The Asian Trends Monitoring Bulletin is a project sponsored by the Rockefeller Foundation, New York, the Centre for

Strategic Futures, Singapore and the Lee Kuan Yew School of Public Policy, National University of Singapore. The Lee Kuan Yew School of Public Policy gratefully acknowledges the financial assistance of the Rockefeller Foundation and the Centre for Strategic Futures, Singapore.

The Asian Trends Monitoring Bulletin focuses on three areas of strategic concern to Asias well-being and future development: trade and investment facilitation; health systems; and energy security.

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Production Manager, Production & Research Dissemination Chris Koh

Editorial Team Principal Investigators Darryl S.L Jarvis Phua Kai Hong T S Gopi Rethinaraj

Research associates Johannes Loh Nicola Pocock Taufik Indrakesuma Image credits, with thanks Image on page 3: Stefan Munder* Image on page 4: Sustainable sanitation* Image on page 7: Sergio & Gabriella* Images on page 7: The Floating Toilet Project* Image on page 8: Keith Bacongco* Image on page 10: Christophe.Thillier* Image on page 12: World Bank Photo Collection* Image on page 13: obron* Images on page 14: goya* Images on page 16: sherrattsam* Image on pages1819: bbcworldservice* *These images were obtained from www.flickr.com

Permission is granted to use portions of this work copyrighted by the Lee Kuan Yew School of Public Policy. Please acknowledge the source and email a copy of the book, periodical or electronic document in which the material appears to chris.k@nus.edu.sg or send to

Chris Koh Lee Kuan Yew School of Public Policy 469C Bukit Timah Toad Singapore 259772

Contents
Water: the forgotten challenge? The growth of megacities: exacerbating future water problems Tonl Sap: floating toilets and waste management system Getting prices right: a constant struggle in ASEAN Integrating rural sanitation marketing into a national programme in Vietnam Privatisation: boon or bane for water provision? Preventing water pollution: the carrot or the stick? Closing remarks References Editorial team 3 4 7 8 11 12 14 16 17 20

Water: the forgotten challenge?

Global megatrends such as climate change, rapid urbanisation and surging water demand will force Asia to change the way it addresses water governance over the next 20 years.5 To make matters worse, Asian countries have actually witnessed their water quality drop in recent years, perhaps signifying a lack of concern by governments and society as a whole. Clearly, a change of course is required. There are several aspects of water governance that currently demand attention. This bulletin has selected four important aspects that are especially relevant to the plight of the poor: What are the best ways to cope with the rapid urbanisation of the poor in water utilisation? How does pricing water for affordability affect investment and
Children playing in the dirty water in Manila Bay.

water conservation? Is privatisation of water treatment and supply a bane or a boon for the poor? What is the best way to deal with water pollution by the poor: a carrot or stick approach? To enhance our analysis and provide a policymaker perspective, the team interviewed several water policy experts and government officials who attended the Temasek Foundation Water Leadership Program at the Lee Kuan Yew School of Public Policy from 1021 October, 2011. The team received insights from within ASEAN (Indonesia and the Philippines) and other parts of Asia (Sri Lanka, Kazakhstan and China). We express our sincerest gratitude to the interviewees as well as the Temasek Foundation and PUB, Singapores national water agency, for their cooperation. Excerpts from the interviews can be found within this issue. We invite you to share the Asian Trends Monitoring (ATM) Bulletin with colleagues interested in pro-poor issues in Southeast Asia. The ATM Bulletin is also available online, www.asiantrendsmonitoring.com/download, where you can subscribe to future issues. We encourage you to regularly visit our website for more updates and recent video uploads in our blog. Thank you again for supporting the ATM Bulletin, and as always, we gladly welcome your feedback.

While Asia is home to some of the most vibrant economies in the world, it is also the global epicentre for some of the worst human development indicators. Around 700 million people live without access to safe drinking water in Asia, and a staggering two billion people do not have access to basic sanitation, exposing them to disease and often deadly infections.1 Poor water and sanitation governance continues to plague Asia, casting a dark shadow over the future with the United Nations expecting 3.5 billion people to be living in water-scarce and water-stress areas in the coming decade.
2

Access to water has important implications for health, education, poverty and the environment. Children around the world are missing an incredible 440 million school-days per year due to diseases related to water, sanitation and hygiene. In adults, these diseases lead to productivity and income losses equivalent to millions of dollars per year, mostly among the poor. Moreover, contaminated water is one of the leading
3

causes of diarrhoea, responsible for one-fifth of child mortality under the age of five.4 Lack of clean water and sanitation could result in losses of billions of dollars and stunted economic progress, leaving Asias poorest further behind.

