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

Corporatization is often employed to help improve the operational and financial
performance of water and sanitation utilities. In Kiribati and the Marshall Islands,
coporatization failed to deliver improved commercial focus and management capacity 47 . In
Samoa, corporatization has resulted in improved indicators in some areas, but not yet in
others. While making the goals of corporatization more explicit, and providing additional
capacity building assistance may go some way towards helping to improve performance
indicators, it would appear that corporatization alone does not reliably result in incentives to
reduce costs or increase revenue on a sustainable basis. The following examples describe
Pacific countries’ experience with corporatization:
Fiji: In the late 1990s, two TAs were provided to develop a corporatization plan
for the Public Works Department. The aim was to establish a wholly governmentowned
limited liability company with clear commercial objectives, accountability
and operational autonomy. Recommendations for corporatization were
implemented briefly (“on paper”), but the water utility soon returned to its
original state as a government department with no financial or decision making
independence during the political upheaval in 1999 and 2000. The Ministry of
Works’ Public Works Department resuming all responsibility for water and
sewerage. The Government’s intention is to internally restructure the Water and
Sewerage Department to improve its operations to the point where it can operate
without additional Government funding, after which it will be corporatized;
perhaps in 2005. Throughout these changes, the utility’s performance has not
improved, and in some cases, performance indicators have deteriorated. Water
tariffs are held below costs and are subsidized by the Government. The water
utility has no control over its budget and the existing allocations from
Government do not allow for system improvements and general maintenance
Kiribati: Loans and TAs 48 were provided to facilitate institutional reform through
corporatization. Reforms included setting up a Board of Directors 49 , developing
Management Information Systems (MIS) to support management, and drawing
up a corporate plan for the utility. Neither service delivery nor financial
performance had significantly improved by 2003. Tariffs are very low and are not
sufficient to cover operating costs. This coupled with a significant increase in
population numbers on South Tarawa has resulted on poor service and water
quality. However, unaccounted for water has reduced to around 40% following
the replacement of a major pipe to Betio under the ADB-financed Sanitation,
Public Health and Environment Improvement (SAPHE) project.
Marshall Islands: Technical assistance in the Marshall Islands was aimed at
improving utility performance through changing the composition of the Board of
Directors to ensure a balance between government and non-government
representation, and strengthening the Majuro Water Supply Company’s financial
planning, management and operational capacity. This has not resulted in
improved operational and financial performance. In fact, performance has
deteriorated. The Board of Directors meets irregularly and depends on the utility’s
47 “None of the utilities conveyed any real attempt or wish to optimize revenue or reduce costs” ADB, March 2003
48 The ADB’s first TA to design a “Corporatization Plan for the Public Utilities Board” was approved in 1997
49 ADB TA 2811-KIR “Corporatization Plan for the Public Utilities Board, June 1997
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