The link between delivering infrastructure to the poor and improved health and educational outcomes and increases in productivity is generally accepted. However, basic infrastructure is often not accessible to the poor: water and electricity are not provided to poorer neighbourhoods, roads are unfinished. This may lead to the poor paying more for substitute services such as tankered water and diesel generators.
Historically, few incentives have been given to infrastructure service providers, and in particular private sector providers, to focus on access to services for the poor. The typical approach for managing affordability has been blanket subsidies provided to existing consumers, irrespective of their ability to pay, and little emphasis on generating new connections. These policies have generally done little to benefit the poor. For example the recent World Bank study The Political Economy of Energy Subsidy Reform states that “Energy consumption subsidies, although often intended to benefit the poor, are typically regressive as the bulk of the benefits accrue to those with the highest levels of consumption - those at the top of the income distribution.” Additionally, the law can hinder options for reaching the poor, with restrictions on service delivery to informal settlements.
A PPP - including management and operations contracts through to leases, affermages and concessions/BOT projects- can be an excellent opportunity to generate services access to the poor as incentives and penalties can be crafted into the arrangements between the government and the service provider. For example, minimum performance criteria in the contract can include new connections to poor areas and delivery of services to the poor. Similarly, the government can provide certain financial incentives - such as subsidies - to new connections that particularly benefit the poor. Such incentives can push the service provider to be innovative in findings solutions to access for the poor. To be successful, these mechanisms need to be at the heart of each infrastructure project, and drafted into the legal documentation underpinning the project. The challenge with a pro-poor PPPs, then, lies in the structuring of such incentives and penalties.
It is important to note that without a proper enabling environment (such as strong regulators) and proper project structuring, PPPs may not achieve improved services delivery to the poor, and may only deepen existing structural fault-lines. The political economy and affordability of the sector and project must also be understood in order to generate maximum benefits for the poor. Please see the PPP Knowledge Lab for more on these issues.
This section looks at key issues to be considered to ensure that PPPs can reach the poor and sets out possible legal and contractual mechanisms and solutions to facilitate and incentivize service delivery to the poor:
- Key issues in PPPs for the Poor
- Laws and regulations supporting pro-poor services delivery
- Contractual examples supporting pro-poor services delivery
- Other mechanisms supporting pro-poor services delivery
The section also takes a look at innovations in billing and collection, technological solutions to allow more flexibility in service levels, education and dissemination of information, complaints systems and dispute resolution and methods of limiting monopoly of service.
The inclusion of Pro-Poor content in PPP projects has been well analyzed for different sectors of the economy. Below are documents explaining how pro-poor content in contracts, regulations, and practices have worked in the field.
Engaging Communities in Public-Private Partnerships in the Delivery of Basic Services to the Poor: Inter-Country Models and Perspectives - This paper analyzes how PPP can change lives and have a strong impact addressing issues that the government may not be able to. The author highlights four main PPP projects brought to a significant level with the efforts of local communities. The author also explains PPP models in Indonesia, Pakistan, Sri Lanka, and Thailand that provide the regions with energy, biodiversity conservation, water and anti-retroviral drugs respectively.
Improving Access to Infrastructure Services by the Poor: Institutional and Policy Responses - This paper provides an overview of nature and extent of service accessibility challenges faced by developing countries. The paper also captures various policies in place which act as a key driver for the government to work towards improved access to service to the poor. Part A summarizes the access challenges of infrastructure and telecommunication services in low-income households and communities. Part B focuses on structural reforms and key drivers for policymakers to address the access challenge, tapping the role of reform, market structure, pricing policies, and subsidy and regulatory systems. Part C outlines how policy approach needs to be modified to different institutional environments. Part D offers some concluding observations on implementation strategy.
Public-Private Partnerships and the Poor - Private Sector Participation and the Poor: 1. Strategy - The first part of the report captures analysis of some strategies on "Private Sector Participation and the Poor". It includes a study on several water sector public-private partnerships mainly where the management of the project was transferred to the private company to identify recurring issues in such projects.
Public-Private Partnerships and the Poor - Private Sector Participation and the Poor: 2. Implementation - The second part of the report discusses "Private Sector Participation and the Poor" and analyzes the stages of private sector participation and the relevant contracts, the key constraints in implementing the same and the capacity of these projects to fill some gaps and issues that may exist around the impacts of PPP on poor consumers.
Public-Private Partnerships and the Poor - Private Sector Participation and the Poor: 3. Regulation - This third part of the report "Private Sector Participation and the Poor" covers analysis on water regulations and its significance in the lives of poor. It has several sections such as the regulatory process, practical experiences in setting up regulations in low-income environment and selection of past projects.
Utilities Privatization and the Poor: Lessons and Evidence from Latin America - This document studies several experiences in Latin America regarding utility privatizations and their impact on the poor by capturing the analysis of the policy perspective. The paper aims to shed light on the issue of who can and does benefit from privatization utilities and to guide policymakers in making the right choices.
Better Water and Sanitation for the Urban Poor - Good Practice from sub-Saharan Africa, Chapter 7 - Policy does matter! Developing Policies and Strategies for Improving Water Supply and Sanitation for the Urban Poor - This Chapter explains how policy should focus on creating specific strategies that specifically target the poor in urban areas. The document implies that policies usually are too general and do not address the real problem of the poor settled in informal areas. The Chapter also gives examples of good practices in water sector policy in several regions of Africa.
