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Key Facts Jordan
Population 5.4 million
Urban population as a percentage of total population 78%
Population with access to water supply 98%
Population with access to waste water collection andtreatment systems 63%
Regulatory framework Ministry of Water and Irrigation (MWI), Water AuthorityJordan (WAJ), Programme Management Unit (PMU)
Service providers National public providers with regional administrations aswell as private operators
Regulation and Supervisionin Water Supply and Sanitation (WSS)
the municipal network are high, at
more than 98%, but water supply is
intermittent. Around 63% of the ap-
proximately 5.4 million inhabitants of
Jordan have access to wastewater
collection and treatment systems.
Service provision in the Sector. The
Water Authority of Jordan (WAJ) is re-
sponsible for WSS service provision in
the Kingdom. Over the past years an
ambitious restructuring programme
was implemented, including the de-
centralization and commercialisation
of services as well as the delegation of
Jordan is one of most water-scarce
countries in the world and the lack of
water will be a serious challenge to
its future economic growth. Despite
scarcity, water use is not efficient,
with high levels of Non Revenue
Water (NRW) in the range of 47% in
the Amman region. Agriculture, which
contributes about 5% to GDP, uses
around 63% of water resources,
again with high NRW-levels, low tar-
iff, and low cost recovery. As a con-
sequence, Jordan suffers chronic
imbalances in its water supply-de-
mand equation. Connection rates to
Division Environment and Infrastructure
power from the centrally controlled
WAJ to regional units operating on a
commercial basis.
Private Sector Participation (PSP)
went underway in 1999 with the sign-
ing of a Management Contract be-
tween the WAJ and the private joint
venture LEMA (Ondeo and Mont-
gomery Watson Arabtech Jardaneh)
for the Amman Greater Area serving
2.2 million customers (set to expire by
the end of 2006). Additional PSPs
were considered but not carried out.
The tender of a Management Contract
Situation in the countrywith regard to WSS
Case sheet
Focus: Jordan
commissioned by:
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Sector policies
WSS regulatoryframework in Jordan
Sector policies Monitoring Contract monitoring
Tariff setting
Central oversight
Northern Gouvernorate Water Admin-
istration (NGWA) was cancelled. As a
consequence, it was decided to ten-
der a three-year Managing Consultant
Contract (MaCo), which will give way
to the establishment of a commer-
cially operating public company. The
negotiations for a Build Operate Trans-
fer (BOT) tender on Disi water supply
were stopped while the BOT Asamra
wastewater treatment plant is cur-
rently under implementation. In the
future further BOTs as well as the pub-
licly owned water company approach
and Micro-PSP options (PSP of localprivate companies in selected busi-
ness activities such as billing and col-
lection) are sought for Jordans water
sector. The first Micro-PSP contract
has been awarded to a local Jordani-
an Engineering consultant in 2005.
Regulatory Framework
Institutional Structure of the Sector.Within the existing setting there is no
clear separation of the roles of agen-
cies with regard to regulatory and su-
pervisory and operational tasks. The
Ministry of Water and Irrigation (MWI),
the WAJ, as well as a Programme
Management Unit (PMU) carry out
regulatory tasks (see chart above).
The MWI was established in 1988 to
improve the coordination in the sector.
Since 1992 the MWI is in charge of the
development of sector policies and
the overall management of the scarce
water resources. The WAJ is the cen-
tralised authority responsible for WSS
services. WAJ is working under the
WAJ law which regulates current op-
erations. The regional administrationsof WAJ in the Gouvernorates are fully
dependent on headquarters with the
exception of the Northern Governo-
rates Water Administration. Authorities
have been delegated from WAJ to
NGWA to support the decentralisation
process (e.g. financial planning, hu-
man resource development, procure-
ment and capital investment pro-
grammes). PMU was created in 1997
to manage a comprehensive pro-gramme of restructuring and rehabili-
tation of the water supply system in
Amman and to administer the Man-
agement Contract and the implemen-
tation of further PSP projects. It oper-
ates under the supervisory control of
an Executive Management Board,
which is headed by the Minister.
Regulatory Tasks, Powers and
Tools. Within the regulatory frame-
work, the MWI is responsible for mon-
itoring, planning, management and
the formulation of strategies and poli-
cies in the water sector. Price regula-
tion is also done by the MWI, which is
committed to set tariffs at operation
and maintenance (O&M) cost recovery
at minimum. However, decisions of afinancial nature require the approval
by the cabinet.
WAJ is a semi-autonomous body
within the ministry, carrying full re-
sponsibility for WSS nationwide as
well as for regulatory oversight. WAJ,
in coordination with MWI, is also re-
sponsible for the groundwater moni-
toring and control. In future WAJ is
sought to be mainly responsible forbulk water supply to the providers and
the WSS services in the remaining
Gouvernorates. The PMU is responsi-
ble for the regulation of the Amman
MWIMinistry of Water and Irrigation
Minister of Water and Irrigation
WAJ (Water Authority of Jordan) PMU (Programme Management Unit )
Local WSS Administrationsunder central control
Decentralised/commercialisedWSS Administration (NGWA)
Private operator (LEMA) / Aqaba Water Company (AWC)
Customers B Customers CCustomers A
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Management Contract and other PSP
initiatives in the Gouvernorates. How-
ever, its regulatory functions remain
limited to sector monitoring with a fo-
cus on performance improvement and
asset management. Over time, PMU
gradually expanded its field of inter-
vention to include PSP-promotion, in-
troduction of modern management
tools and monitoring and reporting ofthe water operators. In the future PMU
will become the monitoring and audit-
ing unit of the water sector.
Incentives for Service Providers.
There are no real market-based incen-
tives for performance in place. Per-
formance indicators were used in the
Amman Management Contract, as
well as in the Micro PSP contracts.
Dispute Prevention and Resolution.
There are no institutionalised dispute
prevention and resolution mechanisms
in place. Conflicts with regard to the
Amman Management Contract were
carried out between the private opera-
tor LEMA, the PMU and the MWI.
