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must be taken into consideration. Below we provide a brief overview of the situation
with respect to PSP in the region, and of the main forms of PSP.
Water
In SEE the private sector has not traditionally been involved in providing water
supply and wastewater treatment services. In a context in which water utility efficiency
is low and the quality of service unsatisfactory, there will be stronger pressure
on governments and municipalities to undertake serious reforms. Attracting
private sector participation in running the utilities is only one of the possible solutions
for increasing efficiency and improving cost recovery. Other benefits come
in the form of improved management, better value for consumers and easier access
to capital. Private sector participation in the region is almost absent, with a few
rare exceptions.
In Albania there have been several cases of private sector participation in water
utilities:
• Management contract financed through World Bank credit for four cities: Durres,
Lezhe, Fier and Saranda. This contract expired in July 2008.
• Management contract financed through Kf W for Kavaja. This contract expired
in May 2008.
• Concession contract financed through Kf W for Elbasan. This contract was
suspended in December 2006.
In Bosnia and Herzegovina, Montenegro and Serbia there has not yet been any
involvement of the private sector in the water utilities.
Main forms of private sector participation
As shown in Table 16, there are six main forms of private sector participation
in water utilities, with varying degrees of private participation in the ownership of
the physical assets (e.g. pipes); participation in operation and maintenance; capital
investments such as pipe replacement; the distribution of commercial risk; and
the duration of the contract.
Pros and cons of involving the private sector in the water utilities
Involving private-sector participation in water utilities may not be a solution
in itself. Benefits and drawbacks have to be carefully considered. Table 17 presents
some generic arguments for and against the private sector, which must be taken
into consideration when planning reforms.
The advantages of PSP are potentially greater in SEE, since there is a bigger discrepancy
between the experience of international water utility operators and that
of local operators. Better access to capital is another strong argument for PSP in developing
countries. However, municipal and state decision makers are more reluctant
to embrace PSP, mainly due to concerns about affordability and the desire to
harvest some of the efficiency gains locally.
C H A P T E R 6
WAT E R A N D WA S T E U T I L I T I E S I N S E E — S TAT U S A N D R E F O R M
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