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  1. 1. Urban Infrastructure Provision and Management Master’s Programme Week-2 Session-4 Role of Urban Infrastructure and Its Environment Institute of Urban Development Studies
  2. 2. Recap <ul><li>By Instructor </li></ul>
  3. 3. Session Objectives <ul><li>By the end of session Participants will be able to: </li></ul><ul><li>Recognize external costs of urban infrastructure provision. </li></ul><ul><li>Describe and analyze contemporary debate on Urban Infrastructure. </li></ul><ul><li>Distinguish different options for Public Private Partnerships for Urban Infrastructure Provision and Mnagement. </li></ul>
  4. 4. External Cost (Benefits) <ul><li>A cost that is not borne directly by the person who decides about incurring it. </li></ul><ul><li>For Example if someone decide to play loud music at night and another person who is living next door; he will definitely bear the cost of lost sleep, but he will not decide about the playing of loud music. </li></ul>
  5. 5. The External Cost of Urban Infrastructure in Urban Areas Better Water Supply Less likely contract a waterborne disease Scenario-1 Scenario-2 If one contract a waterborne disease Dispose excreta in a sewer Sewer opens into nearby lake It put the neighbors at risk Even if the person above use a modern sanitary system, still disease Can be spread through food handling or some other form of accidental contact. Or the sewer system could be overwhelmed in a flood.
  6. 6. Conclusion The Higher the quality of the water an individual use, the lower probability of the neighboring community of contracting a water-borne disease and thus the community are comfortable and healthy.
  7. 7. <ul><li>The Externality argument was more relevant for nineteenth-century cities in industrialized courtiers. </li></ul><ul><li>Externality concerns are also still relevant today in developing countries. About 1.1 billion people lack access to clean water, and 2.4 billion lack access to sanitation. </li></ul><ul><li>(water Supply and Sanitation Collaborative Council, 2004). </li></ul>
  8. 8. Contemporary Debate of Infrastructure <ul><li>Public Private Participation (PPP) in Urban Infrastructure works. </li></ul><ul><li>Eco-efficient and sustainable urban infrastructure provision. </li></ul><ul><li>Urban Infrastructure and Crosscutting issues like gender, HIV/AIDS etc. </li></ul><ul><li>Urban Infrastructure Asset Management /IT assisted Urban Infrastructure record keeping. </li></ul>
  9. 9. Public Private Participation (PPP) in Urban Infrastructure works. <ul><li>Basic Options </li></ul><ul><li>Service contract </li></ul><ul><li>Management contract </li></ul><ul><li>Lease </li></ul><ul><li>Build-operate-transfer (BOT) </li></ul><ul><li>Concession </li></ul><ul><li>Divestiture (Asset Sell) </li></ul>
  10. 10. Private Involvement Public Involvement Service contract Management contracts Lease Concession BOT BOO Divestiture (Full Scale Privatization) PPP
  11. 11. <ul><li>Definition: specific tasks are contracted to the private sector, but overall utility management remains with the public sector </li></ul><ul><li>Typical duration: 6 months - 2 years </li></ul><ul><li>Pros: can inject good technical expertise </li></ul><ul><li>Cons: unlikely to improve performance greatly where overall management is weak </li></ul><ul><li>e.g. Mexico City: divided into 4 zones, each allocated to a private service contractor for 10 years, beginning in 1993. Contracts are in 3 stages, and cover: </li></ul><ul><ul><li>mapping the network, consumer census, metering </li></ul></ul><ul><ul><li>regularization of billing </li></ul></ul><ul><ul><li>loss detection and reduction </li></ul></ul>Service Contract
  12. 12. <ul><li>Definition: a private company is paid a fee to operate a set of municipal services with a typical duration of 3 to 5 years </li></ul><ul><li>Pros: gains in managerial efficiency </li></ul><ul><li>Cons: gains can be difficult to enforce; city remains responsible for investment </li></ul><ul><li>e.g. Solid Waste Collection . Common in Caracas, Seoul, Bangkok, Jakarta, Lagos. </li></ul><ul><li>Contractors are often medium-size enterprises (100 contractors in Lagos, 85 in Seoul) </li></ul><ul><li>Cost savings can be significant (in US - pvt sector is 10-30% cheaper, In UK & Canada - private sector is 20-40% cheaper) </li></ul>Management Contract
  13. 13. <ul><li>Definition: a private company leases the assets of a utility, and maintains and operates them, in return for the right to revenues within a typical duration of 10 to 15 years </li></ul><ul><li>Pros: commercial risk borne by the private sector, giving strong performance incentives </li></ul><ul><li>Cons: administratively demanding; government remains responsible for investments </li></ul><ul><li>e.g. Water in Guinea: Guinea instituted a lease contract for water supply in Conakry and 16 other towns in 1989. </li></ul><ul><li>Other issues: </li></ul><ul><li>Continuing difficulties in : connection rate below expectations, high unaccounted-for water, high prices </li></ul><ul><li>Institutional issues: problems in clearly allocating responsibilities and risks; problems in coordinating investment and operations </li></ul>Lease
  14. 14. <ul><li>Definition: private sector develops, finances and operates bulk facilities with typical duration of 15 to 30 years </li></ul><ul><li>Pros: good way of getting efficient delivery of bulk services, with private investment </li></ul><ul><li>Cons: not a good solution if supporting distribution systems are poor, or traffic levels are uncertain </li></ul><ul><li>e.g. Solid Waste in Hong Kong: </li></ul><ul><li>DBO (Design-build-operate) for refuse transfer stations and a chemical waste plant. For waste plant, capital cost paid over 5years in monthly installments; </li></ul><ul><li>DBO for landfills (including restoration and after care)- capital costs paid in lump sums at milestones </li></ul>Build Operate Transfer (BOO)
  15. 15. <ul><li>Definition: city owns the assets, but contracts with the private sector for operations, maintenance and investment with a typical duration of 25 to 30 years. </li></ul><ul><li>Pros: potential for high efficiency in operations and investment </li></ul><ul><li>Cons: requires considerable commitment and regulatory capacity </li></ul><ul><li>e.g. Water & Sanitation Manila (South Asian): </li></ul><ul><li>- A 25-year water and sewerage concession began in Manila in 1997 </li></ul><ul><li>requires increase in water connections from 65% to 100% of households within 10 years </li></ul><ul><li>requires increase in sewerage connections from 8% to 83% of households within 25 years </li></ul>Concession
  16. 16. <ul><li>Definition: the assets of a municipal utility are sold to the private sector </li></ul><ul><li>Typical duration: indefinite, but may be limited by a license </li></ul><ul><li>Pros: potential for high efficiency gains </li></ul><ul><li>Cons: requires credible regulatory framework </li></ul><ul><li>Example: England and Wales </li></ul>Divestiture (Asset Sale)
  17. 17. Conclusion <ul><li>By Participants </li></ul>
  18. 18. Thank You