Nicola Pocock Johannes Loh Taufik Indrakesuma

The growth of megacities: exacerbating future water problems

What are the consequences of lowincome urbanisation in terms of pollution?
People who move to the city and then build their homes on the river banks are usually poor and uneducated. They do not understand that disposing of waste inside the river is wrong, and that the rivers need to be protected and maintained. It is important to realise that their choice of living by the riverbank is
With no water and drainage system, this slum in Manila has holes full of polluted water, rubbish and human excreta.

due to a lack of other options. They cannot afford to live anywhere else, forcing them to build these illegal settlements. Because these settlements are illegal, the dwellings do not follow environmental standards, and do not have proper waste management systems. The only real way for them to dispose of their household waste is to throw it into the river. Continuous disposal of household waste into the river then pollutes the river and causes the quality of water to drop significantly. Enny Sudarmonowati, Head of Jakarta Green Monster, a Jakarta-based environmental NGO

Megacities in Asia continue to grow at a rapid and perhaps, dangerous pace. Indonesias urban population has more than tripled from 32.4 million to 102.9 million since 1980.6 The Philippines is also expected see a tripling of its urban population well before 2020. ASEANs capital cities are growing very quickly. For example, Jakartas population will soon exceed ten million inhabitants and is still growing by more than 120,000 per year. Metro Manila has
7

smaller infrastructure investments. As people leave their remote villages and start to live in apartment buildings or densely packed urban settlements, it becomes easier for governments to provide piped water connections. The cost of extending the water grid to remote rural areas is very significant, and remains one of the main barriers to providing piped access to water in these regions. Here, water authorities could embrace the trend of urbanisation as a way to exploit the economies of scale in water infrastructure investments. However, these benefits may not apply to Southeast Asian cities, where the internal migrants are mostly poor. As the poor move closer to urban centres, they face several challenges such as increased cost of living and scarcity of housing. Thus, they often settle in slums or temporary settlements in the urban periphery, areas where the piped connections are unlikely to be constructed. The consequences of slum creation for water provision are dire. For example, informal

already reached 11.5 million, but still grows rapidly at about 2% per year. The same trend can be found across ASEAN. This trend is attributable not only to natural population growth but also to rapid urbanisation. Thousands of rural poor relocate to urban areas each year with the hope of finding better work opportunities. This trend in urban growth has several consequences for water provision. The main positive consequence of urbanisation and densely populated urban areas is that governments are able to provide water for more people using

settlements in Jakarta are mostly clustered on land where it is illegal to build homes, such as rainwater catchment areas and river banks. In these circumstances, the illegal settlements cause direct harm to the citys water supply, both by hampering groundwater replenishment,

Figure 1: Population growth 19902025 (estimated)

Source: United Nations, Department of Economic and Social Affairs, Population Division (2010). World Urbanisation Prospects : The 2009 Revision. CD-ROM Edition - Data in digital form (POP/ DB/WUP/Rev.2009).

because they damage the water catchment areas, and by polluting rivers with their household wastes. Even when slums do not form in areas that jeopardise the water supply, slum-dwellers still face legal barriers such as lack of legal tenure over their housing. This causes a problem in providing piped connections to these houses. In Jakarta, a law prohibits the extension of utilities services to households without property titles for fear that the services would legalise the settlement. Other cities struggle with the same problems,

with informal settlements popping up on unused plots of land. Facing this rapid flow of urban poor, governments have difficult decisions to make. There is the option to concede full legal rights to illegal settlers, enabling water companies to legally provide the settlements with piped water connections. The main strength of this solution is that it is quick and conflict-free. Slum-dwellers will likely favour the solution because they are not forced to relocate and will receive the services that they require. However, this solution comes with several

issues. The concession of full rights over this land essentially rewards people for squatting. This will induce more people to settle illegally, inviting larger waves of migrants who come with the intention of settling illegally. This, in turn, exacerbates the pressures on all of the citys essential services, not just water. There is also the option of clearing the illegal settlements and providing alternative housing at a low cost. This gives the poor a legal means of accommodation and a legal means to access piped water and other utilities. However, this also

