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Private Sector Involvement

Involve the Private Sector

One of the proven ways of obtaining efficiency gains in solid waste management is through the involvement of the private sector (see useful links below) – that is, when the key success factors of competition, transparency and accountability are present. The private sector improves efficiency and lowers costs by introducing commercial principles such as limited and well-focused performance objectives, financial and managerial autonomy, a hard budget constraint, and clear accountability to both customers and providers of capital. The private sector plays other important roles by mobilizing needed investment funds, and by providing new ideas, technologies and skills.

Effective Private Sector Inclusion Can Lower Collection Costs

There is ample evidence from around the world to support these claims. Various research studies within the United States, Canada, and the United Kingdom, which separately surveyed more than 2,000 cities, showed that services provided by public monopolies typically cost 25 to 41 percent more than competitively contracted services. In Malaysia, where many cities engaged multiple collection contractors through well-defined competitive tendering procedures, the cost of contractor services averaged 23 percent lower than the cost of service provided by the local authorities. A study of five major Latin American cities, found that private contracting halved service costs through higher labor and vehicle productivity.

Private sector participation should be viewed as a possible opportunity for covering a portion of urban solid waste service needs. Guidance is available to assess whether and how to involve the private sector, including recommendations for the preparation of contract and bidding documents.

Promote Micro-Enterprises as Part of a Poverty Reduction Strategy

The urban poor most suffer from lack of urban infrastructure and the Bank has published a targeted study of how the private sector can address services to the poor.

In the solid waste sector, one form of private sector involvement that creates livelihood for urban poor is through the incorporation of micro-enterprises and informal waste recycling cooperatives in the municipal solid waste management system. Research has shown that the promotion of micro-enterprises is an effective way of extending affordable services to poor urban communities. The promotion and development of recycling cooperatives also provides a way of upgrading the living and working conditions of informal waste pickers (pdf), resulting in higher incomes for them and greater self esteem.

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