2 Barriers

2Barriers

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To set the stage for the discussion, this chapter summarizes the main barriers to the development of the water and sanitation subsectors in EECCA countries, and considers their causes and implications.

Overview

Within the WSS sector, rural WSS provision is an especially difficult puzzle to solve. Rural water and sanitation systems, where they exist, often have fundamentally different needs and capacity from urban systems. This is true for their infrastructure, geography-topography, costs, and customer base. Existing regulations intended for urban WSS systems and infrastructure can get in the way of rural WSS development. Other barriers, summarized below, include low political priority and a lack of a coherent strategy, gaps in or inconsistent regulation, poor existing infrastructure, unrealistic construction and consumption norms, overcapacity, maintenance and operational inefficiencies, high costs and low affordability, difficulty accessing capital and financing options, and regional disparities.

Low affordability and willingness to charge

Some studies have observed that willingness to pay (WTP) (as a percentage of household budget) is higher in rural areas, reflecting the value that rural citizens assign to WSS services and the marginally high positive impact that even a basic improvement in service can bring. For example, willingness to pay for improved services versus in Armenia is significantly higher outside Yerevan, at 41.6%, vs. 27.1% in the capital.1 WTP for both water and sanitation are high; sanitation is highest.2 In Georgia, rural households have a higher WTP than their urban counterparts, who receive high quality of service and pay higher tariffs. Finally,

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a study in Uzbekistan found that WTP for high quality drinking water and sanitation service was highest among unconnected households in rural areas at UZS 14 000 (6.09 USD) per month, and lowest in Tashkent, at UZS 3 500 (USD 1.52) per month.

3 Despite trends in high WTP among rural households, they tend to be poorer than urban households and ultimately less able to pay for WSS services. This, in turn, limits the amount that WSS system operators (utilities or community-based operations) can charge and increases the financing required to subsidise operations or, preferably, reach cost recovery. Governments often have low willingness to charge, a common aversion, as raising prices and tariffs on any essential goods and services are politically unpopular and no ruling party or coalition wants to be “the one” to increase tariffs.

Weak sector strategy or controversial regulation

The OECD found in 2011 that many municipalities and water utilities in EECCA countries did very little or poor quality strategic planning within the water sector. If the policy, legal and regulatory frameworks does not enable discussion of, or clearly delegate responsibilities for, WSS, especially rural WSS, and does not set clear and feasible sector development targets, financing and political action does not follow.

For example, Kyrgyz Republic had no law on WSS for many years, inhibiting sector development.4 There are also legal regulatory acts issued by the national and/or province level governments contradicting to each other, e.g. some provisions of the Water Law and the Water Code in Kyrgyzstan. The World Bank called for Armenia to better define the responsibilities of national and municipal actors in its Water Code. Management and regulatory difficulties at the village level have in part been attributed to lack of clarity on institutional relationships.5

Weak governance

The OECD Principles on Water Governance define water governance as “the range of political, institutional and administrative rules, practices and processes (formal and informal) through which decisions are taken and implemented, stakeholders can articulate their interests and have their concerns considered, and decision-makers are held accountable for water management.”6 However, the three dimensions of water governance outlined in the effectiveness, efficiency, and trust and engagement, are in generally short supply in EECCA countries. Sector governance is critical to developing and implementing policies and plans, and that includes turning the SDG 6 commitments into actions. For example, when rural WSS is not properly integrated into legal and regulatory documents, it prevents sector stakeholders from delineating or expressing their responsibilities and powers, and prevents them from accessing essential resources or financing. If governance were strong, then the wide range of challenges described in this section and hindering WSS access would be fewer and they would be smaller. In the WSS sector responsibilities and accountability are often unclear. In Kyrgyzstan, the department responsible for developing rural water supply and sanitation was severely underfunded for many years. In Ukraine, roles and responsibilities were scattered among different government entities lacking common goals, a situation found in other countries as well.

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Higher unit costs for rural service provision

High operating costs are a barrier to sustainable financing and cost recovery. These costs include high leakage and other operational inefficiencies, electricity tariffs and pumping, treatment, repairs of deteriorated pipelines, and poor management.8 Outdated consumption and construction norms that force over installation of capacity compared to the present and future demand, especially in rural contexts, further push up costs. Only a few EECCA countries have adopted new design and construction norms that are more appropriate for small water or sewerage systems in rural areas. This is largely because many rural systems in the EECCA region were originally funded out of collective farm budgets and funds without either the involvement or contributions from other water users that rely on them. The collective farm system collapsed with the fall of the Soviet Union and has left rural communities with a burden that continues 30 years later. Belarus, where cooperative farms still operative, is an exception to the rule. However, this does not mean overcapacity is not a problem, as both water usage and population have declined and there is overcapacity at the national level even though some villages have no water systems at all.9

Outdated consumption and construction norms and their inappropriate application

Part of the Soviet legacy in EECCA countries is the continued use of norms determining the installed capacity of water intakes, pumping and treatment stations, and the size of piping required for systems. Originally intended to serve growing cities and towns, and meeting their peak demand, the old Soviet norms can make the design and construction of small rural systems prohibitively expensive. Inefficient systems take up more capital and recurrent financing. One effect is to limit the total number of rural systems that can be financed, given the limited funding packages that can be counted on. The use of outdated, inappropriate consumption norms and design standards end up locking in inefficient use of resources and finances for the life of the asset.

