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Conceptual and Practical Aspects of Water Regulation in Developing Countries  

Sanford V. Berg

Organizations regulating the water sector have major impacts on public health and the sustainability of supply to households, industry, power generation, agriculture, and the environment. Access to affordable water is a human right, but it is costly to produce, as is wastewater treatment. Capital investments required for water supply and sanitation are substantial, and operating costs are significant as well. That means that there are trade-offs among access, affordability, and cost recovery. Political leaders prioritize goals and implement policy through a number of organizations: government ministries, municipalities, sector regulators, health agencies, and environmental regulators. The economic regulators of the water sector set targets and quality standards for water operators and determine prices that promote the financial sustainability of those operators. Their decisions affect drinking water safety and sanitation. In developing countries with large rural populations, centralized water networks may not be feasible. Sector regulators often oversee how local organizations ensure water supply to citizens and address wastewater transport, treatment, and disposal, including non-networked sanitation systems. Both rural and urban situations present challenges for sector regulators. The theoretical rationale for water-sector regulation address operator monopoly power (restricting output) and transparency, so customers have information regarding service quality and operator efficiency. Externalities (like pollution) are especially problematic in the water sector. In addition, water and sanitation enhance community health and personal dignity: they promote cohesion within a community. Regulatory systems attempt to address those issues. Of course, government intervention can actually be problematic if short-term political objectives dominate public policy or rules are established to benefit politically powerful groups. In such situations, the fair and efficient provision of water and sanitation services is not given priority. Note that the governance of economic regulators (their organizational design, values or principles, functions, and processes) creates incentives (and disincentives) for operators to improve performance. Related ministries that provide oversight of the environment, health and safety, urban and housing issues, and water resource management also influence the long-term sustainability of the water sector and associated health impacts. Ministries formulate public policy for those areas under their jurisdiction and monitor its implementation by designated authorities. Ideally, water-sector regulators are somewhat insulated from day-to-day political pressures and have the expertise (and authority) to implement public policy and address emerging sector issues. Many health issues related to water are caused or aggravated by lack of clean water supply or lack of effective sanitation. These problems can be attributed to lack of access or to lack of quality supplied if there is access. The economic regulation of utilities has an effect on public health through the setting of quality standards for water supply and sanitation, the incentives provided for productive efficiency (encouraging least-cost provision of quality services), setting tariffs to provide cash flows to fund supply and network expansion, and providing incentives and monitoring so that investments translate into system expansion and better quality service. Thus, although water-sector regulators tend not to focus directly on health outcomes, their regulatory decisions determine access to safe water and sanitation.

Article

The Health Impact of Water and Sanitation Utilities Privatization and Regulation in Sub-Saharan Africa  

Lisa Bagnoli, Salvador Bertomeu-Sanchez, and Antonio Estache

As of 2017, the urban access rate to safe water sources in 2017 stood at 84% while rural access was still around 45%. The rates for sanitation were 44% and 22%, respectively. Since the 1980s many high-profile reforms supported by international organizations have been implemented in the region in an attempt to close the access gaps in the water and sanitation sector (WSS). Two recommendations with high international exposure were an increased role for large-scale private sector participation in the management and financing of national or regional utilities and the creation of separate sector regulatory agencies to increase the independence of regulation. Both reforms seemed to contribute to improved water access rates, at least for the urban population, but not enough to catch up with the demands of a fast-growing population; and both failed to deliver on sanitation. The progress these initiatives allowed was correlated with improvements in the average health outcomes for some indicators (i.e., under-five mortality associated to diarrhea) but once again, it was not enough and was not fairly distributed. Indeed, improvements seem to have mostly benefited upper- and middle-income groups. Unfortunately, an evaluation of the health effects of these two reforms have not yet been fully established empirically, which is why it seems prudent to talk about correlations rather than causal effects. Most of the statistically robust evidence on the impact of utilities and regulatory reforms on health is incomplete because details of several dimensions of these reforms and their context are not measured consistently across countries or within countries. In addition, the small amount of econometric evidence available is based on pre-2010 data for SSA. The imperfect data is however solid enough to suggest that without further governance changes in the region, the health risks are likely to increase. This is because due to the high population growth rate of the region, closing the access gaps is likely to get tougher considering current investment levels and technological choices. The necessary changes require improving the match between policy and technological choices, including service delivery technologies that are consistent with the ability to pay and the tariff and subsidy levels adopted to ensure cost recovery without excluding any category of users.

Article

Urban Water Regulation and Health: The Case of Chile  

Michael Hantke-Domas and Ronaldo Bruna

In 50 years, Chile achieved nearly full urban water and sanitation coverage—even higher than some developed countries. Furthermore, in just a decade, the country obtained full urban wastewater treatment, making it probably the only developing country that will successfully meet the Sustainable Development Goals (SDGs) in this matter. These achievements can be attributed to policies oriented towards the incremental or gradual improvement of the water and sanitation sector sustained for more than 50 years. This policy was mainly focused on (a) increasing public investment in expanding coverage levels, both for potable water and sewerage; (b) reducing enteric diseases and infant mortality; (c) improving child nutrition; (d) streamlining public utilities; (e) establishing a legal framework for economic regulation applied by an independent body applicable to all utilities; (f) building efficient institutions; (g) a full cost recovery tariff policy; (h) bringing private capital into the industry; (i) subsidizing those who need it most; and (j) de-politicizing the sector. The Chilean experience is not well documented or, at least, there are few references regarding its success story, which reinforces the motivation to understand its history.