Policy Research Working Paper | Water_Supply_and_Sanitation | World Bank

Low-level versus high-level equilibrium in public utility service

2011-06-30T04:00:00.000Z

Heterogeneity of public utility services is common in developing countries. In a "high-level" equilibrium, the quality of utility services is high, consumer willingness to pay for services is high, the utility is well funded and staff well paid in order to induce high quality of performance. In a "low-level" equilibrium the opposite is the case. Which alternative occurs depends on both the quality of utility management, and public perceptions about service quality. If a utility administration has the potential to offer high-quality service, and the public is aware of this, high-quality equilibrium also requires the publics service payments to be high enough to fund the needed pay incentives for the utility staff. When the public lack knowledge about the utility administrations quality, the publics initial beliefs about the utility administrations quality also will influence their willingness to make adequate service payments for a high-quality equilibrium. This paper shows that, with low confidence, only a low-level equilibrium may exist; while with higher initial confidence, a high-level equilibrium become possible. "Intermediate" (in between the low- and high-level) outcomes also can occur in early periods, with "high-level" outcomes later on.

Municipal solid waste management in small towns : an economic analysis conducted in Yunnan, China

2011-08-22T04:00:00.000Z

Municipal solid waste management continues to be a major challenge for local governments in both urban and rural areas across the world, and one of the key issues is their financial constraints. Recently an economic analysis was conducted in Eryuan, a poor county located in Yunnan Province of China, where willingness to pay for an improved solid waste collection and treatment service was estimated and compared with the project cost. This study finds that the mean willingness to pay is about 1 percent of household income and the total willingness to pay can basically cover the total cost of the project. The analysis also shows that the poorest households in Eryuan are not only willing to pay more than the rich households in terms of income percentage in general, but also are willing to pay no less than the rich in absolute terms where no solid waste services are available; the poorest households have stronger demand for public solid waste management services while the rich have the capability to take private measures when public services are not available.

Valuing water quality improvement in China : a case study of lake Puzhehei in Yunnan province

2011-08-22T04:00:00.000Z

While polluted surface water is encountered across most of China, few economic valuation studies have been conducted on water quality changes. Limited information about the economic values associated with those potential water quality improvements or deteriorations is a disadvantage for making proper choices in water pollution control and clean-up activities. This paper reports an economic valuation study conducted in Yunnan, China, which aims to estimate the total value of a real investment project to improve the water quality of Lake Puzhehei by one grade level. Located in Qiubei County, which is far from large cities, the lake has been experiencing fast water quality deterioration in the past years. A conservative estimation strategy shows that on average a household located in Qiubei County is willing to pay about 30 yuan per month continuously for 5 years for water quality improvement, equivalent roughly to 3 percent of household income. The elasticity of willingness-to-pay with respect to income is estimated to be 0.21. The economic rate of return of the proposed project is estimated to be 18 percent, indicating a strong demand and high efficiency of investment in water quality improvement in China. This study also demonstrates that previous knowledge about water quality changes and the project may have a significant positive impact on people's valuation, and that the interviewer effect on valuation can be negative.

Angola's infrastructure : a continental perspective

2011-09-27T04:00:00.000Z

Infrastructure made a net contribution of around 1 percentage point to Angola's improved per capita growth performance in recent years, despite unreliable power supplies and poor roads, which each holding back growth by 0.2 percentage points. Raising the country's infrastructure endowment to that of the region's middle-income countries (MICs) could boost Angola's annual growth by about 2.9 percentage points. As a resource-rich, postconflict country, Angola has shown an exceptionally strong commitment to financing the reconstruction and expansion of its infrastructure. It has recently expanded its generation capacity, embarked on an ambitious multibillion-dollar road rehabilitation program, begun to make investments aimed at easing congestion at the Port of Luanda, and embarked upon an ambitious rehabilitation program for urban water systems. Numerous challenges remain, however. Angola needs to upgrade its electricity transmission and distribution infrastructure, expand its urban water-supply system, improve efficiency at the Port of Luanda, and make policy and regulatory adjustments across the board. Angola presently spends around $4.3 billion per year on infrastructure, with $1.3 billion lost to inefficiencies. After taking sectoral allocations and inefficiencies into account, a modest funding gap of $115 million per year remains, which could be largely eliminated by focusing on lower-cost water and sanitation options. Angola's infrastructure needs are manageable relative to its fast-growing economy, as long as the country can address inefficiencies.