Figure 2: Percentage of population connected to a sewerage system (selected cities)

Intervention opportunity
Small scale private water provision has been a major feature in many slums around the world. In 2003, small scale private water providers served 19% of the population in Ho Chi Minh City and 44% of the population in Jakarta*. The main advantage of these small scale providers is that they do not require expensive infrastructural developments and are able to reach
Source: BAPPENAS (2007). Urban Sanitation: Portraits, Expectations and OpportunitiesIts not a private matter anymore. Indonesia Sanitation Sector Development Program (ISSDP).

remote areas that water grids cannot reach. Despite the operational advantages of small scale providers in slums, the service comes with its own set of problems. First, there is the high price of vended water, which has been thoroughly discussed in a previous section. Secondly, the quality of vended water is difficult to regulate, given that most vendors operate informally. Thus, innovations that can improve the quality of services by small scale water providers, either by helping to push vendor costs down or helping to improve the quality of vended water, will greatly benefit slum dwellers . *Conan, H. and M. Paniagua (2003). The Role of Small-Scale Private Water Providers in Serving the Poor. ADB.

comes with its own set of problems. This option is expensive for governments due to the cost of new public housing projects. Additionally, the magnitude of urbanisation makes it virtually impossible to provide enough of these housing units. The inevitable limits of supply will force many poor people to be stuck in their make-shift settlements without proper access to water. Finally, aside from the specific problems from illegal settlements, there are also problems

caused by the absolute number of migrants. Rapidly growing urban populations will cause a strain in the available water resources. Although pipelines can be built and households can be connected to formal water services, the available amount of water is a different story. Several cities are barely able to keep up with the rapidly rising demand for water. In these kinds of situations, the slightest blip in supply could leave thousands of people without enough water. To take

What are the consequences of unimpeded urban growth for water provision?
I think the biggest problem in Jakarta is long-run water security. Jakarta only supplies 3% of its own drinking water, with 97% of the base water supplied from West Java and Banten. This is because it is currently much cheaper to source the water from other provinces than to process the groundwater and river water in the province. We believe that continuing down this road is unsustainable, especially considering

the projected increase in demand in not only Jakarta but also in our source provinces due to their economic and population growth. This increase in their internal demand may cause scarcity problems in the respective provinces, which will likely lead to prioritising their water supplies to meet internal demands rather than to be sold to Jakarta. Prices will rise, which will make life worse for the people of Jakarta in general, but especially for the poor. Sriwidayanto Kaderi, Technical Director, Jakarta Water Supply Enterprise

another example from Jakarta, a burst pipeline in September 2011 left nearly half of the city without water for almost 48 hours.8 Thus, it is clear that governments need to act quickly to address the issue of adequate supply in face of high volumes of city-bound internal migrants in the future.

Case study 7

Tonl Sap: floating toilets and waste management system

All the waste go straight into the water.

Tonl Sap is the largest freshwater lake in Southeast Asia which drains into the Mekong river during the dry season. During the monsoon season however, the lake reverses the direction of its flow and floods to form a lake up to five times its usual size. When this happens, sanitation becomes a problem for the floating villages in Tonl Sap. According to Engineers Without Borders from Australia, floating villages can float up to ten kilometres
9

Few homes though, canor want tostore six months worth of human waste, and given that most of the land areas in the lake are deluged for a good part of the year, another solution was needed to store the waste. Developed by Flinders University in Australia and constructed by teachers, villagers and rangers, a floating waste management barge will house the community's waste, where it will be converted into rich compost over a period of six months. By then, the monsoon waters will have subsided and the compost can serve as fertilisers for the villagers.

within the expanding and receding waters. This exacerbates the problem caused by a lack of toilets and an eco-friendly sanitation system within the community. To help, they came up with a novel ideafloating toilets. Designed by local partners from the Engineering Institute of Cambodia, the Ministry for Rural Development, Resource Development International, Cambodia and the University of Phnom Penh, and in close consultation with community members, eco-friendly floating latrines were built and deployed, within the priced range of US$35. One such example is the 3-hole urine diversion dehydration toilet, which is capable of storing faeces for up to six months by adding ash to it. By design, the toilet can separate urine and wash water from menstrual waste and oral cleansing fluids. It is constructed from locally-sourced materials like cement, PVC pipe, used buckets with a wood or metal frame and all that is needed to maintain the hygiene of the toilet is soap, ash and water.

