relevant links

Despite large investments in water and sanitation in the 1980s and 1990s, the number of people without access to basic water and sanitation services in urban and peri-urban areas continues to increase.

Reforming water utilities and attracting private investment is difficult. Politically sensitive tariffs, limited scope for competition, slow asset turnover requiring long-term debt finance, and a daunting mix of currency, information, country and sub-sovereign risks all require careful handling if private participation is to succeed. These problems help explain why foreign direct investment in water lags as much as ten years behind that of power or telecommunications systems.

In very poor countries, run-down systems with extremely low tariffs may take considerable time before they can be made commercially viable, as tariff hikes must be sequenced with service improvements. This often calls for a step-wise privatization process (as in Guinea or Gaza), first transferring O&M responsibility to a private firm under a lease or management contract with public financing of investments, then moving up to a concession as information, confidence and the regulatory environment improve. The World Bank helps governments to develop strategies for utility modernization and to establish regulatory frameworks that encourage better performance and faster investment in the sector.

Utility Modernization: Water and sanitation staff work to improve the efficiency, pricing and customer orientation of utilities so they can better serve their clients, control costs, maintain assets, collect their bills and generate cash for investment. Effective partnerships include those with competent public-sector utilities such as SONEDE in Tunisia and AQUA in Bielsko-Biala, Poland. Although these utilities remain under majority public ownership and management, they have expanded their outsourcing of service tasks to small private providers, and AQUA has now opened its capital to minority private shareholders as well.

Private Sector Participation (PSP) in Water & Sanitation: Where public delivery fails, the World Bank Group supports private entry. We advise and assist countries in developing regulatory frameworks and in designing viable, clean transactions that reconcile the interests of investors and consumers, and recognize the needs of the poor. IFC, MIGA and the World Bank's partial risk guarantees are the main conduits for financing private sector investment in credit-worthy projects such as the Buenos Aires concession.

To learn more about the World Bank's activities in urban water and sanitation development, please select one of the following key topics:

Economics of Water and Sanitation

Pricing and Tariffs

Private Sector Participation

Serving the Urban Poor

Utility Finance

Utility Operations and Maintenance

 

Water and Sanitation Program: Services for the Urban Poor