Burkina Faso's infrastructure : a continental perspective

2011-09-27T04:00:00.000Z

Infrastructure contributed 1.3 percentage points to Burkina Faso's annual per capita gross domestic product (GDP) growth over the past decade, much of it due to improvements in information and communication technology (ICT). Raising the country's infrastructure endowment to that of the region's middle-income countries (MICs) could boost annual growth by more than 3 percentage points per capita. Burkina Faso has made significant progress developing its infrastructure in recent years, especially in the ICT sector. The country has also moved forward in the areas of road maintenance and water and sanitation, but still faces challenges in these sectors, as well as in the electricity sector. As of 2007, Burkina Faso faced an annual infrastructure funding gap of $165 million per year, or 4 percent of GDP. That gap could be cut in half by the adoption of more appropriate technologies to meet infrastructure targets in the transport and the water and sanitation sectors. Even if Burkina Faso were unable to increase infrastructure spending or otherwise close the infrastructure funding gap, simply by moving from a 10- to 18-year horizon the country could address its efficiency gap and meet the posited infrastructure targets.

Cameroon's infrastructure : a continental perspective

2011-09-29T04:00:00.000Z

The poor state of Cameroon's infrastructure is a key bottleneck to the nation's economic growth. From 2000 to 2005, improvements in information and communications technology (ICT) boosted Cameroon's growth performance by 1.26 percentage points per capita, while deficient power infrastructure held growth back by 0.28 points per capita. If Cameroon could improve its infrastructure to the level of Africa's middle-income countries, it could raise its per capita economic growth rate by about 3.3 percentage points. Cameroon has made significant progress in many aspects of infrastructure, implementing institutional reforms across a broad range of sectors with a view to attracting private-sector participation and finance, which has generally led to performance improvements. But the country still faces a number of important infrastructure challenges, including poor road quality, expensive and unreliable electricity, and a stagnating and uncompetitive ICT sector. Cameroon currently spends around $930 million per year on infrastructure, with $586 million lost to inefficiencies. Removing those inefficiencies would leave an infrastructure funding gap of $350 million per year. Given Cameroon's relatively strong economy and natural-resource base, as well as its success in attracting private financing, the country should be able to close that gap and meet its infrastructure goals within 13 years.

Zimbabwe's infrastructure : a continental perspective

2011-10-06T04:00:00.000Z

Despite general economic decline and power-supply deficiencies, infrastructure made a modest net contribution of just less than half a percentage point to Zimbabwe's improved per capita growth performance in recent years. Raising the country's infrastructure endowment to that of the region's middle-income countries could boost annual growth by about 2.4 percentage points. Zimbabwe made significant progress in infrastructure in its early period as an independent state, building a national electricity network with regional interconnections, an extensive and internationally connected road network, and a water and sewer system. But the country has been unable to maintain its existing infrastructure since it became immersed in economic and political turmoil in the late 1990s. Zimbabwe now faces a number of important infrastructure challenges, the most pressing of which lie in the power and water sectors, where deteriorating conditions pose risks to the economy and public health. Zimbabwe currently spends about $0.8 billion per year on infrastructure, though $0.7 billion of this is lost to inefficiencies of various kinds. Even if these inefficiencies were fully captured, Zimbabwe would still face an infrastructure funding gap of $0.6 billion per year. That staggering figure can be reduced, however, to $0.4 billion if the country adopts a more modest spending scenario, or even to $0.1 billion under a minimalist, maintenance-only scenario. To close the gap, Zimbabwe needs to raise additional public, private-sector, and international funding, which, when coupled with the prospect of economic rebound and prudent policies, would allow the country to regain its historic infrastructure advantages.

Mozambique's infrastructure : a continental perspective

2011-11-21T05:00:00.000Z

In the last 10 years, Mozambique's economy has grown steadily at an impressive rate of 7.7 percent per year, driven by the service sector, light industry, and agriculture. This pace is expected to continue or even increase with the massive influx of already-planned investment on the order of $15-20 billion. Mozambique's infrastructure is well developed in some sectors, including its east-west transport infrastructure, power grid, and water and sanitation networks. But the nation still faces critical challenges in these and other areas, including developing north-south transport connections, properly managing the water system, and expanding hydroelectric generation to meet potential. Mozambique spent about $664 million per year on infrastructure during the late 2000s, with as much as $204 million lost annually to inefficiencies. Comparing spending needs with existing spending and potential efficiency gains leaves an annual funding gap of $822 million per year. Mozambique could reduce inefficiency losses by positioning itself as a key power exporter. The country could reach infrastructure targets in 20 years through a combination of increased finance, improved efficiency, and cost-reducing innovations.