Overcapacity

Because of these norms, systems built during Soviet times to handle much larger capacity than current demand also mean that maintenance, rehabilitation and capital costs are excessive. In the rural Kopyl rayon of Belarus, capacity utilisation of boreholes built to abstract water for drinking and other domestic needs is as low as 22%. In urban WSS in Moldova, in small towns and medium size cities, for example, the capacity utilisation rates of piped/centralise water supply systems are often at 25% maximum, in the context of shrinking population and diminishing demand for water. Key factors contributing to these negative development trends include over-sized systems (further contributing to operational inefficiency) as demand for water supply fell. This often means that tariffs are unable to cover the costs of inefficient operations and capital costs of highly over-built systems.

Low political priority

When WSS access, especially in rural areas, is not a national strategic priority, it becomes difficult to mobilise political, financing or donor support to these initiatives. By contrast, in cases where WSS access is a political or strategic priority, efforts are made to embed it into water policy and regulation, and design strategies to ensure or identity funding. In the absence of a national WSS strategy or plan, whether or not a region or municipality or village receives project funding is more likely to be linked to the motivation or

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politically connections of local leaders. Two questions thus arise: First, when and why has WSS access become a political priority in some countries? Second, what actions can development partners take, beyond aligning project support to SDGs 6.1 and 6.2, to encourage prioritisation?

Decentralisation and unfunded mandates

Rural service provision and system oversight of operators in EECCA is normally tasked to local governments, who often assign it to community-based operators (CBOs) in rural areas. But small operators do not benefit from the economies of scale that their urban counterparts do, and face high upfront capital costs compared to resources they have available. The Rural Water Supply Network (RWSN) calls asking community organisations to manage water systems “an abdication of responsibility” by national governments and donors.10 From a management perspective CBOs tend to be weak and lack capacity, yet are not given the management, technical or financial support to go with the mandate. Many of them simply “muddle through” as best they can. Generally, the only real alternative to under-resourced community management is no management at all, rather than better management.

Difficult access to capital

Individual rural WSS projects are typically too small and unattractive for commercial and development financial institutions (DFIs), as well as difficult for “crowd funding” by local communities. Their small size, and high transaction and project preparation costs makes it difficult to generate sufficient financial returns on investment, while pooling such projects is associated with additional costs and risks. Some models of regional rural water management, such as the Veolia Djur using a Public-Private Partnership (PPP) model in Armenia (see Box 2.1) appear to be successful, but have not been replicated elsewhere.

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Box 2.1. Armenia Veolia Djur case

Where private companies have long-term concession agreements (e.g. lease or affermage contracts), they either finance the investment themselves or issue bonds. Armenia’s engagement with the private sector to provide WSS services has been lauded as a PPP case “that works”. There was high public support for private management through the country’s first “phase” from 2000 to 2016, though several PPPs failed to improve significantly the financial performance of water utilities outside of Yerevan.11 In 2016, the government initiated the “second phase” by signing a lease with a single private operator (the private company Veolia, through its subsidiary Veolia Djur) for 15 years, and aims to remedy previous shortcomings by focusing on service-provision to 579 unconnected rural communities. The contract, worth €800 million, will provide drinking and wastewater services in rural Armenia.12 The company provides water supply and drainage systems to 311 rural communities.13 It also provides wholesale water supply services to 63 settlements beyond its service area, where it has assumed the responsibility for exploitation and maintenance of state-owned water supply and drainage systems attached to the State Water Management Company. Under this arrangement, the Water Committee is responsible for renovations of the major property repairs, network expansions and the renewal of investments; the Government is responsible for capital expenditures; while the construction of the new water supply and sanitation systems is the expense of Veolia Djur.

Source: 1. Veolia (2016), Veolia wins affermage contract for all water and wastewater services in Armenia. 2. Muzenda, D. and Marin, P. (2018), Water PPPs that work: The case of Armenia. https://blogs.worldbank.org/ppps/water-ppps-work-casearmenia

Deteriorating infrastructure

Most EECCA countries have old WSS systems, built to provide greater capacity than presently needed, with deteriorating water pipelines and high costs of rehabilitation. Breakdowns are frequent, service is irregular, and leakages can be high, as are technical and commercial water losses. Many EECCA countries struggle to afford maintaining and rehabilitating existing infrastructure, let alone expanding it to rural areas which still lack access. In Armenia, 60% of water supply networks and sewage collectors were built more than 35 years ago.14 In Kyrgyzstan, over 61% of the existing 1415 rural water systems were constructed 25 to 65 years ago and are rapidly deteriorating.15 Sometimes system rehabilitation can even exacerbate existing problems. When transmission pipes are replaced or water is drawn from new sources, the resulting higher volumes place additional pressure on worn-out internal networks, causing them to burst.