Pro-poor Provisions. A well-estab-
lished tariff structure exists for do-mestic water use (progressive system)
with subsidised lifeline tariff for poorer
communities, generally guaranteeing
affordability. Intermittent supply proofs
to be a larger burden on the shoulders
of the poor.
Assessing ResultsRegulatory Independence. Although
WAJ and PMU are semi-autonomousbodies, the degree of political interfer-
ence in Jordans WSS sector contin-
ues to be an important factor in regula-
tion. Within the current structure it is
difficult to differentiate and coordinate
between the responsible agencies.
Transparency in Decision-making.
Since the first PSP activities in 1996
(preparation of the Amman Manage-
ment Contract), transparency and co-
operation between the public and
private sector has considerably im-
proved. Today, the public as well as
the private sector perceive the Am-
man Management Contract as a suc-
cess. The large number of interna-
tional companies willing to bid for re-
cent tenders has shown that the trustof the international market in the pro-
cedures in Jordan is relatively strong.
Stakeholder Involvement. There is
no institutionalised consultative proc-
ess. Even though WAJ law envisages
the participation of citizens and local
authorities there is little evidence of
stakeholder engagement. With re-
gard to the Amman PSP-preparation
process and other intended PSPs,there was no stakeholder involve-
ment. The private operator LEMA, on
the other hand, has made positive
experiences with customer consulta-
tion by way of focus group discus-
sions in Amman. In Aqaba stake-
holder consultations took place guar-
anteeing the smooth transition to-
wards a water company. But in
general low trust in authorities and
the absence of non-governmental
organisations are impediments to
taking the poor consumers views
forward.
Promotion of Competition. Initially,
there was a strong drive towards PSP.
However, due to changing markets it
became apparent that complex PSPmodels would not be sought anymore
and that alternative approaches, such
as Micro-PSP and the concept of a
public company, would be promoted.
WAJ supports decentralisation as a
first step towards PSP through delega-
tion of authority and also the imple-
mentation of different forms of PSP
(Amman Management Contract, Man-
aging Consultant Contract for the
NGWA, Aqaba Water Company, BOT Asamra wastewater treatment plant)
and other PSP measures.
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German Development Cooperation has
been engaged in Jordan for over 30
years. Through its Water Programme,
GTZ is supporting the implementation
of the Jordanian Water Strategy in all
important institutions responsible for
water supply and sanitation, irrigation
and water reuse as well as water re-
sources management. The Operations
Management Support (OMS) compo-
nent of the programme supports the
institutional reform in WSS, improved
operational efficiency and Phasing-In
Approaches for different PSP options.
In close cooperation with KfW, progress
could be achieved with regard to cost
recovery in the sector. German Devel-
opment Cooperation closely coordi-
nates with USAID, JICA, MREA and the
EU. Currently GTZ is heading the Donor
Subgroup on Water. Within its Techni-
cal Committee on Commercialisation
and PSP, issues on regulation, PSP and
user group participation, especially in
irrigated agriculture, have been elabo-
rated and presented to the Minister of
Water and Irrigation.
Impact of Regulatory Reform on
Sector Performance. NRW contin-
ues to be rather high and service
provision is not satisfactory. However,
the overall performance in the WSS
sector has improved. The achieve-
ments of the first Amman Manage-
ment Contract became apparent afterfive years. The highest cost recovery
in Jordan is achieved by Aqaba Water
Company, which is benefiting from its
location, a small service area with
some major consumers. The Northern
Gouvernorates Water Administration
(NGWA) can be considered as the
best performing utility managing to
reduce its operational deficit by more
than 30% within just four years.
Conclusionsand OutlookUrban water demand is projected to
almost double by 2020. To increase
supplies and service efficiency, the
government has already launched an
ambitious investment programme.
Key measures in order to meet the
challenges are the institutional and
the regulatory reforms. The principalregulatory functions are not likely to
be carried out by an independent
regulator within the foreseeable fu-
ture. However, an agency with a cer-
tain degree of independence could
be formally introduced as a mediator
between all stakeholders to promote
high quality service provision, trans-
parency, legitimacy and equality in a
politically and economically uncer-
tain environment. There is also apressing need to get consumers
more involved and to raise their
awareness.
Role of German Development Cooperation.
This document belongs to a series of CaseSheets, which draw on GTZs advisory servic-es in the area of Regulation and Supervisionof Water Supply and Sanitation. The conclu-
sions expressed in this paper are those of
the authors and should not necessarily be attributed to GTZ or German DevelopmentCooperation as a whole. Nor do the conclu-
sions represent official policy of the GTZ.
This note is available on www.gtz.de/pspFor more information: [email protected] Authors: Marina Meuss,Uwe Stoll, Nina Barmeier Published by:Deutsche Gesellschaft fr Technische
Zusammenarbeit (GTZ) GmbHPO Box 5180, 65726 Eschborn, Germany
Imprint
Design by: www.creativerepublic.net, 2006Photos: Marc LatzelPrinted on 100% recycled paper
Status: January 2006
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Key Facts Kenya
Population 32 million
Urban population as a percentage of total population 36%
Population with access to water supply 50%
Population with access to sanitation No reliable data available
Regulatory framework Water Services Regulatory Board (WSRB)
Service providers Water Services Providers (WSPs), Alternative providers
Regulation and Supervisionin Water Supply and Sanitation (WSS)
to decentralised sanitation. Popula-
tion growth in Kenya is projected to
increase dramatically, particularly in
the urban informal settlements, fur-
ther worsening the situation.
Service Provision in the Sector.
