Version classiqueVersion mobile

Eaux, pauvreté et crises sociales

 | 
Habib Ayeb
, 
Thierry Ruf

Atelier 2. Réguler les accès aux eaux potables en ville et dans le monde rural

The political economy of providing efficient water supply and sanitation services to the poor

The case of Colombia

Matthias Krause

Texte intégral

Introduction

1Adequate domestic water supply and sanitation (WS&S) services are a crucial element for escaping poverty. Lacking access to these services is one important factor causing infectious diseases and decreasing productivity and economic possibilities of the household. The provision of equitable and efficient WS&S services presupposes effective policies in order to (i) implement affordable solutions for the poor who lack access as well as to tackle (ii) the significant health and environmental externalities and (iii) the natural monopoly characteristics associated with these services. This is a complex issue because expanding services and improving their quality typically cannot be reached without improving efficiency and financial sustainability of service providers. Moreover, neglecting environmental sustainability will put in danger the availability of safe water which in its turn will hurt especially the poor.

2In the first chapter, the main elements of a “good” WS&S policy are outlined based on a discussion of the equity and efficiency characteristics of WS&S services. Subsequently and using an institutionalist political economy approach, the relation between WS&S policy weaknesses and failures in political and administrative governance is described. During the last decade the academic and political debate has focused too narrowly on the polemic privatization issue. It is argued that a broader governance perspective is better suited to analyze policy weaknesses and further develop research on WS&S sector reform.

  • 1 In the context of this research project carried out by the German Development Institute, the autho (...)

3The chapter 2 presents preliminary empirical evidence from Colombia based on an ongoing research project1..The focus is on finding evidence for the hypothesis that weaknesses in WS&S policies are related to weaknesses in political and administrative governance. The Colombian WS&S sector is very suited to explore this hypothesis. Starting in the late 1980s it has been deeply transformed with the goal of improving achievements in equity and efficiency. The reform included the promotion of private sector participation (PSP) which allows assessing how governance weaknesses influence both public service providers and providers with PSP. Preliminary evidence indicates that reluctance of politicians to grant full independence to the regulator and to service providers is detrimental to efficiency, that there is a discrimination of the rural poor in subsidy policy that may be related to their political voicelessness and that inefficiencies in the use of publicly funded grants are related to a weak administrative governance.

Conceptual approach

The relation between poverty and WS&S services

  • 2 According to a widespread consensus in development literature the term poverty should not be limit (...)
  • 3 For a discussion of definitions and characteristics of improved (or adequate or safe) WS&S service (...)
  • 4 The health and economic benefits of WS&S services to households are well documented. See UN-HABITA (...)
  • 5 For an in-depth analysis of the disadvantage of poor people to influence government decisions on g (...)

4Poverty can be broadly defined as a multiple and pronounced deprivation in wellbeing2. Poverty manifests itself in different dimensions of well-being: (i) material deprivation, (ii) low achievements in education, (iii) ill health, (iv) vulnerability, (vi) political voicelessness and powerlessness. Having this broad poverty concept in mind, it can be argued in the first place that lacking access to improved3 WS&S services itself is a symptom of poverty as it is a kind of material deprivation. At the same time, lacking access to these services is one important factor causing deprivations in other dimensions. It increases the risk of falling ill with the consequence of decreasing productivity and economic possibilities of the household4. Productivity and economic possibilities do not only decrease due to the consequences of ill health but also due to time and money spent in getting safe water, e.g. from a dug well two miles away or from an expensive source like water vendors. Finally, lacking adequate WS&S services is often also a consequence of other poverty dimensions. From a conceptual point of view, there are two exemplary institutional settings (out of a continuum of combinations) for allocating WS&S services: (i) free markets that allocate services according to the price mechanism and (ii) State organizations that allocate services according to a political logic. In general the poor are handicapped with respect to both allocation mechanisms (i) because of their low purchasing power and (ii) because of their political voicelessness and powerlessness5.

Social goals and implications for WS&S policy

  • 6 This is a rather limited perspective on environmental sustainability. In the literature that centr (...)

5The academic and public debate on the organisation of domestic WS&S services centres around three social goals: equity, efficiency and environmental sustainability. In what follows the former two are going to be discussed (environmental aspects are treated under the heading “efficiency”)6.

Equity

  • 7 An argument closely related to this is to highlight the human rights character of WS&S services. F (...)

6The main argument for why WS&S services matter from an equity perspective has been given above: their close interrelation with and impact on poverty7. The implications are that WS&S policies should promote access of the poor to adequate services and make sure that these services are affordable for low-income households. This can be achieved e.g. by subsidizing access to (and possibly consumption of) WS&S services of the poor. A free market allocation based on the price mechanism alone that is not complemented by any specific poverty-oriented policies or subsidies will not achieve the equity goal in the WS&S sector.

Efficiency I: market failure

  • 8 It can be distinguished between the narrow concept of (i) operational efficiency which means that (...)
  • 9 Cf. e.g. Noll (2002).

7An important strand of (economic) literature is concerned primarily with efficiency8. Urban WS&S show two important characteristics that prevent markets from working efficiently, i.e. from serving the greatest number of consumers according to their preferences at the lowest possible cost9:

  • Natural monopoly10 – in a free market setting this phenomenon means that consumers are faced with a single supplier that can charge high prices for a low quality service because he has not to fear any competition due to the cost characteristics of the supply technology. This leads to losses in consumer welfare.
  • Environmental and health externalities11 – in a free market setting these phenomena lead to situations where too much water is extracted from a water source as compared to its capacity to replenish, too few sanitation facilities are installed or the water body is polluted too much because the environmental and health costs associated with these activities are not reflected in the market price and are thus not accounted for by the individual households or firms.

8Both market failures are good reasons for the State to take an active role in designing specific policies and regulations for promoting a low cost and good quality service as well as for internalising external effects. It does, however, not necessarily imply State ownership of service providers.

Efficiency II: State failure

  • 12 Low coverage especially among low-income households, intermittent and bad service, high water loss (...)
  • 13 Cf. Shirley and Walsh (2000) and the overview of literature given there. Applied to the case of th (...)
  • 14 See footnote 9.
  • 15 As far as the author knows, the term “low-level equilibrium” in the context of WS&S has been coine (...)

