRMcomponents.ExamplesaretwoprojectsinEthiopiathat,nexttoafocusonnon-revenuewater(NRW),addressthethreattowaterresourceavailabilitybybringingtogetherdifferentstakeholders(localpublicauthorities,industrialwaterconsumers,watersupplyorganisations,partnerswithlocalknowledgepartners)andtoincreasetheircapacityinIWRMthroughan integrated water chain approach. Both are initiatedbyaninternationalcooperationbranchofaDutchdrinkingwaterfirm.

Representation in the PPPs:•WhiletheprivateengagementinthesePPPsismainlyshapedbytheinternationalcooperationbranchesofDutchdrinking-watercompanies,there are also local water companies involved.

•Localpublicandsemi-publicactorsarepresentinallprojectsandtheirengagementisquiteextensive.Inoneproject,twoDutchwaterboardsareengaged,usingtheirexpertiseandknowledgein integrated water management.

•NGOsarealsoinvolved,beingpresentin9ofthe12projects;theirengagementmainlycentresonprogrammemanagementandinclusiveBoPstrategies.Specialisedtechnicalsupportisprovidedbyresearchinstitutions(in7ofthe12projects)andbyDutchconsultancycompanies(in3cases).

Contributions of partners:•Theleadprivatesectorplayersinthiscategoryare(internationalcollaboration)branchesofDutchdrinking-waterfirmsthatsupporttheir‘colleague’operatorsindevelopingcountries.TheyoperateonthebasisoftheircorporatesocialresponsibilityagendaandthemoneythattheycontributeisCSR/grantmoney13(whichmeansthatthereisnocommercialinvestmentandnoreturnoninvestmentisexpected).Inthissense,theysimplyleverageadditionalpublicgrantmoneythroughthesePPPsfortheirownprojects.

•Themediumandlong-termbusinesscaseintheseprojectsmostlycentresonthereductionof

non-revenuewater.Thisistomaketheutilitiesmorefinanciallyandeconomicallyviable,coveringtheiroperationalexpenditureandpreferablyalsoanincreasingpartoftheircapitalexpenditures.This,inturn,allowstheutilitiestoa)extendtheirservicesandcoveragetoadditionalconsumers,andb)overtimetobecomemoreattractivetootherinvestments,suchassoftloansfromtheWorldBankorothersources.Ingeneral,however,thecaseforsucheconomicviabilityisrelativelylong-term(forexample,tenyearsormore)andnotnecessarilyattheendofthepresentPPPprojectduration.ThepresentPPPsarenotexpectedtobeabletocontinuewithoutadditionalfinanceafterthepresentprojectperiod.

A2.Innovativetechnologyforwater harvesting and storage

Thiscategorycontainsoneprojectthatfocusesoncreatingawater-harvestingsolutionforcommunitywatersupplyinadryregionofSouthAfrica.ThisprojectandcategoryareuniquewithintheFDWportfolioasitistheonlyprojectwheretechnologyexportandapplicationbyDutchcompaniesisthemain driver.

• The lead private partners areacombinationoffourDutchcompaniesthatprovidecomponentsforthewaterharvestingandstoragesolution.Theyaimtotestthisunderrealconditionstoshowitseffectivenessandthusworktowardsitsapplication on a larger scale with lower costs. The projectisuniquewithintheFDWportfolioasthelead private actorsare(medium-sized)Dutchenterpriseswiththeambitiontodeveloptheirbusiness,i.e.pilotingawaterharvestingsystem.

• Other partners: TheDutchleadactorsworkwithapublicwaterutilityresponsibleforwaterprovisiontolocalcommunitiesintheareaconcerned.TworesearchinstitutionssupporttheDutchcompaniesindevelopingandinstallingthetechnologicalapplications;aSouthAfricannot-forprofitcompany(NPC)takescareofembeddingthesysteminthecommunities.TherearenoNGOsinvolved(althoughtheNPCcanbeseenassuch).

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12 • The core focus is on developing and testing innovativeandaffordabletechnologybyinstallinga new technical water harvesting and storage solutionin20communities.

• The development benefitsoftheprojectareimprovedprovisionofwatertothelocalcommunity,bothintermsofsecurityandquality.Inaddition,technicalfacilitiesincludeelementslikeaplaygroundandaclass/meetingroom.

• Intermsofbusiness case/financial sustainability,thisprojectseekstoprovidetheregionalpublicwaterauthoritywithanalternativewatersourcethatischeaperthanthepresentpracticeofimportingwaterfromotherregions.FortheleadDutchcompanies,theongoingbusinesscaseistheexportoftheirtechnology.

On this project the following further observations can be made:•Theprojectcanbeseenascloselylinkedwiththewaterutilitycategoryasitconcernsutilityoperationsaswell.Thisprojectislistedhereasaseparatecategory,however,asithasverydifferentleadprivatepartnersandthusdifferentbusinessdriversaswell.

•Theprojectshowssimilaritieswithanumberofprojectsinthe‘inputsandtechnology’categoryoftheFDOVPPPs,whereexportandmarketingbyDutchcompaniesisthemainbusinessdriveraswell.

A3.Financingmechanismsforwater and sanitation delivery

Twoprojectsfallunderthiscategory;oneinKenyaandoneinBenin.TheprojectinKenyaistheonlyprojectintheportfoliowithacentralfocusonsanitation.

• The lead business actors are a commercial bank(provideroffinancialservices)andamanufacturer/supplierofwaterresearchequipment,bothDutch.

• Other partners: nexttotheseprivateactors,NGOsandnationalpublicactorsplaysignificantroles,mostlyforlocalembeddingoftheprojectactivities.

