30 Mar 2011

Missing management not missing money

From the Economist:
(Cambodia) Tim Chan Tha is sifting and flattening used plastic bags for recycling. A widow with three children, she earns about 6,000 riels ($1.50) a day for this. She lives nearby down muddy dirt roads, in a cluster of ramshackle huts of corrugated iron, salvaged wood and tarpaulins. Ms Tha’s life seems as miserable an example of urban poverty as could be found anywhere.

In one respect, however, she is lucky. Her home has a constant supply of running water, drinkable straight from the standpipe outside. Perhaps just as remarkably, she pays for it. The provider is a government-owned utility, the Phnom Penh Water Supply Authority (PPWSA), which actually makes a profit and pays tax. For its many fans in the world of development experts, its achievement in doing this while serving the very poor makes it a model—proof that all that stands between poor people and a decent water supply is mismanagement.
GWI expands on this theme in an editorial on water provision (or failure thereof) in North Africa:
There seems to be a slack assumption across much of academia that the private sector only comes into contact with government if there is privatisation. Somehow they think government remains more pure and separated from the temptations of private business if everything remains under government control. In fact, the reverse is true. The greater the government control of the economy, the more private businesses come up against government as they go about their daily affairs. That is when the scope for corruption becomes enormous.


If you want to be corrupt in the water sector, the best way of doing it is to work out who is going to pay the best bribes first, then package a project into smaller parts so these favoured companies all have a piece of the action and all pay you for it. Then announce a tender with a deadline no more than two weeks after the publication of the request for proposals. This should ensure that no one apart from your preferred bidders come up with offers. If any outsider is able to whip together a bid in double-quick time, you then use non-specific “quality” criteria to dismiss it. When the project inevitably fails to perform two years down the line, rig another tender to fix it. The money-go-round continues as long as the system remains under corrupt government control.
The editorial goes on to lament subsidies to water service that fail to cover costs and lead to conflict between operators, customers and the government.

Bottom Line: Better to compete based on full cost pricing and service to customers.

1 comment:

Anonymous said...

Very interesting & illuminating. Predictable outcomes, once one understands the underlying mechanics.

How about those Aussies - do you reckon they are on the right track?


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