9The traditional model for organising WS&S services in most developing countries until the 1990s has been public provision by State-owned monopolies with politically set tariffs that in most cases contained some sort of cross-subsidies between consumer classes. The choice of this model has often been justified on equity and efficiency grounds. Unfortunately, in many cities in developing countries this traditional model has been associated with disappointing achievements both with respect to the equity and the efficiency goal12. According to an important strand in literature13, the main reasons for the bad performance lie in the negative consequences of (i) State ownership and (ii) absence of competition on the operational efficiency14 of service providers. As there are no private shareholders that press the management to use inputs in the most efficient way to maximize profits, and as customers cannot sanction bad service by switching the supplier, managerial slack occurs. Moreover, management decisions are not taken according to a business logic but according to a political logic with the consequence of a low-level equilibrium15.

  • 16 The term “private sector participation” (PSP) is used to describe a range of different ways of inv (...)
  • 17 Most of the empirical studies use data from Latin America because market-oriented reforms have bee (...)
  • 18 Cf. Izaguirre (2004).
  • 19 Cf. Kessides (2004), p. 6. Generally, we can observe that the global political debate on water iss (...)

10Inspired by this State failure argumentation, International Finance Institutions and important donor countries during the 1990s promoted private sector participation16 (PSP) in developing countries, usually combined with the building up of regulatory agencies for monopoly regulation. Assessing the success of this strategy has been a matter of controversy. As far as the academic debate is concerned, the picture is inconclusive17. Most analysts acknowledge improvements in operational efficiency but underline that overall success has been diminished by ineffective regulation and insufficient poverty orientation. An undisputed result is that private investments in the WS&S sector in developing countries have materialised only to a small fraction and have lagged far behind the expectations18. In the political arena, PSP in WS&S has been highly controversial from the beginning and it has in several cases encountered strong political opposition, not only in Latin America19. Typically it is claimed that PSP is inequitable and worsens the situation of the poor.

Elements of a “good” WS&S policy

  • 20 Cf. World Bank (2004); Kessides (2004), ch. 5.

11There is no such thing as a “unique state-of-art blueprint” for equity and efficiency enhancing WS&S policy. With respect to the polemic issue of PSP recent proposals are less dogmatic20. In what follows the main lines of an encompassing WS&S reform are sketched that probably many analysts would endorse.

  • Organizational separation of the functions policy-making, regulation and service provision aiming at making harmful political influence on regulation and management of WS&S services more difficult and at encouraging actors to concentrate on their core functions: politicians and policy makers21 on policymaking, regulators on tariff and quality regulation, and service providers on management of WS&S services.
  • Poverty orientation: to assure that the poor gain access to safe WS&S services and that the use of these services is affordable to them is a fundamental task of policymaking. Measures include subsidising22 the connection costs (and possibly the current tariffs) of low-income households, defining and monitoring connection targets in low-income neighbourhoods, empowering the poor for participating in regulation and planning of WS&S in order to enable them to exercise their consumer rights.
  • Economic regulation: this element aims at protecting WS&S service users from the abuse of monopolistic power and consists basically in defining (and controlling) efficient tariff and quality levels that have to be met by service providers and in promoting competition for the market (e.g. competitive bidding of concessions) to substitute for the absent competition in the market23.
  • Tariff reform: this element basically is about aligning the tariff level with the level of efficient24 costs and aims at improving allocative efficiency as well as financial sustainability of service providers. This (together with PSP) typically is the most conflictive measure because in the very most cases it means that tariffs have to be increased.
  • Corporatization of service providers: this bundle of measures includes both options: commercialisation25 under public ownership and PSP in one of its various forms (see above). It aims at improving operational efficiency and at insulating management from harmful political influence. Minimum requirements for improvements to occur under public ownership are that service providers are transformed into incorporated enterprises with an own budget and autonomy of the management to decide on manpower and budget allocation.
  • Environmental regulation: protecting water bodies from pollution and assuring long-term availability of fresh water resources internalises negative external effects on downstream users and on the environment and is a condition for the sustainability of WS&S service provision. Typical measures include quantitative limits and/or fees for the abstraction from and the pollution of the water bodies, subsidisation of sewerage treatment plants as well as the building up of monitoring systems for water quality and quantity.

Governance matters

  • 26 In a very general way governance can be perceived as ‘the sum of the many ways individuals and [.] (...)
  • 27 This is not to say that self-centred behaviour is generally detrimental to social welfare (self-ce (...)

12Here it is argued that unsatisfactory achievements in both the traditional and the market oriented model may be related to weaknesses in governance26. As has been discussed above, equity and efficiency achievements in the WS&S sector are threatened by both State failure and market failure. Even when relying exclusively on private utilities for service provision, the State is necessary for economic and environmental regulation and for poverty orientation. If under the traditional model the State failed to achieve equity and efficiency being responsible for policy-making, regulation and service provision, why should the overall result improve with the State being necessarily still responsible for the former two functions, unless the underlying reasons for the State failure are explicitly and effectively addressed in WS&S sector reform? What market failure and State failure theories have in common is that they describe conditions under which self-centred behaviour of individual actors does not lead to a maximization of the social goals equity and efficiency, i.e. conditions under which self-centred behaviour can be detrimental to social welfare27.

13From a normative point of view the main function of a good governance structure is helping to reduce detrimental forms of self-centred behaviour and, in general, to shape the behaviour of the main actors in the WS&S sector (basically politicians, policy makers, regulators, private and public service providers, and users) in such a way that it is conducive to the equity and efficiency goals. Weaknesses in governance can have a negative effect on WS&S policies and thus on service performance by two different ways: (i) policies do not point at the right direction because of failures during the process of policy formulation and political decision making. This is related to weaknesses in political governance. Example: subsidies are only available for those who are already connected to the WS&S system leaving all the low-income households that lack a WS&S connection without any assistance because the non-connected poor have a weak political voice and thus are not taken into account by politicians and policy-makers when drafting subsidy rules. (ii) Policies point at the right direction but they are not implemented effectively because actors use the rooms for manoeuvre policies leave open for pursuing particularistic goals to the detriment of social goals, i.e. because of failures during the process of policy implementation. This is related to weaknesses in administrative governance. Example: subsidies do not reach the poor because the public administration exercises its discretional power to use the money for the pursue of particularistic interests which in its turn is facilitated by a low transparency of budget processes, a weak accountability of the public administration and a lack of effective sanctioning mechanisms.