Botswana's infrastructure : a continental perspective

2011-11-23T05:00:00.000Z

Infrastructure made a net contribution of just over two percentage points to Botswana's improved per capita growth performance in recent years. Raising the countrys infrastructure endowment to that of the region's middle-income countries could boost annual growth by about 1.2 percentage points. Botswana has made significant infrastructure progress in recent years, spanning the transport, water and sanitation, power, and mobile telephony sectors. But the country still faces a number of important infrastructure challenges. The most pressing is in the power sector, where the country is economically and financially exposed to a lack of generation capacity and insufficient power supply, leaving the economy vulnerable to power price shocks and load shedding. Botswana's international transport connections and Internet connectivity also lag behind those of comparable countries. Botswana's overall resource envelope of $800 million per year surpasses its $785 million needs estimate. Nevertheless, it loses $68 million a year to inefficiencies and faces a funding gap of $305 million per year, entirely in the power sector, traceable to the quality of spending decisions. Botswana will be in a good position to meet its infrastructure goals if it can reduce inefficiencies, increase public-sector receipts, and attract more public funding.

Allocative inefficiencies resulting from subsidies to agricultural electricity use : an illustrative model

2012-01-19T05:00:00.000Z

This paper provides an analytical discussion of several interconnected resource allocation problems from under-pricing of electricity used by farmers for groundwater extraction. In these situations, groundwater extraction is inefficiently high even without electricity under-pricing. Moreover, part of the electric power supply intended for farmers is often diverted to other unauthorized uses (notably illicit consumption). The paper demonstrates that unless non-price electricity rationing imposes severe constraints on demand, the range of resource allocation problems includes insufficient incentives to provide high-level service by the power utility, insufficient incentives for farmers to install and operate efficient equipment, and losses due to political "rent seeking" activities to influence water allocations. It also shows that diversion of electricity to illicit uses can increase overall economic efficiency when this leads to less electricity use by farmers, thus somewhat ameliorating the problem of excessive groundwater extraction as well as the inefficiencies related to under-pricing of electricity. Systemic reforms for overcoming these problems may face severe political obstacles.

Tanzania's infrastructure : a continental perspective

2012-02-08T05:00:00.000Z

Infrastructure contributed 1.3 percentage points to Tanzania's annual per capital GDP growth during the 2000s. If the country's infrastructure endowment were improved to the level of the African leader, Mauritius, annual per capita growth rates could increase by 3.4 percent. Tanzania has made great progress in reforming its trunk roads, improving the quality of the road network. The country has also seen significant gains in ICT networks, and has one of the most competitive domestic air transport sectors in Africa. The power sector poses Tanzania's most serious infrastructure challenge. Despite significant improvements in pricing and operational performance in recent years, inefficiency still absorbs about 1.4 percent of GDP. Moreover, due to heavy reliance on hydro-power the sector remains vulnerable to climate variability. The port of Dar es Salaam also suffers from performance problems as rapid traffic growth has increasingly exposed deficiencies in storage and access to the port. Poor access to safe water is another challenge, exacerbated by poor budget execution in the sector. Tanzania would need to invest $2.4 billion annually for 10 years to meet its infrastructure targets. Spending at that level would absorb just over 20 percent of the country's GDP. Existing spending stands at $1.2 billion a year. Tanzania loses $0.5 billion each year to inefficiencies such as underpricing, undercollection of revenue, overstaffing, and lack of budget prioritization. But even if inefficiencies could be fully captured, an annual funding gap of $0.7 billion would remain. That gap could be shrunk to $0.4 billion if lower-cost technologies were adopted and if regional power trade could be further developed.

