ATM #15: Good water governance matters

The Asian Trends Monitoring Bulletin is a project sponsored by the Rockefeller Foundation, New York, the Centre for Strategic Futures, Singapore and the Lee Kuan Yew School of Public Policy, National University of Singapore. The Lee Kuan Yew School of Public Policy gratefully acknowledges the financial assistance of the Rockefeller Foundation and the Centre for Strategic Futures, Singapore.

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Production Manager, Production & Research Dissemination Chris Koh

Editorial Team Principal Investigators Darryl S.L Jarvis Phua Kai Hong T S Gopi Rethinaraj

Research associates Johannes Loh Nicola Pocock Taufik Indrakesuma Image credits, with thanks Image on page 3: Stefan Munder* Image on page 4: Sustainable sanitation* Image on page 7: Sergio & Gabriella* Images on page 7: The Floating Toilet Project* Image on page 8: Keith Bacongco* Image on page 10: Christophe.Thillier* Image on page 12: World Bank Photo Collection* Image on page 13: obron* Images on page 14: goya* Images on page 16: sherrattsam* Image on pages18–19: bbcworldservice* *These images were obtained from www.flickr.com

Permission is granted to use portions of this work copyrighted by the Lee Kuan Yew School of Public Policy. Please acknowledge the source and email a copy of the book, periodical or electronic document in which the material appears to chris.k@nus.edu.sg or send to

Chris Koh Lee Kuan Yew School of Public Policy 469C Bukit Timah Toad Singapore 259772

Contents Water: the forgotten challenge?

3

The growth of megacities: exacerbating future water problems

4

TonlĂŠ Sap: floating toilets and waste management system

7

Getting prices right: a constant struggle in ASEAN

8

Integrating rural sanitation marketing into a national programme in Vietnam

11

Privatisation: boon or bane for water provision?

12

Preventing water pollution: the carrot or the stick?

14

Closing remarks

16

References

17

Editorial team

20

3

Water: the forgotten challenge?

Global megatrends such as climate change, rapid urbanisation and surging water demand will force Asia to change the way it addresses water governance over the next 20 years.5 To make matters worse, Asian countries have actually witnessed their water quality drop in recent years, perhaps signifying a lack of concern by governments and society as a whole. Clearly, a change of course is required.

There are several aspects of water governance that currently demand attention. This bulletin has selected four important aspects that are especially relevant to the plight of the poor: • What are the best ways to cope with the rapid urbanisation of the poor in water utilisation?

• How does pricing water for affordability affect investment and Children playing in the dirty water in Manila Bay.

water conservation?

• Is privatisation of water treatment and supply a bane or a boon for

While Asia is home to some of the most vibrant economies in the world, it is also the global epicentre for some of the worst human development indicators. Around 700 million people live without access to safe drinking

the poor?

• What is the best way to deal with water pollution by the poor: a carrot or stick approach?

water in Asia, and a staggering two billion people do not have access to

To enhance our analysis and provide a policymaker perspective, the

basic sanitation, exposing them to disease and often deadly infections.1

team interviewed several water policy experts and government officials

Poor water and sanitation governance continues to plague Asia, casting a

who attended the Temasek Foundation Water Leadership Program at the

dark shadow over the future with the United Nations expecting 3.5 billion

Lee Kuan Yew School of Public Policy from 10–21 October, 2011. The team

people to be living in water-scarce and water-stress areas in the coming

received insights from within ASEAN (Indonesia and the Philippines) and

decade.

other parts of Asia (Sri Lanka, Kazakhstan and China). We express our sin-

2

Access to water has important implications for health, education,

cerest gratitude to the interviewees as well as the Temasek Foundation and

poverty and the environment. Children around the world are missing

PUB, Singapore’s national water agency, for their cooperation. Excerpts from

an incredible 440 million school-days per year due to diseases related to

the interviews can be found within this issue.

water, sanitation and hygiene. In adults, these diseases lead to produc-

We invite you to share the Asian Trends Monitoring (ATM) Bulletin with col-

tivity and income losses equivalent to millions of dollars per year, mostly

leagues interested in pro-poor issues in Southeast Asia. The ATM Bulletin is

among the poor. Moreover, contaminated water is one of the leading

also available online, www.asiantrendsmonitoring.com/download, where

causes of diarrhoea, responsible for one-fifth of child mortality under the

you can subscribe to future issues. We encourage you to regularly visit our

age of five.4 Lack of clean water and sanitation could result in losses of bil-

website for more updates and recent video uploads in our blog. Thank you

lions of dollars and stunted economic progress, leaving Asia’s poorest fur-

again for supporting the ATM Bulletin, and as always, we gladly welcome

ther behind.

your feedback.

3

Nicola Pocock Johannes Loh Taufik Indrakesuma

4

The growth of megacities: exacerbating future water problems What are the consequences of lowincome urbanisation in terms of pollution?

“People who move to the city and then build their homes on the river banks are usually poor and uneducated. They do not understand that disposing of waste inside the river is wrong, and that the rivers need to be protected and maintained.

It is important to realise that their “choice” of living by the riverbank is With no water and drainage system, this slum in Manila has holes full of polluted water, rubbish and human excreta.

due to a lack of other options. They cannot afford to live anywhere else, forcing them to build these illegal

Megacities in Asia continue to grow at a rapid and

smaller infrastructure investments. As people

perhaps, dangerous pace. Indonesia’s urban pop-

leave their remote villages and start to live in

ulation has more than tripled from 32.4 million to

apartment buildings or densely packed urban

gal, the dwellings do not follow envi-

102.9 million since 1980.6 The Philippines is also

settlements, it becomes easier for governments

ronmental standards, and do not have

expected see a tripling of its urban population

to provide piped water connections. The cost of

proper waste management systems.

well before 2020.

extending the water grid to remote rural areas

The only real way for them to dispose

settlements.

