Should we Bet on Private or Public Water Utilities in Cambodia? Evidence on Incentives and Performace from Seven Provincial Towns

Abstract

Is public or private sector provision of water more likely to succeed in urban areas of Cambodia? Using quantitative and qualitative data from a range of surveys and technical assessments, this paper compares consumer satisfaction and technical performance of four private and four public utilities in Cambodia. The results indicate that households served by private utilities are significantly more satisfied with the piped water than customers of public utilities: the daily availability and quality of piped water is better and service interruptions are less frequent. This has not happened by accident. Private utilities hire more educated staff whom they pay higher salaries; maintain their facilities on a more regular basis; and implement quality control programs more diligently. Private sector operators seem to face stronger incentives than public utilities to keep their customers satisfied. However, this improved service does not come for free and, consequently, does not yet reach all the available households. Households served by private utilities pay significantly more for piped water services, and some lower-income households that are not served by private utilities are partially limited by the high connection fees (as opposed to the regular monthly payments). Overall, while this recent effort to introduce private sector involvement in the water sector in Cambodia is encouraging, the full gains have not yet been realized. The commercial incentive for improved performace will likely be stronger if the privatization option used is a lease or concession arrangement; if there is more competition in the water market; and if the regulatory structure in Cambodia encourages commercial incentives to be more demand-responsive and cost conscious. Under these conditions, the private sector is a good bet.supply, privatization, urban infrastructure, Cambodia