Uganda's infrastructure : a continental perspective

2012-02-08T05:00:00.000Z

Uganda has made substantial progress on its infrastructure agenda in recent years. The early and successful ICT reform detonated a huge expansion in mobile coverage and penetration resulting in a highly competitive market. Power sector restructuring has paved the way for a rapid doubling of power generation capacity. Uganda is doing well on the water and sanitation MDGs, and has made effective use of performance contracting to improve utility performance. However, a number of important challenges remain. Despite reforms, the power sector continues to hemorrhage resources due to under-pricing and high distribution losses, while electrification rates are still very low. Providing adequate resources for road maintenance remains a challenge, and further investment is needed to increase rural connectivity and improve road safety. Addressing Uganda's infrastructure challenges will require sustained expenditure of around $1.4 billion per year over the next decade, strongly skewed towards capital expenditure. Uganda already spends approximately $1 billion per year on infrastructure, equivalent to about 11 percent of GDP. A further $0.3 billion a year is lost to inefficiencies, the bulk of which are associated with underpricing and distribution losses in the power sector. Uganda's annual infrastructure funding gap is about $0.4 billion per year, most of which is associated with irrigation as well as water and sanitation infrastructure.

Assessing economic and political impacts of Hydrological variability on treaties : case studies on the Zambezi and Mekong basins

2012-04-16T04:00:00.000Z

International river basins will likely face higher hydrologic variability due to climate change. Increased floods and droughts would have economic and political consequences. Riparians of transboundary basins governed by water treaties could experience non-compliance and inter-state tensions if flow falls below levels presumed in a treaty. Flow information is essential to cope with these challenges through water storage, allocation, and use. This paper demonstrates a simple yet robust method, which measures gauge station runoff with wetness values derived from satellite data (1988-2010), for expanding sub-basin stream flow information to the entire river basin where natural flow information is limited. It demonstrates the approach with flow level data that provide estimates of monthly runoff in near real time in two international river basins: Zambezi and Mekong. The paper includes an economic framework incorporating information on existing institutions to assess potential economic and political impacts and to inform policy on conflict and cooperation between riparians. The authors conclude that satellite data modeled with gauge station runoff reduce the uncertainty inherent in negotiating an international water agreement under increased hydrological variability, and thus can assist policy makers to devise more efficient institutional apparatus.

Economy-wide implications of direct and indirect policy interventions in the water sector: lessons from recent work and future research needs

2012-05-08T04:00:00.000Z

Water is increasingly becoming a limiting factor for sustainable economic growth and development in many countries. Its allocation has significant impacts on overall economic efficiency, particularly with growing physical scarcity in certain regions. Greater water supply variability further increases vulnerability in affected regions. Water also has become a strategic resource involving conflicts among those who may be affected differently by various policies. This paper analyzes various policy interventions aimed at improving water allocation decisions, using a novel approach that incorporates macro and micro level considerations in a unified analytical framework. The framework facilitates assessment of various linkages among policies and their impacts within individual sectors and economy-wide. Drawing on country based studies in Morocco, South Africa, Turkey, and Mexico, the analysis reveals difficult tradeoffs among various policy objectives, including priorities placed on different sectors, regional advantages, and general economic efficiency gains versus broader social impacts. The comparison of policy impacts demonstrates the usefulness of the framework in information that policy makers can use to rank the policy interventions according to the emphasis placed on different policy objectives. The paper also compares approaches used in other studies that apply computable general equilibrium models in various contexts of water, environment and agriculture.

Handwashing behavior change at scale : evidence from a randomized evaluation in Vietnam

2012-09-24T04:00:00.000Z

Handwashing with soap, which has been shown to reduce diarrhea in young children by as much as 48 percent, is frequently mentioned as one of the most effective and inexpensive ways to save children's lives. Yet rates of handwashing remain very low throughout the world. Handwashing with soap campaigns are de rigueur in developing countries, but little is known about their effectiveness. Few have been rigorously evaluated, and none on a large-scale. This paper evaluates a large-scale handwashing campaign in three provinces of Vietnam in 2010. Exposure to the campaign resulted in a slight increase in the availability of handwashing materials in the household, and caregivers in the treatment group were more likely to report washing hands at some of the times emphasized by the campaign. However, observed handwashing with soap at these times is low, and there isn't any difference between the treatment and control groups. As a result, no impact on health or productivity is found. These results suggest that even under seemingly optimal conditions, where knowledge and access to soap and water are not main constraints, behavior change campaigns that take place on a large scale face tradeoffs in terms of intensity and effectiveness.