There have been a great number of
changes in Kenyas WSS sector with
the completion of the Water Act of
2002 (enacted in 2003). The Act pro-
vides for the decentralisation of pow-
ers from the national to the regional
and local level; the separation of wa-
ter resources management from WSS
as well as the institutional separation
Kenya is classified as a chronically
water-scarce country and has cur-
rently the lowest access to safe wa-
ter in East Africa. Available access
statistics are largely outdated but it
is estimated that more than 50% of
the population is underserved. Urban
informal settlement and the rural
poor are the most affected: while the
urban poor largely rely on informal
vendors, the rural consumers often
draw their water from unprotected
sources. The sanitary situation is
likely to be worse with just about
10% of all households connected to
a sewerage system and around 50%
Division Environment and Infrastructure
of policy, regulatory, asset holding and
operational functions.
Prior to the reforms, a number of
organisations had been involved in
water service provision including the
Ministry of Water and Irrigation (MWI),
the National Water Conservation and
Pipeline Corporation (NWCPC), vari-
ous local councils as well as an esti-
mated 3000 Community Based Or-
ganisations.
Following the provisions of the Act,
the transfer of asset ownership from
the Water Ministry and the National
Case sheet
Focus: Kenya
Situation in the Countrywith regard to WSS
commissioned by:
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Framework for WSS service provision
financing provision
for poor areas
no regulation
License
WSS regulatoryframework in Kenya
Service Provision Agreement
Dispute prevention and resolution
Water Corporation to seven regional
Water Services Boards (WSBs) has
been gazetted in July 2005, and
most local governments have hand-
ed over their assets to the WSBs.
While the WSBs are in charge of asset
development and bear overall WSS
service responsibility within their are-
as of jurisdiction, they appoint Water
Services Providers (WSPs) to actuallyprovide the service.
In urban settlements the WSPs are
mostly local authority-owned utilities
that have been established recently
as commercialised, publicly owned
companies. In other areas numerous
community-managed projects are to
be transformed into formally recog-
nised WSPs. Community Based Or-
ganisations will retain the ownershipover their assets and, where possi-
ble, remain or become in charge of
operations.
Regulatory FrameworkInstitutional Structure of the Sector.
The national regulator, the Water
Services Regulatory Board (WSRB),
has been created by virtue of the
2002 Water Act to supervise water
services provision in the country.
However, some regulatory tasks are
delegated to the seven regional
WSBs. A Water Appeals Board (WAB)
is responsible for resolving and deter-mining certain disputes. The Water
Services Trust Fund (WSTF) assists in
financing the provision of water to
areas without adequate supply (see
chart above).
The regulator, which has only be-
come operational in 2004, consists
of an 11-member board structure in
charge of major decisions and a
management team headed by a CEO.The recruitment process to fill the
key positions is still on going. The
sectors line ministry is the MWI,
defined by the Act as policy-making
body in charge of providing an ena-
bling framework for effective service
provision. The Minister wields con-
siderable powers, such as appointing
and removing Board members and
ensuring sector control.
Regulatory Tasks, Powers and Tools.
Institutional responsibilities, powersand regulatory tools are still in the
process of being further defined. The
regulators primary responsibilities are:
WSP s (Water Services Providers) Alternative providers
WSBs (Water Services Boards)
MWI (Ministry of Water and Irrigation)
WSRB (Water Services Regulatory Board) WSTF (WaterServices Trust Funds)
Customers A Customers B
WAB(Water Appeals Board)
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< Licensing the WSBs and formulating
sector guidelines and regulations.< Monitoring and enforcing the
WSBs compliance with conditions
attached to their licences.< Determining standards and issuing
guidelines on service provision,
customer protection, cost-effectiveand efficient operation and mainte-
nance (O&M) procedures.< Fulfilling certain dispute resolution
functions.< Issuing overall guidelines on tariff
policies, structures and adjustment
mechanisms.< Compiling sector information for
comparative competition of provid-
ers and informing the public about
sector development.
The overall price regulation regime
is currently being further defined and
clarified. The proposal endows indi-
vidual WSPs to request adjustments
of remuneration as part of their peri-
odic business planning process,
which the WSB approves. Any adjust-
ment to the WSB remuneration will
need to be approved by the regulator.In addition, the current draft concept
proposes an indexation formula to be
included in the standard service pro-
vision agreement between the WSBs
and the WSPs. The WSBs also have
monitoring tasks in relation to the
service provision agreements within
their area and are partly allowed by
law to make their own subsidiary
regulations within the framework of
the overall regulatory regime.
Incentives for Service Providers.
The current Model Service Provision
Agreements provide for some simple
incentive mechanisms. According to
these, the WSPs may be allowed to re-
tain part of the additional revenues if
they outperform with regard to collec-
tion rates and Unaccounted-for-Water
(UFW). As part of a government civil
service reform policy, on going since
July 2005, the WSBs and the top man-
agement of state corporations as well
as the Ministry have signed Perform-
ance Contracts, which will be assessed
annually.
Dispute Prevention and Resolution .
The functions of the Water Appeals
Board are likely to be limited to disputes
between the regulator and WSB or, as athird instance, between WSBs and
WSPs. Alternative more localised and
accessible mechanisms are currently
being discussed as part of the on-going
development of dispute resolution and
appeals mechanism guidelines and
Model Service Provision Agreements.
Pro-poor Provisions. Although strate-
gic plans indicate an awareness of
pro-poor issues in the regulatoryprocess, the definition of targets has
remained vague and implementation is
in the initial stages. While many formal
providers operate a flat-rate lifeline tar-
iff, the actual impact on low-income
communities is contentious. There are
indications that connection rates may
be prohibitively high. Service provision
in the large informal settlements re-
mains outside the regulatory regime.
Presently, the sector institution with aclear pro-poor focus and mandate is
the Water Services Trust Fund.
Assessing ResultsRegulatory reforms have only started
recently and are part of a wider sec-
tor reform. So far, key institutions
have been established and are in the
process of becoming operational.
Some crucial regulatory tools have
been developed or are currently be-
ing finalized. Direct impacts of the
regulatory reform are expected to be
seen once the institutions and tools
become effective.