Do pro-poor policies increase water coverage? An analysis of service delivery in Kampala’s informal settlements - This document studies the impact of pro-poor policies on water coverage in Uganda in the water sector. The policies discussed are implemented by the National Water and Sewerage Corporation, particularly in informal settlements in Kampala City.
Output-based contracts in small-town water supply in Uganda: Challenges and opportunities - The document is an analysis on the role of private sector operators in the delivery of water in small towns, especially after an output-based aid was piloted in certain towns. The paper elaborates on the methodology and challenges that delivering water faces, such as regulatory issues of the region and the policy implications of the project.
Pro-poor concessions for sustainable water services - This Article indicates the need for having pro-poor clauses in contracts related to water delivery. It also analyzes the importance of maintaining the contract commercially attractive enough for pulling investment from the private sector.
Providing Water to Poor People in African Cities Effectively: Lessons from Utility Reforms - This document analyzes the cases of several cities in Africa that showed an important increase in access and quality of water service to the poor. What triggered these changes was a series of reforms in the water sector’s political economy which created a momentum for improving the utilities’ performance. The improvement in the services was evident from institutional reforms that allowed better financing of services and water access in such informal settlements. For instance, small service providers in remote areas had access to technology to provide basic water service for free.
Regulation of Water and Sanitation Services: Getting Better Service to Poor People - This paper aims to provide some practical guidance on how to evaluate regulatory arrangements and adapt them to be more conducive for expanding access and improving service to poor customers.
Who pays the most for water? Alternative providers and service costs in Niger - Despite water being subsidized in most developing countries, poorer households end up paying more per unit of consumption because they are generally not connected to the network and, as a result, are forced to buy water from public fountains or street vendors at a higher price. This note includes data on Niamey households’ water consumption and expenditure from different sources to estimate unit costs of service provision for water, looking at differences in costs according to both service provider and household poverty status. The results indicate that the poor pay much higher unit prices for the water they consume than better off households who are connected to the network.
WSS Working Notes No. 11: Taking Account of the Poor in Water Sector Regulation - Regulatory frameworks can have a decisive influence on making water and sanitation services more accessible to the poor and on giving service providers the right incentives to serve them. In some cases, however, existing regulatory frameworks may introduce obstacles to serving the poor rather than provide an environment conducive to extending service. This note seeks to provide practical guidance on how regulatory frameworks can be designed and implemented in a way that is more conducive to expanding access and improving service to poor customers.
Energy access - Making Power Sector Reform Work for the Poor - This document by the Global Network on energy for Sustainable Development explains the significant outcome of policy review and reform in the energy sector that was implemented in different regions in Africa, Asia, and Latin America. The reforms mainly focused on the providing access to energy services to the poorer sections of the communities
The results could be summed up in 4 areas:
(i) Protecting Funds: Funds for electrification of the poor need to be protected and specifically guided by sound policies, and use of funds must be under transparent planning process;
(ii) Explicit focus on the Poor: Usually energy policies do not address or are not explicitly focused on the poor’s needs, for these new policies should be implemented. Similarly, financial aid such as subsidies or lifeline tariff should be incorporated in policies to provide relevant assistance targeted for the poor;
(iii) Participation of Local Communities: Energy projects including all sectors should involve participation of local communities to ensure that the project addresses relevant issues and needs of such communities;
(iv) Low-cost technologies: Guidelines on technology that allow compromise on cost and/or innovation have a serious impact on energy access and also on livelihoods of poor.
Expanding Renewable Energy Access with Pro-Poor Public-Private Partnerships in the Developing World - This article explains 8 cases in which private capital was mobilized to provide renewable energy infrastructure to poor populations in different part of the world. The author indicates how renewable energy infrastructure has large upfront costs and what specific models of PPPs can be used to implement it. The author also elaborates on various case studies and their respective PPP models.
Sustainable Thermal Energy Service Partnerships - Sustainable Thermal Energy Service Partnerships (STEPs) is a project that aims to create a sustainable pro-poor PPP model for delivering thermal energy services in developing countries. The project conducts researches on the sector and produces materials to support the functions of decision-makers.
The Political Economy of Energy Subsidy Reform - This study explores the political economy of energy subsidy reform. For years, especially in the 2000s when energy prices have been high, this topic has been central to many political agendas. In 2009, the Group of 20 (G-20) advanced and emerging market economies called for a phaseout of inefficient fossil fuel subsidies in all countries, and the G-20 reaffirmed this in 2012 (IMF 2013b).
Starting a Pro-Poor Public-Private Partnership For a Basic Urban Service - This is a guideline that indicates 4 key steps to start up a pro-poor PPP to deliver basic services in an urban area. The steps are:
- Build understanding;
- Analyze context;
- Develop Initial PPP model; and
- Design a process. Each of them is explained in detail in the document.
Toolkit for Pro-Poor Municipal PPPs - This paper aims to provide practical guidance on how to evaluate regulatory arrangements and adapt them to be more conducive to expanding access and improving service to poor customers.
Reference Tool on Inclusive Infrastructure and Social Equity - The Reference Tool on Inclusive Infrastructure and Social Equity presents a practical evidence-based framework for practitioners to maximise the impact of infrastructure investment on reducing inequality and increasing the positive social outcomes of large infrastructure projects for often under-served or vulnerable groups.
For more information on Pro-Poor PPPs, visit Key Issues in PPPs for the Poor, Laws and Regulations Supporting Pro-Poor Services Delivery, Contractual Examples Supporting Pro-Poor Services Delivery, Other Mechanisms Supporting Pro-Poor Services Delivery or the section on Case Studies.
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