14In what follows the Colombian WS&S policy is analyzed. The focus is on finding evidence for the hypothesis that weaknesses in WS&S policies are related to weaknesses in political and administrative governance.

Case study: Colombia

  • 28 Cf. Maldonado and Vargas Forero (2001); Fernández (2004); SSPD (2002).

15Starting in the late 1980s the Colombian WS&S sector has been transformed with the goal of improving achievements in equity and efficiency. Two major reforms have shaped the governance structure of the Colombian WS&S sector: decentralization and public utilities reform28. Through the decentralization process (started in 1986) the responsibility for service provision and infrastructure assets were transferred from the national level to municipalities. Before, there had been a mixed responsibility with the major cities having been served typically by municipal corporations and the remaining urban and rural areas by national-government-owned providers managed by the Instituto Nacional de Fomento Municipal (INSFOPAL). The public utilities reform (started in 1994) introduced major institutional changes in the WS&S sector. The most important changes were (i) the establishment of regulatory agencies at the national level with the mandate to regulate tariffs and enhance competition, (ii) the introduction of the principle of cost covering tariffs, (iii) corporatization of service providers and promotion of PSP, as well as (iv) the creation of institutions for user participation. The public utilities law (no. 142, 1994) confirmed (v) the principle of solidarity prescribing cross-subsidies between socio-economic groups and declaring the covering of unmet WS&S needs a priority.

16The remainder of this paper is organized as follows. First a short overview of the WS&S service situation in Colombia is given. The subsequent analysis concentrates on policy weaknesses (not so much on achievements) and potential connections to governance failures. It is limited to two WS&S policy elements: organization of policymaking, regulation and service provision and poverty orientation. Finally some general conclusions are presented.

Overview of the WS&S service situation

Table 1. Coverage with improved water supply and sanitation services (% of population)

Table 1. Coverage with improved water supply and sanitation services (% of population)

Source: DNP (2004), p. 5 (modified by the author)

  • 29 Cf. OPS / OMS (2001): 11-12; 79.
  • 30 These figures relate to the area “rural 2” as classified by DANE; cf. OPS and OMS (2001), p. 79.
  • 31 Cf. Meléndez (2004), p. 49 ff.

17Between 1993 and 2003 overall coverage rates have increased from 79.7% to 86.1% (improved water services) and from 73.2% to 82% (improved sanitation services) of total population (see table 1). Coverage in rural areas is much lower than in urban areas (more or less half). Access to WS&S services in Colombia varies according to the wealth of households29. By 1997 only 57.5% of the households belonging to the decile with the lowest per capita consumption spending had an in-house water connection whereas among the decile with the highest per capita consumption spending the same share amounted to 98.3%. Again rural areas differ markedly from urban. Differences between poor and rich are much bigger on the countryside (poorest decile: 29.2%, richest decile: 54.9%)30 than in the city (poorest decile: 91.5%, richest decile: 99.1%). Differences between poor and rich as well as between rural and urban areas are less pronounced when in addition to in-house connections other improved WS services (wells, public standpipes) are taken into consideration31.

Table 2: Performance of urban WS&S services (excluding four major capitals) with and without PSP; 1998-2003

Table 2: Performance of urban WS&S services (excluding four major capitals) with and without PSP; 1998-2003

Source: author's calculations based on data provided by SSPD and CRA; non-representative sample of 26 cities (excluding Bogotá, Medellín, Cali, Barranquilla): 9 cases with PSP, 17 cases without PSP

  • 32 This picture for providers with PSP (clear improvements but unsatisfactory average levels) may be (...)

18Table 2 presents indicators for coverage – water and sewer connections – as well as for operational efficiency – unaccounted for water (percentage of potable water that is produced but not billed: the lower the indicator the more efficient) and collection rate (percentage of the amount billed to customers that is collected: the higher the indicator the more efficient) – distinguishing between providers with PSP and without PSP. Figures for the total sample of 26 service providers have developed into the desired direction (change 1998-2003) except for unaccounted for water that has increased by 8.8% on an unsatisfactorily high average level (45.4%). Except for coverage with sewer connections, providers with PSP show more significant improvements than those without PSP (the latter actually have worsened with respect to unaccounted for water and collection rate). When looking at average levels of the indicators however, providers with PSP perform worse except for the collection rate32.

  • 33 Cf. SSPD (2002): 30-32.
  • 34 Cf. Meléndez (2004): 23, 53.

19In the course of the WS&S sector reform tariffs have been increasing significantly. E.g. between 1998 and 2001 the sector specific price index rose by 42.7% (i.e. 12.6% per year) in real terms33. Real tariff increases have coincided with some improvements in coverage and operational efficiency (see above) but also with higher proportional spending of low-income households. The share of household income spent on WS&S services of the poorest quintile amounts to 6.8% (2003) which lies above the internationally recommended 5%34.

Organization of policy-making, regulation and service provision35

  • 35 This section is based on Fernández (2004).

20Table 3 shows the organizational structure of the functions policy-making, regulation and service provision which is strongly influenced by the fact that Colombia is a decentralized State (functionally, fiscally and politically). Although municipalities are fully responsible for service provision in their territories and consequently mayors for local WS&S policy-making (definition of coverage targets/urban planning, decisions on corporatization of service providers, allocation of public funds), the national government retains crucial responsibilities in the realm of WS&S policy-making like sectoral planning (including national coverage targets and allocation of public funds) and capacity-building. Colombia is a special case as compared to international practice because responsibility for economic regulation is split. The task of defining tariff and quality of service levels is done by CRA, control is accomplished by SSPD and monitoring is a shared responsibility of both agencies. The 1,091 municipalities existing on Colombian territory accomplish their task of service provision by a variety of organizational forms: incorporated enterprises (with or without PSP); directly by the municipal administration or, especially in rural contexts, by different forms of community organizations. The main resources to finance service provision come from tariffs paid by users and publicly funded subsidies (see below).

