Can delegated management and higher tariffs improve the quality and coverage of water and sanitation services – for both rich and poor? This is the principle behind a World Bank-funded program in Ecuador – and it appears to be working.

Despite improvements over the past several decades, urban and rural water supply and sanitation coverage in Ecuador still ranks among the lowest in South America. Just 39 percent of rural inhabitants have easy access to water supplies of any kind (including wells and public taps). A mere 29 percent can access sanitation services such as piped sewerage or appropriate on-site sanitation. The quality of existing services is poor.

The World Bank Water and Sanitation Programme reports on the Rural and Small Towns Water Supply and Sanitation Program (PRAGUAS), which aims to modernise water and sanitation services in Ecuador, with the active participation of communities, municipalities, non governmental organisations and local private operators.

Low water tariffs have been blamed for poor coverage, as has municipal mismanagement. Low tariffs benefit only those with connections – typically better-off people. They recover just two-thirds of operating costs, depriving service providers of the resources necessary to extend their coverage to unserved poor people. The municipal government departments responsible often lack financial and institutional autonomy.

PRAGUAS offers municipalities both technical assistance and financial incentives to delegate water and sanitation service provision to autonomous (public or private) operators. It insists upon tariff levels that cover operation and maintenance costs (with provisions to protect low-income customers).

The programme is run by the central government in co-operation with municipalities, supported by World Bank funding of US$130 million, in adjustable programme loans over 10 years. A total of 43 municipalities have signed up for technical assistance to date. Six have successfully completed service delegation. Case studies reveal that:

• Higher tariffs in Cayambe municipality have promoted a culture of responsible water usage, with less residential leakage.
• Water coverage has risen from 77 to 90 percent in Pedro Moncayo and service provision has been delegated to a private operator.
• Residents in Pujili city centre now enjoy 24 hour a day water services.
• Water rate increases from 0.03$/m³ to 0.07$/m³ are needed in Guaranda, before competitive salaries can be offered to staff of a new municipal company.
• The number of household water connections in Caluma has increased from 1,320 to 1,600.
• Water coverage in Echeandia has increased from 72 to 98 percent, since a co-operative was established.

It is too early to fully evaluate the success of new service providers. But the report analyses the delegation process, offering the following lessons for the future:

• Technical assistance to  municipalities should be combined with financial incentives
• Identifying and training Delegation Assistance Consultants is the most effective way to provide technical assistance.
• Tariffs can be increased if service quality visibly improves.
• Financial mechanisms are needed to recover the costs of technical assistance from municipalities that fail to delegate management.
• Municipalities should be offered a selection of possible (public and private) management models, not forced to adopt just one.

Source(s):
‘Lessons from small municipalities in Ecuador: Delegating water and sanitation services to autonomous operators’, The World Bank WSP (Water and Sanitation Program) Field Note, by Franz Drees-Gross, Luis Andrade and Beatriz Schippner, February 2005 Full document.

Funded by: The World Bank

id21 Research Highlight: 27 July 2005

Further Information:
The World Bank Water and Sanitation Program
Franz Drees-Gross
Latin America and the Caribbean Region
Alvarez Calderón 185
San Isidro
Lima 27
Perú

Tel: +511 615 0685
Fax: +511 615 0689
Contact the contributor: wspandean@worldbank.org

Water and Sanitation Program - Latin America and the Caribbean

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