Regulatory Independence. Although
the Water Act provides for a fairly inde-
pendent regulator, at this stage of thereform process, the WSRB is not yet
fully independent. Funding is currently
provided through government grants
and a proposal for a regulatory levy of
1% is waiting for approval. In addition,
staff is still being seconded from the
Ministry to the regulator instead of be-
ing recruited from the market. A board
appointed by the Minister takes key
regulatory decisions and most of the
WSRBs responsibilities are limited toissuing guidelines and advice rather
than actual decision-making. However,
the ultimate degree of independence
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German Development Cooperation
has been intensely involved in estab-
lishing local government-owned au-
tonomous and commercialised com-
panies in various secondary towns in
Kenya. These projects serve as a
model for the establishment of WSPs
throughout Kenya under the on-going
reforms. Presently, GTZ is providing
substantial support to the sector
through the Water Sector Reform
Programme. Objectives of this project
are inter alia the establishment of an
effective regulatory regime for WSS;
the operationalisation of the new in-
stitutions, established as part of the
water sector reforms; and the com-
mercialisation of WSPs. Water re-
source management components in-
tend to optimise available resources,
their management and use. KfW as
the sector focus coordinator repre-
Conclusionsand Outlook
sents German cooperation externally
and as such also co-chairs the water
donor forum. Close cooperation ex-
ists with the Swedish/Danish funded
Kenya Water and Sanitation Pro-
gramme formalised in a joint financ-
ing agreement as well as an agree-
ment on a common programme be-
tween German Development Coop-
eration (KfW, GTZ and DED) and the
World Bank.
will be determined with the definition
of the respective roles and responsi-
bilities and the development of regula-
tory tools.
Transparency in Decision-making.
There is an increasing awareness of
the regulator as well as growing pres-sure from the general public and the
regulated industry to move towards
more transparency and accountability
in regulatory decision-making.
Stakeholder Involvement. The Water
Act requests consultation on a number
of provisions and regulations. A culture
of public consultation and active
stakeholder engagement is gradually
being build. By appointing representa-
tives into the boards of the respective
institutions some improvements have
been made with regard to involving
consumers and civil society. Some of
the larger WSPs are starting the proc-ess of improving customer service
(e.g. Nairobi Water Company).
Promotion of Competition. While the
Water Act encourages competition by
appointing the WSP, government poli-
cy gives preference to public local
government companies.
The success of regulatory reform will
depend on the progress of the overall
reform process in the sector as well
as on the future strength and credibil-
ity of the regulator. It remains to be
seen whether the regulator will be
able to take a leading role, providing
guidance to the regulated industry aswell as to the Ministries throughout
the reform process.
Role of German Development Cooperation.
This document belongs to a series of CaseSheets, which draw on GTZs advisory servic-es in the area of Regulation and Supervisionof Water Supply and Sanitation. The conclu-
sions expressed in this paper are those of
the authors and should not necessarily be attributed to GTZ or German DevelopmentCooperation as a whole. Nor do the conclu-
sions represent official policy of the GTZ.
This note is available on www.gtz.de/psp.For further information: [email protected]
Authors: Authors: Anja Knig, RolandWerchota and Nina Barmeier Published by: Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ) GmbHPO Box 5180, 65726 Eschborn, Germany
ImprintDesign by: www.creativerepublic.net, 2006Photos: GTZ Printed on 100% recycled paper
Status: January 2006
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Key Facts Peru
Population 27.5 million
Urban population as a percentage of total population 71%
Population with access to water supply 76%
Population with access to waste water collection andtreatment systems 57%
Regulatory frameworkSuperintendencia Nacional de Servicios de Saneamiento(SUNASS )
Service providersEmpresas Prestadoras de Servicios de Saneamiento (EPS),Juntas Administradoras de Servicios de Saneamiento(JASS), Community-based organizations, NGOs
Regulation and Supervisionin Water Supply and Sanitation (WSS)
ticularly in the rapidly growing peri-urban areas, are a consequence ofthis situation.
Service provision in the Sector. InPeru 45 WSS utilities or EPS (Empre-sas Prestadoras de Servicios deSaneamiento) public companies inproperty of the corresponding munici-palities - are in charge of providingservice to about 65% of the popula-tion. The remaining 35% of the - most-ly rural - population, is serviced bysmaller service associations or JASS
The urban WSS sector in Peru hasrelatively high WSS coverage ratiosbut they are mostly confined to theutilities in densely populated areas.Smaller utilities have not reachedsufficient levels of WSS coverage. Ahigh level of Unaccounted-for-Water(UFW) with a national average of45%, low metering rates, poor waterquality and intermitted water availa-bility are persisting problems in thesector. Wastewater treatment facili-ties are almost absent. Frequent wa-ter borne infectious diseases, par-
Division Environment and Infrastructure
(Juntas Administradoras de Serviciosde Saneamiento) as well as by othertypes of community organizations andNGOs. Private sector participation(PSP) had until very recently been lim-ited to outsourcing, with the exceptionof a concession contract for the con-struction and operation of a water plantin Chilln issued by Limas utilitySEDAPAL (Servicio de Agua Potabley Alcantarillado de Lima). Lately, thereare number of PSP processes in effectat the provincial level. If these pilotsprove to be successful ten more EPSs
Situation in the countrywith regard to WSS
Case sheet
Focus: Peru
commissioned by:
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are to be privatised in the next years. Amongst the pilot projects is a 30-yearconcession for the city of Tumbesawarded end of July 2005 by the Pri-vate Investment Promotion Agency(PROINVERSION) to the Argentinean/ Peruvian consortium Latinaguas-Con-
cyssa. The company EPS GRAU, op-erator of the WSS system in the city ofPiura, is in the stage of pre-qualificationfor a 30-year concession. A number ofsmall and medium-size municipalitiesare in the process of tendering the op-eration of their WSS services (e.g. Se-chura and Laredo).
Regulatory Framework
Institutional Structure of the Sector.