A well-maintained and fully utiliSed latrine.

Getting prices right: a constant struggle in ASEAN

suggests that the effectiveness of block pricing is still an open question. Internationally, there has been much debate over what constitutes an ideal set of pricing policies, leading to very different price structures both between countries and between cities within a country. Tortajada (2010) notes, sustainable cost recovery or marginal cost pricing is part of an on-going debate, and no consensus is likely to be reached in the near future. There are differences of opinion on government interventions, subsidies, marginal pricing, water conservation taxes, flat water tariffs, and the ability of

Villagers have to queue to buy water in Baranagay Tinoto, Philippines.

Intervention opportunity
The first problem that arises from heavily polluted water sources is a significant increase in costs. The number of additional filtration and sterilisation processes needed to make this water potable comes with a hefty price tag. This, unfortunately, leads to increasing prices faced by consumers, whether poor or otherwise. However, we believe that advances in technology may lead to new innovations that can help keep the cost increases reasonable. Although we should continue campaigning for cleaner rivers in order to clean up the water supply, cheaper and higher quality filtration technology can become a temporary solution. Sriwidayanto Kaderi, Technical Director, Jakarta Water Supply Enterprise

Water pricing policy is one of the most impactful and politically sensitive aspects of water governance for the poor. When regulators set the price of water, there are far-reaching implications for household consumption levels, cost recovery for the water companies, potential private sector investment, as well as water conservation efforts. Three of the most common goals for policy makers are affordability for the poor, cost recovery and operational sustainability, as well as water conservation. The problem, then, is that these goals are at odds with each other and are difficult to achieve through a single set of prices. For example, if water prices are set at a level that is affordable to the poor, it often means that water companies are unable to recover their costs or maintain an acceptable profit margin without government subsidies. Inability to recover costs can lead to negative consequences further down the line, when infrastructure needs to be maintained or replaced. Additionally, setting low prices can

lead to over-consumption, as the scarcity of water is not reflected in the price. Conversely, if prices are set at a level that is enough to cover long-term maintenance, it may be prohibitively expensive for some subsets of the population. To further complicate things, the price then might not even be able to prevent consumption from exceeding sustainable levels. Thus, water authorities whose primary goal is water conservation need to set prices even higher. Some water authorities, such as in Manila, Phnom Penh, Vientiane, and Singapore, have tried implementing block pricing to overcome these difficulties. Price discrimination can help to solve pricing dilemmas through differential rates based on consumption levels. That way, people can be discouraged from overconsumption, and those who consume more can cross-subsidise those who consume less. However, not all water providers have opted for block pricing, and pricing schemes still vary greatly from city to city. This

Figure 3: Water tariffs of different cities across the region, in US$ per litre

the poorest population to pay 10. Nevertheless, conflicting views on the right policies cannot be used as an excuse for failing to provide reliable water services to the poor.

All of Southeast Asias major cities have different pricing schemes for household consumption of water. Bangkok, for example, has a flat pricing scheme of 10 baht (US$0.33) per cubic

metre (m3). The flat pricing scheme has also been adopted by Sabah state in Malaysia. Block pricing schemes have been adopted by cities such as Manila, Phnom Penh, Vientiane, Singapore,

10 to around US$172. Assuming a consumption rate of 50 litres per day, this connection fee is equivalent to three years worth of vended water. For someone whose priority is day-to-day subsistence, making an investment that only breaks even after three years is unthinkable.

