Optimizing Public and Private Roles in the Context of Evolving Needs & Marketplace World Water Forum 5 – Istanbul Session March 16, 2009 Paul Reiter IWA Executive Director

2 What Have We Learned? 1. The problem of urban water and sanitation service provision in lower and middle income countries is growing rapidly, not shrinking 2.In meeting these challenges, experience over the past 15 years reveals that while real progress was made, PPPs alone are not likely to be the solution for lifting public utility performance world wide 3.Reaching the 93% of public utilities will therefore require a different and more complex approach 4. The traditional private sector marketplace has matured and evolved in a way that could provide additional tools for strategic outsourcing New service offerings More local and regional participants from developing countries

3 New Types of Services: Increasing use of management contracts Turnkey treatment and network management Performance based outsourcing of specific functions (e.g., leakage reduction) Build-out of connections through output-based aid contracts Growing Share of Participants from Dev Countries

4 What Have We Learned? 1. The problem of urban water and sanitation service provision in lower and middle income countries is growing rapidly, not shrinking 2.In meeting these challenges, experience over the past 15 years reveals that while real progress was made, PPPs alone are not likely to be the solution for lifting public utility performance world wide 3.Reaching the 93% of public utilities will therefore require a different and more complex approach 4. The traditional private sector marketplace has matured and evolved in a way that could provide additional tools for strategic outsourcing New service offerings More local and regional participants from developing countries 5. At the same time, non-traditional resources are emerging Public sector utility service providers Contributions through Water Operator Partnerships 6. Taken together, a new and promising environment is emerging

5 Moving On: Elements of an Agenda for the Future Develop a common understanding that Recognizes that water is special – Acknowledges that in the ”grey zone”, both public and private operators have role to play Acknowledges that high performance  public or private control Broadens the discussion beyond utility management to the entire supply chain

Between Black and White: Operating in the Grey Zone Full- scale contract for operations and CIP Public ownership of assets and control of policy Strategic outsourcing: -- CIP -- Treatment -- Separable specialties Purely municipal operations and CIP Private Private operations and CIP Construction Major Design Other Activities Degree of PSP High Low

7 Moving On: Elements of an Agenda for the Future Develop a common understanding that Recognizes that water is special – Acknowledges the reality of life in the ”grey zone” Acknowledges that high performance  public or private control Broadens the discussion beyond utility management to the entire supply chain Make needed commitments Promote high performance standard for all utilities and mechanisms for monitoring and rewarding performance Ensure sufficient institutional underpinnings are in place for change Addresses financing needs including those for capacity development Recognize and foster the unique nature of the optimization process for each venture Facilitate capacity development to support this process Understanding of different modes of private participation and when/where each are appropriate Risk management Alternative procurement models and techniques

8 The Sessions Focus on utilities Enhancing utility performance under various circumstances including PSP variants -Setting performance standards -Interfaces with donor programs -Linkages with regional banks/lending Focus on supply chains Creating more vibrant local and regional supply chains -Cascading supply relationship -Establishing new niches in the marketplace

9 The Sessions Exploring a policy framework Is it possible to develop consensus on a generalized policy framework for regional tailoring and implementation addressing both utility performance and supply chain issues? -Parties, process, timing

10 Why is This Important … Water and wastewater utilities are the engines of the economic well being of cities In developing countries, the potential contribution of private sector support in the form of specialized knowledge and general know-how is significant This discussion of PSP has been overshadowed for 15 years by one form of private sector participation – full delegation of responsibility to the private sector in the form of concessions or affermage arrangements

11 …Why is This Important Full delegation approaches to PSP have been controversial in part because of real/perceived lack of control of the local utility and their community With the emergence of new offerings from the private sector, we are now in a position to thoughtfully broaden consideration of PSP to include other forms of private participation – forms which leave the nearly 93% of public utilities with more managerial control In addition, the advent of Water Operator Partnerships further expands the possibilities for strategic engagement with external operators