The water regulatory agency SUNASS(Superintendencia Nacional de Servi-cios de Saneamiento) was created bydecree in 1993 as a decentralized andautonomous agency under the jurisdic-tion of the Presidency of the Council ofMinisters. Presently, SUNASS over-sees quality, coverage and rates in 45EPSs. Service provision in small cities
and rural areas, administered by localgovernments or other institutions, aswell as small legal commercial activi-ties (water deliverers) are not registeredwith SUNASS.
SUNASS is a comparatively largeregulator with around 100 employeesheaded by a Superintendent appointedby the minister. The financial autonomyof SUNASS with an annual budget of
US$ 4million is provided by means of a2% levy on the turnover of the industry.The Ministry of Housing, Constructionand Sanitation (MVCS), created in
PMO (OptimizedMaster Plan)
SUNASS(Regulator)
Municipalities
EPSs (Utilities)
Contrato deexplotation
Elaborate and approve contract
Sign contract
Promotes and assists withelaboration of PMO
Elaborate and sustain PMO
Authorize imple- mentation of PMO
Approves PMO and supervises
executionSupervisesexecution
MVCS(Ministry of Housing, Con-struction and Sanitation)
Promotes contract and provides technical assist- ance for its preparation
MVCS(Ministry of Housing, Con-struction and Sanitation)
PMO (OptimizedMaster Plan)
SUNASS(Regulator)
Municipalities
EPSs (Utilities)
ConcessionContract
Elaborate and approve concession
Sign concession
Promotes and assists withelaboration of PMO
Elaborate and sustain PMO
Authorize imple- mentation of PMO
Approves PMO and supervises
executionSupervisesexecution
PROINVERSION(Private Investment Promo-
tion Agency)
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2002, is the line ministry of the sector,responsible for the management, su-pervision and policy planning.
Regulatory Tasks, Powers and
Tools. SUNASS has the functions tosupervise, regulate, oversee and en-
force water service provision; to setnorms and standards for water quality;and to resolve controversies and userclaims. The agency is empowered totake punitive action against any viola-tions committed by providers. With re-gard to price regulation SUNASS pow-er is limited to designing tariff rules andproposing tariff levels. The ultimate ap-proval of tariff adjustments is carriedout by the municipalities, with the ex-ception of the city of Lima.
In the past, two plans were used forthe regulation of tariffs of public pro-viders and a single plan, the OptimizedMaster Plan (PMO), for the determina-tion of rates of private providers. Re-cently, SUNASS modified the directiveof formulation and approval of tariffsfor public providers. Now the PMO is
being used for the regulation of tariffsof both: public and private providers.The PMO includes proposals for theeconomic offers, management objec-tives, tariff structure, and tariff formulaand coverage rates. SUNASS respon-sibility is to examine the proposal in aconsultative process with the popula-tion and to submit the outcome incase of private providers - to PROIN-VERSION for approval and to the mu-
nicipalities in case of public providers.Once the PMO is approved for privateproviders, it is viewed as involvingmandatory targets.
Incentives for Service Providers.
The link between regulatory incen-tives and performance measures inPeru is weak. To stimulate improve-ments of the municipal utilities man-agement, SUNASS established abenchmarking scheme in 1999 which
is based on nine indicators measur-ing four areas of efficiency: quality ofservice, coverage rates, managementand financial efficiency. Each utilityannually reports to SUNASS on itsefficiency indicators. The rankingbased on the data is calculated andpublished by the regulator. However,SUNASS cannot (at present) applyformal rewards or penalties based onthese rankings. Because of the lackof connection between the utilitiesperformance and benefits, no real in-centives for service improvement arepresently given to the utilities.
Dispute Prevention and Resolution. At the moment there are no viableconflict resolution mechanisms inplace with regard to disputes be-tween the regulator and a service
provider. If a service provider doesnot adhere to regulation, SUNASSmay assess a penalty but there are nofurther implications if the providerfails to comply.
The law provides for a water utilityto appeal the regulators decision tothe courts, but judiciary weaknessesreduce the credibility of the regulatoryframework. Disputes raised by con-
sumers and presented to service pro-viders are addressed by the regula-tors consumer appeals office in thesecond instance.
Pro-poor Provisions. In its capacityas consumer protection agency, SU-NASS encourages the service provid-ers to apply social rates and cross-subsidies in their rate structures in ur-ban areas. For example, in Cusco thesocial rate for WSS services is ap-
proximately 36% lower, than the reg-ular domestic rate and almost 80%lower than the rate applicable to com-mercial and industrial users.
Assessing ResultsRegulatory Independence. AlthoughSUNASS is financially self-sufficient itis still vulnerable to political interven-tion, so that unpopular decisions, suchas tariff increases, are extremely diffi-cult to implement. Because there is noboard representing different stakehold-ers and the powers are concentratedon the Superintendent, SUNASS is notimmune to direct intervention by theministry. The presence of multiple enti-ties in charge of supervising EPSs, in-cluding the Ministry of Housing, theMinistry of Economy and Finances and
SUNASS doesnt provide for a cleardefinition of roles.
Transparency in Decision-making.
Regulatory decision-making is gettingincreasingly transparent. SUNASS`regulations and decisions as well asthe results of the benchmarking schemeare available on the regulators webpage. Users can get guidance uponconsultation using the service hotline.
Stakeholder Involvement. There islittle stakeholder involvement in regu-latory decision-making. As an attempt
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German Development Cooperation hasbeen engaged in Peru for over 30 years.GTZs water supply and sanitation pro-gramme PROAGUA focuses (i.) on fi-nancial, institutional and commercialstrengthening of the water utilities (EPS),
(ii.) supporting public participation andstakeholder dialogue and (iii.) setting up
capacity building and training sys-tems for the EPS. As a member andco-coordinator of the Grupo Agua,GTZ closely coordinates its activitieswith bi- and multilateral developmentcooperation partners active in Peru`s
WSS-sector.
to establish a forum for regulatory con-sultations a consultative committee,comprising representatives of differentstakeholder groups, including the Su-perintendence, the water utilities, themunicipalities, as well as associationsof engineers and consumers was cre-
ated. SUNASS is also obliged to con-sult consumers on the PMO and toinclude their views into the plan.