Table 3. Distribution of responsibilities according to territorial levels of government

Table 3. Distribution of responsibilities according to territorial levels of government

Source: Based on Fernández (2004), p. 28, modified by the author.

21In what follows two potential weaknesses of this governance structure are briefly discussed that are both related to the risk of detrimental political influence: (i) independence of the regulatory agency CRA and (ii) independence of service providers.

  • 36 Cf. Smith (1997), especially p. 11 (formal safeguards).
  • 37 What follows is based on information gained in interviews with experts and representatives of orga (...)
  • 38 Cf. also Fernández (2004): 81-83.

22There is a strong consensus that in order to accomplish their tasks of protecting consumers from monopolistic market power as well as of promoting efficiency and investments in the WS&S service sector, regulatory agencies shall be independent (i.e. be insulated from the influence of politically or economically powerful groups and possess an adequate technical expertise)36. In the case of CRA independence can be questioned because of several features contradicting typical formal safeguards that would support independence37: A) ministries are directly involved in the decisions of the regulatory commission: 3 out of 7 members are ministers – the remaining 4 are technical experts. B) Technical experts are appointed exclusively by the executive (President) – the legislative branch is not involved. C) Appointment of technical experts is not based on a transparent and competitive selection that would assure technical expertise. These weaknesses in the independence of CRA may have contributed to the delay in the revision of the outdated methodology for tariff regulation that should have been completed by 2001 but actually was still not fully implemented by July 2005, increasing this way the uncertainty in the WS&S service industry38. The revision of the old methodology is very necessary because it contained hardly any incentives for efficiency which means that tariff increases may partially reflect rents and inefficient costs (especially in big and intermediate cities where tariff increases have been substantial).

  • 39 Cf. Fernández (2004), p. 81.

23The management of a service provider should be independent from detrimental political influence on management decisions (e.g. concerning staff selection, technology choice, investment) in order to concentrate on operational efficiency within the given policy and regulatory framework that should be conducive to equity and efficiency. Formal safeguards that prevent detrimental influence of the municipal government are strong in case of a private incorporated enterprise, average in case of a public incorporated enterprise and more or less absent in case services are provided by the municipal administration. There is some empirical evidence indicating that detrimental political influence may be a bigger problem in the case of public provision: A) one indicator for political interference is the frequency of change of the general manager. Unfortunately this indicator is only available for a small non-representative sample of 4 service providers (2 public incorporated enterprises; 2 private incorporated enterprises) for which it was collected during this investigation. Whereas both public enterprises have had 6 general managers between 1998 and 2005, one private enterprise had 4 and the other 1 during the same period. B) As has been already discussed above (see table 2), providers with PSP on average showed improvements in both indicators for operational efficiency (unaccounted for water and collection rate) between 1998 and 2003 whereas providers without PSP on average worsened with respect to these indicators. C) Many public providers (especially in intermediate and small cities) did not implement tariff increases that would have been necessary to approximate cost covering levels because tariff increases were blocked by municipal governments39.

Poverty orientation

  • 40 Cf. Estache et al. (2002): 14-21, who make this distinction and, in addition to subsidies, discuss (...)
  • 41 Cf. Foster (1996): 14-16.
  • 42 According to data from WHO and UNICEF (2000).
  • 43 Cf. Meléndez (2004), p. 53.

24The analysis of the poverty orientation of Colombian WS&S policy is limited to the issue of subsidies. With respect to their principal objective, it can be distinguished between subsidies (i) aiming at lowering the cost of connecting to the service for lowincome households who lack access and those (ii) aiming at lowering the cost of using the service for low-income households who already have access (in order to guarantee affordability and to prevent withdrawal from the service)40. In the academic debate the first objective is considered as more relevant, especially in countries where access is low and lack of access correlates negatively with income41. Access in Colombia (see table 1) cannot be considered as very low: as compared to 20 other Latin American countries, in 2000 Colombia ranked on position 5 (water) and 6 (sanitation)42. Lack of access to both services is much more common in rural areas where approximately 86.5% of all households without improved WS&S services live. In rural areas there is a clear negative correlation between lack of access and income whereas in urban areas this negative correlation holds only for sanitation services43.

  • 44 On these issues cf. Estache et al. (2002), ch. 3-4; Yepes (2003); Krause et al. (2003): 24-25.

25With respect to the way of delivering subsidies to the target population, one can distinguish between cross-subsidies that are delivered through the tariff scheme (the principle being that some consumer classes pay more than the cost of service whereas other consumer classes pay less) and direct subsidies that can either be delivered through the supply side (e.g. by financing a network extension to a poor part of the town with public grants and thus without extra costs for low-income dwellers) or through the demand side (e.g. by granting cash or vouchers to low-income households so that they can pay for their connection costs)44.

  • 45 Cf. e.g. Foster et al. (2000).
  • 46 Cf. Yepes (1999): 4-7.

26There are at least three important criteria to assess subsidy schemes: (i) their targeting quality (i.e. the extent to which subsidies reach those households that are or should be eligible), (ii) the cost of administrating the targeting system and (iii) the extent to which subsidies harm allocative efficiency45. Direct subsidies to the demand side are typically the most preferred instrument among economists because (contrary to crosssubsidies) they do not distort the price signal and are thus less harmful for allocative efficiency46. In Colombia, subsidies in the WS&S sector take two forms: public grants to the supply side and cross-subsidies.

Public grants to the supply side

  • 47 DNP (2004) provides a description of the fiscal transfer system from national to municipal governm (...)
  • 48 Own calculation with the data reported by DNP (2004), p. 8.

27Important amounts of public grants are allocated to the WS&S sector by the national government (a smaller fraction) and by municipalities (the vast majority) that, in principle, could be used to pursue the objective of expanding access among lowincome households. The bulk of these resources come from the national budget. Table 4 shows subsidies stemming from the national budget that have been allocated to the whole environmental services sector (WS&S services, waste water treatment, solid waste disposal). It can be seen that earmarked transfers47 to municipalities within the framework of the decentralization law no. 715 (2001) are by far the most important source with a share of 86%. Transfers are earmarked to be used for the environmental services sector but the administration of these funds and the spending decision are made by municipal governments. These transfers are not only the most important source of subsidies, they are important even when compared to the GNP of the whole sector: 33.5% on average as measured in current prices for the years 1994-200348.