Inefficiencies and proper operation and maintenance challenges

Inefficiencies in management and operation, or the lack of capacity to proper operate and maintain inhibits the sustainability of WSS systems and increases their costs. This includes low investment in, and technical experience for, providing system maintenance, low collection rates etc. Low management capacity exists because of low paying positions make it difficult attracting good long-term management and qualified staff. Because small rural systems have higher unit costs to begin with, and a poorer customer base, more

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expensive unit operating costs resulting from inefficiencies, and poor management can make these systems expensive to maintain, lead to high failure rates, and makes system sustainability less likely.

Minimal evidence that solutions can be scaled up or replicated

Successful solutions for rural WSS in the EECCA region do exist. They include the case of Veolia Djur, the Swiss project “Rural Water Supply and Sanitation” in Uzbekistan and Tajikistan, and the Central Asia Alliance for Water (CAAW), an NGO based in Osh, Kyrgyz Republic. For two decades it has operated a successful scheme with dozens of participating communities, but despite its success, the model has not been replicated throughout the country.

The complex interplay of institutional, regulatory, political, technical, capacity and financial challenges can work against the goal of access to good quality, reliable and affordable water, and proper sanitation on a sustainable basis. Systemic challenges will never disappear completely, but they can be addressed, or at least managed. By thoughtfully identifying and prioritising barriers, and understanding how they relate, they can be more precisely and efficiently addressed in order to pave the way for SDG 6 progress.

References

Muzenda, D. and Marin, P. (2018), “Water PPPs that work: The case of Armenia”, https://blogs.worldbank.org/ppps/water-pppswork-case-armenia.

Naughton, M. (2017), “Community management of water points: more problem than solution? RWSN Dgroups discussion synthesis”, RWSN, Skat, St Gallen, Switzerland, https://www.rural-water-supply.net/en/resources/details/786.

OECD (2020), Towards Water Security in Belarus: A Synthesis Report, OECD Publishing, Paris, https://doi.org/10.1787/488183c4-en. OECD (2018), Guidelines for Introducing Sustainable Business Models in Rural Water Supply and Sanitation to Achieve Greater Levels of Water Security (unpublished) OECD (2017), OECD Studies on Water Improving Domestic Financial Support Mechanisms in Moldova's Water and Sanitation Sector, OECD Publishing, Paris, https://books.google.ca/books?id=l8E6DwAAQBAJ&dq=social+support+subsidy+wss+eecca&source=gbs_navlinks_s OECD (2016), Updating Ukraine’s water governance system: From infrastructure to governance-oriented institutions, OECD

Publishing, Paris, Water-Practice-44-Updating-water-governance-system-Ukraine.pdf (oecd.org) OECD (2015), OECD Principles on Water Governance, OECD Publishing, Paris. OECD (2009), Strategic Financial Planning for Water Supply and Sanitation, OECD Publishing, Paris, https://www.oecd.org/env/resources/43949580.pdf UNHCR (n.d.), “Special Rapporteur on Human Rights to Safe Drinking Water and Sanitation”. UNICEF (2021), “Kyrgyzstan: Water, sanitation and hygiene,” https://www.unicef.org/kyrgyzstan/water-sanitation-hygiene. Veolia (2016), “Veolia wins affermage contract for all water and wastewater services in Armenia”, https://www.veolia.com/en/veolia-wins-affermage-contract-for-all-water-and-wastewater-services-in-armenia

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World Bank (2011), “Republic of Armenia Water Sector Note”, https://openknowledge.worldbank.org/bitstream/handle/10986/2816/613170White0Co007110watersector0eng.pdf?sequence =1&isAllowed=y World Bank (2015a), “Republic of Armenia Financial Strengthening of Operating Water Concessions Armenia Water Sector Tariff

Study”, https://ppiaf.org/documents/3698/download. World Bank (2015b), “The Case of Uzbekistan Social Impact Analysis of Water Supply and Sanitation Services in Central Asia”, https://socialvalueuk.org/wp-content/uploads/2017/03/97832-REVISED-Box394849B-ENGLISH-report-en-ebook.pdf

Notes

1 See World Bank (2015a). 2 See World Bank (2015a). 3 See World Bank (2015b). 4 See UNICEF (2021).

5 See World Bank (2011). 6 See OECD (2015). 7 See OECD (2016). 8 See OECD (2009). 9 See OECD (2020). 10 See Naughton, M. (2017). 11 See Muzenda, D. and Marin, P. (2018).

12 See Veolia (2016).

13 See UNHCR (n.d.).

14 See OECD (2010). 15 See OECD (2018).

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