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Yerevan Water Supply: Going Private Gradually

Publication | August 2008
Yerevan Water Supply: Going Private Gradually

This case study focuses largely on how the Government of Armenia first embarked on private sector participation in its water supply and sewerage sector, which was through the 4-year management contract in Yerevan.

In 1998, the Government of Armenia began to seriously weigh a private sector solution to the worsening situation with the water supply system in the country's capital, Yerevan. The Government's eventual decision to engage the private sector through a 4-year management contract - backed up by donor-funded projects - helped address some of the system's biggest issues, such as high nonrevenue water and low revenue collection rates. With the system in a more promising condition following the management contract, the Government proceeded with a greater commitment to work with the private sector and offered a 10-year lease contract over the system.

For Yerevan, the Government employed the two-step approach to engaging the private sector: first with a short-term management contract (4 years, extended to 5 years) then a longer-term lease contract (10 years) with a private operator. The Yerevan experience proves the approach's viability for attracting the private sector to an ailing utility. The Government has already put its second largest water utility - Armenia Water and Sewerage Company, a closed joint stock company - on the same path as Yerevan.

This model may provide confidence where governments are hesitant about involving the private sector but facing few alternative sources for the capital infusion and technical expertise that their failing systems call for.

This case study focuses largely on how the Government first embarked on private sector participation in its water supply and sewerage sector, which was through the 4-year management contract in Yerevan. Where it was possible, the case study also examines Yerevan's transition to the 10-year lease contract, which is just concluding its second year of private operations.

Contents 

  • Armenia and Its Capital City at a Glance
  • Rationalizing Private Sector Participation (PSP)
  • Choosing the PSP Mode
  • Description of the Two-Step Contract Process
  • Reforms for Introducing PSP
  • Early Progress Noted on the Lease Contract
  • Lessons from Introducing Private Operators into Yerevan Water Services