• The core focus oftheprojectsisonsettingupfinancingmechanismsforthesupplyofsafedrinkingwaterandsanitationfornowunderservedhouseholds.

• The development benefitsoftheprojectrelate

toaccesstosafedrinkingwaterandsanitationandstrengtheningofthesupplychaininthewaterand sanitation domains respectively.

• The business case/financial sustainability underpinningtheprojectsisbasedonsettingupfinancingmechanismsthatenablethesupplysideofthemarket(entrepreneurs/privateservices)tooffersafedrinkingwaterorsanitationtopoorhouseholds.Nexttothis,thesanitationprojectalsofocusesonprovidingmicro-financetothedemandside(enablinghouseholdstoinvestinimprovedsanitation).

Somebasicobservationsandconsiderationsontheprojectinthiscategoryare:

The projects:•TheseprojectsareremarkablewithinFDW,asbothfocusoncreatingafullysustainablecommercial/marketdrivenbusinesslogicinawaythatmostprojectsinFDWarenotcapableofdoing.

•Althoughhavingsomeprinciplesimilarities,theprojectsarealsoquitedifferent.Whattheyhaveincommonhoweveristhattheyworkonsustainablefinancingforservicesbetweenprivateserviceprovidersandhouseholds.

•ThedrinkingwaterprojectinBeninstartsaninvestmentfundtosetupa‘flywheel’forwaterentrepreneurswhooffersafedrinkingwatertoruralhouseholds.Partoftheincomeofthewaterentrepreneurswillflowbackintothisinvestmentfundtobuynewequipmentandsetupanewgenerationofentrepreneurs.

•ThesanitationprojectinKenyafocusesmoreonthedemandsideasitprovidesmicro-financeandawarenessraisingcampaignstohouseholdstostimulatetheirinvestmentinsanitation.Stimulatingprivateservicesbyenterprisesinsanitationfortheseusersisasecondcomponent.Interestingly,thisistheonlysanitationprojectinthewholeFDWportfolio.

•Thus,nexttothefactthatoneprojectisindrinkingwaterandtheotherinsanitation,amaindifferencesbetweentheseprojectsisthatonefocusesmoreontheconsumers,whiletheotherfocusesonfinancefortheprovider.

Representation in the PPP:•Nationalpublicactorsareheavilyinvolvedinbothprojects.IntheprojectinKenya,theMinistryofPublicHealthandSanitationisinvolvedtosupport

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13 creatingthedemandforsanitationandforalignmentwithpublichealthpolicy.TheNationalWaterInstituteofBeninwillberesponsibleforlegislativeandpolicyissuesaroundthenewstructureofwaterentrepreneursandactsasanationalfocalpoint.

•Inbothprojects,NGOsarealsoinvolved:mainlytocreatedemand/localsensitizationoftheactivitiesamonglocalcommunities.Inthesanitationproject,oneNGOisinvolvedinattractinginvestorsforthemicrofinanceproducts.

Contributions of partners:•Althoughbothprojectsarefocusedoncreatingamarketdrivenbusinesslogic,theleadprivatepartners do not commercially invest and are notdirectlypartofthefinancingmechanismscreated.InthedrinkingwaterprojectinBeninthegovernmentwilleventuallymanagetheinvestmentfund,whileinthesanitationprojectlocalfinancialinstitutionsprovidethemicroloans.ThefinancialcontributionoftheleadprivatepartnersconsistsofCSR/foundationmoneytosetuptheproject.

A4. Improved WASH governance throughM&Edata

Thiscategoryconsistsofonlyoneproject,inGhana,focusingonimprovingtheWASHsectorinruralareasthroughanimprovedmonitoringsystem.

•Theprojecthasnoclearlead business actor. The privatesectorinvolvedconsistsofaninternationalcooperationbranchofaDutchcompany,probablyforCSRreasons,andalocalphoneprovider,whowillbenefitfromtheprojectthroughincreaseddemandforitsmobileservices.Bothcannotbeconsidered lead partners.

•SignificantinvolvementcomesfromtheGhanaiangovernment,whoalsofinanciallycontributestotheproject.Other partners involved are a knowledgeinstituteinwater(theapplicant),andtwoNGOs.

• The core focus oftheprojectisongatheringandmakingavailabledataonthestatusofruralwaterandsanitationsystemstoimproveplanning,maintenance and repair.

• The benefitsoftheprojectliesinimprovementsinwatergovernancethroughimproved

informationsystems.ThesebenefitswillleadtoincreasedaccessandmaintenanceofwaterandsanitationfacilitiesincertainruralareasofGhana.

•Theoverallprojectdoesnothaveanexplicitongoingbusinesscaseormodelforfinancial sustainability,andmaythusbeexpectedtorequireongoingpublicfinanceorsubsidy.

The project:•ThekeyandinnovativepropositionoftheprojectistogatherinformationonthestatusofwaterandsanitationssystemsinruralGhanaonalarge-scalebyusingmobilephonetechnologyanduploadingthedatainacentraldatabase.Thiswillinformgovernmentplanning,repairandmaintenanceactivities/servicesandwillalsobeavailabletootherstakeholders,suchasmunicipalitiesandlocalservicesproviders.

•Theprojecthasattractedconsiderablesupportfromotherdonors,butasfarascanbeseen,hasnobusinesscaseorfinancingstrategyforrunningtheactivitymoreindependently,apartfromthecontinueduseofpublicresources.Thelocalphoneproviderwillbenefitfromincreasedbusinessbecauseofincreasedservicedemand.However,thisbusinesscaseisonlya(relativelysmall)partoftheprojectandthemobilephoneproviderdoesnotinvestintheprojectitself.ThefinancialcontributionoftheleadprivatepartnerprobablyconsistsofCSRmoneywithnoreturnoninvestment expected.

