Private Sector Participation (PSP) in Jordan's Water Sector

Table of Contents

1. Problem background

1.1 Structure of the thesis

1.2 Aims and Limitations

1.3 Methodology

2. Theoretical Background

2.1 Overview and definition of private sector involvement

2.2 Different forms of private sector participation

2.2.1 Work & service contract

2.2.2 Management contract

2.2.3 Lease / Affermage

2.2.4 Build-Operate-Transfer (BOT)

2.2.5 Concession

2.2.6 Divestiture

2.2.7 Comparison of PSP options

2.3 Unique Characteristics of Water

2.4 Potential risks of private sector involvement in the water sector

2.5 Performance measurement of a water utility

2.5.1 Unaccounted-for-water

2.5.2 Non-revenue-water

2.5.3 Problems with measuring water losses

2.6 Resume

3. Analysis of risks and benefits of private sector participation

3.1 Assessment of the benefits of private sector involvement

3.1.1 PSP can combat inefficiency, overstaffing and low productivity

3.1.2 PSP can increase the quality of goods and services

3.1.3 PSP cannot cover all investment needs

3.1.4 PSP can solve the lack of managerial skills or managerial authority

3.1.5 The public sector can suffer from unresponsiveness to the public

3.1.6 Public utilities may suffer from undermaintenance of facilities and equipment

3.1.7 PSP is not an adequate way to receive funds for needed capital investments

3.1.8 Excessive vertical integration can harm the performance of the core product

3.1.9 The problems of obsolete practices or products are of minor importance

3.1.10 Public utilities are vulnerable for multiple and conflicting goals

3.1.11 Misguided and irrelevant agency missions leads to inertia

3.1.12 Underutilized and underperforming assets are a serious problem

3.1.13 Illegal practices are difficult to measure

3.1.14 Theft and corruption influence the private sector involvement

3.2 Assessment of the risks of private sector involvement

3.3 Alternative concepts of private sector involvement

3.3.1 Small-scale entrepreneurs can serve the poor

3.3.2 Micro level private sector participation as a short-term option for PSP

3.4 Resume

4. Case Study: The Hashemite Kingdom of Jordan

4.1 Economic, ecological and social information on Jordan

4.2 Jordan’s water institutions and water policy in brief

4.2.1 Jordan’s water institutions in brief

4.2.2 Jordan’s water policy on private sector participation in brief

4.3 Private sector participation in Jordan’s water sector is mainly donor driven

4.4 Jordan’s experience with management contracts in the water sector

4.4.1 Greater Amman Water Supply and Wastewater Service

4.4.2 Northern Governorates Management contract

4.4.3 Wadi Mousa Water and Wastewater Management contract

4.4.4 Further projects and lessons learned

4.5 Jordan’s future: public company?

4.6 Resume

5. Remarks and Conclusion

Objectives and Key Themes

This thesis analyzes the ongoing debate regarding private sector participation (PSP) in water services, specifically within the context of developing countries. The research aims to evaluate the benefits and risks of PSP, discuss the effectiveness of different implementation models, and explore alternative approaches such as micro-level participation in the Jordanian water sector.

• Theoretical differentiation of Privatisation, PPP, and PSP.
• Evaluation of performance metrics like non-revenue water.
• Assessment of risks and benefits associated with private sector involvement.
• Analysis of the Jordanian water sector as a case study.
• Examination of micro-level PSP as a preparatory stage for reform.

Excerpt from the Book

Chapter Summaries

1. Problem background: Introduces the complexity of the privatization debate and defines the scope of the thesis, which is to analyze private sector involvement in the water sector with a specific focus on Jordan.

2. Theoretical Background: Defines the conceptual differences between privatization, PSP, and PPP, and details the unique characteristics of water, performance measurement, and typical risks in the sector.

3. Analysis of risks and benefits of private sector participation: Evaluates 14 common characteristics of public utilities to determine if and how PSP can improve performance, while addressing risks for both public and private entities.

4. Case Study: The Hashemite Kingdom of Jordan: Examines Jordan’s water institutional framework, the donor-driven nature of their reforms, and historical experiences with management contracts and micro-PSP.

5. Remarks and Conclusion: Summarizes findings and suggests that for successful reform in developing countries, policy-making must be locally enabled rather than solely driven by external mandates.

Keywords

Private Sector Participation, PSP, Water Sector, Jordan, Privatisation, Public Private Partnerships, PPP, Performance Measurement, Non-revenue Water, Management Contracts, Micro-PSP, Water Scarcity, Infrastructure, Development Aid, Utility Reform.

Frequently Asked Questions

What is the core focus of this research?

The thesis focuses on analyzing the impact and effectiveness of various private sector involvement strategies within the water sector, specifically assessing the results observed in the Hashemite Kingdom of Jordan.

What are the primary themes discussed?

The primary themes include the definitions of privatization/PSP/PPP, the unique socio-economic nature of water, the evaluation of utility performance, and the assessment of donor-led institutional reforms.

What is the main research objective?

The objective is to evaluate the benefits and risks of private sector participation in the water sector and to discuss how alternative methods, such as micro-level PSP, can serve as viable reform strategies.

Which scientific methodology was applied?

The research relies on a combination of literature analysis and the author's direct field experience as a trainee in the 'Operations Management Support' project in Jordan from 2004 to 2005.

What topics are covered in the main section?

The main sections cover the theoretical framework of PSP, an analysis of utility performance indicators like NRW, and a detailed case study of Jordan’s water institutions and management contracts.

Which keywords best describe this work?

Key terms include Private Sector Participation (PSP), Jordan, Water Sector, Performance Measurement, and Management Contracts.

How does the author evaluate the "management contract" model in Jordan?

The author observes that the initial management contracts in Jordan, such as the one in Amman, often failed to meet initial expectations regarding efficiency and capital investment, leading to a shift toward the concept of public companies.

What is "micro-PSP" according to the author?

Micro-PSP is a complementary, short-term preparatory stage aimed at outsourcing specific business processes like meter reading or billing to local companies to improve efficiency before undertaking broader reforms.

Does the author believe that the private sector can solve all investment needs?

No, the author concludes that the private sector is generally focused on projects with high returns and is often reluctant to fund the large-scale infrastructure investments required for the water sector in developing countries.