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Changing the Rules to RewardChanging the Rules to Reward

Efficiency: Linking Formal and InformalEfficiency: Linking Formal and InformalProvidersProviders

Almud WeitzUrban Economist, ADB

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They service:They service:

A total of 7 million people in 8 Asian citiesA total of 7 million people in 8 Asian cities

1 million in1 million in CebuCebu, Philippines, Philippines

5 million in metro Manila, Philippines5 million in metro Manila, Philippines

19% of the population in Ho Chi19% of the population in Ho Chi MinhMinh City, VietnamCity, Vietnam

6% of the population in Kathmandu, Nepal6% of the population in Kathmandu, Nepal

Small Scale Water Providers (Small Scale Water Providers (SSWPsSSWPs) are) area Fact of Life for Millions of Customers ina Fact of Life for Millions of Customers in

Asian CitiesAsian Cities

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They areThey are responsiveresponsive to their customer needs, deliveringto their customer needs, delivering

water at the doorstepwater at the doorstep

Where they manage small piped networks, they haveWhere they manage small piped networks, they have flexibleflexible

arrangements for connectionsarrangements for connections They provide theThey provide the linkage between the utility and thelinkage between the utility and the

customerscustomers that the utility does not servethat the utility does not serve

Their margins are lowTheir margins are low

Where they link officially with a major supplier,Where they link officially with a major supplier, water qualitywater qualitysupplied is goodsupplied is good

SSWPsSSWPs Provide a Good ServiceProvide a Good Serviceto Their Customersto Their Customers

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Administrative regulations hamper their operations

To ply their trade, they often have to bribe officials, adding totheir costs

Their access to credit is limited because their business is seenas risky and non-profitable

They can be subject to political interference and politicalownership

They lack information about future water planning in theirservice area, discouraging investment

SSWPsSSWPs Struggle in an UnfavorableStruggle in an Unfavorable

Business EnvironmentBusiness Environment

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A conducive legal framework would recognize the importantpart SSWPs play in water provision

Recognition could translate into better information andpossibly benchmarking of SSWPs

Public suppliers should recognize SSWPs as legitimate bulkcustomers

Policy regarding tariff setting should recognize that SSWPspredominantly service the poor

SSWPs should be Officially Recognizedas Part of The Water Sector

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Medium term licenses would provide SSWPs with securityneeded for expansion planning

Licenses and contracts would help SSWPs in getting accessto commercial, long-term finance

Licenses specifying SSWP coverage expansion wouldintegrate them into water sector investment strategy

Licenses specifying minimum levels of service can improveproper monitoring of SSWPs and thus improve their services

Recognition and Licenses wouldEncourage SSWPs to Expand and

Improve their Services

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CebuCebu, Philippines, Philippines

$100 connection fee plus legal document requirements$100 connection fee plus legal document requirementsprevent poor citizens from connecting to the public utilityprevent poor citizens from connecting to the public utilitysswater systemwater system

SSWPsSSWPs provide water through cheap piped systems orprovide water through cheap piped systems orpolyethylene hoses at connection fees of $20polyethylene hoses at connection fees of $20--6060

Ho ChiHo Chi MinhMinh City, VietnamCity, Vietnam

Legal Framework developed to promote involvement ofLegal Framework developed to promote involvement ofSSWPsSSWPs

Regulation of 2002 specifies types of services, selectionRegulation of 2002 specifies types of services, selectionprocedure forprocedure for SSWPsSSWPs, rights and responsibilities, and hand, rights and responsibilities, and hand--over processover process

SSWP tariffs are significantly lower than in other citiesSSWP tariffs are significantly lower than in other cities

Examples of Good PracticeExamples of Good Practice

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ConclusionConclusion Reaching the Millennium Development GoalsReaching the Millennium Development Goals

cannot happen without addingcannot happen without addingSSWPsSSWPsto theto theequationequation

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Thank youThank you