•Asmentionedbefore,thisprojectsshowssomesimilaritieswiththebenchmarkingprojectsinBoliviaandKenyaunderA1,asthesealsofocusondatacollectiontoimproveefficientwatermanagement.TheGhanaprojectdiffers,however,inthesensethatend-usersarethedatacollectorsandthatdifferentstakeholders,suchasmunicipalitiesand(private)serviceprovidersaswellasnationalagencies,willusethesedata.ThebenchmarkingprojectsunderA1areentirelyfocusedonimprovingthewaterutilitiesthemselvesandaredrivenbytheambitiontoimprovetheperformanceoftheseutilities.

Contributions of partners:•Financialcontributionsarecomingfromthelocalpublicsectorandamajorinternationalprivatefoundation.Therearenocontributionsbycommercialfirms.Inthatsensethepublic-privatecharacterofthisprojectisthin.

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14 B.Efficientandsustainablewateruse,particularlywithinagriculture

ThispolicysubthemeofFDWfocusesontheimprovementofwateruseinirrigatedandrainfedagriculture,andtomakethismoresustainable.Efficientwaterusewillallowforasustainableincreaseintheproductionoffood-andproductioncrops.Itwillensurethepreservationofnaturalresourcesandallowforhigherresilienceofthefoodsupplytotheconsequencesofclimatechange.Suchefficientuseisalsoexpectedtoleadtoanimprovementinthelivesofothersmallfarmers,laborers,fishermen,andpeopleworkinginanimalhusbandry.

Thereisonecategoryofprojectsthatfallsunderthissubtheme.

B1. Improved irrigation and irrigation management ThiscategorycontainsfiveprojectslocatedinGhana,Palestine,SriLanka,SouthAfricaandIndia14.Theirkeycharacteristicsare:

• The lead private actors are private actors in thecountryconcerned(inthreecasesthesearecompanies;inonecaseacooperativeusersorganisation;andinonecaseajointventurefoundedbybothsmallholdersandprocessingmills)thatseektomanageanirrigationsystemforagriculture.

• Other partners: formsofusers’organisationsareplayingaprominentroleinfourofthefiveprojects.Publicagencies,knowledgeinstitutesandNGOsarealsoparticipating.

• A core focus isonimprovingandrunningtheinfrastructureeffectively,andoncreatingeconomic drivers to make the irrigation systems moresustainable.Inthreecases,thisiscombinedwithabroaderengagementaimedatstimulatingagriculturalproduction.

• The development benefitsoftheprojectareintermsoffarmers’accesstoirrigationwater(andservices)andintermsofsustainablemanagementoftheinfrastructure(including

some environmental benefits).This,inturn,isexpectedtoleadtofarmer’simprovedproductionandincomeincrease.Inatleasttwoprojects,theaspectofimprovedwaterfoot-print(waterused/volumeofcropproduced)isalsoconsideredaprimarybenefit.

• The business case/financial sustainability underpinningtheprojectsisbasedontheprofitabilityofirrigatedagricultureforfarmersingeneralandofefficientwateruseinparticular.Inturn,thisfeedsthefinancialsustainabilityoftheinfrastructure,itsmanagement,andthesupply/turn-overofprocessingfirms/buyersofthefarmers’produce.

Thefollowingfurtherobservationsandconsiderationscanbemadeabouttheseprojects:

The projects:•Thebusinesscasescentreonirrigatedagriculture,themanagementofirrigationsystemsandimprovedproductivityforbuyers/processors.

•Theseprojectsdonotprovidedrinkingwatertoconsumersorenterprises-onlyirrigationwatertofarmers.Inonecase,theirrigationprojectuseswastewaterfromurbanconsumptionandcanthusbeconsideredtobedownstreamfromtheutilityanddrinking-waterprojects.

•Allfiveprojectshaveenvironmentalelements:sustainableproductiveuseofwateringeneral,moreefficientuseofwaterand,inonecase,alsothereuseofwastewaterwithproductiveuseofthenutrientscontainedinit.

Representation in the PPPs:•Inallcasesitareboththecommercialfirmsandsmallholderfarmersthatseektoimprovetheirrigationinfrastructure.However,theprecisebusinessdriversoftheprivateactorsinthevariouscasesaresomewhatdifferent.InthePalestiniancase,afirmrunningatown’ssewagesystemwillinvestinirrigationinfrastructureand seeks to operate it on a commercial or full-recoverybasis.IntheSriLankancase,theinfrastructureisownedbythefarmers’organisationsandthePPPcentresonabetterfinancingmodelbasedonuserfees.Inthecases

14 During the time of writing the extension of this portfolio scan, however, the projects in Sri Lanka and Palestine have been put on hold. For more information, see the summary report of the interviews that were undertaken as a contribution to the Mid Term Review of FDW in autumn 2015.

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15 ofGhana,SouthAfricaandIndia,agriculturalfirmsinvestinfarmer’suseofirrigationinfrastructuretoexpandtheirproduction.15 InthecaseofGhana,anagriculturalfirmdevelopsandmanagesanucleusfarmandsellsinputsandbuysproducefromthesmallholders.

•Inthesecases,onefindsrelativelylessinvolvementofthelocalpublicsectorthaninotherFDWcategories.InSriLankaandIndia,thelocalpublicsectorisabsentfromtheofficialpartnership,whileinGhana,PalestineandSouthAfrica,thelocalpublicsectormainlyplaysasupportingrole.However,engagementofthelocalpublicsectorincertaincasesisvital,forexampleinstimulatingwider(system)changewiththehelpoftheinterventions.

