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Private Sector Participation in the Water Sector in the Eca Region: Emerging Lessons

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Private Sector Participation in the Water Sector in the Eca Region: Emerging Lessons Final Draft: October 27, 2003 WORLD BANK ORGANIZATION OF ECONOMIC COOPERATION AND DEVELOPMENT PRIVATE SECTOR PARTICIPATION IN THE WATER SECTOR IN THE ECA REGION: EMERGING LESSONS Final Report Authors: Olena Maslyukivska (University of Kyiv-Mohyla Academy, Ukraine) M. Sohail (WEDC, Loughborough University, UK) Bradford Gentry (Yale University, USA) Contract manager: M. Sohail October, 2003 Table of Contents Acronyms............................................................................................................................ 4 Acknowledgements ............................................................................................................. 5 EXECUTIVE SUMMARY ............................................................................................................ 6 1. INTRODUCTION ................................................................................................................... 9 1.1. The study ..................................................................................................................... 9 1.2. Report roadmap........................................................................................................... 9 2. METHODOLOGY ................................................................................................................ 11 2.1. The desk study ........................................................................................................... 11 2.2. The fieldwork............................................................................................................. 11 2.3. Limitations of the work.............................................................................................. 11 3. REVIEW OF THE STATUS AND TRENDS OF PSP IN THE WATER SECTOR IN THE ECA REGION .............................................................................................................................................. 13 3.1. Status and trends of PSP in ECA .............................................................................. 13 3.2. Impacts of PSP on financial performance and levels of service............................... 25 3.3. Public and/ or political perceptions of PSP in the region ........................................ 26 4. SITUATIONAL ANALYSIS TO ASSESS THE LEVELS AND IMPACTS OF PSP IN FOUR COUNTRIES IN THE REGION....................................................................................................................... 29 4.1. Differences between the focus countries ................................................................... 30 4.2. Models of PSP in water and sanitation..................................................................... 33 4.2.1. CZECH MODEL ......................................................................................................... 33 4.2.2. HUNGARIAN MODEL ................................................................................................. 37 4.2.3. POLISH MODEL ........................................................................................................ 39 4.3.4. ESTONIAN MODEL .................................................................................................... 42 5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS........................................................ 45 2 List of Annexes ANNEX 1 FOCUS COUNTRIES’ PROFILES ANNEX 2 PRIVATE SECTOR PARTICIPATION IN WATER PROJECTS IN THE ECA REGION ANNEX 3 WATER PROJECTS FINANCED BY EXTERNAL SOURCES ANNEX 4 ECONOMIC INDICES 4.1 ECA REGION POPULATION BY COUNTRY 4.2 GDP PER CAPITA 2000 4.4 PRIVATE SECTOR SHARE IN GDP, 2000 4.4 FOREIGN DIRECT INVESTMENT PER CAPITA 4.5 FOREIGN DIRECT INVESTMENT IN 1995-2000 4.6 ECONOMICAL LIBERALIZATION 4.7 DEMOCRATIZATION 4.8 GROUPING OF THE ECA COUNTRIES BY ECONOMIC LIBERALIZATION AND DEMOCRATIZATION 4.9 CORRUPTION PERCEPTION INDEX, 2000 List of Graphs GRAPH 1: CUMULATIVE FOREIGN DIRECT INVESTMENT IN 1995–2000 IN ECA REGION ......................14 GRAPH 2: NUMBER OF PSP PROJECTS IN WATER IN THE ECA REGION BY COUNTRY GROUPINGS, 2002 ......................................................................................................................................................18 GRAPH 3 NUMBER OF PSP PROJECTS IN WATER IN THE ECA REGION, BY COUNTRY, MAY 2003.........19 GRAPH 4. PERCENTAGE OF POPULATION IN THE REGION SERVED BY PRIVATE SECTOR BY GROUPINGS21 GRAPH 5. TOTAL WATER PROJECT COSTS AND IFI/DONOR FUNDING (MILLION DOLLARS) ...................22 GRAPH 6. WATER PROJECTS EXTERNAL FUNDING BY PSP GROUPS OF COUNTRIES ..............................23 GRAPH 7 EXTERNAL FINANCING OF WATER PROJECTS IN ECA REGION BY DIFFERENT