Making Urban Services Work For Poor People January 19, 2004 Junaid Ahmad.
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Transcript of Making Urban Services Work For Poor People January 19, 2004 Junaid Ahmad.
![Page 1: Making Urban Services Work For Poor People January 19, 2004 Junaid Ahmad.](https://reader033.fdocuments.in/reader033/viewer/2022052913/56649e875503460f94b8a350/html5/thumbnails/1.jpg)
Making Urban Services Work
For Poor People
January 19, 2004
Junaid Ahmad
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Ground RealitySouth Asia as an example
Not one city or town in South Asia has 24 hour, 7 days a week water supply Hyderabad and Karachi : 3 hours every two days Delhi and Dhaka: 6-8 hours a day Intermittent supply: health implications
Unaccounted for water: over 50% Cities in South Asia: leaking bucket
Cost recovery: very low --- 20% of O&M Sanitation
Open defecation Little waste water treatment (less than 8-10%)
Decaying infrastructure: no O&M Scale without sustainability
30-40% not connected Use of infrastructure for patronage and politics!!
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The Overall Context
The “ground realities” suggest that making services work is essential to making services work for poor people
Going from 15-16 hours of water a day to 24 hours (or increasing access by 10%) is a matter of money and technical solutions: it’s a managerial problem
Going from 3 hours every other day to 24 hours (or increasing access by 40%) is not a matter of money and technical solutions, it is an institutional problem
Don’t fix the pipes, fix the institutions that fix the pipes
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Messages of the WDR
What kind of institutional reforms? Ones that ensure that the institutional relationships between key players in service delivery chain are such that they:
Empower poor people to Monitor and discipline service providers Raise their voice in policymaking
Strengthen incentives for service providers to serve the poor
So, what are these institutional relationships?
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A framework of relationships of accountability
Poor people Providers
Client power: short route of accountabilty
(e.g. small-independent providers)
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Poor people Providers
Policymakers
A framework of relationships of accountability
Long route of accountability
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Poor people
Policymakers
A framework of relationships of accountability
Providers
voice
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Mexico’s PRONASOL, 1989-94
Large social assistance program (1.2 percent of GDP)
Water, sanitation, electricity and education construction to poor communities
Limited poverty impact Reduced poverty by 3 percent Even an untargeted, uniform per capita transfer would
have reduced poverty by 13 percent
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PRONASOL expenditures according to party in municipal government
Source: Estevez, Magaloni and Diaz-Cayeros 2002
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A framework of relationships of accountability
Providers
Policymakers
Poor people
compact
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Policymaker-provider:Contracting NGOs in Cambodia
Contracted out: NGO managed & could hire, fire, & transfer staff, set wages, procure drugs
Contracted in: NGO managed and could transfer but not hire and fire staff
Control group: Services run by government
12 districts randomly assigned to each category
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Contracting for Outcomes: health services in Cambodia
Source: Bhushan, Keller and Schwartz 2002
Use of facilities by poor people ill in previous month
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A framework of relationships of accountability
Providers
Policymakers
Poor people
compact
Client power
voice
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Poor people Providers
National policymakers
Decentralization
Local policymakers
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Applying the framework to Cities:
Changing Paradigms
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The Context
A New Global Setting Urban Millennium
A New Management ChallengeCreating World Class-Cities
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Important Implication
Municipal service delivery cannot be seen in isolated context;
How municipal services come together to serve the city-economy;
Managing cities to be credit worthy National economic growth and poverty reduction efforts
will be increasingly determined by the productivity of cities and towns
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What will determine the economic potential of cities?
In the context of the “city economy”… …how the political and delivery institutions of the
cities are structured, will determine the contribution of cities to the national income
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Models of Urban Governance
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Which Model of City Governance?
Metropolitan Government Metropolitan Government with Economic
Decentralization Metropolitan Government with Political
Decentralization
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Metropolitan Government
Water/Transport/Waste Management/ElectricityUtilities
Communities/Firms
Municipality1 Municipality 4
Taxes TaxesTransfers
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Key Differences
In the political decentralized model, political and fiscal power is shared between the metropolitan and municipal tier.The metropolitan tier and municipalities jointly keep each other in check.