•Inallcases,thereisacleardegreeofengagementofwaterusers,sometimessupportedbyNGOs.

Contributions of partners•ThiscategorycontainstheonlyprojectswithinFDWinwhichrealcommercialoperationalandfinancialinvestmentsaremadebytheleadprivatepartners.Inthreecases,privateactorsmakesignificantfinancialinvestmentsinirrigationinfrastructure,expectingareturnoninvestmentthroughbuyingtheimprovedproductionoffarmersbenefitingfromtheimprovedirrigation.InthePalestiniancase,afirmseekstooperateirrigationinfrastructureonacommercialbasis.OnlyinSriLankatheprivateinvestmentconsistsofCSR/foundationmoney.

C.Safedeltasandimprovedbasinmanagement

ThisFDWpolicysubthemeisaboutthesustainablemanagementofriverbasins,whichaimstoensurethatallbasinmanagementandwaterusinggroups(households,fishery,agriculture,industry,safedeltashydropower,andnature)haveenoughwaterandthatthiswatermeetsthequalitystandards–whilesustainingnaturalresources.Thisthemealsoaimstocreateasafelivingenvironmentbypreventingdisasterssuchaslargefloods.Itallowsforregulationandmitigatingtheconsequencesofclimate change.

Twocategoriesofprojectscanbedistinguishedunderthissubthemeonthebasisoftheirchangelogic.

C1.SafedeltasOneprojectinIndonesiafallsundertheSafeDeltacategory and in that sense is an exception in the portfolio.16ItsmainfocusisonbuildingresiliencealongerodingdeltacoastlinesinNorthernJava.

• The lead actor isafoundationownedbytwoDutchdredgingcompanies.ThefoundationbringstogetherseveralDutchstakeholderstofosternewcoastalzonemanagementsolutions.

• Other partners aretwoDutchknowledgeinstitutes,oneNGOandoneengineeringcompany(allDutch)andtwoIndonesianMinistries.

• The core focus oftheprojectcombinescivilengineeringwithmangroverehabilitationtobuildsafeandadaptivecoastlines,whilesimultaneouslyintroducingsustainablelanduse.

• The development benefitsoftheprojectarerestoredlivelihoodsofcoastalcommunitiesthroughrestoredecosystemservices(ornaturalcapital)ofcoastalzonesinNorthernJava,andland/coastprotection.

• The business case/financial sustainability underpinningtheprojectisbasedoninvestinginthepreventionoffurthercoastalerosion,whichhelpscoastalcommunitiestosustaintheirlivelihoods.Aproportionofcommunities’sustainedincomesandprofitsgotoacommunity

15 In the case of India, a large multinational firm is part of the PPP, although it is not an active partner; it only contributes cash given its interest in the sugarcane sector. 16 This project was approved under the second call. Although the own financial contribution for the Safe Delta subtheme was lowered from 40% (first call) to 30% (second call), it has only attracted this one project so far.

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16 fund,whichincombinationwithgovernmentfundswillgotothemaintenanceofthecoastline.Thereisnobusinesscasefortheprivatepartnersin the conventional sense.

Someadditionalcommentstothisproject:

The project:•Theprojectispartofawidercoastalzonemanagementprogramoftheleadingfoundation.Thisprojectismeantasaflagshipprojecttoinformandinspirecoastalzonemanagersfromgovernment and the private sector.

Representation in the PPP:•Theleadingfoundationisownedbytwodredgingcompanies,butallDutchpartnersinthisPPPareamemberofthisfoundation.Thefoundationaimstofacilitatecollaborationamongdifferentstakeholders in coastal zone management.

•Oneknowledgeinstitutecontributestothetechnicaldesignofthecoastaldefensemeasures;theotherknowledgeinstituteandtheNGOareresponsibleforthemoresocio-economicaspects(suchastheaquacultureandmangroverehabilitationmeasures)oftheproject.TheNGOalsotakesupthetaskofcommunityfacilitationandlocalembeddingoftheintervention.

•TheIndonesianMinistries’roleistoaligntheprojectwithexistingprogramsandpoliciesandtoeventuallyreplicateandscalethisflagshipproject.

Contribution of partners:•Thefoundation,ownedbytwoDutchdredgingcompanies,makesthelargestfinancialcontributiontotheproject,eventhoughthereisnoclearbusinesscase.Thisprojecthoweverhelpsthecompaniestopositionthemselvesforfuture,similaractivities;theproposedprojectispartofawidercoastalzoneprogramthataimstoconsolidatetheexperiencesandsolutionsintomainstreamuse.Theprivatecontributionthereforeconsistsoffoundationmoney,butstrategicallyused,asthedredgingcompanieshope that their investment leads to engagement insimilarprojects.

C2.Improvedbasinmanagement/IWRM

Thecorerationalefortheprojectinthiscategoryisbuiltonimprovingintegratedwatermanagementinlargecatchmentareas(includingtheundergroundaquifers).TheonlyprojectinthiscategoryisinColombia.17However,asmentionedunderA1,itmustbenotedthattwowaterutilityprojectsinEthiopiaalsohavesignificantIWRMcomponents;theyarehowevernotsharedunderC2astheirfirstfocusison(andmainbudgetgoesto)reducingNRW.

ThekeycharacteristicsoftheprojectinColombiaare:

• The lead actors areamixoflocal(publicorprivate)sectororganisationsandtheinternationalprivatesector.Thetwomajorforeignmultinationalsengagedareinterestedinthelong-termsustainabilityofwaterresourcesforitsownbusinessprocess.