Intervention opportunity
A possible solution to the problem of burdensome household connection fees is the use of a community-based connection. One such example is the Master Metre System, tested and used successfully in Metro Manila, Jakarta and Phnom Penh. The metre is installed at the gateway to a certain neighborhood or community which measures the collective consumption of all customers
A water pipe runs through a shantytown in Jakarta.

behind this metre. The water authority charges the community, which in turn has to take care of bill collection from the individual households. This method enables water managers to roll out water supply to poorer neighborhoods without the need for individual metres in every house, which is usually the main cost barrier for potential customers. Feedback from communities has shown that bill collection can be tedious, but the collection rate is generally above 90%. Another advantage of this approach is that leakages or illegal taps, which resulted in high percentages of non-revenue water for the water company, are then the responsibility of the community. This adds an extra incentive for the community to maintain the network and police illegal tapping.

as well as the Penang region in Malaysia. They are based on the amount of water consumed. However, the division of pricing blocks varies greatly between cities. Singapore only divides consumption into two blocks, 040m3 and over 40m3. Interestingly, even private households with five or more members rarely exceed 30m3 per month. A five-member household with an average daily consumption of 154 litres per day per person would consume only 23m3 and thus, would still fall into the cheapest pricing block. Penang and Vientiane have three consumption blocks, while Phnom Penh has four. Jakarta is particularly interesting because of price discrimination across household income levels. The water authority uses a block pricing scheme based on consumption and also household income. It is unclear whether any of these pricing schemes are superior to others. There is no clear correlation between the number of pricing blocks and the level of consumption, and no evidence

that pricing blocks are more effective than just setting a higher base price. Of course, the unit cost of water is not the only thing that the poor may struggle with. In many cases, the poor do not have access to formal piped water connections because they cannot afford the installation fees. If the fixed costs are prohibitively high, it does not matter how low the variable costs are. The inability to afford a piped water connection often results in a situation where the poor end up paying more for water than the rest of society. The poor are often forced to rely on private water vendors who charge up to 12 times the price of piped water. For example, in Manila, the price of five drums (1m3) of water is approximately US$3, whereas the same amount of water would only cost US$0.20 from a piped connection.11 Although the price per litre of water is much cheaper through a piped connection, the connection fee for a piped connection amounts

Case study 11

Integrating rural sanitation marketing into a national programme in Vietnam

When supply side subsidies for toilets have done little to improve sanitation in rural Vietnam, are demand driven strategies the answer? International Development Enterprises (IDE), a non-profit organisation that helps the poor to invest their way out of poverty, thinks so. They have implemented several rural sanitation marketing pilot projects in various parts of Vietnam, alongside the governments National Rural Water Supply and Sanitation Strategy which has declared the adoption of demand-responsive approaches and decentralised governance via the implementation of the second National Target Program (NTP) for poverty reduction (20062010). IDE's most recent rural sanitation marketing pilot project was initiated in Quang Tri province, an area with 33% sanitation coverage, in early 2010. IDEs demand driven
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What is sanitation marketing?

Sanitation marketing is an emerging innovation that employs a demand-driven approach, building on the benefits perceived by users to ensure that communities have access to sustainable sanitation services. It rests on four principles: Productthis may be an item (toilet) but also be a service (pit emptying) or a practice (hand washing) which people want and are willing to pay for. Therefore, a range of diverse products should be provided to suit a variety of conditions and pockets; Pricethis is the hardest part of marketing sanitation resulting in attempts to keep costs down and offer a range of products with various prices. Hence smart subsidies might be chosen to reach the poor, who also have to overcome social and other costs; Placethe products must be accessible and available to the customers, which means that the supply chain and information about the product needs to reach the target groups. The critical role of implementers is in facilitating and catalysing the sanitation market to bring suppliers close to customers; and Promotioncreating demand for the product is the most challenging part of selling sanitation. This can be obtained by promotion, which includes communication with customers by many channels including demonstrations, advertising, mass media, word of mouth, etc. Promotion campaign should be designed based on understanding the drivers of customer demand and their trusted channels. The four expected outcomes include: Ensuring that people choose to receive the products they want and are willing to pay for; Financial sustainabilitythe private sector earns profits by selling sanitation products that are paid for customers, while public funds can be spent more efficiently on product development, market research, and promotion and facilitation activities; Cost-effectiveness and replicabilityin addition, effectiveness can be measured by sale figures; and Behavioural change alongside hardware improvementswith the marketing approach, purchasers may come to value, use and maintain sanitation facilities correctly.