Because these settlements are ille-

ASEAN’s capital cities are growing very quickly.

is very significant, and remains one of the main

of their household waste is to throw it

For example, Jakarta’s population will soon

barriers to providing piped access to water in

into the river. Continuous disposal of

exceed ten million inhabitants and is still growing

these regions. Here, water authorities could

household waste into the river then

by more than 120,000 per year. Metro Manila has

embrace the trend of urbanisation as a way to

pollutes the river and causes the qual-

already reached 11.5 million, but still grows rap-

exploit the economies of scale in water infra-

ity of water to drop significantly.”

idly at about 2% per year. The same trend can be

structure investments.

7

found across ASEAN.

However, these benefits may not apply

— Enny Sudarmonowati, Head of

This trend is attributable not only to natural

to Southeast Asian cities, where the internal

Jakarta Green Monster, a Jakarta-based

population growth but also to rapid urbanisation.

migrants are mostly poor. As the poor move

environmental NGO

Thousands of rural poor relocate to urban areas

closer to urban centres, they face several chal-

each year with the hope of finding better work

lenges such as increased cost of living and scar-

opportunities.

city of housing. Thus, they often settle in slums

settlements in Jakarta are mostly clustered on

This trend in urban growth has several con-

or temporary settlements in the urban periphery,

land where it is illegal to build homes, such as

sequences for water provision. The main posi-

areas where the piped connections are unlikely to

rainwater catchment areas and river banks. In

tive consequence of urbanisation and densely

be constructed.

these circumstances, the illegal settlements

populated urban areas is that governments are

The consequences of slum creation for

cause direct harm to the city’s water supply, both

able to provide water for more people using

water provision are dire. For example, informal

by hampering groundwater replenishment,

5

Figure 1: Population growth 1990–2025 (estimated)

Source: United Nations, Department of Economic and Social Affairs, Population Division (2010). World Urbanisation Prospects : The 2009 Revision. CD-ROM Edition - Data in digital form (POP/ DB/WUP/Rev.2009).

because they damage the water catchment

with informal settlements popping up on unused

issues. The concession of full rights over this land

areas, and by polluting rivers with their house-

plots of land.

essentially rewards people for squatting. This

hold wastes.

Facing this rapid flow of urban poor, govern-

will induce more people to settle illegally, invit-

Even when slums do not form in areas that

ments have difficult decisions to make. There is

ing larger waves of migrants who come with the

jeopardise the water supply, slum-dwellers still

the option to concede full legal rights to illegal

intention of settling illegally. This, in turn, exacer-

face legal barriers such as lack of legal tenure over

settlers, enabling water companies to legally pro-

bates the pressures on all of the city’s essential

their housing. This causes a problem in providing

vide the settlements with piped water connec-

services, not just water.

piped connections to these houses. In Jakarta, a

tions. The main strength of this solution is that it

There is also the option of clearing the illegal

law prohibits the extension of utilities services

is quick and conflict-free. Slum-dwellers will likely

settlements and providing alternative housing

to households without property titles for fear

favour the solution because they are not forced

at a low cost. This gives the poor a legal means

that the services would “legalise” the settlement.

to relocate and will receive the services that they

of accommodation and a legal means to access

Other cities struggle with the same problems,

require. However, this solution comes with several

piped water and other utilities. However, this also

6

Figure 2: Percentage of population connected to a sewerage system (selected cities)

Intervention opportunity Small scale private water provision has been a major feature in many slums around the world. In 2003, small scale private water providers served 19% of the population in Ho Chi Minh City and 44% of the population in Jakarta*. The main advantage of these small scale providers is that they do not require expensive infrastructural developments and are able to reach Source: BAPPENAS (2007). Urban Sanitation: Portraits, Expectations and Opportunities—It’s not a private matter anymore. Indonesia Sanitation Sector Development Program (ISSDP).

remote areas that water grids cannot reach.

caused by the absolute number of migrants.

Despite the operational advan-

is expensive for governments due to the cost of

Rapidly growing urban populations will cause a

tages of small scale providers in slums,

new public housing projects. Additionally, the

strain in the available water resources. Although

the service comes with its own set of

magnitude of urbanisation makes it virtually

pipelines can be built and households can be

problems. First, there is the high price

impossible to provide enough of these housing

connected to formal water services, the available

of vended water, which has been thor-

units. The inevitable limits of supply will force

amount of water is a different story. Several cities

oughly discussed in a previous section.

many poor people to be stuck in their make-shift

are barely able to keep up with the rapidly rising

Secondly, the quality of vended water

settlements without proper access to water.

demand for water. In these kinds of situations,

is difficult to regulate, given that most

Finally, aside from the specific problems

the slightest blip in supply could leave thou-

vendors operate informally.

from illegal settlements, there are also problems

sands of people without enough water. To take

comes with its own set of problems. This option

Thus, innovations that can improve the quality of services by small scale water providers, either by

What are the consequences of unimpeded urban growth for water provision?

the projected increase in demand in not only Jakarta but also in our source provinces due to their economic and population growth. This increase in their internal

“I think the biggest problem in Jakarta is

demand may cause scarcity problems in the

long-run water security. Jakarta only sup-

respective provinces, which will likely lead

plies 3% of its own drinking water, with 97%

to prioritising their water supplies to meet

of the base water supplied from West Java

internal demands rather than to be sold to

and Banten. This is because it is currently

Jakarta. Prices will rise, which will make life

much cheaper to source the water from

worse for the people of Jakarta in general,

other provinces than to process the ground-

but especially for the poor.”

water and river water in the province.

