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CASE STUDIES

Title
PRIVATE SECTOR PARTICIPATION IN WATER SUPPLY, DHAKA (BANGLADESH)

Sector


Summary
Dhaka, the capital of Bangladesh, is one of the largest urban agglomerations in the Asian region, accomodating about 10 million people. The Dhaka Water Supply and Sewerage Authority (DWASA) has recently (1997) introduced partial privatization of billing and revenue collection with the aim of improving its efficiency. It was also a precondition of the World Bank credit of US $80.3 million for the Fourth Dhaka Water Supply Project. Due to strong resistance and pressure from the DWASA Employees Union, DWASA decided to contract out one zone to a private firm and the other to the Employees Union on a trial basis for a period of one year. It was also decided to review the contracts after a year to provide a basis for renewal or cancellation of either or both the contracts. After the first year the performance of both the contracts were terminated and DWASA decided to hand over the private sector's contract to the DWASA employees union.

The initiative has a significant impact on institutional capacity of DWASA employees union. The number of water accounts increased after privatisation. Improvement in collection was also remarkable. Due to close monitoring, efficiency in water production also increased. The quantity of unaccounted for water also reduced. This experimental project might be considered as a model for other state-owned enterprises. DWASA will introduce this system for other zones soon.

Location
Dhaka, the capital city of Bangladesh, is one of the largest urban agglomerations in the Asian region.

Situation
The Dhaka Water Supply and Sewerage Authority (DWASA) showed lack of efficiency which was due to its high unaccounted for water, inadequate revenue earnings, large amount of accounts receivable, poor customer service, etc.

Lead
Dhaka Water Supply and Sewerage Authority

Strategy
Dhaka WASA introduced partial privatized system of billing and revenue collection with the aim of improving its efficiency.

The general objective of privatization was to improve the billing and revenue collection system. In order to achieve this objective initially it was decided that DWASA would contract out the revenue collection service of two zones to the private sector through a competitive bidding system. Due to strong resistance and heavy pressure from DWASA Employees Union, this objective was changed and DWASA decided to contract out only one zone to a private firm and the other to the Employees Union on a trial basis for a period of the one year. It was also decided that both the contracts would be reviewed after a year to provide a basis for renewal or cancellation of either or both the contracts.

Process
DWASA prepared a TOR that defined the scope of work and other technical specifications. DWASA carried out some of its services and activities under the code name 'Performance Improvement Program' through a private contractor and invited competitive bid offers. The successful contractor submitted the rate offers against the physical quantities of works stated in the TOR. Payment was made monthly on a simple unit price basis and on the basis of the Bill of Quantities. A provision of incentive was also made in the contract.

The Commercial Manager of DWASA was nominated as the Project Director. A reporting system was introduced in the project. The Project Director was assigned to liaise between the private sector and DWASA. He was also responsible for discussing and resolving any problem in the private sector. A Monitoring Committee was also formed. The Project Director would inspect the progress and quality of work of private sector and decide about the materials, facilities and services to be provided by DWASA. A provision of incentive was also made.

In privatised system, bill was prepared regularly based on actual consumption. Private sector employees were given better salaries and therefore, they were more careful in discharging their responsibilities. The revenue collection almost doubled in two years.

The two revenue zones of DWASA contracted out were reviewed after a year and both the contracts were terminated after the first year. DWASA decided to terminate the private sector's contract and hand it over to the DWASA employees union considering their better performance.

Financing
World Bank Credit of US $ 80.3 million for the Fourth Dhaka Water Supply Project financed this initiative.

Lessons
1. A pressure from external agency such as multilateral agency like World Bank is required to introduce and implement a new system of infrastructure financing.
2. National policies, rules and regulations must provide support for implementing such initiatives in environmental infrastructure financing.
3. TOR for such initiative should be well defined.
4. Proper data management system should be established.
5. Ceiling on remuneration should be determined carefully.
6. Strong political commitment is required for the success of such an initiative.
7. The private firms require technical skills for successful initiative .
8. Concensus building among all stakeholders is important.
9. Risks of all types should be assessed and appropriate machanisms should be adopted to alleviate them.
10. Participation of multilateral agencies enhances the transparency and credibility of the process.


Contact
Dr. Noor M. Kazi

Designation


Organisation
Environment and Development Associates
Address:
City: Dhaka
State: Bangladesh
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