Water is a scarce and precious resource in the Middle East and North Africa. Population growth, rising living standards and urbanization increase the pressure on the resource, leading to increasing costs of urban water supply. Water scarcity and higher costs could further reduce the already low performance of many public urban water and sanitation utilities in the region. Physical losses and commercial losses are high (see unaccounted-for water); water is often supplied only for a few hours per day or even per week; little effort has been made to involve water users in low-income settlements to provide them with the most appropriate types of affordable water and sanitation services; tariffs are so low that even the operation and maintenance costs of the utilities are often not recovered (see under municipal water pricing and cost recovery); and wastewater is in most cases not adequately treated, leading to environmental and health hazards (see under wastewater re-use). In addition to these problems, policymakers are reluctant to transfer water from the main water user - agriculture - to urban areas at a relatively low financial cost, because they perceive the social and political costs of such transfers as too high. Meanwhile, the once very high cost of seawater desalination is declining, making desalination a more competitive technology for urban water supply in coastal areas where in locations where supply from conventional sources may be unavailable or to expensive.
A Central Problem: Low Performance of Urban Water and Sanitation Utilities
At the core of many problems of the urban water supply and sanitation sector is the weak performance of public utilities. With the exception of very few cases, indicators for the level of service provision, technical efficiency and financial performance are much lower than in well-managed utilities, while staffing levels are usually higher than necessary (see under performance indicators). Substantial efforts have been undertaken in the past to improve the performance of public utilities through financial support for infrastructure investment, technical assistance, and covenants stipulating higher tariffs. However, in the absence of a change in the institutional framework and the incentive system, these efforts have met with little success.
The World Bank's Strategy and Private Sector Participation
The World Bank's strategy in urban water supply and sanitation has therefore shifted to emphasize private sector participation, especially in the great majority of utilities that are currently not performing well. Private sector participation can take the form of a management contract (a short-term contract without private capital contribution), a lease (an intermediate form) or a concession (a long-term contract, fully involving the private sector in financing and risk-taking) (see an overview table of the various forms of private sector participation. In the region, the Bank has supported management contracts in the West Bank, the Gaza Strip and Jordan. It also plans to support management contracts and leases in Algeria, Yemen and in other countries. Morocco has embarked on an ambitious program to grant a total of seven concessions for urban water supply and sanitation.
Strengthening the Regulatory Framework
In order to successfully attract the private sector and to improve the level and the efficiency of services, the role of the public sector in water supply and sanitation has to be redefined, moving to more limited and different, but not less difficult tasks. It is essential for governments to demonstrate a strong political commitment, create an adequate legal and institutional framework, promote a high degree of technical skill among the civil servants regulating the operator, and to ensure a fair and transparent bidding process. An appropriate regulatory framework can and should also provide strong incentives for the private sector to focus on the alleviation of poverty. This could be done by requesting private operators to cover poor neighborhoods, to identify the most appropriate levels of service in those areas in close collaboration with local communities, and to design tariffs in a way that does not discriminate against the poor. Last but not least, governments should ensure that there is an appropriate framework for the voluntary and compensated transfer of water from agriculture to urban uses, in order to ensure an adequate supply for the basic need of clean drinking water for a rising population.