We believe that continuing down this road is unsustainable, especially considering

— Sriwidayanto Kaderi, Technical Director, Jakarta Water Supply Enterprise

helping to push vendor costs down or helping to improve the quality of vended water, will greatly benefit slum dwellers . *Conan, H. and M. Paniagua (2003).

“The Role of Small-Scale Private Water Providers in Serving the Poor”. ADB.

another example from Jakarta, a burst pipeline in September 2011 left nearly half of the city without water for almost 48 hours.8 Thus, it is clear that governments need to act quickly to address the issue of adequate supply in face of high volumes of city-bound internal migrants in the future.

Case study 7

Tonlé Sap: floating toilets and waste management system

All the waste go straight into the water.

Tonlé Sap is the largest freshwater lake in Southeast Asia which drains into

Few homes though, can—or want to—store six months worth of human

the Mekong river during the dry season. During the monsoon season how-

waste, and given that most of the land areas in the lake are deluged for a

ever, the lake reverses the direction of its flow and floods to form a lake up

good part of the year, another solution was needed to store the waste.

to five times its usual size. When this happens, sanitation becomes a prob-

Developed by Flinders University in Australia and constructed by teach-

lem for the floating villages in Tonlé Sap. According to Engineers Without

ers, villagers and rangers, a floating waste management barge will house

Borders from Australia, floating villages can float up to ten kilometres

the community's waste, where it will be converted into rich compost over a

within the expanding and receding waters. This exacerbates the problem

period of six months. By then, the monsoon waters will have subsided and

caused by a lack of toilets and an eco-friendly sanitation system within the

the compost can serve as fertilisers for the villagers.

9

community. To help, they came up with a novel idea—floating toilets.

Designed by local partners from the Engineering Institute of Cambodia, the Ministry for Rural Development, Resource Development International, Cambodia and the University of Phnom Penh, and in close consultation with community members, eco-friendly floating latrines were built and deployed, within the priced range of US$35.

One such example is the 3-hole urine diversion dehydration toilet, which is capable of storing faeces for up to six months by adding ash to it. By design, the toilet can separate urine and wash water from menstrual waste and oral cleansing fluids. It is constructed from locally-sourced materials like cement, PVC pipe, used buckets with a wood or metal frame and all that is needed to maintain the hygiene of the toilet is soap, ash and water.

A well-maintained and fully utiliSed latrine.

8

Getting prices right: a constant struggle in ASEAN suggests that the effectiveness of block pricing is still an open question.

Internationally, there has been much debate over what constitutes an ideal set of pricing policies, leading to very different price structures both between countries and between cities within a country. Tortajada (2010) notes, “… sustainable cost recovery or marginal cost pricing is part of an on-going debate, and no consensus is likely to be reached in the near future. There are differences of opinion on government interventions, subsidies, marginal pricing, water conservation taxes, flat water tariffs, and the ability of

Villagers have to queue to buy water in Baranagay Tinoto, Philippines.

Intervention opportunity

Water pricing policy is one of the most impact-

lead to over-consumption, as the scarcity of

“The first problem that arises from

ful and politically sensitive aspects of water gov-

water is not reflected in the price.

heavily polluted water sources is a sig-

ernance for the poor. When regulators set the

Conversely, if prices are set at a level that is

nificant increase in costs. The number

price of water, there are far-reaching implications

enough to cover long-term maintenance, it may

of additional filtration and sterilisa-

for household consumption levels, cost recovery

be prohibitively expensive for some subsets of

tion processes needed to make this

for the water companies, potential private sector

the population. To further complicate things, the

water potable comes with a hefty

investment, as well as water conservation efforts.

price then might not even be able to prevent

price tag. This, unfortunately, leads to

Three of the most common goals for pol-

consumption from exceeding sustainable lev-

increasing prices faced by consumers,

icy makers are affordability for the poor, cost

els. Thus, water authorities whose primary goal

whether poor or otherwise. However,

recovery and operational sustainability, as well

is water conservation need to set prices even

we believe that advances in technol-

as water conservation. The problem, then, is

higher.

ogy may lead to new innovations

that these goals are at odds with each other

Some water authorities, such as in Manila,

that can help keep the cost increases

and are difficult to achieve through a single

Phnom Penh, Vientiane, and Singapore, have

reasonable. Although we should con-

set of prices. For example, if water prices are

tried implementing block pricing to overcome

tinue campaigning for cleaner rivers

set at a level that is affordable to the poor, it

these difficulties. Price discrimination can help to

in order to clean up the water supply,

often means that water companies are unable

solve pricing dilemmas through differential rates

cheaper and higher quality filtration

to recover their costs or maintain an accept-

based on consumption levels. That way, people

technology can become a temporary

able profit margin without government sub-

can be discouraged from overconsumption, and

solution.”

sidies. Inability to recover costs can lead to

those who consume more can “cross-subsidise”

negative consequences further down the line,

those who consume less. However, not all water

— Sriwidayanto Kaderi, Technical

when infrastructure needs to be maintained or

providers have opted for block pricing, and pric-

Director, Jakarta Water Supply Enterprise

replaced. Additionally, setting low prices can

ing schemes still vary greatly from city to city. This

9

Figure 3: Water tariffs of different cities across the region, in US$ per litre

the poorest population to pay� 10. Nevertheless,

All of Southeast Asia’s major cities have dif-

metre (m3). The flat pricing scheme has also been

conflicting views on the right policies cannot be

ferent pricing schemes for household consump-

adopted by Sabah state in Malaysia. Block pric-

used as an excuse for failing to provide reliable

tion of water. Bangkok, for example, has a flat

ing schemes have been adopted by cities such

water services to the poor.

pricing scheme of 10 baht (US$0.33) per cubic

as Manila, Phnom Penh, Vientiane, Singapore,

10 to around US$172. Assuming a consumption rate of 50 litres per day, this connection fee is equivalent to three years’ worth of vended water. For someone whose priority is day-to-day subsistence, making an investment that only breaks even after three years is unthinkable.