Promoting handwashing behavior in Peru : the effect of large-scale mass-media and community level interventions

2012-11-14T05:00:00.000Z

This paper analyzes a randomized experiment that uses novel strategies to promote handwashing with soap at critical times in Peru. It evaluates a large-scale intervention that includes a mass media provincial campaign and a district-level community component. The analysis finds that the mass media intervention alone had no significant effect on exposure to the handwashing promotion campaign messages, and therefore no effect on handwashing knowledge or handwashing behavior. In contrast, the community-level intervention, a more comprehensive intervention that included several community and school activities in addition to the communications campaign, was successful in reaching the target audience with handwashing promotion messages and in improving the knowledge of the treated population on appropriate handwashing behavior. Those improvements translated into higher self-reported and observed handwashing with soap at critical junctures. However, no significant improvements in the health of children under the age of five were observed. The results are consistent with earlier literature, which indicates that substantively changing behavior to improve health is a complex task requiring intensive and more personalized interventions.

Investment decision making under deep uncertainty -- application to climate change

2013-01-09T05:00:00.000Z

While agreeing on the choice of an optimal investment decision is already difficult for any diverse group of actors, priorities, and world views, the presence of deep uncertainties further challenges the decision-making framework by questioning the robustness of all purportedly optimal solutions. This paper summarizes the additional uncertainty that is created by climate change, and reviews the tools that are available to project climate change (including downscaling techniques) and to assess and quantify the corresponding uncertainty. Assuming that climate change and other deep uncertainties cannot be eliminated over the short term (and probably even over the longer term), it then summarizes existing decision-making methodologies that are able to deal with climate-related uncertainty, namely cost-benefit analysis under uncertainty, cost-benefit analysis with real options, robust decision making, and climate informed decision analysis. It also provides examples of applications of these methodologies, highlighting their pros and cons and their domain of applicability. The paper concludes that it is impossible to define the "best" solution or to prescribe any particular methodology in general. Instead, a menu of methodologies is required, together with some indications on which strategies are most appropriate in which contexts. This analysis is based on a set of interviews with decision-makers, in particular World Bank project leaders, and on a literature review on decision-making under uncertainty. It aims at helping decision-makers identify which method is more appropriate in a given context, as a function of the project's lifetime, cost, and vulnerability.

Water nationalization and service quality

2013-01-15T05:00:00.000Z

The objective of this paper is to explore the impact of Uruguay's privatization and subsequent nationalization of water services on network access and water quality. The results suggest that although the early privatization of water services had little impact on access to the sanitation network, the subsequent nationalization led to an increase in network access at the bottom of the income distribution as well as an improvement in water quality.

Impact evaluation of a large-scale rural sanitation project in Indonesia

2013-02-13T05:00:00.000Z

Lack of sanitation and poor hygiene behavior cause a tremendous disease burden among the poor. This paper evaluates the impact of the Total Sanitation and Sanitation Marketing project in Indonesia, where about 11 percent of children have diarrhea in any two-week period and more than 33,000 children die each year from diarrhea. The evaluation utilizes a randomized controlled trial but is unusual in that the program was evaluated when implemented at scale across the province of rural East Java in a way that was designed to strengthen the enabling environment and so be sustainable. One hundred and sixty communities across eight rural districts participated, and approximately 2,100 households were interviewed before and after the intervention. The authors found that the project increased toilet construction by approximately 3 percentage points (a 31 percent increase in the rate of toilet construction). The changes were primarily among non-poor households that did not have access to sanitation at baseline. Open defecation among these households decreased by 6 percentage points (or 17 percent). Diarrhea prevalence was 30 percent lower in treatment communities than in control communities at endline (3.3 versus 4.6 percent). The analysis cannot rule out that the differences in drinking water and handwashing behavior drove the decline in diarrhea. Reductions in parasitic infestations and improvements in height and weight were found for the non-poor sample with no sanitation at baseline.

Water hauling and girls' school attendance : some new evidence from Ghana

2013-05-15T04:00:00.000Z

In large parts of the world, a lack of home tap water burdens households as the water must be brought to the house from outside, at great expense in terms of effort and time. This paper studies how such costs affect girls' schooling in Ghana, with an analysis based on four rounds of the Demographic and Health Surveys. Using Global Positioning System coordinates, it builds an artificial panel of clusters, identifying the closest neighbors within each round. The results indicate a significant negative relation between girls' school attendance and water hauling activity, as a halving of water fetching time increases girls' school attendance by 2.4 percentage points on average, with stronger impacts in rural communities. The results seem to be the first definitive documentation of such a relationship in Africa. They document some of the multiple and wide population benefits of increased tap water access, in Africa and elsewhere.