Phnom Penh, the capital of the Kingdom of Cambodia, lies on the confluence of the Mekong and the Tonle and Bassac rivers. These rivers are the main source of freshwater for the city’s population of about 1.3 million. Many of the Asian cities’ publicly managed water utilities perform below their potential. It was also a case of Cambodia’s Phnom Penh Water Supply Authority (PPWSA); the service was plagued with maladies of inefficient service, poor coverage and financial losses. The utility managed to produce only 65,000 m3/ day, which was 45% of its initial capacity. The lack of electricity, chemicals, funds, and qualified personnel to undertake proper operational and maintenances prevented the utility from carrying out its services to full capacity. The problem was further compounded when the public took matters into its own hands and made thousands of illegal connections by building underground tanks. The PPWSA was made operational again in 1979 after the change in the political situation. In 1986, the water utility company was authorized to bill consumers for water supplied within its network. It was revealed that about 26,880 customers were registered, but only about 40% actually paid their water bills. Non-revenue water (NRW) exceeded 70%, and the total revenue covered only about 50% of operational expenditure. The distribution network was also very old. Staff were under-qualified, underpaid, unmotivated and lacked efficiency. Nepotism was widely practiced, and discipline among the workers was low. The billing system was also improperly documented and highly inaccurate.
PPWSA undertook major reforms and transformed a war-ravaged water utility into a commendable model that stands for other cities to emulate. Since 1993 with a long series of transformations that started within PPWSA’s top management, based on a culture of change and donor support led to a significant turnaround. Over a period of 15 years, PPWSA went through major changes that catapulted the water utility into one of the more successful water service providers in the region.
Political support for the reform process came with the Prime Minister giving full support. The top management was restructured, and dynamic younger personnel with more advanced qualifications were promoted to senior posts with more responsibilities. The water authority was granted autonomous status with independent management. The factors that contributed to this turnaround included investing in staff and providing incentives, promoting transparency, involving civil society, and investing in modern management procedures and technology.
Other improvements included establishing a complete consumer database, reducing NRW to less than 6%, improving collections, metering all of the utility’s water supply coverage, and introducing 24x7 water supply. Operations were also made more efficient by overhauling the old infrastructure, and streamlining the billing process, among a slew of new measures. Because of these reforms, the PPWSA has widened its distribution network from serving 40% of Phnom Penh in 1993 to over 90% in 2009 with clean, affordable water.
The poor living in slums are given certain privileges. For example, they are allowed to pay in installments within 10 to 20 months during which interest is charged. There is a 30% subsidy for the poor that is cross-subsidized by others. The strategy of cost recovery was also successful in reinforcing autonomy. The successful implementation of the strategy led to less reliance on the government than anticipated on tariff increases. This reduced the price obstacles for the poor to manageable proportions.
Results and lessons learnt
- The PPWSA has shown that it is possible for reforms to become successful if the governance framework is supportive and public utilities can make profits or at least break-even, with affordable tariffs and timely supply of water. It needs to be recognized that the reform does not happen overnight, the changes in institutional arrangements and management practices took over 15 years.
- The success of PPWSA is a result of several factors including a General Director with sufficient vision and leadership to push through a culture of change, a desire for change at the local political level, sufficient autonomy to be able to implement reforms as well as donor backing and shared objectives between line ministries, employees and donors.
- This case illustrates that a public sector utility can implement a management approach more akin to that of a private sector company based on results and incentives.
- Risks which were identified during the transformation included the financial viability of PPWSA, the security situation within the country, and government’s inability to carry out reforms. The ability to mitigate these risks based on the factors changes on different aspects such as annual reviews of tariffs, programme to finance the cost of connections for the poor and allowing for flexibility in policy formulation and institutional proposal proved successful.
This case study is based on the report and the study conducted by IUCN and PPWSA. The work was supported by the Ministry of Foreign Affairs of Finland
Binayak Das, Ek Sonn Chan, Chea Visoth, Ganesh Pangare, and Robin Simpson (2010), eds. Sharing the Reforms Process, Mekong Water Dialogue Publication No. 4, Gland, Switzerland: IUCN. 58pp.