Combined Methods Case Study. Albania PSIA: Decentralization and Water Sector Privatization Reform

The objective was to measure the distributional impact of the water and wastewater sector reform that aims to provide equitable access to safe water and affordable tariffs using two parallel models – decentralization with (a) private, and (b) public management of water utilities. The World Bank assists the Government through the Municipal Water and Wastewater Project. Reform impacts are seen to affect about 35-38% of the urban population, and as decentralization of the water sector management takes place for the first time in Albania through the Bank project. Hence, the Government and the World Bank designed the PSIA to set a baseline by assessing consumer/ beneficiaries’ perceptions of, and satisfaction with service delivery. This is done through a comparison between four project cities with private utility management and four control cities with public utility management. The impacts will also be compared through the baseline across different points in time – before and after private sector participation.

The PSIA was carried out by a multi-disciplinary team of local researchers and Bank staff with financial support from UNDP. The study followed the mixed method approach. It collected data through 664 socio-economic household surveys, 90 key informant interviews, 32 focus group discussions, and eight city profiles. Conducting Stakeholder Analysis, Institutional and Risk Analyses, the study examined the distributional impacts of the reform on the well-being of the different groups in terms of (i) tariff increases; (ii) access to water and wastewater services through public and private provision; (iii) support for the poor (via the subsidies in form of a lifeline of 20 liter/capita/day, and the connection/ meter installation which are either free or charges included in bills over time); (iv) transfer of property rights of water company shares to the local governments; and/or (v) changes in employment for different groups. Bank staff provided a two-day training for local researchers, followed by two days of piloting. The team collaborated closely with central and local government officials from the Ministry of Territorial Adjustment and Tourism, the eight municipalities, water utilities, and representatives of civil society and the private sector.

The PSIA baseline findings suggest adjustments through a different sequencing and pacing of the reform. For instance, improvements in service quality and the collection ratio should be made a prior condition for gradual tariff increases. At present, the utilities cannot afford service improvements without increasing the tariff first, but customers are either unable or unwilling to pay the tariff increases without visible service improvements. Furthermore, in the Bank’s project cities with privately managed utilities, the PSIA suggests to accelerate the completion of the meter installation program before tariffs are raised again. This would allow poor and vulnerable groups to fully benefit from the lifeline tariff that the project has introduced, and support utility cost recovery as many non-poor consumers are willing to pay higher tariffs for better services and a meter-controlled consumption. For cities with publicly managed utilities, the PSIA suggests to implement the sewage tariff law, accompanied by public awareness campaigns and collection of user fees, and to accelerate the merging of the water and sewerage enterprises.

The PSIA impacts on Bank operation, especially its Municipal Water and Wastewater Project, though crucial insights into the on-going reform process, and the perceptions and expectations of authorities and different social groups on the project scope, objectives, and implementation. The PSIA also complements the project’s public communication program and the benchmarking of water utility activities. The PSIA will also impact on the wider policy dialogue between the Bank, the Government and local and international partners on private sector participation in the sector, as it will provide a comprehensive picture on the reform progress, and respective stakeholder perceptions through its longitudinal measuring of reform impacts against the set baseline across time.

Contact: Andreas Rohde, Arohde@worldbank.org