Promotion of Competition. SUNASSis only marginally involved in facilitat-ing competition by private sector par-ticipation. Currently, this role lies morewith PROINVERSION. The SUNASSbenchmarking systems role is to stim-ulate comparative competition but toachieve this, incentives or penalties
would need to be linked to it. Also, theweight given to the benchmarking sys-tems indicators might need to be re-vised to serve this purpose. Impact of Regulatory Reform on
Sector Performance. SUNASS and
its line ministry advocate a policy oftotal recovery of operating and main-tenance costs through user fees. Nev-ertheless the rate policies have not yetbeen accepted by elected officialsand tariffs are still too low in manyurban areas. This provides little incen-tives for service providers to improveUFW and makes it difficult to covercosts for service provision, to carryout operation and maintenance andeven more to expand coverage.
Conclusionsand Outlook
A number of regulatory improvementshave taken place in recent times andtheir impact remains to be seen. Par-ticularly the ongoing PSP-initiativesinvolving regional and national firmscould offer an effective means to im-prove sector performance and to
stimulate municipal service providersefficiency.
An accountable regulator will play akey role in realizing the gains. However,some regulatory reforms still remain tobe carried out: the legal framework forSUNASS tasks needs to be complet-ed and its strategic orientation andgoals need further clarification. Theautonomy from government and ac-countability in decision-making has tobe guaranteed.
To make operations more efficient,several organizational obstacles needto be solved and the staffs conductwould need to adjust to the new struc-tures. The accuracy of the currentSUNASS ranking schemes would needto be revised to make it an effective
tool for providing incentives to thepublic utilities.
Role of German Development Cooperation.
This document belongs to a series of CaseSheets, which draw on GTZs advisory servic-es in the area of Regulation and Supervisionof Water Supply and Sanitation. The conclu-
sions expressed in this paper are those of
the authors and should not necessarily be attributed to GTZ or German DevelopmentCooperation as a whole. Nor do the conclu-
sions represent official policy of the GTZ.
This note is available on www.gtz.de/pspFor more information: [email protected] Authors: Michael Rosenauer, Nina Barmeier and Sandra NeuhausPublished by:Deutsche Gesellschaft fr Technische
Zusammenarbeit (GTZ) GmbHPO Box 5180, 65726 Eschborn, Germany
Imprint
Design by: www.creativerepublic.net, 2006Photos: GTZ/PROAGUAPrinted on 100% recycled paper
Status: January 2006
8/14/2019 Water - A Key to Sustainable Development 3
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Key Facts Uganda
Population 24.7 million
Urban population as a percentage of total population 15%
Population with access to water supply About 57%
Population with access to sanitation Between 60 80% depending on source
Regulatory framework Regulation done largely by contract
Service providers National Water and Sewerage Corporation (NWSC),Local private and public operators, Small-scale providers
Regulation and Supervisionin Water Supply and Sanitation (WSS)
sanitation. The WSS sector is a main
area of focus in Ugandas Poverty Re-
duction Strategy and key in meeting
the Millennium Development Goals.
Service Provision in the Sector.
Water supply services in 19 large ur-ban towns are the mandate of the
National Water and Sewerage Cor-
poration (NWSC), a commercialised,
publicly owned utility established in
1972. NWSC currently also owns
and manages the assets of 18 of the
44 largest towns in Uganda. The
present water supply coverage in
these towns stands at 68%. Assets
Uganda is a largely rural country with
ample water resources. However,
slightly less than half of the population
still lives without access to safe water
supply: overall urban water supply
coverage stands at about 60% of the
population, whereas rural water cover-age is about 55%. It is estimated that
86% of the urban population use
shared or unshared on-site sanitation
and around 4% have no access to any
sanitation facility. Less than 10% are
connected to the water-borne sewer-
age systems, which are mostly in a
very poor state. In rural areas around
60% of the households use on-site
Division Environment and Infrastructure
of the remaining urban towns are
owned and managed by the respec-
tive municipal town councils, a result
of the governments decentralization
programme. Over half of these towns
have established a Water Authority,
which contracts out operations to lo-cal private firms. The local private
sector currently serves 61 towns and
has achieved water supply coverage
rates of 67%.
There have been two international
private sector contracts in recent
years in the form of management
contracts in the Kampala water
Situation in the Countrywith regard to WSS
Case sheet
Focus: Uganda
commissioned by:
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supply area (1997-2001 undertaken
by JBG Gauff, a German consulting
firm and 2002-2004 carried out by
ONDEO Services Uganda Limited, a
French water firm). In 2002/2003 it
was still envisaged to turn these in-
ternational private sector contracts
into a lease or concession contract
for the urban water sector, along with
the creation of a regulatory authority.These plans were not carried out and
instead the reforms are now focusing
on improving the financial and com-
mercial viability of NWSC and estab-
lishing an asset holding authority.
Regulatory FrameworkInstitutional Structure of the Sector.
The main institutions in charge ofregulation of the WSS sector are the
Ministry of Water, Lands and Environ-
ment (MWLE), its technical arm, the
Directorate of Water Development
(DWD), the Performance Contract Re-
view Committee (PCRC), as well as
the service providers themselves
(NWSC, water authorities). The Water
Act of 1995 puts DWD in charge of
technical regulation in the sector.
DWD is carrying out this role with re-
gard to monitoring of the perform-
ance contracts that exist between the
water authorities and the MWLE.Since 2000 part of the technical regu-
lation is carried out via performance
contracts between the MWLE / the
Ministry of Finance, Planning and
Economic Development (MoFPED) on
the one hand and NWSC on the other
hand. The PCRC is in charge of over-
seeing these contracts on behalf of
the MWLE. The NWSC in return mon-
itors its area offices under the Inter-
nally Delegated Area ManagementContracts (IDAMCs) and the water
authorities monitor the private sector
operators through management con-
tracts (see chart above).