In the economic decentralized model, political and fiscal powers resides at the metropolitan level. The regions are only de-concentrated arms of the metro unlike the independent municipalities of the first model
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Similarities Fiscal and political power is devolved to city
governments. Both models adopt corporate structures for the
financing and delivery of municipal services with user-charges.
In both models the city has share ownership with expected dividends from the corporations.
Danger of political deadlock.
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Expenditure Responsibilities
Redistributive Spatial Planning Service delivery
Metro tier Metro tier, municipal Metro-wide companies
(economies of scale), municipal companies
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Tax Assignment/Revenue Sources
Metro Tier
Municipal
Companies
(All three tiers)
Business Taxes, Commercial Property
Residential Property (land only?)
User-charges
(Capital markets)
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Need for Decentralized Borrowing
Lumpy investment requirements Inter-temporal redistribution Signal of quality of governance Create accountability
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Sources of Finance
Supra-local Government(s) and Public Financial Institutions Subject to patronage Inefficient allocation of resources
Private Financial Institutions Transparent and Market-based Subject to Moral Hazard
Need for suitable Regulatory Framework
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Regulatory Framework
Information/Disclosure System Bankruptcy Laws/Penalties for default Own tax bases for collateral Separation of fiscal and financial systems
Independent Central Bank Public Sector out of Financial System Prudential Regulation of Financial System
Market Decentralization
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Key Lessons
Expenditure and tax assignments: should be legislated
Capital market Access: Any implicit liability should be made explicit
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Tradeoffs
Metropolitan Political
Decentralization
Economic
Decentralization
Macro Stability - -/+ Design
+
Efficiency: Allocative
- + -/+ Design
Efficiency:
Locational + -/+
Design
+
Efficiency:
Planning Coordination
+ -/+ Design
+
Equity + -/+ Design
+
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City Restructuring:Johannesburg Example
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Johannesburg’s Original Structure
4 municipalities and one metro Fragmented: no economies of scale Duplication of service delivery Typical line function responsibility No integrated planning
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The Problem Chronic poor performance is the rule rather than
the exception in many publicly run municipal services
Technical losses Poor cost recovery Subsidies do not reach the poor
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Why?
Policy
Regulation Delivery
Define the Objectives– 24-hour supply– Clean water– Extended Access
• Define the Rules
Enforce the Rules– Monitor Compliance– Regulate Pricing
Deliver the Service Play by the Rules
.
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Restructuring of Johannesburg
Delivery
Contract
Fiscal
Surplus
Water & Sanitation
Waste
Electricity
IT
Transport/Roads
•Slum-upgrading
•Primary Health•Peoples Center
R1
R2
R11
•Spatial Planning•Fiscal Budget•Local Economy
Metropolitan Government
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Change Process
Time framework: 21 months
No one blue print for the companies
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Organizing to Deliver service contract management contract lease concession divestiture
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Organizing to Deliver
Low High
GovernmentInvolvement in
Running theBusiness
Government Ownership
High
Low
CorporatisedUtility
Fully-privatisedWater Company
Government-run,Joint Equity
Company
ManagementContract
Water Department
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Johannesburg’s Choice
Electricity generation: sale of assets Water and Sanitation: Management Contract with
Incentive IT: sale and lease back services Roads: Corporatized Line Department Waste: Corporate utility Property Management: Private Management
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41PRIVATE SECTOR PARTICIPATION IN URBAN WATER & SANITATION SERVICES5/ 6 DECEMBER 2001:
Water and Sanitation
PAST
Fragmented : 5 water, 5 sanitationand Sep Rev, HR, ITand Fleet
42% UFW : Capex Constr18% Technical losses24% Commercial losses
Non-payment : Sep of rolesnot commercial
Backlogs : Capexno invest plan