Table 4. National fiscal spending for WS&S, waste water treatment and solid waste disposal, 1998-2002

Table 4. National fiscal spending for WS&S, waste water treatment and solid waste disposal, 1998-2002

Source: Fernández (2004)

  • 49 Cf. DNP (2004), p. 6; Fernández (2004): 71-72.

28With respect to the important portion of transfers that are used for WS&S services, there is no general procedure on the micro level that is designed for targeting expenditures so as to expanding access among low-income households (however, the formula for distributing transfers among the 1,091 municipalities considers poverty as one important criterion which means that in practice poorer and smaller municipalities receive higher transfers per habitant than richer and bigger municipalities49). The targeting of local spending depends exclusively on the priorities and decisions of the municipal government which in turn are influenced by local political governance. There are some indications that, on average, municipal governments do not target public grants to low-income households lacking access to improved WS&S services:

  • 50 Cf. DNP (2004), p. 12.

29As has been said above, 86.5% of these households live in rural areas. However, just 46% of earmarked transfers (1996-2001) have gone to rural areas50. This spending pattern could be related to the political voicelessness of the rural poor.

  • 51 Cf. DNP (2004); Fernández (2004): 63, 70-72; information gained in interviews with experts and rep (...)
  • 52 Cf. DNP (2004), p. 17.
  • 53 Municipalities with PSP execute a higher proportion of funds than those without PSP. Cf. DNP (2004 (...)

30One could argue that a sort of indirect targeting would be achieved if public grants were efficiently used for expanding general access to WS&S services (because of the negative correlation between lack of access and income – see above). However, there are concerns with respect to the efficient use of transfers51. According to a recent calculus of the National Planning Department52, national coverage rates in 2003 could have been 100% (piped water) and 95% (sewerage), if transfers to municipalities (1996-2003) would have been executed efficiently in infrastructure expansion projects (in contrast to 88% and 74%, respectively, that were actually measured in 2003). Some observed problems related to administrative governance features are: A) an important portion of transfers earmarked for WS&S are not executed for that purpose53. B) Fiscal control and auditing procedures related to transfers are weak. C) Funds are used for items that have no direct impact on coverage expansion (e.g. for covering deficits generated by the cross-subsidy-scheme, see below). D) Due to lacking technical expertise and lacking articulation between the planning activities of the municipal administration and the service provider, funds are used for infrastructure projects that are unsuitable or unworkable. E) Corruption related to the use of public grants for construction activities in the WS&S sector is a common phenomenon in Colombia and compounds the before mentioned problems.

Cross-subsidies

  • 54 Cf. Fernández (2004): 54-57; residential class 4 and official consumers neither receive a subsidy (...)
  • 55 Cf. Meléndez (2004): 25-26.

31The Colombian cross-subsidy-scheme is organized as follows. All consumers are divided into four classes: industrial, commercial, official and residential (the latter is by far the most important class by number and consumption). Residential consumers are again subdivided into 6 socio-economic strata (1 being the poorest and 6 the richest). Up to of 20m3/connection/month (defined as basic consumption level by CRA) residential consumer classes 1, 2, 3 pay a subsidized tariff that lies below the cost of service (50%, 40%, 15%, respectively) as regulated by CRA whereas residential consumer classes 5 and 6, industrial and commercial classes pay a surcharge (20% respectively)54. Classification of residential consumers is a responsibility of mayors and is done based on a standardized methodology provided by the National Department of Statistics which considers basically the characteristics of the housing unit55.

  • 56 See e.g. Yepes (2003), p. 7.
  • 57 Cf. Meléndez (2004): 22-23, 63.

32Apart from the well known negative effects on allocative efficiency which in some cases can be of considerable magnitude56, the Colombian cross-subsidy-scheme shows the following weaknesses57: A) targeting quality is low because the error of inclusion is high: 51% of consumers that receive a subsidy through the tariff have an income that lies above the national poverty line (the positive thing about this is that the error of exclusion is extremely low: only 0.7% of connected households with an income below poverty line do not receive a subsidy). Moreover, cross-subsidies do not redistribute from rich to poor but are slightly regressive. B) The share of consumers that are eligible for receiving cross-subsidies is constantly increasing. Whereas in 1993 residential classes 1, 2 and 3 represented 75% of total residential consumers, by 2003 this figure had increased to 88%. C) The cross-subsidy-scheme is not operational in smaller and poorer cities and localities because there exist no consumer classes that pay a surcharge. This means that deficits between the cost of service as regulated by CRA and tariff revenues have to either be covered by the municipal government (that can use earmarked transfers for that purpose) or by the service provider (which means that necessary expenditures may have to be postponed and service quality may decrease). These three characteristics indicate that – apart from urban low-income households that already have access to WS&S services – urban middle classes benefit most from the cross-subsidy-scheme. The losers of the Colombian subsidy policy seem to be the rural poor. This result supports the hypothesis that politicians and policy-makers allocate subsidies to benefit (urban) constituencies that have relatively more political power and are better organized. This pattern of behaviour is related to weaknesses in the political governance.

Conclusions

33Based on the comments so far, the following general conclusions can be drawn:

34Achieving the equity goal is interrelated with achieving the efficiency goal. Providers that are managed efficiently and are financially sustainable are able to effectively expand services to the non-connected poor and to provide a good quality service; the more efficient a subsidy scheme is managed the more resources can potentially reach the poor.

35Achieving equity and efficiency in WS&S services presupposes a complex policy mix the quality of which depends on the quality of the political and administrative governance of the country or region.

36There is some empirical evidence supporting the hypothesis that several of the weaknesses observed for Colombian WS&S policy are related to governance weaknesses:

  • Politicians seem to be reluctant to grant full independence to the regulator and to service providers because they would lose means to influence tariffs and allocation of funds which in turn are important to win elections and maintain clientelistic networks. This behaviour is harmful for the efficiency of WS&S service supply. On average, PSP seems to be more effective in insulating management from detrimental influence than corporatization under public ownership.
  • Because of their political voicelessness those who are most in need (the (rural) poor who lack access to improved WS&S services) are disadvantaged with respect to subsidy policy.
  • A weak administrative governance gives rise to an inefficient use of public grants and eases corruption.

