Water is Life: A Caribbean Experience

	Official Bank Web Sites The World Bank in St. Lucia Water Supply & Sanitation in Latin America & the Caribbean Multimedia - National radio jingle Radio jingle (320k mp3) encourages St. Lucians to be careful about water useage

November 14, 2005 —Water is essential to the economy of St. Lucia, a small Caribbean island state which depends largely on tourism and agriculture.  However, like so many other water utilities around the developing world, St. Lucia’s state water and sanitation corporation is suffering from a crisis of confidence and performance.  To turn the sector around, the Bank is helping the Government of St. Lucia to implement an innovative strategy involving a public-private partnership, investment in urgent works, a new regulatory framework, and a colorful communications campaign. 

Finding a solution

St. Lucia’s public water utility, WASCO, is suffering from numerous problems including:

• growing water shortages,
• insufficient cash flow to cover costs,
• lack of regulation, and 
• loss of consumer confidence.

Since 2000, the Bank has been working with the Government to find a sustainable solution for the sector.  The strategy that has caught on with the Government—and, it appears, with outside investors—is a public-private partnership (PPP) for the utility.  In parallel, the Bank is financing an urgent investment program in order to fix the immediate supply problems and restore consumers’ good will.

“We envision that the PPP and the accompanying investment program will improve living conditions in St. Lucia and create an enabling environment for increased private investment in sunrise industries,” says Caroline Anstey, Country Director for the Caribbean.

To compensate for water shortages, trucks are often required to supply customers.

The design of the PPP transaction—slated for April 2006—is innovative in a number of ways:

• it defines a clear role for the public sector, including a seat on the Board for the Government;
• it uses the national pension fund as an anchor for private investments; and
• it invites new types of investors to participate in the PPP.

St. Lucia may seem like a small destination to pilot this new and concerted approach to water sector reform.  Governments from around the region, however, as well as Bank and International Finance Corporation (IFC) staff are following the process carefully to learn whether the strategy of combining a PPP with targeted public investments can be replicated in other client countries.

Key lessons learned

In designing the PPP transaction for WASCO, the project team incorporated the results of public opinion and investor surveys; lessons from the country’s privately owned electric utility; and Bank experience—both successful and unsuccessful—in designing infrastructure projects with private sector participation. 

“Not all of our client countries are ready for direct private participation in sensitive sectors such as water and sanitation,” explains Jordan Schwartz, team leader for the project.  “Where that seems to be a solution, the approach has to work in the local context.”
 
One point that became clear was that the market for water investments has shifted since the reform program began five years ago.  As a result, the project team reached out to a wider range of investors after the big international water companies initially declined to participate in a more traditionally designed concession.  Now that regional investors, tourism interests and smaller water companies have shown interest in the PPP, several of the traditional investors have come back to the table.

Aerial view of the Roseau dam, the main water supply source for the north of St. Lucia.

• Political economy—tariffs, timing and approach to reform should be on the table
• Legal and regulatory framework—investors and consumers still care
• Sequencing of interventions—the Bank can’t ignore a water crisis while trying to fix it with long-term measures
• Definition of the market—investment money and talent still abound even if they’re not housed under world-famous brand names

Connecting with the public

Although the trend has begun to reverse, polls show that public support for private sector participation in public service delivery has declined throughout LAC over the last decade.  To find out if this was the case in St. Lucia, the project team commissioned a countrywide public opinion survey.  The findings were surprising:

o the people of St. Lucia did not have a strong view about whether the water utility was publicly or privately owned;

• in as much as they cared, they wanted the government to retain a seat at the table;
  
• they were willing to pay more for water, but only if there were improvements in the service first.

“The opinion survey gave us data with which to counter the polemical arguments we were hearing from some stakeholders about the roles of the public and private sectors,” explains Schwartz.

To raise awareness of and support for the reforms, the project also allocated funding to a public information campaign which includes brochures, electronic messages, radio jingles, community group forums and public lectures, water catchment/river clean-ups, and a students’ water parade.

“A more reliable and continuous water supply will greatly improve the quality of life for the citizens of St. Lucia,” says Karla Chaman, development communications specialist for the project. “As the jingle says, water is life!”