• Other partners: thereissignificantinvolvementonthepartofthepublicactorsconcerned,includinginfinancialcontributions.TworesearchinstitutionsandanNGOarealsoengaged.

• The core focus is on improving integrated water resourcesmanagementinlargecatchmentareas.Theprojectalsoincludesmeasuresinirrigation,climatechangeadaptation,etc.atalowerlevel.

• The development benefitsoftheprojectareimproved water management in the catchment areasandonfarms,thussafeguarding(asmuchaspossible)thelong-termuseofthewaterforproductiveandotheruses.Theprojectalsorelates to climate change and environmental issues.

• The business case/financial sustainability underpinningtheprojectisacombinationofa)long-termmacroeconomicadvantagesofgoodIWRMwithb)improved(cost-)efficiencyandsustainabilityofthespecificproductiveuses.WhethertheseactuallyconstituteafinancialbasisforthecontinuationofthecurrentprojectandPPPbeyondthepresentfundingisnotimmediately clear.

17 Note that in this scan this project is placed in another category than is done by RVO/DGIS. They have labeled this under efficient water use. The project however has many more and wider components and its drivers have to do with a much more integrated and basin oriented view on water management. See further details in this section.

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17 Inreviewingthisproject,thefollowingfurtherobservationsandconsiderationscanbemade:

The projects:•Becauseofthebroadintegratedwatermanagementambitionsofthisproject,itischaracterisedbycollaborationwithawiderangeofstakeholders,andaninvestmentintheimprovedknowledgeofwatermanagementpractices and technologies.

•Whiletheprojectaimsatclearlong-termwater-managementbenefits,thedirectbusinessandfinancingcasesforthecontinuationoftheimprovedIWRMpracticesstimulatedbytheprojectis,however,notbeenclearlyspecified.Inthissense,sustainabilityremainsunclear.

•LikecategoryC1(SafeDeltas)theprojectaimstosafeguardthelong-termuseofnaturalresourcesforproductiveuse:however,theSafeDeltaprojectaimsatsafeguardingwater(andaquaculture/land)formaintainingthelivelihoodsofcoastalcommunitiesingeneral,whiletheprojectinthiscategoryfocusesonaparticularcrop(coffee)inviewoftheinterestsofthemultinationalfirm(s)andproducersfederationengaged.

•Asmentioned,twowaterutility(A1)projectsinEthiopiashowsimilaritieswiththeprojectinthiscategory;bothprojectshaveanIWRMcomponent,focusingonbringingawiderangeofstakeholderstogether to improve their capacity in water resourcemanagement.OneoftheseprojectsevenspendsalmostonethirdofitsbudgetonIWRM.However,theIWRMcomponentisonlyoneelementoftheseprojects,astheircorefocusisonreducingtheNRWforwaterutilities.Moreover,theprojectinColombiadiffersinthesensethattheleadingmultinationalfirmsareinterestedinthesustainabilityofwaterresourcesfortheproductionoftheircorecommodity;theprojectsinEthiopiaareledbyaDutchdrinkingwaterfirmwithCSRmotives.

Representation in the PPP:•Theprojectisnotledbythemultinationalfirms.Theapplicantisanationalcoffeefarmers’organisation.

•Anationalministryisseriouslyengaged,whichisalsoreflectedinsignificantfinancialcontributions.Researchinstitutionsarealsostronglyengaged.

•Themajormultinationalfirmsengagedarefundamentallyinterestedinthelong-termsustainabilityofsupplyfortheircoreprocess.Thecommercialfirmshavedecidedtoengageinandinvestinwhatisbasicallyapublicgoodandarelatedpublicfunction:thesustainableavailabilityofwaterresourcesanditsmanagementinalargecatchmentarea.Clearly,thefirmshaveincentivestoinvestinsuchlong-termpublicendeavours,becausetheyseethatthesustainabilityoftheirsupplybaseisatstake.

•AninvestmentisbeingmadeinIWRMtocounteracttheincreasingirregularitiesinwateravailabilitypatterns(droughtsandfloods)forcoffeecultivation.ThedirectengagementoflargemultinationalsisinitselfafairlyuniquecharacteristicwithintheFDWportfolio.18

Contribution of partners:•Themultinationalsarealsoprovidingamajorfinancialcontribution.Thisisnocommercialinvestmentinadirectbusinesscase,butrathermoneyfromtheirsocialresponsibilitybudget(tobeconfirmed),strategicallyusedtoincreasethelikelihoodoflong-termoperationsandsourcing.Astheprojectalsoaddressesbroaderwaterconcernsintheregionsconcerned,itcanalsobeexpectedtostrengthenthe‘socialandpoliticallicencetooperate’forthiscompany.

18 In this sense, this category of projects in FDW has aspects in common with the sourcing category of PPPs in FDOV.

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18

19 These questions also come up in the other studies that were undertaken to contribute to the MTR: the study on weakly populated segments, the summary report of the interviews and the study on non-approved projects.. 20 There are various explanations for this and it has also provoked several discussions. Please see the MTR and contributions to the MTR, as this will not be discussed further in this factual portfolio scan.