approach does not utilise subsidies to households, with subsidies instead targeted toward market development, training and monitoring via: Offering households a range of toilet options at low prices. Based on the health ministry's hygienic toilet standards and local conditions, IDE modified toilet designs with different material choices to reduce the construction cost of toilets; Training local sanitation masons to build toilets, after which they were given endorsement by local health institutions and IDE; and Training local promoters to mobilise households to build hygienic toilets via town meetings, home visits, loudspeaker announcements and leaflet distribution. Nguyens* recent assessment of the programme reveals high demand for sanitation in study communes in Quang Tri and that access to sanitation has been improved by offering appropriate toilets at an affordable cost. However, she highlights that the strategies of both government agencies and IDE currently lack an environmental focus. There is also evidence that the governments strategy is contradicted by the financing mechanism for the implementation of the NTP program, which still relies on supply driven approaches. To overcome this, donor attention would strengthen accountability of the NTP program and support oversight by civil society and local recipients of finance and sanitation service delivery. Finally, she notes that Vietnamese national targets for rural sanitation can only be achieved by integration of good local planning and sound policies, effective institutions at all levels, up-to-date legislation and regulations, and fora and mechanisms for active participation of the private sector and civil society.

12

Privatisation: boon or bane for water provision?

(West Zone), continues to struggle with high losses to non-revenue water, partly due to the old and deteriorated infrastructure it inherited. This case study shows that although Manila enjoyed relative success in its privatisation efforts, there is still much room for debate. The ongoing debate about the privatisation of water services revolves around the issues of coverage, pricing and quality of service. The main argument in favour of privatisation is that the service quality is often better than what stateowned enterprises can provide. Being unconstrained by government budgets and government bureaucracy gives private companies the impression of efficiency and high quality of service. The ability to seek greater amounts of funding for projects also gives private water companies more resources to work with and more options for provision than local governments. The main argument against privatisation is
More waste water treatment facilities like this are needed in Manila.

also due to the nature of private companies.

As discussed previously, providing water services can be very costly for governments. Several cities around the world have explored the option of privatising water services in order to ease the burden on governments in providing water. Currently, there are only a handful of cities in Southeast Asia that have privatised water provision, such as Jakarta and Manila. Water provision in most other Southeast Asian cities is handled by municipal or provincial governments, and sometimes even the national government. Looking outside of Southeast Asia, we can find countries such as England, Wales and France that are almost completely reliant on private companies for their tap water. After deciding that it could neither maintain the quality of water infrastructure nor expand it to meet the rising demand of the growing urban population, the municipal government of Metro

Manila tendered two concessions for water and sanitation services in 1997. At the time, only twothirds of people had piped connections for 16 hours a day, with non-revenue water reaching 63%. The controversial privatisation move introduced the principle of cost recovery, leading to an increase in water tariffs.13 While the price hikes were criticised by many, other impacts of the privatisation were more positive. One of the two private operators, Manila Water Company Inc. (East Zone), was able to achieve 24 hour coverage for 99% of residents and bring down nonrevenue water to 20% by 2008. However, this was only possible with the assistance of the Global Partnership for Output-Based Aid (GPOBA), an organisation that helped to subsidise installation fees and water charges for poor communities. The other company, Maynilad Water Services

Explained: non-revenue water?

Non-revenue water includes unbilled authorised consumption (e.g. for fire fighting), apparent losses (unauthorised consumption from illegal connections and metring inaccuracies) and real losses from leakages and overflow from utility storage. In short it is the difference between water supplied and water sold (i.e. volume of water lost) expressed as a percentage of net water supplied. It is estimated that 5065% of non-revenue water in Asian cities results from apparent losses.

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Some reports even indicate that the costs of private water provision outweigh the benefits. Anand and Kallidaikurichi remark that in the absence of effective regulation, transforming public monopolies into private monopolies poses serious risks of market failure, including exploitative pricing and poor service delivery.16 With regard to the impact on the lives of the

Are governments too slow to act on crucial water issues?

Governments (in Sri Lanka) have been slow to respond to the challenges faced by the water sector and are responsible for its state of affairs today. Water professionals have been unable to articulate their arguments
A boy washing his hands with water coming from a pipe in Aceh.

well enough to convince politicians to act decisively; the professionals themselves have been slow to respond to the unfolding dilemma of development vis--vis resource sustainability. A national water policy document has been in circulation between agencies since the 1990s, but we still have no water policy. Without political resolve backed by a set of committed professionals, we cannot move forward on these issues.

