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Water d G W t and Governance CoPs Joint Session: C P J i tS i Guidance Note on Urban Water Supply Sector Ri k A S t Risk Assessment t

Sandra Nicoll
Public Management, Governance and Participation Division, RSDD 07 May 2010

Objective of the Session
To increase awareness and familiarize Water and Governance CoP staff with the Urban Water Supply Risk Assessment Guidance Note But l B also ……… to provide an opportunity for id i f water sector and governance colleagues to meet together to di h discuss water sector governance issues more broadly

Two Areas for Discussion
Context for Sector Governance in ADB Urban Water Supply Sector Risk Assessment Guidance Note


Second Governance and Anticorruption Action Plan (GACAP II )
Three governance themes: Public financial management Procurement Combating corruption Applied at three levels: Country C t Sector
Project P j t

GACAP II Approach pp
ADB has adopted a risk-based approach to governance riskassessment and prioritization of areas for ADB support d i ii i f f Focus on risk of reduced development effectiveness …That DMC and ADB development objectives will not be p j met, or will be adversely affected by poor governance, weakly performing institutions or vulnerability to corruption… corruption


Implementation of GACAP II
Risk Assessment - PFM PFM, Procurement, Corruption Informs Informs Country Partnership Strategy Preparation St t P ti

Country Risk Management Plan Informs • • Results Frameworks Sector Road Maps


Sector Risk Mngt Plan
a) b) c) )

Risk Assessment – PFM, Procurement, Corruption Informs

Sector reform support actions Capacity development actions Project design/implementation j g p measures

Informs Informs

Project/Program RRP (design documents) Project risk mitigation measures identified 6

Risk Assessment – FM, Procurement, Corruption

Project Risk Mngt Plan Informs Practical Mitigation Measures

Introduction to Sector Guidance Notes
RSGP has prepared a series of sector guidance notes: (i) electricity, (ii) urban water supply, (iii) education (in process), and (iv) road transport (in process) Joint effort with CoPs Meant to supplement ADB’s Guidelines for Implementing GACAP II Intended to aid ADB staff in commissioning/ undertaking risk assessments and tailoring TORs to consider sector risk vulnerabilities Part of efforts to generate knowledge products that can inform future CPS preparation


Guidance Note: Urban Water Supply Sector Risk A S i Assessment
The urban water supply sector is vulnerable to pp y risks due to the involvement of multiple institutions in water governance, capital intensity, largelarge-scale procurement, interface between public and private sectors, and high demand for water services, among others. Sector risks can occur along a value chain ─ p policy, legal framework, regulation, p y, g , g , planning, g, financial management, procurement, human resources, and sector operations.

Framework for Sector Risk Assessment
Institutional Risks st tut o a s s Policy, legal framework, and regulation

Organizational Risks

Planning, financial management, procurement, and human resources dh

Operations p

Water harvesting and storage, water treatment, distribution, and customer interface

Illustrative Governance Risks
Policy y Vested interests influence policy and investment priorities to enrich themselves and/or their associates. These undermine responsiveness to sector needs needs.

The absence of a legal framework for managing contracts, contracts along with ill-defined responsibilities and risk ill defined riskLegal framework sharing arrangements, poses corruption risks. The lack of financial autonomy of the regulator undermines independent sector regulation. Inadequate planning can lead to inefficient delivery of water. Lack of informed participation by stakeholders in planning processes can lead to unresponsive plans.



Illustrative Governance Risks
Financial mgt Insufficient revenue streams to cover operations and maintenance lead to poor service quality and undermine new investments investments. The absence of procurement professionals leads to loose contracts, legal disputes, and nondelivery of services. Large-scale procurement creates opportunities for corruption when transparent procurement processes are absent. Conflict of interest in senior level appointments can lead to actions that favor certain contractors and patrons.

ProcureP ment

Human resources

Private water vendors and cartels collude with public Operations officials to prevent network extension, forcing customers to rely on overpriced water .

The guidance note is not intended to be rigid A risk management plan follows the risk g p assessment Risk management measures are excluded g from the guidance note because differences in country context call for y measures that are tailored to specific situations

Water Risk Assessments/Risk Management Plans
Country Armenia Sector Urban devt (drinking water) Year 2009 2007 007 2009 2007 2007 2007

Ca bod a Wate esou ce a age e t Cambodia Water resource management Pakistan PRC Samoa Urban devt (water supply & sanitation) Wastewater management Drainage & sanitation infra

Sri Lanka Water supply and sanitation

Key References



4. 5.

David Ehrhardt, Eric Groom, Jonathan Halpern, and Seini O’Connor. 2007. Economic Regulation of Urban Water and Sanitation Services. Services. Washington, DC Th W ld B k W hi t DC: The World Bank. Jonathan Halpern, Charles Kenny, Eric Dickson, David Ehrhardt, and Chloe Oliver. 2008. Deterring Corruption and Improving Governance in the Urban Water Supply and Sanitation Sector: A Sourcebook. Water Sourcebook Working Note No. 18. Washington, DC: The World Bank. Janelle Plummer and Piers Cross. 2007. Tackling Corruption in the Water and Sanitation Sector in Africa. In J. Edgardo Campos and Sanjay Pradhan, eds. The Many Faces of Corruption. Washington, DC: The World Bank. Transparency International. 2008. Global Corruption Report 2008: Corruption in the Water Sector. New York: Cambridge University Press Sector. Press. Water Integrity Network. 2008. Advocating for Integrity in the Water Sector. Sector. Berlin: Water Integrity Network.


Thank You