Intervention opportunity A possible solution to the problem of burdensome household connection fees is the use of a community-based connection. One such example is the “Master Metre System”, tested and used successfully in Metro Manila, Jakarta and Phnom Penh. The metre is installed at the “gateway” to a certain neighborhood or community which measures the collective consumption of all customers A water pipe runs through a shantytown in Jakarta.

behind this metre. The water authority charges the community, which

as well as the Penang region in Malaysia. They

that pricing blocks are more effective than just

are based on the amount of water consumed.

setting a higher base price.

However, the division of pricing blocks varies

Of course, the unit cost of water is not the

greatly between cities. Singapore only divides

only thing that the poor may struggle with. In

consumption into two blocks, 0–40m3 and over

many cases, the poor do not have access to for-

40m3. Interestingly, even private households with

mal piped water connections because they can-

five or more members rarely exceed 30m3 per

not afford the installation fees. If the fixed costs

month. A five-member household with an aver-

are prohibitively high, it does not matter how low

age daily consumption of 154 litres per day per

the variable costs are.

person would consume “only” 23m3 and thus,

The inability to afford a piped water connec-

would still fall into the cheapest pricing block.

tion often results in a situation where the poor

Penang and Vientiane have three consumption

end up paying more for water than the rest of

blocks, while Phnom Penh has four. Jakarta is par-

society. The poor are often forced to rely on pri-

ticularly interesting because of price discrimina-

vate water vendors who charge up to 12 times

tion across household income levels. The water

the price of piped water. For example, in Manila,

authority uses a block pricing scheme based on

the price of five drums (1m3) of water is approxi-

consumption and also household income.

mately US$3, whereas the same amount of water

It is unclear whether any of these pricing

would only cost US$0.20 from a piped connec-

schemes are superior to others. There is no clear

tion.11 Although the price per litre of water is

correlation between the number of pricing blocks

much cheaper through a piped connection, the

and the level of consumption, and no evidence

connection fee for a piped connection amounts

in turn has to take care of bill collection from the individual households.

This method enables water managers to roll out water supply to poorer neighborhoods without the need for individual metres in every house, which is usually the main cost barrier for potential customers. Feedback from communities has shown that bill collection can be tedious, but the collection rate is generally above 90%. Another advantage of this approach is that leakages or illegal taps, which resulted in high percentages of non-revenue water for the water company, are then the responsibility of the community. This adds an extra incentive for the community to maintain the network and police illegal tapping.

Case study 11

Integrating rural sanitation marketing into a national programme in Vietnam

What is sanitation marketing?

Sanitation marketing is an emerging innovation that employs a demand-driven approach, building on the benefits perceived by users to ensure that communities have access to sustainable sanitation services. It rests on four principles: • Product—this may be an item (toilet) but also be a service (pit emptying) or a practice (hand wash-

When supply side subsidies for toilets have done little to improve sanitation

ing) which people want and are willing to pay for.

in rural Vietnam, are demand driven strategies the answer? International

Therefore, a range of diverse products should be pro-

Development Enterprises (IDE), a non-profit organisation that helps the poor

vided to suit a variety of conditions and pockets;

to invest their way out of poverty, thinks so. They have implemented several

• Price—this is the hardest part of marketing sanitation

rural sanitation marketing pilot projects in various parts of Vietnam, along-

resulting in attempts to keep costs down and offer a

side the government’s National Rural Water Supply and Sanitation Strategy

range of products with various prices. Hence smart

which has declared the adoption of demand-responsive approaches and

subsidies might be chosen to reach the poor, who

decentralised governance via the implementation of the second National

also have to overcome social and other costs;

Target Program (NTP) for poverty reduction (2006–2010). IDE's most recent

• Place—the products must be accessible and avail-

rural sanitation marketing pilot project was initiated in Quang Tri province,

able to the customers, which means that the sup-

an area with 33% sanitation coverage, in early 2010. IDE’s demand driven

ply chain and information about the product needs

approach does not utilise subsidies to households, with subsidies instead

to reach the target groups. The critical role of imple-

targeted toward market development, training and monitoring via:

menters is in facilitating and catalysing the sanitation

12

• Offering households a range of toilet options at low prices. Based

market to bring suppliers close to customers; and

on the health ministry's hygienic toilet standards and local condi-

• Promotion—creating demand for the product is the

tions, IDE modified toilet designs with different material choices to

most challenging part of selling sanitation. This can

reduce the construction cost of toilets;

be obtained by promotion, which includes commu-

• Training local sanitation masons to build toilets, after which they

nication with customers by many channels including

were given endorsement by local health institutions and IDE; and

demonstrations, advertising, mass media, word of

• Training local promoters to mobilise households to build hygienic

mouth, etc. Promotion campaign should be designed

toilets via town meetings, home visits, loudspeaker announce-

based on understanding the drivers of customer

ments and leaflet distribution.

demand and their trusted channels.

Nguyen’s* recent assessment of the programme reveals high demand for sanitation in study communes in Quang Tri and that access to sanitation has been improved by offering appropriate toilets at an affordable cost.