IFI/DONOR BY COUNTRY GROUPING .....................................................................................................................23 GRAPH 8. WATER PROJECT COST FUNDED FROM EXTERNAL SOURCES WITH AND WITHOUT PSP.........24 GRAPH 9. NUMBER OF PSP PROJECTS IN WATER IN THE ECA REGION, 1992-2002...............................25 List of Tables TABLE 1: PROPOSED DIVISION OF THE COUNTRIES OF THE ECA REGION INTO GROUPS ACCORDING TO THE ATTRACTIVENESS OF PSP ......................................................................................................17 TABLE 2: TYPES OF PSP OPTIONS PRESENT IN THE ECA REGION BY COUNTRY ...................................21 TABLE 3: FOCUS COUNTRIES: BACKGROUND INFORMATION.................................................................29 TABLE 4: POPULATION AND NUMBER OF MUNICIPALITIES IN FOCUS COUNTRIES .................................31 List of Boxes BOX 1: ACEA & COMPANY: AN ARMENIAN WATER UTILITY.................................................................19 BOX 2: ALMATY SUI, KAZAKHSTAN: THE FIRST MANAGEMENT PROJECT IN THE FSU .........................20 BOX 3 MOSCOW BOOT MODELS: WASTEWATER TREATMENT PLANTS IN SOUTH BUTOWO AND ZELENOGRAD ................................................................................................................................20 BOX 4: PUBLIC PERCEPTIONS: AN ILLUSTRATION FROM RUSSIA...........................................................28 3 Acronyms ADB Asian Development Bank CSE Central and South East Europe DANCEE Danish environmental assistance to Eastern Europe EBRD European Bank of Reconstruction and Development ECA Central and Eastern Europe and Central Asia EECCA Eastern Europe, the Caucuses and Central Asia EIB European Investment Bank EU European Union FSU Former Soviet Union IFI International Finance Institutions ISPA European Union’s Instrument for Structural Policies for pre-Accession facility OECD Organization of Economic Cooperation and Development Originally created to assist Poland and Hungary in 1989, today the PHARE PHARE programme encompasses the 10 candidate countries of central and eastern Europe PHARE PHARE Cross-Border Co-operation Programme CBC PSP Private Sector Participation SAPARD Special Accession Programme for Agriculture and Rural Development STAN Countries of the Former Soviet Union having ending –stan: e.g. Uzbekistan WB World Bank Country Abbreviations AL Albania LT Latvia AM Armenia LV Lithuania AZ Azerbaijan MD Moldova BH Bosnia-Herzegovina MK Macedonia BU Bulgaria PL Poland BY Belarus RO Romania CR Croatia RU Russia CZ Czech Republic SK Slovakia EE Estonia SL Slovenia FYR FR Yugoslavia TJ Tajikistan GE Georgia TM Turkmenistan HU Hungary TR Turkey KG Kazakhstan UA Ukraine KZ Kyrgyz Republic UZ Uzbekistan 4 Acknowledgements The team would like to thank the people for providing assistance with the research in particular the following:. Estonia Harry Liiv Deputy Secretary General, Ministry of Environment, Estonia Harri Jankovski Managing Director, Estonian Water Works Association, Estonia Jaan Maanas Main Specialist of Water Management, Tallinn Municipal Engineering Services Department, Estonia Risto Aasmaa Senior Specialist of Development Division, Tallinn Municipal Engineering Services Department, Estonia Kalev Aun Director, Environmental Investment Center, Estonia Katrin Mustasaar Law Consultant, Supervisory Board of Tallinn Water Company, Estonia Maaja Narusk Environmental Information Centre, Estonia Mrs. Merit Merisaar GWP, Estonian Water Club, Estonia Czech Mr. Ctibor Kocman Deputy Director for international Relations, The State Republic Environemtnal Fund, Czech Republic Mr. Ing. Vladimir Head of the department of methodical system management, Chaloupka Ministry of Agreculture, Czech Republic Mr. Ing. Filip Drapak National Property Fund, Czech Republic Mr. Pavel Kavka Commercial Manager, Ondeo Services, Czech Republic Mr. Vladimir Pytl Secretary, SOVAK, Czech Republic Mr. Prof. Ing. Jiri Chairman of the Association of Wastewater treatment Wanner, DrSc experts of the Czech Republic; Professor of the Department of Water and Environmental Engineering, Institute of Chemical Technology, Czech Republic Hungary Csaba Haranghy Acting CEO, Waterworks of Budapest Co.Ltd, Hungary Tamas Rupp Vivendi Water Hungary Rt. , Hungary Dr. Maria Papp The Hungarian Professional Director, Association of Water and Sewerage Companies Maria Csutora Associate Professor, Institute of Environmental Sciences, Department of Environmental Economics and Technology, Budapest University of Economic Sciences and Public Administration, Hungary Ms. Katalin Nemethne GKI Economic Research Co., Hungary Pаl Judit Rakosi Water Management Department, Ministry of Environment and Water Management, Hungary Poland Bartosz Clemenz Salans D. Oleszczuk Kancelaria Prawnicza Sp.k., Poland Tomasz Janas Salans D. Oleszczuk Kancelaria Prawnicza
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