37When designing WS&S sector reforms, special attention should be given to the political and administrative governance of the respective country in order to adapt policies to governance features.

Bibliographie

Bibliography

Alt, J. E., Alesina A., 1996 – Political economy: An overview, in: Goodin, R. E. / H.-D. Klingemann (eds.), A new handbook of political science, Oxford: Oxford University Press, pp. 645-674.

Braeutigam R. R., 1989 – Optimal policies for natural monopolies, in: Schmalensee, R. / R. D. Willig (ed.), Handbook of industrial organization, Vol. 2, Amsterdam: Elsevier, pp. 1289-1346.

Budds J., McGranahan G., 2003 – Are the debates on water privatization missing the point? Experiences from Africa, Asia and Latin America, in: Environment & Urbanization, vol. 15, no. 2, pp. 87-113.

Clarke G. R. G., Kosec K., Wallsten S. J., 2004 – Has private participation in water and sewerage improved coverage? Empirical evidence from Latin America, World Bank Policy Research Working Paper 3445, Washington, D.C.: World Bank.

Cornes R., Sandler T., 1996 – The theory of externalities, public goods and club goods, 2nd edition, Cambridge, Mass.: Cambridge University Press.

DNP (Departamento Nacional de Planeación), 2004 – El sistema general de participaciones en el sector de agua potable y saneamiento básico, Bogotá: DNP.

Esrey S. A., 1996 – Water, waste, and well-being: A multicountry study, in: American Journal of Epidemiology, vol. 143, n° 6, pp. 608-23.

Estache A., Foster V., Wodon Q., 2002 – Accounting for poverty in infrastructure reform: Learning from Latin America's experience, WBI development studies, Washington, D.C.: World Bank.

Fernández D., 2004 – Sector agua potable, Informes de base. Colombia: Desarrollo económico reciente en infraestructura (REDI), Washington, D.C.: World Bank.

Foster V., 1996 – Policy issues for the water and sanitation sectors, Washington, D.C.: Inter-American Development Bank.

Foster V., Gómez-Lobo A., Halpern J., 2000 – Designing direct subsidies for the poor -a water and sanitation case study, in: Public Policy for the Private Sector, Note n° 211.

Fuest V., Laube W., 2004 – Konzept einer armutsorientierten Entwicklungszusammenarbeit im Wassersektor, Teilgutachten 1 im Rahmen des Forschungsprojekts des Bundesministeriums für wirtschaftliche Zusammenarbeit und Entwicklung: "Wasser und Armut. Schlussfolgerungen für die Umsetzung des Aktionsprogramms 2015 und das Erreichen der Millennium Development Goals", Bonn: DIE.

Hutton G., Haller L., 2004 – Evaluation of the costs and benefits of water and sanitation improvements at the global level, Geneva: WHO.

Izaguirre A. K., 2004 – Private infrastructure: Activity down by 30 percent in 2002, in: Public Policy for the Private Sector, Note n° 267.

Jalan J., Ravallion M., 2001 – Does piped water reduce diarrhea for children in rural India, World Bank Policy Research Working Paper 2664, Washington, D.C.: World Bank.

Johnson C., Start D., 2001 – Rights, claims, and capture: Understanding the politics of pro-poor policy, Working paper 145, London: Overseas Development Institute.

Kessides I. N., 2004 – Reforming infrastructure: Privatization, regulation, and competition, World Bank Policy Reserach Report, Washington, D.C.: World Bank.

Krause M., et al. 2003 – Sustainable provision of renewable energy technologies for rural electrification in Brazil: An assessment of the photovoltaic option, Reports and Working Papers 10/2003, Bonn: DIE.

Maldonado M. M., Vargas Forero G., 2001 – Evaluación de la descentralización municipal en Colombia. La descentralización en el sector de agua potable y saneamiento básico, Archivos de Economía, Documento 166, Bogotá: DNP; Dirección de Estudios Económicos.

Meléndez M., 2004 – Subsidios al consumo de los servicios públicos en Colombia. Hacia dónde movernos? Informes de base. Colombia: Desarrollo económico reciente en infraestructura (REDI), Washington, D.C.: World Bank.

Neubert S., et al. (eds.) 2005 – Integriertes Wasserressourcenmanagement (IWRM) - Ein Konzept in die Praxis überführen, Baden-Baden: Nomos.

Noll R., 2002 – The economics of urban water systems, in: Shirley, M. M. (ed.), Thirsting for efficiency: The economics and politics of urban water system reform, Amsterdam; New York: Pergamon, pp. 43-63.

OPS (Organización Panamericana de la Salud), OMS (Organización Mundial de la Salud) 2001 – Desigualdades en el acceso, uso y gasto con el agua potable en América Latina y el Caribe. Colombia, Serie Informes Técnicos n° 4, Washington, D.C.: OPS, OMS.

Rosen H. S., 1992 – Public finance, 3rd edition, Homewood, Boston: Irwin.

Scharpf F. W., 1997 – Games real actors play: Actor-centered institutionalism in policy research, Theoretical lenses on public policy, Boulder: Westview Press.

Shirley M. M., 2000 – Reforming urban water systems: A tale of four cities, in: Manzetti, L. (ed.), Regulatory policy in Latin America:Post-privatization realities, Miami: North-South Center Press at the University of Miami, pp. 147-170.

Shirley M. M., Walsh P., 2000 – Public versus private ownership: The current state of the debate, Working paper 2420, Washington, D.C.: World Bank.

Shirley M. M., Ménard C., 2002 – Cities awash: A synthesis of the country cases, in: Shirley, M. M. (ed.), Thirsting for efficiency: the economics and politics of urban water system reform, Amsterdam; New York: Pergamon, pp. 1-41.

Smith W., 1997 – Utility regulators - the independence debate, in: Public Policy for the Private Sector, vol. 12, n° December 1997, pp. 9-12.

Spiller P. T., Savedoff W., 1999 – Government opportunism and the provision of water, in: Savedoff, W. / P. T. Spiller (eds.), Spilled water. Institutional commitment in the provision of water services, Latin American Research Network, Washington, D.C.: Inter-American Development Bank, pp. 1-34.