The four expected outcomes include: • Ensuring that people choose to receive the products they want and are willing to pay for;

However, she highlights that the strategies of both government agencies

• Financial sustainability—the private sector earns

and IDE currently lack an environmental focus. There is also evidence that

profits by selling sanitation products that are paid

the government’s strategy is contradicted by the financing mechanism for

for customers, while public funds can be spent more

the implementation of the NTP program, which still relies on supply driven

efficiently on product development, market research,

approaches. To overcome this, donor attention would strengthen account-

and promotion and facilitation activities;

ability of the NTP program and support oversight by civil society and local

• Cost-effectiveness and replicability—in addition,

recipients of finance and sanitation service delivery. Finally, she notes that

effectiveness can be measured by sale figures; and

Vietnamese national targets for rural sanitation can only be achieved by

• Behavioural change alongside hardware improve-

integration of good local planning and sound policies, effective institutions

ments—with the marketing approach, purchasers

at all levels, up-to-date legislation and regulations, and fora and mecha-

may come to value, use and maintain sanitation facili-

nisms for active participation of the private sector and civil society.

ties correctly.

12

Privatisation: boon or bane for water provision?

(West Zone), continues to struggle with high losses to non-revenue water, partly due to the old and deteriorated infrastructure it inherited. This case study shows that although Manila enjoyed relative success in its privatisation efforts, there is still much room for debate.

The ongoing debate about the privatisation of water services revolves around the issues of coverage, pricing and quality of service. The main argument in favour of privatisation is that the service quality is often better than what stateowned enterprises can provide. Being unconstrained by government budgets and government bureaucracy gives private companies the impression of efficiency and high quality of service. The ability to seek greater amounts of funding for projects also gives private water companies more resources to work with and more options for provision than local governments.

The main argument against privatisation is More waste water treatment facilities like this are needed in Manila.

As discussed previously, providing water services

Manila tendered two concessions for water and

can be very costly for governments. Several cit-

sanitation services in 1997. At the time, only two-

ies around the world have explored the option

thirds of people had piped connections for 16

of privatising water services in order to ease the

hours a day, with non-revenue water reaching

burden on governments in providing water.

63%.

Currently, there are only a handful of cities in

The controversial privatisation move intro-

Southeast Asia that have privatised water pro-

duced the principle of cost recovery, leading to

vision, such as Jakarta and Manila. Water provi-

an increase in water tariffs.13 While the price hikes

sion in most other Southeast Asian cities is han-

were criticised by many, other impacts of the pri-

dled by municipal or provincial governments,

vatisation were more positive. One of the two

and sometimes even the national government.

private operators, Manila Water Company Inc.

Looking outside of Southeast Asia, we can find

(East Zone), was able to achieve 24 hour cover-

countries such as England, Wales and France that

age for 99% of residents and bring down non-

are almost completely reliant on private compa-

revenue water to 20% by 2008. However, this was

nies for their tap water.

only possible with the assistance of the Global

After deciding that it could neither maintain

Partnership for Output-Based Aid (GPOBA), an

the quality of water infrastructure nor expand it

organisation that helped to subsidise installation

to meet the rising demand of the growing urban

fees and water charges for poor communities.

population, the municipal government of Metro

The other company, Maynilad Water Services

also due to the nature of private companies.

Explained: non-revenue water?

Non-revenue water includes unbilled authorised consumption (e.g. for fire fighting), apparent losses (unauthorised consumption from illegal connections and metring inaccuracies) and real losses from leakages and overflow from utility storage. In short it is the difference between water supplied and water sold (i.e. volume of water “lost�) expressed as a percentage of net water supplied. It is estimated that 50–65% of non-revenue water in Asian cities results from apparent losses.

13

Some reports even indicate that the costs of private water provision outweigh the benefits. Anand and Kallidaikurichi remark that “in the absence of effective regulation, transforming public monopolies into private monopolies poses serious risks of market failure, including exploitative pricing and poor service delivery.”16 With regard to the impact on the lives of the

Are governments too slow to act on crucial water issues?

Governments (in Sri Lanka) have been slow to respond to the challenges faced by the water sector and are responsible for its state of affairs today. Water professionals have been unable to articulate their arguments A boy washing his hands with water coming from a pipe in Aceh.

well enough to convince politicians to act decisively; the professionals themselves have been slow to respond to

As profit-oriented entities, private companies

access and coverage was neutral compared to

may choose to provide water only selectively,

before the PPPs were launched, while service

to the segments of consumers that can gener-

quality and operational efficiency usually went

ate the largest amount of profit. Private com-

up.14 The effects on tariff levels were inconclusive.

panies would not have an incentive to build

Yet, other research has shown that there is

pipelines in order to connect neighbourhoods

no significant difference between the quality of

that would not be able to afford their prices,

service in private-run water companies and pub-

although these segments of consumers may

lic water companies. A 2004 report by the Asian

be most in need of a clean piped connection.

Development Bank about the privatisation of

Companies may be similarly dissuaded from

water services in Manila concluded that “involv-

providing piped connections to sparsely popu-

ing the private sector may not in itself necessarily

lated remote areas due to the high investment

lead to better access and quality of services, but

cost of building pipelines and the low expected

it allows for the formation of innovative arrange-

poor, Martin concludes that evidence of “sizable

returns.

the unfolding dilemma of development vis-à-vis resource sustainability.