Regulatory Tasks, Powers and
Tools. The PCRC is tasked to monitor
the contract performance between
MWLE/MoFPED and NWSC using
performance indicators. These include
among others the coverage, Unac-
counted for Water (UFW), collection
efficiency, financial and operating ef-
ficiency, customer service and opera-
tional indicators. The MWLE is re-sponsible for price regulation. Pres-
ently, the operating entities propose
tariffs and the MWLE endorses these.
There are currently no explicit mecha-
nisms for the periodic evaluation of
tariffs to ascertain cost-recovery.
Since 2004, tariffs for the NWSC-
served towns are indexed annually to
adjust for inflation and increases in
operating costs. During the last Joint
Sector Review in September 2005 itwas agreed that the existing regula-
tory framework needs to be strength-
ened by more clearly defining institu-
tional roles and responsibilities and by
Performance contracts
WSS regulatoryframework in Uganda
PCRC (PerformanceContract Review Committe)
Contract monitoring
Consumer A Consumer B
NWSC (National Waterand Sewerage Corporation)
Muncipal Town Councils / Water Authorities
IDAMC (Internally DelegatedManagement Contract)
Private Operator NWSC Area Offices
Contract monitoringManagement
contracts Contract monitoring
MWLE (Ministry of Water)MWLE (Ministry of Water) &
MoFPED (Ministry of Planning)
DWD (Directorate of WaterDevelopment)
Contract monitoring
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providing targeted capacity building,
where necessary. Regulation by con-
tract will be the key regulatory mecha-
nism in the short and medium term.
Incentives for Service Providers.
The IDAMCs, established within each
of the NWSC service areas, have a
well-defined incentive mechanism
that is based on Minimum Per-formance Standards and Perform-
ance Targets. Under this system sev-
eral key areas of performance are
used to calculate incentive fees for
the staff in each operating area. In ad-
dition to the normal management fee
and a 25% performance-related com-
ponent, there is an incentive fee,
which allows the operators to earn a
bonus when minimum performance
standards are exceeded.
Dispute Prevention and Resolution .
There are no explicit mechanisms for
dispute resolution. However, the Wa-
ter Statute of 1995 provides for the
establishment of a Water Policy Com-
mittee (WPC) to assist the Minister in
sector co-ordination and to advise on
disputes between agencies. The dis-
pute appeals and dispute resolutionbetween NWSC head office and area
offices are handled by the managing
director/board of NWSC. This arrange-
ment may lead to conflict of interest
and is envisaged to be changed in the
ongoing reforms when more contracts
with local private sector entities have
been entered into.
Pro-poor Provisions. Although the
poor have benefited from the increasedconnections and greater continuity in
water supply, most of the reforms that
have taken place had no explicit pro-
poor focus and there are no defined
standards and levels of service at
present. Currently, the NWSC provides
a subsidised yard tap and domestic
tariff as well as a new connection policy
that provides more affordable access to
water supply services to the urban and
peri-urban poor. In recent years, the
NWSC has also improved customer
services, reduced the average time to
deal with complaints and introducedGIS based customer records and a
Customer Charter.
Assessing ResultsThe process of strengthening the ex-
isting regulatory framework, as agreed
at the Joint Sector Review in 2005, is
ongoing and improvements are cur-
rently being defined. All stakeholders
contribute actively to the process of
developing a transparent and well-de-
fined framework.
Regulatory Independence. Within
the current process of strengthening
the regulatory framework, it is difficult
to assess the degree of autonomy in
decision-making. It is questionable
whether the PCRC, which is financedby the government, provides suffi-
ciently robust means to oversee the
performance contracts. It lacks the
resources to act as a permanent sec-
retariat and is in fact largely not opera-
tional. In general, there is a lack of ef-
fective monitoring and enforcement of
standards. The need for capacity in
the DWD paired with overlapping roles
and responsibilities lead to institution-
al conflicts.
Transparency in Decision-making. The ongoing review and analysis of
the existing regulatory framework in-
creased the awareness with respect
to transparency, accountability and
need for enforcement. A recent tariff
directive by the Minister highlighted
the need for a clear price regulation
mechanism based on sound analysis
of the respective service area before
tariff adjustments are applied.
The Association of Private Water Op-
erators (APWO) is raising pressure on
the government to increase transpar-
ency and accountability. Information
campaigns are under way to enhance
awareness and understanding of the
reform process in the affected insti-
tutions as well as by the general
public.
Stakeholder Involvement. The deci-
sion to strengthen the existing regu-
latory framework was made through
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Conclusionsand Outlook
German Development Cooperation
has supported the reforms in the ur-
ban WSS sub-sector since 2002 un-
der its Reform of the Urban Water
Sector (RUWAS) programme. RUWAS
advises on the legal, institutional and
regulatory changes necessary to im-
plement the agreed sector reforms.
The programme forms part of the Sec-
tor Wide Approach to Planning (SWAP)
that was adopted in 2002. It is an ac-
tive member in the Water and Sanita-
tion Sector Working Group (WSWG), a
high-level decision-making and steer-
ing committee that coordinates the
work of all stakeholders in the sector.
The development partner contribu-
tions are coordinated through the Wa-
ter and Sanitation Sector Development
Partner Group (WSDPG) that is cur-
rently chaired by Germany as lead
donor. Sector progress is monitored
biannually during the Joint Technical
and Joint Sector Reviews in March
and September of each year.
a participatory process involving all
key stakeholders. However, at
present the sole mechanism to in-
volve the consumers in WSS regula-
tion is a NWSC community develop-
ment officer. There are currently no
other staff or committees for captur-
ing the voice of the poor.