SSPD (Superintendencia de Servicios Públicos Domiciliarios), 2002 – Acueducto, alcantarillado y aseo 1998-2001, in: Supercifras en m3, no. 6, pp. 1-143.

UN-HABITAT (United Nations Human Settlements Programme), 2003 – Water and sanitation in the World's cities. Local action for global goods, London; Sterling: Earthscan.

Urquhart P., Moore D., 2004 – Global water scoping process. Is there a case for a multistakeholder review of private sector participation in water and sanitation? Scoping report, Executive summary, Brasilia: ASSEMAE.

Weiss T. G., 2000 – Governance, good governance and global governance: Conceptual and actual challenges, in: Third World Quarterly, vol. 21, no. 5, pp. 795-814.

World Bank, 1994 – World development report 1994. Infrastructure for development, Washington, D.C.: World Bank.

World Bank, 2001 – World Development Report 2000/2001. Attacking poverty, Washington, D.C.: World Bank.

World Bank, 2003 – World Development Report 2004. Making services work for poor people, Washington, D.C.: World Bank.

World Bank, 2004 – Public and private sector roles in water supply and sanitation services, Operational guidance for World Bank Group staff, Washington, D.C.: World Bank.

WHO (World Health Organization), UNICEF (United Nations Children's Fund), 2000 – Global water supply and sanitation assessment 2000 report, Geneva: WHO, UNICEF.

Yepes G., 1999 – Do cross-subsidies help the poor to benefit from water and wastewater services? Lesson from Guayaquil, Working paper, Water and Sanitation Program, Washington, D.C.: World Bank, UNDP.

Yepes G., 2003 – Los subsidios cruzados en los servicios de agua potable y saneamiento, Informe de trabajo, Washington, D.C.: Inter-American Development Bank.

Notes

1 In the context of this research project carried out by the German Development Institute, the author of this paper recently returned from a research stay in Colombia during which quantitative and qualitative data was collected.

2 According to a widespread consensus in development literature the term poverty should not be limited to lack of income or monetary wealth. The following concept is based on World Bank (2001), chapter 1.

3 For a discussion of definitions and characteristics of improved (or adequate or safe) WS&S services see WHO/UNICEF (2000), annex A; UN-HABITAT (2003): 2-5.

4 The health and economic benefits of WS&S services to households are well documented. See UN-HABITAT (2003), ch. 2; WHO / UNICEF (2000): 1-3; Hutton and Haller (2004); Fuest and Laube (2004), ch. 3.2. For an in-depth empirical analysis and discussion of health benefits from WS&S services see e.g. Jalan and Ravallion (2001), Esrey (1996).

5 For an in-depth analysis of the disadvantage of poor people to influence government decisions on general pro-poor policies and to obtain benefits from such policies, see Johnson and Start (2001).

6 This is a rather limited perspective on environmental sustainability. In the literature that centres on sustainable water resource management, environmental aspects are treated in a much more elaborated manner. See Neubert et al. (2005) for an in-depth discussion of theoretical and practical aspects of the Integrated Water Resource Management concept that integrates environmental, economic and social goals from a resource management perspective.

7 An argument closely related to this is to highlight the human rights character of WS&S services. For the interpretation of the International Covenant on Economic, Cultural and Social Rights of the United Nations Economic and Social Council regarding the right to water cf. Budds and McGranahan (2003), p. 94.

8 It can be distinguished between the narrow concept of (i) operational efficiency which means that a given output (here quantity and quality of WS&S services) is produced at the lowest possible cost and the encompassing concept of (ii) allocative efficiency which (expressed in an oversimplifying way) means that the maximum number of consumers are provided with goods and services according to their preferences at the lowest possible cost. Cf. e.g. Rosen (1992), ch. 4.

9 Cf. e.g. Noll (2002).

10 A market is a natural monopoly when – due to economies of scale and/ or scope – the lowest cost alternative to satisfy a given demand is supply by one single firm. For a technical discussion of the natural monopoly see Braeutigam (1989).

11 According to Rosen (1992), p. 66, “externality” can be defined as an “... activity of one person affecting the welfare of another in a way that is outside the market ...”. For an in-depth theoretical (and technical) analysis of externalities and public goods see Cornes and Sandler (1996).

12 Low coverage especially among low-income households, intermittent and bad service, high water losses, failure of the subsidies to reach the poor, average tariffs below average costs of service (which means that the resulting financial losses have to be covered by State transfers), unnecessarily high costs of service provision (e.g. due to overstaffing). Cf. Kessides (2004): 2-3, 220; World Bank (1994): 25-36.

13 Cf. Shirley and Walsh (2000) and the overview of literature given there. Applied to the case of the WS&S sector, see Foster (1996): 1-5.

14 See footnote 9.

15 As far as the author knows, the term “low-level equilibrium” in the context of WS&S has been coined by Pablo Spiller. See Spiller and Savedoff (1999).

16 The term “private sector participation” (PSP) is used to describe a range of different ways of involving the private sector in the provision of WS&S services: service contract, management contract, lease, concession, build-own-transfer schemes (BOT), joint venture, divestiture = pure privatization. These different models imply different types of articulation between private and public actors with differing divisions of responsibilities, risks and rights. For a description of different forms of PSP, cf. Shirley (2000), p. 150; Budds and McGranahan (2003): 89-90; Foster (1996), p. 12.

17 Most of the empirical studies use data from Latin America because market-oriented reforms have been concentrated in this region.
Whereas several case studies show improvements in coverage, operational efficiency and water losses following PSP – cf. e.g. Shirley and Ménard (2002) – a recent analysis using a quantitative approach finds no significant difference in coverage improvements between PSP and public provision – cf. Clarke et al. (2004).

18 Cf. Izaguirre (2004).

19 Cf. Kessides (2004), p. 6. Generally, we can observe that the global political debate on water issues is marked by ideological polarization. See Urquhart and Moore (2004) and Budds and McGranahan (2003) for a survey of the different positions and arguments in this debate.