A national water policy document has been in circulation between agencies since the 1990’s, but we still have no water policy. Without political resolve backed by a set of committed professionals, we cannot move forward on these issues.

ments that can facilitate access and improve the

improvements” is indeed sparse, while admitting

Evidence from other countries provides a

quality of services available to the poor.”15 This

that the explosive development of urban centres

mixed picture. Some reports claim that priva-

conclusion can be interpreted to imply that the

in developing countries continues to challenge

tisation of water provision has lived up to its

improvements witnessed in the case of Metro

public and private utilities alike. He criticises that

potential and brought about improvements in

Manila’s privatisation were not due to any inher-

policy makers assumed an “automatic trickle-

water provision, even for poor neighbourhoods.

ent characteristics of private water companies,

down effect” to occur with the implementation

A study on privatisation efforts and public-pri-

but rather due to the overall process of reform

of water PPPs, but points out that major benefits

vate partnerships (PPP) in developing countries

and innovation that surrounded the privatisa-

for the poor have only materialised in few iso-

found that the average impact of PPPs on water

tion move.

lated examples.17

14

Preventing water pollution: the carrot or the stick?

Litter and trash lie along this river in the North Port District of the Philippines.

Water pollution is one of the most difficult hurdles

incentive (the carrot) or offering a negative incen-

fine of up to RM100,000 or imprisonment up to

to overcome in ensuring water security. For years,

tive (the stick). Offering positive incentives would

five years for anyone caught polluting any inland

industries and households alike have polluted

mean rewarding companies or households that

body of water.

their surrounding rivers and lakes due to lack of

dispose of their waste properly, while offering

Negative incentives are usually effective to

incentives, exposing the poor, who dependent on

negative incentives would mean punishing those

influence behaviour. Individuals now have to

natural water sources, to extreme health risks from

that do not.

calculate the risk of getting caught and paying a

waterborne diseases Properly disposing and pro-

Globally, the most often used approach to

fine, thus dissuading them from the act of litter-

cessing waste entails very high costs compared to

deal with pollution is through negative incen-

ing. Fines are especially effective against indus-

disposing that same waste into nearby waterways

tives, by making water pollution illegal, mandat-

tries because the imposed cost of pollution fac-

for free. There is no incentive for proper waste

ing proper waste treatment and disposal for both

tors into the company’s production costs. One

treatment because companies and households

households and industries, and enforcing signifi-

added benefit of imposing fines is that should

do not bear the cost of polluted water themselves

cant penalties for non-compliance. For example,

non-compliance still occur, the fines collected

(economists call this a negative externality).

the Jakarta provincial government imposes a

can be used to finance clean-up projects. It is

Thus, governments must alter the polluters’

penalty of 10–60 days imprisonment and a fine of

important to note, however, that effective imple-

incentive structures to make proper waste treat-

up to US$2,000 for people caught throwing gar-

mentation of negative incentives requires proper

ment and disposal a more attractive option. There

bage into one of the city’s 13 rivers. The Malaysian

governance structures and the ability to enforce

are two main ways to do so: offering a positive

Environmental Quality Act of 1974 imposes a

environmental regulation.

15

The effectiveness of negative incentives, however, diminishes somewhat when the culprits are poor. The problem with chronically poor households is that not only are they unable to afford proper waste treatment and disposal, but they also cannot afford to pay the fines if they are caught polluting. To further complicate matters, monitoring pollution and enforcing penalties is especially difficult in informal and temporary settlements such as slums and shanty towns.

Some organisations have tried using a different set of incentives, by attempting to persuade slum dwellers and other poor urbanites to stop polluting through positive rewards.

Often, these positive incentives are in the form of awareness campaigns that give people a “feel good effect” whenever they refrain from polluting. However, there are also more straightforward cases of rewarding people financially.

Many non-governmental organisations are trying to raise awareness by teaching slum dwellers to earn extra income by selling products made from recycled waste.

The main advantage of using positive incentives is that the poor are better able to participate.

They are no longer forced into paying large sums of money, and are instead rewarded with money

How severe is the water pollution?

What methods are most effective to deter pollution by the poor?

“The quality of water in the Laguna Lake Basin is a major concern for us.

”Dealing with pollution by the poor is

Here, the biggest challenges are pri-

difficult. As long as poverty remains

mary sewage treatment and expan-

severe, people will not have any inter-

sion of the sewer network. We are

est in caring for their environment.

faced with the problem of ever-rising

Thus, raising awareness to prevent

levels of water pollution coming from

pollution needs to have an economic

household waste. The current condi-

angle as well.

tion of our sanitation system is not

What the Jakarta Green Monster

sufficient to prevent all of these pol-

has done is to approach poor neigh-

lutants from contaminating the water

borhoods and not only teach them

supply, thus water pollution currently

how to clean up the river, but also

threatens the livelihood of people liv-

show them the economic value in

ing around Laguna Lake.

doing so. We have introduced ways to

People have been forced to look

process the waste into things of eco-

for alternative water sources such as

nomic value. For example, we teach

commercial water vendors, which

them how to recycle plastic and glass

are costly and inefficient as a primary

and how to process organic waste into

source of water. However, the poor

fertiliser.

have no other choice than to drink the

Our organisation shows people the

untreated water; and are consequently

economic potential of being environ-

more prone to catch water-borne

mentally responsible, while at the same

diseases.”

time teaching them that environmental stewardship itself is important. We

for cleaning up the waterways or simply refrain-

— Adelina C. Santos-Borja,

do run the risk of things not working

ing from further pollution.