As profit-oriented entities, private companies may choose to provide water only selectively, to the segments of consumers that can generate the largest amount of profit. Private companies would not have an incentive to build pipelines in order to connect neighbourhoods that would not be able to afford their prices, although these segments of consumers may be most in need of a clean piped connection. Companies may be similarly dissuaded from providing piped connections to sparsely populated remote areas due to the high investment cost of building pipelines and the low expected returns. Evidence from other countries provides a mixed picture. Some reports claim that privatisation of water provision has lived up to its potential and brought about improvements in water provision, even for poor neighbourhoods. A study on privatisation efforts and public-private partnerships (PPP) in developing countries found that the average impact of PPPs on water

access and coverage was neutral compared to before the PPPs were launched, while service quality and operational efficiency usually went up.14 The effects on tariff levels were inconclusive. Yet, other research has shown that there is no significant difference between the quality of service in private-run water companies and public water companies. A 2004 report by the Asian Development Bank about the privatisation of water services in Manila concluded that involving the private sector may not in itself necessarily lead to better access and quality of services, but it allows for the formation of innovative arrangements that can facilitate access and improve the quality of services available to the poor.15 This conclusion can be interpreted to imply that the improvements witnessed in the case of Metro Manilas privatisation were not due to any inherent characteristics of private water companies, but rather due to the overall process of reform and innovation that surrounded the privatisation move.

poor, Martin concludes that evidence of sizable improvements is indeed sparse, while admitting that the explosive development of urban centres in developing countries continues to challenge public and private utilities alike. He criticises that policy makers assumed an automatic trickledown effect to occur with the implementation of water PPPs, but points out that major benefits for the poor have only materialised in few isolated examples.17

14

Preventing water pollution: the carrot or the stick?

Litter and trash lie along this river in the North Port District of the Philippines.

Water pollution is one of the most difficult hurdles to overcome in ensuring water security. For years, industries and households alike have polluted their surrounding rivers and lakes due to lack of incentives, exposing the poor, who dependent on natural water sources, to extreme health risks from waterborne diseases Properly disposing and processing waste entails very high costs compared to disposing that same waste into nearby waterways for free. There is no incentive for proper waste treatment because companies and households do not bear the cost of polluted water themselves (economists call this a negative externality). Thus, governments must alter the polluters incentive structures to make proper waste treatment and disposal a more attractive option. There are two main ways to do so: offering a positive

incentive (the carrot) or offering a negative incentive (the stick). Offering positive incentives would mean rewarding companies or households that dispose of their waste properly, while offering negative incentives would mean punishing those that do not. Globally, the most often used approach to deal with pollution is through negative incentives, by making water pollution illegal, mandating proper waste treatment and disposal for both households and industries, and enforcing significant penalties for non-compliance. For example, the Jakarta provincial government imposes a penalty of 1060 days imprisonment and a fine of up to US$2,000 for people caught throwing garbage into one of the citys 13 rivers. The Malaysian Environmental Quality Act of 1974 imposes a

fine of up to RM100,000 or imprisonment up to five years for anyone caught polluting any inland body of water. Negative incentives are usually effective to influence behaviour. Individuals now have to calculate the risk of getting caught and paying a fine, thus dissuading them from the act of littering. Fines are especially effective against industries because the imposed cost of pollution factors into the companys production costs. One added benefit of imposing fines is that should non-compliance still occur, the fines collected can be used to finance clean-up projects. It is important to note, however, that effective implementation of negative incentives requires proper governance structures and the ability to enforce environmental regulation.