Promotion of Competition. The
IDAMCs already provide a very good
platform for internal competition. The
aim is to continue to engage the local
private sector to stimulate wider com-
petition. The involvement of foreign
private sector firms is also being con-
sidered as a potential option, al-
though market size, country risks and
the currently weak regulatory system
make Uganda a less preferred option
for international involvement.
Impact of Regulatory Reform on
Sector Performance. Service deliv-
ery in NWSC-served towns has
clearly improved between 1998 and2005. This was partly due to private
sector participation initiatives
through management contracts. Pri-
vate sector participation had a sig-
nificant influence on sector reforms
and performance. Even more signifi-
cantly were the internal reforms as
well as the introduction of the
IDAMCs in 2004.
The effectiveness of the strength-
ened regulatory framework will large-
ly depend on the acceptance of the
regulatory reform process by all
stakeholders. So far the process has
received relatively high support be-
cause of its participatory and trans-
parent nature.
Role of German Development Cooperation.
This document belongs to a series of CaseSheets, which draw on GTZs advisory servic-es in the area of Regulation and Supervisionof Water Supply and Sanitation. The conclu-
sions expressed in this paper are those of
the authors and should not necessarily be attributed to GTZ or German DevelopmentCooperation as a whole. Nor do the conclu-
sions represent official policy of the GTZ.
This note is available on www.gtz.de/psp.For further information: [email protected] Authors: Fridtjof Behnsen, Barbara Gerhager and Nina Barmeier Published by:Deutsche Gesellschaft fr Technische
Zusammenarbeit (GTZ) GmbHPO Box 5180, 65726 Eschborn, Germany
Imprint
Design by: www.creativerepublic.net, 2006Photos: GTZ Printed on 100% recycled paper
Status: January 2006
8/14/2019 Water - A Key to Sustainable Development 3
17/20
Key Facts Zambia
Population 10.7 million
Urban population as a percentage of total population 43%
Population with access to water supply 47%
Population with access to sanitation 44%
Regulatory framework National Water Supply and Sanitation Council (NWASCO)
Service providers Commercial Utilities (CUs), Local Authorities (LAs),Water Trusts (in some areas of Lusaka)
Regulation and Supervisionin Water Supply and Sanitation (WSS)
water pipe system or pollute resourc-
es. The unhygienic conditions as well
as the lack of access to safe water
mainly affect the poor, particularly
women and children.
Service provision in the Sector.Urban WSS services in Zambia are
mainly provided by Commercial Utili-
ties (CUs), which are owned by Local
Authorities as shareholders. 84% of
the urban population resides in the
service area of one of the ten CUs.
The remaining 16% are still serviced
by Local Authorities directly (15%) or
by private companies that supply
Zambia is one of the most urbanised
countries in sub-Saharan Africa with
around 43% of the population living in
urban areas. Although the country
has abundant water resources, clean
drinking water only reaches around
47% of the urban population andmore than half of the urban popula-
tion has no access to adequate sani-
tary facilities. The largely desolate
water infrastructure in low-income ar-
eas offers insufficient and often unac-
ceptable service levels with frequent
interruptions. Since decades cholera
arises regularly in these areas, due to
the fact that wastewater can enter the
Division Environment and Infrastructure
water to their employees (1%). Within
the official coverage area of the Lu-
saka Water and Sewerage Company
(LWSC), a very large proportion of the
peri-urban areas receive their supply
through community-managed Water
Trusts.
Regulatory FrameworkInstitutional Structure of the WSS
Sector. The National Water Supply
and Sanitation Council (NWASCO),
established in October 2000, regulates
urban WSS service provision. All the
WSS service providers who provide
Case sheet
Focus: Zambia
Situation in the countrywith regard to WSS
commissioned by:
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Reports Advice Appoints board membersResponsible for
WSS provision
no regulationRegulation
WSS Regulatoryframework in Zambia
financing provisionfor poor
areas
services other than for their own use
are required by the Water Supply and
Sanitation Act of 1997 to obtain an
operators licence. Other service pro-
viders operating in the service area of
a CU, i.e. small-scale providers are
required to enter into formal agree-
ments with the licensee. The commu-
nity-managed Water Trust, up to now,
operate outside of the regulatory re-
gime. NWASCO presently has a staff
contingent of 13 people. Its board is
composed of 16 stakeholders, repre-
senting government institutions, pri-
vate sector and other agencies. In2004, its annual expenditure amount-
ed to about 300,000, 84% of which
is covered through the license fees of
1% of the service providers turnover.
The remaining comes from govern-
ment and technical assistance (e.g.
from GTZ).The water sectors line
ministry is the Ministry of Energy and
Water Development (MEWD). NWAS-
CO reports to parliament through the
Minister of MEWD who also appointsthe members of the regulators board
after the institutions represented on
the board have submitted proposals.
The responsibility for WSS, however,
is under the Ministry of Local Govern-
ment and Housing (MLGH), ensuring
a clear separation between policy/ex-
ecutive and regulatory functions (see
chart above).
Regulatory Tasks, Powers and
Tools. The main functions of
NWASCO, as established under the
WSS Act, are advising government
institutions, licensing of utilities, de-
veloping guidelines for WSS, estab-
lishing and enforcing standards for the
design and management of utilities,advising utilities and other service
providers, disseminating information
to consumers, as well as other activi-
ties. NWASCO has powers to enforce
its functions through the licensing and
tariff setting process and through en-
forcement notices and penalties.
NWASCOs power with regard to
price regulation is based on the WSS
Act. Applications for tariff-adjust-ments by providers go through a
number of stages before final ap-
proval by the regulator. Before sub-
mitting a tariff adjustment proposal a
provider has to hold a consultative
meeting with customer representa-
tives. A new tariff model is applied
since 2005.
Incentives for Service Providers.
There are a number of incentive
mechanisms that are presently being
applied in the urban water sector in
Zambia:< the Service Level Agreement and Ser -
vice Level Guarantee based on the
respective guideline by NWASCO