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service provision do not make the choice an easy one, and require consultation with stakeholders, analysis of the local context and strategic decisions on the models of provision, financing, and governance for each service. Public management (either in-house, shared or via public utilities) remains the most widely used model. In principle, this allows the organizing authority to monitor the service, including its objectives and operation, and minimizes transaction costs, overlapping responsibilities and loss of information, as well as facilitating greater coherence and responsiveness. A public operator can also reduce costs, since it does need to make a profit.19 However, public management is also criticized for being uncompetitive and inefficient. Many public operators have opaque management structures with little accountability and with decision-making powers concentrated among a select few (see, in particular, the regional chapters on Asia and Latin America). Their cumbersome administrative procedures do not always facilitate a good quality service at a lower cost. Outsourcing service provision to the private sector is sometimes then proposed as a way of improving efficiency and responsiveness to customers’ needs. Competition in a sector, in theory, impedes the emergence of ‘natural’ monopolies, creates incentives for operators to innovate, improves access and quality, and lowers costs, which is ultimately beneficial for local governments, for service users and for taxpayers. However, as stressed in the European chapter, there is no empirical evidence that one management system is intrinsically more efficient than any other.20 The optimal choice between outsourcing and direct management can only be made based on caseby-case assessments of each situation by
public authorities. This is why the organizing authority’s freedom of choice of management models is essential. This facilitates experimentation and innovation and promotes flexibility and adaptation to local contexts. In practice, national traditions, sectoral logic and the evolution of the institutional framework, influence how services are managed. In Europe, there are different models: German local multi-service enterprises (Stadtwerke) owned by local authorities; the longstanding French experience of using public utilities, private companies, or joint ventures; and the United Kingdom’s privatization of most basic services in the 80s. Most of these national traditions have become hybridized to some degree over the last twenty years. Currently, three quarters of Europe’s population is provided with water and sanitation by public operators. In Latin America, 90% of water and sanitation is provided by public operators - utilities in urban areas and, usually, water boards in rural areas. Regional governments play an important role in federal countries, while national utilities dominate in smaller countries. In Africa, many francophone countries retain a single national water utility, while anglophone countries tend to have more decentralized management.21 In both cases, but particularly in francophone countries, private operators partner with national utilities or manage part of the service. In Asia, many countries have moved from direct management to national and local public utilities and outsourcing, including joint ventures with private partners. In China, development over recent decades has been supported by both strengthening the capacity of local governments, and through PPPs and joint ventures with foreign partners In most of Eurasia, the majority of water and sanitation providers are owned by municipal and higher-tier governments
Cf. For the advantage of public management http:// www.psiru.org/. See also: http://www.fnccr.asso.fr/ documents/APE-GestionPubliqueDeLEau_2.pdf (in French). 19
Bel, Fageda and Warner (2008) and Mühlenkamp (2013). 20
21
Banerjee et al (2008) p.7.