Environmental Regulation Department,

out – for example, I’ve seen a compos-

Laguna Lake Development Authority,

ter being used as a shoe rack – but we

Philippines

believe that our approach so far has

However, the use of positive incentives generates other problems. Some argue that positive rewards are less able to guarantee action,

largely been effective.”

because the prospect of gain is not as compelling —Enny Sudarmonowati, Head of

as the prospect of loss. This argument is based on the phenomenon of loss aversion in behav-

US$30–40 per household, while setting up

Jakarta Green Monster, a Jakarta-based

ioural economics, popularised by Kahneman and

proper recycling depots requires an investment

environmental NGO

Tversky.18

of tens of thousands of dollars. If the poor are

Moreover, the use of positive incentives to

taught to produce goods using recycled raw

prevent pollution can be costly. Providing the

material, then there also needs to be adequate

on investment” even lower. When compared to

poor with tools, equipment and support sys-

support to ensure that the goods are able to

revenue-generating penalty systems, the use

tems for recycling or composting involves size-

penetrate the market. Finally, the uncertain-

of positive reinforcement becomes even less

able amounts of money. Even the cheapest

ties in the uptake of the projects and the proper

desirable to governments trying to halt the pol-

home composting systems can cost around

use of equipment make the expected “return

lution of water.

16

Closing remarks Given ASEAN’s rapid population growth, it is safe to say that problems of water security will only get worse before they get better. With projected urban populations of 58.3% by 2030 in the Philippines and 53.7% in Indonesia, solutions for urban water provision and access are desperately required, especially for the poor.

According to the Asia Water Governance Index, water policy in Cambodia and Indonesia is more pro-poor than in richer countries like Thailand and Singapore.19 This indicates that access and affordability for low-income groups cannot be taken for granted, even in richer countries with already well-developed water infrastructure.

Given the importance of water and the far-reaching impacts of compromised water security, addressing the currently existing water provision problems can have a great impact on the well-being and economic development of the poor. Key issues for policymakers and private players in the sector to address in the near term include pro-poor pricing, demand surges from lowincome urbanisation, the impact of privatisation on pro-poor provision, and water pollution by poor households. Based on current trends and emerging innovations, we anticipate seeing more demand-driven approaches to water access problems—these have the advantage of gaining buy-in from low-income consumers themselves, in contrast to “top-down” supply-side approaches.

This issue is meant to provide policymakers and organisations working in the field of water security with full information about the issues that are most crucial for the poor. We hope that the discussion within this bulletin can help policy makers optimise their pro-poor policies and guide organisations to support, emulate or improve upon the highlighted micro-level solutions for poor communities around Southeast Asia.

17

References 1. Asian Development Bank (2006). Water Financing Program 2006-

12. Excerpts from: Nguyen HH (2011). Integrating sanitation marketing

2010. Retrieved December 3, 2011 from http://www.adb.org/water/

into a national program: a case study in Vietnam. Brisbane, Queensland,

Knowledge-Center/brochures/WFP-2006-2010.asp

Australia, International Water Centre. Available at: http://docs.watsan. net/Downloaded_Files/PDF/Nguyen-2011-Integrating.pdf (accessed

2. International Development Association (2009). Water Resources:

20-12-2011)

Managing a Scarce, Shared Resource. The World Bank’s Fund for the Poorest. Retrieved November 18, 2011 from http://siteresources. worldbank.org/IDA/Resources/IDA-Water_Resources.pdf

13. Padawangi, R. (unpublished). Building Markets through Quenching Thirst: Clean Water Supply for the Urban Poor in Jakarta and Manila.

Working Paper No.8. New Approaches to Building Markets in Asia.

3. International Finance Corportation (2011). Safe Water for all.

Working Paper Series. Centre for Asia and Globalisation, Lee Kuan Yew

Washington, DC, USA. P.5

School of Public Policy: Singapore

4. Guenther, I. & Fink, G. (2011). Water and Sanitation to Reduce Child

14. Marin, P. (2009). Public-Private Partnerships for Urban Water Utilities

Mortality. Policy Research Working Paper 5618. World Bank

– A review of experiences in developing countries. Trends and Policy

5. Biswas, A. & Tortajada, C. (2010). Future Water Governance: Problems and Perspectives. Water Resources Development. 26(2). Pp.129-139 6. United Nations (2010). World Urbanisation Prospects: The 2009

Options, No.8. The World Bank. p.42 15. ADB (2004). Water for Slums: Private Sector Participation in Manila.

Published in “Bringing Water to the Poor: Selected ADB Case Studies”

Revision Population Database. Retrieved December 7, 2011 from http://

16. Anand, P. & Kallidaikurichi S. (2010). “New” Thinking on Water

esa.un.org/wup2009/unup/index.asp?panel=1

Governance – Clearing the Clouds, p.49

7. Jakarta Post (March, 26, 2011). Population Growth of Greater

17. Marin, P. (2009). Public-Private Partnerships for Urban Water Utilities

Jakarta and its impact. Retrieved November 28, 2011 from http://www.

– A review of experiences in developing countries. Trends and Policy

thejakartapost.com/news/2011/03/26/population-growth-greater-

Options, No.8. The World Bank. p.134

jakarta-and-its-impact.html 18. Tversky, A. & Kahneman, D. (1991). Loss Aversion in Riskless Choice: 8. http://www.thejakartaglobe.com/home/

A Reference Dependent Model. Quarterly Journal of Economics 106,

broken-dike-stops-water-supply-in-jakarta/462899

1039-1061

9. Engineers Without Borders presentation: http://www.slideshare.net/

19. Asia Water Governance Index , Araral, E and Yu, D (2011), Institute of

WaterCentre/designing-for-sustainable-sanitation-floating-toilet-case-

Water Policy. Available at: http://www.spp.nus.edu.sg/docs/AWGI%20

study and Engineers Without Borders: http://www.ewb.org.au/explore/

brochure-IWP-LKYSPP%289-10%29.pdf (accessed 1 February 2012)

initiatives/tonlesapfloatinglatrinesproject 10. Tortajada, C. (2010). Water Governance: Some Critical Issues. Water Resources Development. 26(2). Pp.129-139 11. Padawangi, R. (unpublished). Building Markets through Quenching Thirst: Clean Water Supply for the Urban Poor in Jakarta and Manila.

