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Pricing and Financing for Affordable Water and Sanitation: How Can Different Stakeholders Contribute?
Tuesday 19 August
Morning Seminar
Convenors: Organisation for Economic Cooperation and Development (OECD), European Investment Bank (EIB) and Agence Française de Développement (AfD)
Event Summary and Conclusions
OPENING REMARKS: Monica Scatasta (OECD)
PANEL no.1: CHAIR: Maurice Bernard (AfD, France) – PANELISTS: José Frade (EIB), Richard Franceys (Cranfield University), Gopathampi Krishnan (Public Affairs Centre, India), Mohammed Fadel Ndaw (PEPAM, Sénégal), Sophie Trémolet (independent consultant)
PANEL no.2: CHAIR: José Frade (EIB) - PANELISTS: Maurice Bernard (AfD, France), Peter Börkey (OECD), Catarina Fonseca (IRC, The Netherlands), Dominick De Waal (WSP, Kenya), Samuel Gong’a (Devolution Trust Fund, Zambia)
CLOSING REMARKS: Louis Boorstin (The Bill and Melinda Gates Foundation, USA)
The ongoing OECD Water Programme was presented, as well as findings of OECD’s work on tariffs highlighting their importance for financial sustainability and the difficulties in their use due to tradeoffs between policy objectives. Panelists were asked to address (i) ways to break the vicious circle of underfunding, insufficient investment, deteriorating infrastructure and services and low users’ willingness to pay (WTP), (ii) a real/perceived trade-off: financial sustainability vs. affordability, and (iii) whether the debate on tariffs should extend to improving service quality at reasonable costs and increasing collection rates.
The first discussion called for (i) new definitions of affordability based on local WTP assessments (the poor generally pay more than accepted threshholds), to reduce the influence of “political affordability” considerations, (iii) the role of regulators and providers in controlling costs, through service levels appropriate to local WTP and efficient service provision – good data is needed, (iv) recognition that tariffs can cover O&M costs everywhere, and often some investment costs too: utilities cannot meet social policy objectives without compensation, (v) evidence of how tariff structures / other instruments protect vulnerable groups: agreement was that it is preferable to subsidise access over consumption, and (vi) an informed, non-biased policy dialogue.
The second discussion focused on how diverse public and private actors may contribute to closing the financing gap left by tariffs, calling for (i) realistic investment strategies to optimise investments and increase the effectiveness of fund use, (ii) the need to look beyond ODA, as flows to water and sanitation have not increased and will not meet increasing needs, (iii) improvements in the leveraging capacity of grants, the coordination and effectiveness of the engagement of all stakeholders, from IFIs to local private partners: key aspects are understanding what drives each actor, a strong government leadership for donor coordination and transparent regulation.
Seminar Programme 09:00-12:00, Room T6
Chair: José Frade, Associate Director, Water and Environmental Protection Division, EIB, Luxembourg
Co-chair: Maurice Bernard, Head, Water and Sanitation Division, AfD, France
09:00 |
Welcome and Introduction
Monica Scatasta, Water Programme Coordinator, OECD, France |
09:15 |
Panel Debate 1: Designing Tariffs for Financial Sustainability and Access/Affordability |
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Key Questions to be Discussed by the Panel and Seminar Participants:
• Tariff setting in reality: How has tariff setting evolved in the developed world? What do tariffs in developed countries really recover? How was this achieved? How are tariffs set in developing countries? And what lessons can they learn from the experiences of developed countries?
• What Constitutes “Sustainable” Cost Recovery?
• How can we determine if a tariff level is affordable? Once the level is set, how should costs be allocated between user groups? How well do different tariff structures target support to the intended population (e.g. Consumption-based vs. Access Subsidies)? What about Non-Tariff Instruments?
• How can different stakeholders, including the diverse array of private actors, contribute to balancing financial and social sustainability, e.g. through increased efficiency of investment and O&M?
• What Are the governance conditions conducive to improved tariff design and implementation? |
10:15 |
Coffee Break |
10:45 |
Panel Debate 2 - Filling & Bridging the Financing Gap: The Role of Different Stakeholders |
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Key Questions to be Discussed by the Panel and Seminar Participants: |
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• How can realistic financing strategies be introduced in the W&S Sector?
• In a capital intensive and moderate return such as water, what should be the role of different types of finance/finance providers: (i) ODA/Donors, (ii) Soft Loans in Local & Hard Currency/IFIs, (iii) Commercial Loans/Banks, (iv) State/Municipal/Utility Bonds (iv) Private Capital & Equity/Private Sponsors?
• Are ODA Flows to the Water and Sanitation Sector increasing? Is ODA for the Water and Sanitation Sector going to countries that are most in need in terms of lack of coverage?
• Grants/ODA are constrained by budgets, other sources of finance and constrainted by risk. How can the leverage of Grants/ODA be increased?
• What are the institutional and regulatory conditions conducive to more effective involvement of stakeholders (in particular private actors) and greater financing flows?
• How can different stakeholders, including the private actors, contribute to filling the financing gap by reducing it, e.g. through increased efficiency of investment and O&M?
• How can different stakeholders contribute to improving the borrowing capacity of service providers? |
11:45 |
Rapporteur’s Wrap up
Rachel Cardone, The Bill and Melinda Gates Foundation, U.S.A (tbc) |
12:00 |
Close of Seminar |
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Presentation from the event
 Please scroll down and find the link from the programme
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