Water

Results of ADB Water Week 2004 Water for the Poor: Setting the Rules and Finding the Money Change Agenda Changing the Rules to Reward Efficiency Linking formal and informal providers Recognize the role of small scale water providers in bringing water to the poor

Results of ADB Water Week 2004 Change Agenda Changing selection criteria Changing incentives and advocacy Changing regulation Changing the rules to reward efficiency Changing the focus of lending Changing the nature of water project Changing water financing partners

Millions of people in Asia depend, and will continue to depend for a long time to come, on small-scale water providers for their basic water supplies. But these providers are often overlooked by government policy makers and donors, and seen as a target for cash by corrupt officials, a nuisance by government owned water providers, and exploiters of the poor by the public at large.

Why should SSWPs be regarded in this way? Ignorance of the essential role they play, their customer base and the value of services they offer are probably at the root of the problem.

To 5 million residents of Manila, Philippines, 19% of the population of Ho Chi Minh City, Vienam and 6% in Kathmandu, Nepal, SSWPs provide an essential service, delivering water to their doorsteps. They have the flexibility to manage small piped networks as well as the more conventional supply from jerrycans. Though their prices are higher than large scale providers, this reflects costs of supply which are usually the same as the piped cost to the connected consumer. Despite the higher charges, margins are low.

That they persist to offer essential water services is remarkable in view of the unfavorable business environment in which they operate. Administrative regulations hamper their operations, officials demand bribes to allow them to operate and licenses are short term. Access to credit is limited because their business is seen as risky and they are subject to political interference. In rural areas, there is no access to credit because there is no credit available. Because they lack information about water planning in their area, their future is uncertain, which in turn discourages investment.

Government should recognize the importance of the small-scale water providers in the sector, and that policy and legislation can be changed to recognize the contributions made by these providers in extending services to the poor.

• Government can change the business environment through policy, legislation, licensing, regulation and providing access to finance, especially in rural areas. It can also require that formal providers meet the needs of SSWPs for a quality water supply.

• Large scale providers can accept small SSWPs as legitimate bulk supply customers who should receive a guaranteed service level and pricing and can be contracted to extend services into poor, overcrowded communities.

• Donors should provide information about best practice and assist with management training. They should also take steps to support access of SSWPs to finance.

One of the seven principal elements of ADB's water policy is: Improve and expand the delivery of water services. Focusing on water supply and sanitation (both rural and urban), irrigation and drainage, and other subsectors, support will be provided for autonomous and accountable service providers, private sector participation, and public-private partnerships, emphasizing equity in access to water for the poor and underserved.

There are significant opportunities for increased private participation in new investments and the management of existing systems.

• ADB will help develop contracting modalities that allow potential investors to participate in the expansion and improvement of services. In particular, contracts that address social equity concerns and improve water and sanitation services to the poor will be developed.

Private sector initiatives and market-oriented behavior are expected to improve performance and efficiency, particularly in service delivery.

• ADB will seek to provide innovative financial packages to enable commercial lenders and promoters to manage the risks involved with investing in water-related projects.