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

operating costs, collections levels and service quality were low, and there was little
investment capital available.
The Government let a concession contract in 1994 which allowed UNELCO (the existing
privately-owned electricity operator) to supply water and electricity services to Port Vila for a
period of 40 years. Under this contract, all management, operating and investment functions
are delegated to the concessionaire. Asset ownership and contract performance monitoring
is controlled by the Government based on periodic technical and financial reports. Under
this concession, UNELCO is required to guarantee quality, quantity and continuity of service
and incurs penalties for non-compliance.
The concession has been operating for ten years. In this time, it has delivered significant
service benefits including 52 : service continuity for 24 hours a day, reductions in non-revenue
water, and network expansion. Annual losses of US$440,000 in 1991 were transformed into
a reported surplus of US$12,000 in 2000.
Private sector involvement via a concession has also been implemented in the Port Moresby
water utility ‘Eda Ranu’ in Papua New Guinea. Until 1996, Port Moresby’s water services
were provided by the National Capital District Commission, the local government for the
National Capital District region. In 1996, Eda Ranu was formed on the basis of a 22 year
BOT contract. JC-KRTA, a Malaysian company, was engaged to maintain and operate the
water and sewerage network in the capital city in conjunction with a government owned
company called Water and Sewerage Pty Ltd.
We were unable to collect detailed benchmarking information from this utility for
comparative purposes, but some reports suggest that this has been less successful. Problems
in the tender process, and a flawed contract, which gave the private operator responsibility
for the supply, but not the distribution side of the water system, have been noted as some of
the reasons behind poor performance. For example, under the contract, the private operator
is not responsible for leaks, illegal connections, low water pressure or water shortages. This
provides few incentives for good quality service delivery.
Regulation: There are no independent regulatory authorities for the water and sanitation
sector in the Pacific and any oversight or monitoring functions are performed by the
Government Ministry responsible for the water sector, if at all. With the exception of Papua
New Guinea Water Board and Vanuatu’s UNELCO, tariffs do not cover the utilities’
operating costs.
Where the utility is run by a private operator under a concession contract, contract
monitoring is key. This requires legal, financial and engineering skills. Although it is possible
for Governments to oversee the contract monitoring function, smaller countries may not
have the specialist resources or capacity in-house.
One solution to this issue is to create a small specialist contract monitoring unit, as a
separate legal entity outside of the Ministry, whose task it is to enforce contracts. Additional
specialist analytic capability could be contracted in from regional firms to complement
permanent staff when workload or expertise requirements exceed the norm. Alternatively, a
regional regulatory body could be considered.
52 “A Case Study of the Privatisation of Port Vila”, John Chaniel, UNELCO Vanuatu Ltd; “Infrastructure
Regulatory Review for Government of Vanuatu”, Castalia, July 2004
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