Public-Private Partnerships for Urban Water Utilities

Marin, P.
Development & humanitarian aid, National & regional actors, Government, Urban, Water and sanitation
World Bank

Public-Private Partnerships (PPPs) for Urban Water Utilities: A Review of Experiences in Developing Countries is directed at policy makers in governments as well as donors and other stakeholders. This book analyzes the access, service quality, operational efficiency, and tariff levels of more than 65 large water PPP projects (representing more than 100 million people) over 15 years in different regions. Its goal is to contribute to a better understanding of how to tackle the many challenges of providing water and sanitation services to urban populations in the developing world.

The urban population served by private water operators in the developing world has grown every year since 1990. The results achieved by many projects in service and efficiency improvements reaffirm the value of PPPs, even though the level of private financing did not match initial expectations. Over time, a more realistic market has developed, the number of private investors from developing countries has grown, and contract designs have more pragmatic risk allocations.

Implementing water PPP projects in the developing world has often proved challenging, and they should not be considered the sole option for reform. However, an examination of the available empirical evidence shows that well-designed partnerships between the public and the private sectors are a valid option to turn around poorly performing water utilities in developing countries.

The water sector has many features that set it apart from other infrastructure sectors. This book suggests the value of careful consideration of these specificities for successfully involving private operators. Emphasis should shift from trying to attract private investment to using private operators to improve service quality and efficiency. This approach fosters a virtuous circle: the utility improves its financial situation and gradually becomes able to finance a larger share of its investment needs. Although concessions have worked in a few places, contractual arrangements that combine private operation with public financing appear to be the most sustainable option in many countries. An obvious implication for governments and donors is that they need to remain heavily engaged in the water sector, especially in the poorest countries.