4. Overall observations and issues emerging from this analysis

4.1OverallfindingsonthePPPportfolioHavingdistinguishedsevenPPPcategories,someinitialoverallobservationsontheFDWportfoliocanbemaderegardingthewiderambitionsoftheinstrument.HasFDWmanagedtodrawprivatesectorengagement?WhatisthebusinesscaseofFDWPPPsandwhataretheindicationsontheirsustainability?Andfinally,whatistheextentofinnovationofFDWandisFDWstimulatingnewapproachesinthewatersector?19

PPP Partners: who is involved in FDW?•Clearly,theinternationalcooperationbranchesoftheDutchdrinkingwatercompanies,operatingfromtheirCSRagenda,constitutethelargestgroupofleadactors/applicantsintheFDW(approximatelyhalfofthetotalprojects).20

•Inirrigationinfrastructure(B1),thetechnologydevelopmentforwaterharvesting(A2)andfinancingmechanismsforwaterandsanitationdelivery(A3)categories,togetheratotalof8projects,onecanseethemostclear-cutprivatesectorleadershipthroughleadactorsandfinancialcontributions.

• Real commercial engagement (commercialfirmscontributingfinanciallyinpursuitofdirectlyimprovingtheircorebusinessthroughthePPP)isonlypresentinsixoftheeightPPPsmentionedabove:thesanitationmicrofinancecaseinKenya(wherein-countryfinancialinstitutionsareopeninganewmarket),thewater-harvestingprojectinSouthAfrica(whereDutchfirmspioneeranewapplicationfortheirtechnologies)andtheirrigationprojectsinGhana,Palestine,IndiaandSouthAfrica(whereagriculturalfirmsinvestinexpandingtheirproduction).Theseprojectsshowthatifthereisrealcommercialengagement,thereis also strong private sector leadership in the PPPcollaboration.

•TwoFDWcategories–theirrigationandinfrastructure(B1)andfinancingmechanismsforwaterandsanitationdelivery(A3)PPPs–havevery little engagement of semi-public and public actors compared to the other categories. The

financialcontributionsofnationalgovernmentsand(semi)publicagenciesarealsoalmostabsentinthesecategories.Engagementof(semi-)publicactorsishowevernecessaryaspublicauthoritiescanplayanimportantfacilitatingroleandareofteninthepositiontostimulatewider(system)change.

•ExceptfortheirrigationcasesinSouthAfricaandIndia,conventional development NGOs do not haveleadingroles(e.g.inprojectmanagementorasapplicant)inthePPPsbutratherprovidespecificexpertise(forexample,inlocalembeddingoftheproject).Thepresenceofknowledgeactorsis slightly stronger.

PPP Business Case: indications on sustainability of the FDW PPPs?•Acrosstheportfolio,weseedifferenttypesofprivatecontributionsmadebyprivateactors;financialcontributionsintheformofCSR/foundationmoney,moneyusedforbusinessdevelopment and real commercial investments (bothoperationalandintermsoffinance)thatcontributetoimprovingthecorebusinessofafirm.Thetypeofprivatecontributionmadehassignificantimplicationsfortherisks,business cases and financial sustainability ofaPPP.

•TheeightPPPswithcommercialprivatesectorleadership(B1,A2andA3)arealsotheonlyonesin which a more immediate case for the self-sustaining continuation of activities (withlessornopublicmoney)istheoreticallypossible.InsixofthesethecommercialambitionsoftheprivateactorswiththePPPmeansthattheyhaveastronginterestinmakingarealbusinesscasework.

•Inallothercases,continuationwillprobablyrequiresignificantpublicsectorsupport.Thisdoesnotmeanthattheprojectsarenotcontributingtoalonger-termfinancialoreconomiclogicorsustainability(thiscanbeseeninthecaseofthewateroperators,forexample).Butthelackofintroductionofamajorprivatesectordriverorfinancingmakesthemlookmorelikeconventionalaidprojects.

•ThebusinesscasesandfinancialsustainabilityofthePPPsintheoperator/utility(A1),safedeltas

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19 (C1)andimprovedbasinmanagement/IWRM(C2)PPPsarenotalwaysclear.21

•Generally,alargepartofthebudgetsofFDWprojectsconsistsofacombination of public and private (CSR/foundation) grants forwhichnoreturnoninvestmentisexpected.ThisraisesquestionsaboutthesustainabilityofthepresentPPPsandabouttheirperspectivesforinstitutionalisation,movingon,replication,andscaling.ItalsoraisesthequestionifthesePPPsreallycreatemoremarket-basedsustainabilitythanother,moreconventionalprojectsandprograms in the water domain.

•Theimprovedbasinmanagement/IWRMprojectinColombiaisremarkable,asthe private sector is contributing significant financial resources to a public good issue.ThisistheonlycaseofsuchdirectfinancialcontributionintheFDWportfolio.

Innovation: does FDW stimulate new approaches and Dutch expertise?•17ofthe23FDWPPPsarefocusingondrinking-waterutilitiesandirrigationmanagement(categoriesA1andB1,thetwolargestcategoriesintheportfolio).Bothconstitutefairlywell-knowndomainsofinfrastructuredevelopmentandinfrastructureandservicesmanagement.ThisraisesthequestionofwhethertheprojectsunderFDWdohelppushtheboundariesinthesedomainsandfosterinnovative approaches. Thisquestioncannotbeansweredonthebasisofthepresentanalysis.Itmustalsobenotedthatactivitiesmaybeinnovativeintheparticularlocalcontextoftheproject.

•AnumberofPPPs,especiallythoseinvolvingDutch service providers (bothcommercialandnon-commercialconsultants),market,promote,andextendthecoverageofDutchexpertiseasvestedespeciallyinDutchpublicwatersector(drinking-watercompaniesandwaterboards)andwaterandirrigationconsultancyfirms.However,broaderDutchexpertiseandbusinessesarelargelyabsentfromimprovedbasinmanagement/IWRM,aswellasfromthesewageandwastewatertreatment domains. The technology development projectinSouthAfrica(A2)istheonlyFDWPPPwhereamarketforDutchtechnologyisdirectlypromoted.