Working Paper No.8. New Approaches to Building Markets in Asia.

Working Paper Series. Centre for Asia and Globalisation, Lee Kuan Yew School of Public Policy: Singapore

18

19

Children in Manila sifting through the rubbish in the water for items that can be recycled.

20

Principal Investigators

Research Associates

Darryl Jarvis is an Associate Professor at the LKY School of Public Policy. He specialises in risk analysis and the study of political and economic risk in Asia, including investment, regulatory and institutional risk analysis. He is an author and editor of several books and has contributed articles to leading international journals. He has been a consultant to various government bodies and business organisations and for two years was a member of the investigating team and then chief researcher on the Building Institutional Capacity in Asia project commissioned by the Ministry of Finance, Japan.

Johannes Loh is working as a Research Associate at the Lee Kuan Yew School of Public Policy. He holds a Master’s degree in Public Policy from the Hertie School of Governance in Berlin. His previous research experience includes international student mobility, visual political communication, aid governance and public sector reform in developing countries. Recently, he completed a research project on Success Factors for Police Reform in Post-conflict Situations with the German Technical Cooperation.

His current research is a large cross-national study of risk causality in four of Asia’s most dynamic industry sectors. He teaches courses on risk analysis, markets and international governance and international political economy.

His email is darryl.jarvis@nus.edu.sg

Phua Kai Hong is a tenured professor at the LKY School of Public Policy and formerly held a joint appointment as Associate Professor and Head, Health Services Research Unit in the Faculty of Medicine.

He is frequently consulted by governments within the region and international organisations, including the Red Cross, UNESCAP, WHO and World Bank. He has lectured and published widely on policy issues of population aging, healthcare management and comparative health systems in the emerging economies of Asia. He is the current Chair of the Asia-Pacific Health Economics Network (APHEN), founder member of the Asian Health Systems Reform Network (DRAGONET), Editorial Advisory Board Member of Research in Healthcare Financial Management and an Associate Editor of the Singapore Economic Review.

His email address is spppkh@nus.edu.sg

T S Gopi Rethinaraj joined the Lee Kuan Yew School of Public Policy as Assistant Professor in July 2005.

He received his PhD in nuclear engineering from the University of Illinois at Urbana-Champaign. Before coming to Singapore, he was involved in research and teaching activities at the Programme in Arms Control, Disarmament and International Security, a multi-disciplinary teaching and research programme at Illinois devoted to military and non-military security policy issues. His doctoral dissertation, “Modeling Global and Regional Energy Futures,” explored the intersection between energy econometrics, climate policy and nuclear energy futures. He also worked as a science reporter for the Mumbai edition of The Indian Express from 1995 to 1999, and has written on science, technology, and security issues for various Indian and British publications. In 1999, he received a visiting fellowship from the Bulletin of the Atomic Scientists, Chicago, for the investigative reporting on South Asian nuclear security. His current teaching and research interests include energy security, climate policy, energy technology assessment, nuclear fuel cycle policies and international security. He is completing a major research monograph "Historical Energy Statistics: Global, Regional, and National Trends since Industrialisation" to be published in Summer 2012.

His email address is spptsgr@nus.edu.sg

Prior to joining the Lee Kuan Yew School of Public Policy he has also worked for the United Nations Environment Programme in Geneva, Transparency International Nepal and the Centre on Asia and Globalisation in Singapore.

His email is johannes.loh@nus.edu.sg and you can follow his updates on trends in pro-poor policies in the region on Twitter @AsianTrendsMon

Nicola Pocock is a research associate at the LKY School of Public Policy. She is also the research manager at aidha, a non profit financial education and entrepreneurship training school for migrant women, especially domestic workers, in Singapore. She holds a BA from Warwick University and an MSc from Kings College London. Prior to joining the LKY School of Public Policy, she interned as a Fast stream trainee in the UK civil service at the Home Office and as a research volunteer at Amnesty International. Nicola has also carried out social work in Marseille, France as a European Union sponsored youth volunteer.

Her research interests span health and social policy, health systems financing, social impact assessment, gender, migration and financial behaviours.

Her email is sppnp@nus.edu.sg and you can follow his updates on trends in propoor policies in the region on Twitter @AsianTrendsMon #health

Taufik Indrakesuma is a research associate at the Lee Kuan Yew School of Public Policy. He is a recent graduate of the Master in Public Policy programme at the Lee Kuan Yew School of Public Policy. He also holds a Bachelor in Economics degree from the University of Indonesia, specialising in environmental economics. Taufik has previously worked as a Programme Manager at the Association for Critical Thinking, an NGO dedicated to proliferating critical thinking and human rights awareness in the Indonesian education system.

His research interests include behavioural economics, energy policy, climate change mitigation and adaptation as well as urban development policy.

His email is taufik.i@nus.edu.sg

The Lee Kuan Yew School of Public Policy is an autonomous, professional graduate school of the National University of Singapore.

Its mission is to help educate and train the next generation of Asian policymakers and leaders, with the objective of raising the standards of governance throughout the region, improving the lives of its people and, in so doing, contribute to the transformation of Asia. For more details on the LKY School, please visit www.lkyspp.nus.edu.sg