20 Cf. World Bank (2004); Kessides (2004), ch. 5.

21 See World Bank (2003), p. 48, for the differentiation between politicians and policy makers.

22 The question of how to design WS&S subsidies schemes in order to effectively reach the poor without compromising (too much) overall efficiency of WS&S service provision is a complex issue on which quite a lot of theoretical and empirical research has been done. Cf. Yepes (1999), (2003); Estache et al. (2002), ch. 3-4.

23 For the terms “competition in the market“ and “for the market”, see World Bank (1994), ch. 3.

24 It is the main task of regulation to assure that tariffs do not rise above the level of efficient costs. See above.

25 On commercialization and corporatization see World Bank (1994), ch. 2.

26 In a very general way governance can be perceived as ‘the sum of the many ways individuals and [.] [organizations], public and private, manage their common affairs’; definition of the Commission on Global Governance as cited in Weiss (2000), p. 796. For the purpose of this article WS&S governance can be defined as those principles that shape the decisions and actions of all actors relevant for the WS&S sector, i.e. basically of politicians, policy makers, regulators, (private and public) service providers, and users. From an institutionalist political economy perspective, these principles derive from the structure (in the following: governance structure) of the space of interaction between actors. The governance structure – basically (i) institutions (e.g. water laws, tariff regulations), (ii) (self-centred) actors with their preferences and their specific economic, political and cognitive resources and (iii) actor constellations (e.g. many vs. few actors etc.) – shapes the course of decisions and actions in the WS&S sector (e.g. policies, regulations, management decisions, water consumption). The institutionalist approach is inspired by Scharpf’s actor-centred institutionalism; cf. Scharpf (1997). The term “political economy” is used to describe a theoretical approach that, above all, looks at the economic and the political system of a society in an integrated manner: “[P]olitical economy emphasizes both ‘economic’ behaviour in the political process and ‘political behaviour’ in the marketplace”; Alt and Alesina (1996): 645-646.

27 This is not to say that self-centred behaviour is generally detrimental to social welfare (self-centredness of human behaviour is a basic assumption of the theoretical approach chosen here). On the contrary: under the conditions of perfect markets the interaction of self-centred individuals leads to an efficient allocation of resources (which however might be considered as inequitable).

28 Cf. Maldonado and Vargas Forero (2001); Fernández (2004); SSPD (2002).

29 Cf. OPS / OMS (2001): 11-12; 79.

30 These figures relate to the area “rural 2” as classified by DANE; cf. OPS and OMS (2001), p. 79.

31 Cf. Meléndez (2004), p. 49 ff.

32 This picture for providers with PSP (clear improvements but unsatisfactory average levels) may be related to the fact that PSP in Colombia – in most cases – was initiated when service performance and financial situation of the public provider had become alarming and consequently the pressure on politicians to remedy the situation very high. This means that PSP typically was started in situations where indicators were very bad (information gained in interviews with experts and representatives of organizations of the Colombian WS&S sector).

33 Cf. SSPD (2002): 30-32.

34 Cf. Meléndez (2004): 23, 53.

35 This section is based on Fernández (2004).

36 Cf. Smith (1997), especially p. 11 (formal safeguards).

37 What follows is based on information gained in interviews with experts and representatives of organizations of the Colombian WS&S sector.

38 Cf. also Fernández (2004): 81-83.

39 Cf. Fernández (2004), p. 81.

40 Cf. Estache et al. (2002): 14-21, who make this distinction and, in addition to subsidies, discuss further instruments aiming at these two objectives.

41 Cf. Foster (1996): 14-16.

42 According to data from WHO and UNICEF (2000).

43 Cf. Meléndez (2004), p. 53.

44 On these issues cf. Estache et al. (2002), ch. 3-4; Yepes (2003); Krause et al. (2003): 24-25.

45 Cf. e.g. Foster et al. (2000).

46 Cf. Yepes (1999): 4-7.

47 DNP (2004) provides a description of the fiscal transfer system from national to municipal governments with a focus on the WS&S sector.

48 Own calculation with the data reported by DNP (2004), p. 8.

49 Cf. DNP (2004), p. 6; Fernández (2004): 71-72.

50 Cf. DNP (2004), p. 12.

51 Cf. DNP (2004); Fernández (2004): 63, 70-72; information gained in interviews with experts and representatives of organizations of the Colombian WS&S sector.

52 Cf. DNP (2004), p. 17.

53 Municipalities with PSP execute a higher proportion of funds than those without PSP. Cf. DNP (2004), p. 16.

54 Cf. Fernández (2004): 54-57; residential class 4 and official consumers neither receive a subsidy nor pay a surcharge.

55 Cf. Meléndez (2004): 25-26.

56 See e.g. Yepes (2003), p. 7.

57 Cf. Meléndez (2004): 22-23, 63.

Table des illustrations

Titre Table 1. Coverage with improved water supply and sanitation services (% of population)
Légende Source: DNP (2004), p. 5 (modified by the author)
URL http://books.openedition.org/irdeditions/docannexe/image/4873/img-1.jpg
Fichier image/jpeg, 50k
Titre Table 2: Performance of urban WS&S services (excluding four major capitals) with and without PSP; 1998-2003
Légende Source: author's calculations based on data provided by SSPD and CRA; non-representative sample of 26 cities (excluding Bogotá, Medellín, Cali, Barranquilla): 9 cases with PSP, 17 cases without PSP
URL http://books.openedition.org/irdeditions/docannexe/image/4873/img-2.jpg
Fichier image/jpeg, 79k
Titre Table 3. Distribution of responsibilities according to territorial levels of government
Légende Source: Based on Fernández (2004), p. 28, modified by the author.
URL http://books.openedition.org/irdeditions/docannexe/image/4873/img-3.jpg
Fichier image/jpeg, 91k
Titre Table 4. National fiscal spending for WS&S, waste water treatment and solid waste disposal, 1998-2002
Légende Source: Fernández (2004)
URL http://books.openedition.org/irdeditions/docannexe/image/4873/img-4.jpg
Fichier image/jpeg, 54k

Auteur

Economist. German Development Institute, Bonn – Germany

© IRD Éditions, 2009

Conditions d’utilisation : http://www.openedition.org/6540

Rechercher dans OpenEdition Search

Vous allez être redirigé vers OpenEdition Search