4.2EmergingpolicyissuesandquestionsThepresentscanwasorientedatdistinguishing‘PPPchangelogics’,whichmeansthevariationsinkeylogicsthroughwhichPPPsseektoachievedevelopmentobjectives.Thespecificandoverallfindingswerepresentedinthepreviouschapterandabove.TheyalsopointtosomeinterestingpolicyissuesandquestionsrelatingtotheFDWinstrument.

Types of PPPs•TowhatdegreeisFDWactuallyaportfolioofpublic–privatepartnerships?Orinotherterms:what types of PPPs and private sector engagements does one aim for?Thisscanindicatesthat,intermsoffundingandengagement,asubstantialnumberofFDWprojectshaslimitedengagementofrealcommercialparties(andrelatedcommercialengagementandbusinessdrivers).‘Private’isthusindeedbroadlydefinedwithinFDWandaconsiderablenumberof‘private’contributionsconsistofCSR/foundationmoney.Thereseemstobeadilemmabetweena)thedeeperambitionsofthe‘aid&trade’agendatomakeaidinterventionsmoremarketdrivenandsustainable,andb)the‘publicgood’natureofasignificantpartofthepresentportfolioandthelittledirectcommercialengagement that it manages to attract. This dilemmaneedsfurtherthoughtinshapingapossible3rdcallandmayincludelookingmorepreciselytospecificsub-sectorswithintheFDWambition.

Focus of PPPs•Arelatedquestiontotheoneaboveconcerns

the subthemes that are to be stimulated.22

Thepresentportfoliofocusesonspecificpartsofthe‘DrinkingWaterandSanitation’and‘EfficientWaterUse’themes.ThethirdFDWsubtheme.‘DeltasandWaterBasinManagement’containsfewprojects.Otherill-populateddomainsaresanitation(withonlyoneproject)andwastewatertreatment and solid waste. A relevant policy questionthereforeiswhethertheDutchgovernmentseekstobettercoverthedomains

21 For further comments/views of the PPPs regarding business cases and financial sustainability, see the summary report of the interviews. 22 For further analysis, see the study on weakly populated segments.

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20 (andwhichonesinparticular)thatsofarhavebeendrawinglittleprojectsandhowthatcanbedone.

Pro-poorness•Thoughalltheprojectshave,ofcourse,beenscreenedagainsttheFIETScriteria,thespecific pro-poorness ofPPPshasonaveragenotbeendetailedverystrongly.Forexample,disaggregationoftheimpactagainstwealthstatusandcross-subsidisingforpoorpopulationsarenotorhardlyfound,atleastintheproposals.Thisraisesthequestionhowimportantpro-poornessisvis-à-vistheprivatesectorengagementambitionandhowthesetwoobjectivescanbestbecombined.

Promoting Dutch expertise•Towhatdegreehastheportfoliobeenpromoting

Dutch technology, knowledge, and products? Atthisstage,theportfolio’semphasisfromthisperspective(inlinewiththedominanttypesofPPPs)ismainlyontwosegments:drinkingwaterexpertise and irrigation expertise. Other technical fieldsandotherinterests(fromtechnologyandexportfirmstoexpertisevestedinNGOsorinknowledgeinstitutesaroundIWRM/deltas)arelesswellrepresented.ThisraisesthequestionifusingDutchexpertiseissomethingFDWshouldaimformoreprominently,orthatitisenoughasadesirable“by-catch”.

Thefourlargerpolicyquestionsraisedaboverequireadeeperanalysisanddiscussionofa)thePPPpossibilitiesandlimitationsofthevarioussubthemeswithinFDW;andb)theambitionsandprioritiesoftheDutchgovernmentvisàvistheFDWasawholeaswellasthespecificsubthemesandcategories.23

***

23 These questions have been partly addressed during studies undertaken for the Mid-Term Review of FDW in 2015 and expected to be published in summer 2016.

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21 ThecreationoftheFDWandFDOVfinancingmechanismsin2012isseenasanimportantdevelopmentinthefinancingstrategiesoftheMinistry.TwomainobjectivesofFDOVandFDWare:

a. Throughthesefinancingmechanisms,theMinistryseekstoengagetheprivatesectormoreactively and directly with the main development cooperationobjectivesandthemes:waterandfood&entrepreneurship,respectively.Bothofferbroadspacewithseveralpossiblesubthemesforwhichprojectproposalscanbesubmitted.Forboth,thebasiclogicistocombinesignificantprivatesectorcontributionswithpublicfundingbytheMinistry.Theunderlyingrationaleisthat,byrequestingtheprivatesectortoengage,afoundationwillbelaidforeconomicandfinancialsustainabilityandpossiblescalingup.

b. WhiletheMinistryhasseveralfundingmechanismsforprivatesectordevelopment,andiscurrentlysupportingtheDutchprivatesectorinvariouswaystoengageindevelopingcountries,theFDWandFDOVarenewinthattheyexplicitlyfocusonfundingmixedconsortiaofprivate,civic,knowledge,andpublicactorstoaddress development challenges. This approach isalsoreferredtoas‘theDutchDiamond’.Theapproachseekstousethepotentialinnovationandrealisationpowerofmulti-sectorcollaboration.Anunderlyingassumptionisthatthiscanhelpaddressmorecomplex,systemic,or collective action challenges in the domains concerned,andmayleadtoinnovativesolutionsforpersistentproblems.

