EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf

including full operating expenses and depreciation. This was achieved by setting costreflective
tariffs, improving the utility’s billing efficiency and cost control measures. Both
utilities have achieved tariff increases with government approval. This enabled a move
toward overall profitability 46 . Both UNELCO and the PNGWB are required to be self
financing and generate a return on investment. Other water utilities such as those in Fiji and
Samoa rely on government subsidies to make up the difference between the tariff and actual
operating costs. Loans and donor aid fund major capital works projects.
A.4 Institutional Analysis and Recommendations
Most water and sanitation utilities in the Pacific region are either government departments or
government owned organizations responsible for urban supply. Table A.4 and Figure A.23
provide an overview of the institutional arrangements in the Pacific water and sanitation
sectors.
There is an urgent need to reduce costs and improve the quality and efficiency of service
delivery in the water supply and sanitation sector. While scale issues will be an ongoing
challenge for the Pacific countries, the performance of UNELCO in Vanuatu and, (albeit to
a lesser extent), areas served by the Papua New Guinea Water Board’s, demonstrate that
despite these challenges, improved performance is possible with better commercial and
management practices.
Water resources are an issue for some Pacific countries, but existing management practices
have resulted in inefficiencies, which increase costs further, for example Kiribati has high
non-revenue water, no metering and low tariffs. Pacific countries could therefore benefit
from focusing on institutional changes to improve performance. Commonly recommended
approaches to institutional improvement include:
Corporatization
Private Sector Participation
Regulation
Ensuring that any subsidies are paid for provision of outputs.
The following sections review experience in the Pacific with each of these approaches.
46 The overall profitability level is not reflected every scheme in the Papua New Guinea Water Board. Some
systems are cross subsidizing smaller and less profitable ones. The ADB recommended introducing a regional
tariff structure reflecting the cost of water supply in each location. This had not been implemented by 2003.
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