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Water articles are written by ADB staff and external contributors on various water issues, reforms, and good practices.

Free Access to Water Who Buys It?
May 2007

By Wouter Lincklaen Arriens

Lead Water Resources Specialist, ADB

Political leaders want people to get it. Activists argue that people have a right to it. The people are willing to pay for it. And commercial banks and development agencies can help finance it. So why is access to water still a problem? WHY AREN’T ASIA’S POOR CONNECTED? How people in poor communities can get metered connections that bring clean and affordable water into their homes has always been a big development issue. Hundreds of millions of people across the AsiaPacific region are still waiting, and they find themselves paying too much for unreliable water from other sources. Why is that? For many, the answer is that the one-time connection fee charged by water utilities is too high. If only they could pay for the connection fee, the wait would be over. Is the issue that simple? In many cases it is. Utilities across the region continue to charge the equivalent of $100 or more for a new house connection. This is well above what poor families earn in a month or more. Consensus is lacking among utilities for a suitable business model to connect the poor. ASIA’S HIGH CONNECTION FEES ADB surveys show that between 1993 and 2004, connection fees in Manila increased by 40% to about $150 and in Ho Chi Minh City by almost 100% to $53. Phnom Penh, however, almost halved its fee in the same period but it remained high at almost $90. Kathmandu also lowered its connection fee, from $50 to $20. Delhi and Karachi, on the other hand, charge only nominal rates for connections and Harbin offers free meters and connection to customers living below the poverty line. Vanuatu also offers free connections to low-income households. A widely used benchmark in the region is for families to spend up to 5% of their monthly income on the monthly tariff for clean drinking water, but this does not take into account the cost of the connection, which is often up to 100% or more of their monthly income. Once connected, the poor are willing to pay for good water service, and collection rates are high. However, the barrier of the connection fee is often too high to overcome. And in some cities, the challenge to connect to the utility’s water service is made more difficult by bureaucratic regulations on land tenure that exclude tenants and squatters from applying.
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Should people have to wait at all? Of course not, but poor water governance still conspires against their interests. Utilities that are keen to expand their water service to poor communities argue that political interference prevents them from raising tariffs for capital to extend the service. Other utilities, like in Bandung, are also facing a shortage of raw water resources. SOME BUSINESS UNUSUAL WAYS Many other utilities, however, have yet to target their water services to the needs of the poor. ADB’s Water Week 2004 highlighted that vested interests in the lucrative informal water vending market can hold utilities back from providing more house connections. In implementing its Water for All policy to meet the MDGs, ADB has argued that time is of the essence in connecting the poor to water and sanitation services. And in 2006, an independent review panel called for adopting “business unusual” approaches to deliver more and faster results. Some experts refer to this challenge as going “the last mile” to meet the MDGs Organizations in the region are already exploring new approaches as they find ways to work around the obstacle of high connection fees. Cooperation between water utilities and a commercial bank in Indonesia helps provide poor people with micro-credit to pay connection fees of $80. Output-based grant aid is used in Cambodia to subsidize connection fees. Operators of small piped networks in Manila are allowing connection charges to be paid over three years. And with support of ADB, operators are now collaborating with the utilities to show that threeyear installment schemes for connection fees can work successfully. Land title requirements for legal connections were also waived. This has led some experts to question if connection fees are needed at all. Should service providers still charge customers to get access to their service? Does the local convenience store or supermarket ask its customers to pay when they enter? They also refer to cell phone operators who already use their profits to roll the cost of handsets into convenient service packages and thereby expand their customer base and revenue.

GOING THE LAST MILE FOR WATER Better governance will help accelerate the development of similar entrepreneurial approaches in water services. Utilities that still charge connection fees to the poor of $50-100 or more can be asked by political leaders, customers, and civil society organizations how many poor households have connected to their service in the past 12 months. Such accountability will actually help the utilities to make their case for raising more capital through proper tariffs and collection. Bold leadership and good policies are needed to give poor people affordable connections. Governments can acknowledge that high connection fees are a serious barrier to the poor, and advocate that the tariff be amortized over three years. Utilities can cover the cost of new connections under capital expenditures charged to the overall tariff across all customers. Scheduled increases in tariffs can then reflect the number of additional connections. For water utilities in the 21 st century to provide water for all, better business models are needed that help the poor and the utility. Offering free connections to help households become paying customers makes good business sense, and can be seen as a new way of reaching the last mile in delivering water services.

Wouter Lincklaen Arriens is the Lead Water Resources Specialist of the Asian Development Bank (ADB). Since 1994, he has coordinated ADB’s work to support its member countries in water policies, reforms, knowledege management, capacity development, and regional cooperation. He serves as ADB spokesperson for water work, and recently coordinated the preparation of ADB’s Water Financing Program 2006-2010, which seeks to double investments and results in rural and urban water services and water resources management in river basins. In this column, Wouter contributes his thoughts on water challenges and solution strategies in the Asia-Pacific region.

*This article was first published online at ADB's Water for All website in May 2007: http://www.adb.org/water/articles/2007/Free-Access.asp.

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