Other relevant dimensions of FDOV and FDW are:•ThecreationofthetwofinancingmechanismsmustbeseeninthecontextofbroaderchangesthatarestillunfoldingintheDutchdevelopmentcooperationlandscape.Inparticular:

•Therecognitionthattheeconomiesofmanydevelopingcountriesaregrowing,andthataidplaysadiminishingroleandshouldbeusedspecificallyforcriticalsocialorbreakthroughissues.

•Theambitiontomake‘aidandtrade’moremutuallyreinforcing,includingputtingagrowingemphasisinDutchinternationalcollaboration

policyonservingtheinterestsoftheDutchprivatesectorandusingtheirengagementfordevelopmentpurposes.

•AreductioninNGOfundingandtheanticipatedreplacementoftheexistingcivilsocietyfinancingmechanism(theso-calledCo-financingSystemorMFS).Thefacilitiesthusconstituteaspacefornewcollaborationsandendeavours.

Whilebothfacilitieshaveseveralkeycharacteristicsandelementsincommon,theyalsodifferfromeachotherinthefollowingways:

•TheminimumrequestedPPPcontributioninFDWislower(at40%,and30%forthesubthemeSafeDeltasandImprovedBasinManagement)thaninFDOV(50%).Atleasthalfofthiscontributionmustcomefromtheprivatesector.

•InFDOV,theMoFAasfinancierisalsoparticipatingasaformalpartnerintheprojects(oftenthroughtheDutchEmbassiesinthecountriesconcerned).

Appendix I: The FDW in context

PPPLab Explorations 01

22 A1. Improving the technicalandfinancialperformanceofwaterutilitiesandoperators

FDW12RW01 Country: Rwanda Title: PPPforincreasedaccessto

SustainableWaterServicesinRwanda(SusWas)

Leadactor: VitensEvidesInternationalBV

FDW12BD03 Country: Vietnam Title: ClimateChangeandDrinking-Water

SupplyintheMekongDelta,Vietnam Leadactor: VitensEvidesInternationalBV

FDW12MW01 Country: Malawi Title: Malawi:WaterDemandManagement

toMitigateWaterShortages Leadactor: VitensEvidesInternationalBV

FDW12ET06 Country: Ethiopia Title: SourcetoTapandBack Leadactor: VitensEvidesInternationalBV

FDW12TZ02 Country: Tanzania Title: NetworkingWASHprojectsinMara

Region,Nwash Leadactor: Dunea

FDW12ET03 Country: Ethiopia Title: SustainableWaterServicesinHarar

RegionalState(SWSH) Leadactor: VitensEvidesInternationalBV

FDW14BO11 Country: Bolivia Title: BenchmarkingforWaterUtilitiesin

Bolivia(Bench-AGUA) Leadactor: GIZ

FDW14KE13 Country: Kenya Title: PerformanceEnhancementofWater

UtilitiesinKenya(PEWAK) Leadactor: AquanetBV

FDW14RI15 Country: Indonesia Title: PROPOPI-TowardsPro-poorPrivate

Investmentsinwatersupply Leadactor: PerusahaanDaerahAirMimum

(PDAM)

FDW14PH03 Country: Philippines Title: Sustainableandresilientpro-poor

watersupply,Cebu Leadactor: VitensEvidesInternationalBV

FDW14UG43 Country: Uganda Title: AlternativeApproachesandTools

forImprovedWaterSupplyandSanitationforTownsinNorthernUganda(ATWATSAN)

Leadactor: NationalWaterandSewerageCorporation(NWSC)

A2. Innovative technology forwaterharvestingandstorage

FDW12SA01 Country: SouthAfrica Title: Greensource:aGreen,Sustainable,

andSafeWaterSource Leadactor: TenCateNederlandBV

Appendix II: List of FDW projects by category

PPPLab Explorations 01

23 A3. Financing mechanisms forwaterandsanitationdelivery

FDW12KE03 Country: Kenya Title: FinancialInclusionImproves

SanitationandHealth(FINISH) Leadactor: SNSAssetManagement

FDW14BJ18 Country: Benin Title: SmallWaterWellsEntrepreneurs

(SWWE) Leadactor: StichtingtheEijkelkampFoundation

B1. Improving irrigation and irrigation management forbetterreturns

FDW12GH02 Country: Ghana Title: IntegratedWaterManagementand

KnowledgeTransferintheSisiliKulpawnBasin,Ghana

Leadactor: WiencoGhanaLtd.

FDW12OT01 Country: Palestine Title: JeninWastewaterReuseProject Leadactor: Padico

C1.Safedeltas FDW14RI14 Country: Indonesia Title: BuildingwithNatureIndonesia–

Securingerodingdeltacoastlines Leadactor: StichtingEcoshape

A4. Improving WASH governancethroughM&Edata

FDW12GH06 Country: Ghana Title: SMARTerWASH Leadactor: CommunityWaterandSanitation

Agency(CWSA)

FDW12SL01 Country: SriLanka Title: CallingtheKings Leadactor: RabobankFoundation

FDW14SA19 Country: SouthAfrica Title: Reducingthewaterfootprintof

smallholdersugarcaneproducers Leadactor: SolidaridadNetworkSouthernAfrica

(SNSA)

FDW14IN20 Country: India Title: Increasingwateruseefficiencyin

sugarcanegrowinginIndia Leadactor: StichtingSolidaridad

C2.Improvedbasinmanagement/IWRM

FDW12CO01 Country: Colombia Title: IntelligentWaterManagement:

Public–PrivatePartnershipfortheImplementationofanIntegratedWaterManagementSystemtowardsaClimateIntelligentCoffeeSectorinColombia

Leadactor: Nestlé

Post address:BurgemeesterOudlaan50Mandeville(T)BuildingRoomT4-263062PARotterdamTheNetherlands

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