Going Beyond Regulation: Social Policies and Private Sector Participation in Water Supply
Water is a natural monopoly and the problems associated with monopolies will persist regardless of who operates the system. The question that this UNRISD research addresses is how to increase access to water supply with affordable cost, especially to the poor. Access could be increased by additional investment or through increasing efficiency of the system. The results of this research show that there is no marked difference between public and private provision in terms of access and affordability. However, since regulation is difficult and ineffective (in most developing countries), social policies are crucial in ensuring that the vulnerable groups have affordable access to water supply. Such social policies are quite common in both developing and developed countries alike. The most common forms of social policies in water supply related to income support are linked to welfare systems, housing benefits, funds, charities, tariff rebate, flexible payment, vouchers. The tariff adjustment mechanism include increasing block tariff, cross subsidies, special tariff for low-income households.
Seven country studies were undertaken: Brazil , Burkina Faso ; Colombia ; England and Wales (& Scotland ); France ; Hungary ; and Malaysia . All the country studies show how social policies are crucial in addressing the issue of access and affordability. In the case of France , social policies include a fund for rural water supply, ex-post assistance to those who cannot afford to pay water bills such as no disconnection, and other various laws to help the poor. Like in France , heavy public investment was used to ensure that everyone has access to piped water supply in the UK . Different social policies in UK dealt with problems of affordability such as income support based on property value, subsidies, disconnection banned, various forms of social security support and social assistance to pay for water bills. In addition, UK has had effective regulation by an independent body. In the case of Colombia , our findings show that it the subsidy which helps the poor have access to water and are affordable. Similarly, heavy investment and effective social policies in Brazil helped to increase coverage to the poor. In the case of Hungary , there is heavy cross-subsidy through industrial users to domestic consumption. In addition the tariff is kept low (“hidden subsidy”), investments are financed by the State, and income transfers by central government/local authorities covering around 8% of households. Water cannot be disconnected for non-payment of bills. In Malaysia, the social policies that are in place concern state financing of water supply in rural areas, cross-subsidy (industrial users to domestic), and lifeline block tariff. In addition, there are contractual obligations by the private sector to increase coverage in urban and rural areas. In Burkina Faso , the operator is obliged to provide water through public standpipes to poor neighbourhood, social tariff in the form of lifeline consumption, IBT. Despite some creative social policies to increase access and deal with affordability problems, most developing countries have not managed to increase coverage. For example only 30% of the residents in the Ouagadougou have access to piped water, a considerable amount of the poorest still lack access to safe water supply in Brazil , and Colombia .