Customer Care : Bureaucracyno incentives
Comm delivery : inflexibleCapacity
PRESENT
SERVICEDELIVERY AGRMT
COUNCIL
BY-LAWEnables……
BOARD
Man. Contract
•5 Years•Share upside
• functions and obligations
• standards• tariff process•KPI’s•Funding of socialobligations steppedtariff/ subsidy
Produces 5yr + 1yrBusiness Plan
• Financial model• Capex plan• Delivery outputs• Perfomance targets• Dividends
Commercial:User Charges
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Roads and Storm water
Council
• Owns Assets• Provides Finance• Develop High-level plans
Contracts
Roads AgencyRoads Agency
MDMD
Planning DivisionPlanning DivisionContracts DivisionContracts DivisionInternal
ContractRd & S Man Sys 5 yr ProgrammeContracts out - %Performance benchmarks
• Neg bid for work• Operations• Compete against benchmarks
Commercial:No User Charges
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Capital expenditure (R m)
0
200
400
600
800
1,000
1,200
1,400
1995/6 1996/7 1997/8 1998/9 1999/0 2000/1 2001/2 2002/3
R309m
R1280m
R949mR816m
R1100m
R592m
R375m
R975m
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Operating surplus/deficit (R m)
-350
-300
-250
-200
-150
-100
-50
0
50
100
150
'1995/6 `1996/7 `1997/8 '1998/9 '1999/0 '2000/1 '2001/2 '2002/3
+R102m
-R82m
+R2m +R2m+R0m
-R314m
-R74m
-R116m
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Example: City Utility
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Asset Holding Company
Operating Company
State Govt. Municipalities
shareholders
contract
customers
bulk buyersmunicipalities, SSIPs
customers
Regulator
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Expenditure Responsibilities
Redistributive Spatial Planning Service delivery
(Regulator)
Metro tier Metro tier, municipal Metro-wide companies
(economies of scale), municipal companies
(Independent of the city structure)
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Example: Medium and Small Towns
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Need of Alternative Management Model
Too big to be managed by communities Large and dense enough to benefit from economies of
scale offered by piped water systems
Too small and dispersed to be managed by a conventional utility
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Possible option
Regional or multi-town utilities Advantages
Economies of scale in management Minimize transactions costs of contracting Viable volumes of business
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Criteria for Clubbing
Large enough population base Clusters of 1-2 million
“Manageable” overall distance Within a watershed boundary Voluntary or prescribed
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International Examples: UK
Economies of scale up to population of 1 million 10 large utilities with population of 2-10 million 15 smaller utilities with population base of
250,000 to 1.2 million Jurisdiction based on watershed boundaries
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International Examples: France
WSS responsibility of Local Governments Voluntary “Syndicates” 15500 undertakings for 37000 municipalities – 2/3
per grouping SEDIF manages water services for 144
municipalities and about 4 million customers
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Regional Utility
Shareholders:ULBs, State government
ASSET HOLDING COMPANY
Contract
Private sector operator
Town 1 Town 2 Town 3
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Rules of Engagement
“Top down”: Statutorily create the regions and enforce all ULBs to be members e.g. England, Scotland Need to ensure compatibility with 74th amendment
“Bottom up”: Voluntary association e.g. France Slow How to create incentives for association?
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Governance
Vesting O&M control of water related assets by lease (or otherwise) to AHC/AMC
Share ownership proportional to asset value Voting rights possibly allocated on a more
equitable basis State government as shareholder, coordinator
and arbiter Rules of entry and exit
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Reforming Institutions
Which path?
Through local governments: South Africa
Through the WSS: Chile
Which path for India?
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Reforming Through Local Government: South Africa
City towns
towns
towns
State
capital
operating
capacity
incentives
Utilities,Departments,
Regional systems
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Reforming Through Utilities: Chile
City towns towns
State
City Utility Regional Utility
consumers
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Co-locating Reforms: 74th Amendment
City Utility towns
towns
State
City Regional Utility
consumers