15

The effectiveness of negative incentives, however, diminishes somewhat when the culprits are poor. The problem with chronically poor households is that not only are they unable to afford proper waste treatment and disposal, but they also cannot afford to pay the fines if they are caught polluting. To further complicate matters, monitoring pollution and enforcing penalties is especially difficult in informal and temporary settlements such as slums and shanty towns. Some organisations have tried using a different set of incentives, by attempting to persuade slum dwellers and other poor urbanites to stop polluting through positive rewards. Often, these positive incentives are in the form of awareness campaigns that give people a feel good effect whenever they refrain from polluting. However, there are also more straightforward cases of rewarding people financially. Many non-governmental organisations are trying to raise awareness by teaching slum dwellers to earn extra income by selling products made from recycled waste. The main advantage of using positive incentives is that the poor are better able to participate. They are no longer forced into paying large sums of money, and are instead rewarded with money for cleaning up the waterways or simply refraining from further pollution. However, the use of positive incentives generates other problems. Some argue that positive rewards are less able to guarantee action, because the prospect of gain is not as compelling as the prospect of loss. This argument is based on the phenomenon of loss aversion in behavioural economics, popularised by Kahneman and Tversky.18 Moreover, the use of positive incentives to prevent pollution can be costly. Providing the poor with tools, equipment and support systems for recycling or composting involves sizeable amounts of money. Even the cheapest home composting systems can cost around US$3040 per household, while setting up proper recycling depots requires an investment of tens of thousands of dollars. If the poor are taught to produce goods using recycled raw material, then there also needs to be adequate support to ensure that the goods are able to penetrate the market. Finally, the uncertainties in the uptake of the projects and the proper use of equipment make the expected return on investment even lower. When compared to revenue-generating penalty systems, the use of positive reinforcement becomes even less desirable to governments trying to halt the pollution of water. Enny Sudarmonowati, Head of Jakarta Green Monster, a Jakarta-based environmental NGO

How severe is the water pollution?

The quality of water in the Laguna Lake Basin is a major concern for us. Here, the biggest challenges are primary sewage treatment and expansion of the sewer network. We are faced with the problem of ever-rising levels of water pollution coming from household waste. The current condition of our sanitation system is not sufficient to prevent all of these pollutants from contaminating the water supply, thus water pollution currently threatens the livelihood of people living around Laguna Lake. People have been forced to look for alternative water sources such as commercial water vendors, which are costly and inefficient as a primary source of water. However, the poor have no other choice than to drink the untreated water; and are consequently more prone to catch water-borne diseases. Adelina C. Santos-Borja, Environmental Regulation Department, Laguna Lake Development Authority, Philippines

What methods are most effective to deter pollution by the poor?

Dealing with pollution by the poor is difficult. As long as poverty remains severe, people will not have any interest in caring for their environment. Thus, raising awareness to prevent pollution needs to have an economic angle as well. What the Jakarta Green Monster has done is to approach poor neighborhoods and not only teach them how to clean up the river, but also show them the economic value in doing so. We have introduced ways to process the waste into things of economic value. For example, we teach them how to recycle plastic and glass and how to process organic waste into fertiliser. Our organisation shows people the economic potential of being environmentally responsible, while at the same time teaching them that environmental stewardship itself is important. We do run the risk of things not working out for example, Ive seen a composter being used as a shoe rack but we believe that our approach so far has largely been effective.

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Closing remarks
Given ASEANs rapid population growth, it is safe to say that problems of water security will only get worse before they get better. With projected urban populations of 58.3% by 2030 in the Philippines and 53.7% in Indonesia, solutions for urban water provision and access are desperately required, especially for the poor. According to the Asia Water Governance Index, water policy in Cambodia and Indonesia is more pro-poor than in richer countries like Thailand and Singapore.19 This indicates that access and affordability for low-income groups cannot be taken for granted, even in richer countries with already well-developed water infrastructure. Given the importance of water and the far-reaching impacts of compromised water security, addressing the currently existing water provision problems can have a great impact on the well-being and economic development of the poor. Key issues for policymakers and private players in the sector to address in the near term include pro-poor pricing, demand surges from lowincome urbanisation, the impact of privatisation on pro-poor provision, and water pollution by poor households. Based on current trends and emerging innovations, we anticipate seeing more demand-driven approaches to water access problemsthese have the advantage of gaining buy-in from low-income consumers themselves, in contrast to top-down supply-side approaches. This issue is meant to provide policymakers and organisations working in the field of water security with full information about the issues that are most crucial for the poor. We hope that the discussion within this bulletin can help policy makers optimise their pro-poor policies and guide organisations to support, emulate or improve upon the highlighted micro-level solutions for poor communities around Southeast Asia.

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References
1. Asian Development Bank (2006). Water Financing Program 20062010. Retrieved December 3, 2011 from http://www.adb.org/water/ Knowledge-Center/brochures/WFP-2006-2010.asp 2. International Development Association (2009). Water Resources: Managing a Scarce, Shared Resource. The World Banks Fund for the Poorest. Retrieved November 18, 2011 from http://siteresources. worldbank.org/IDA/Resources/IDA-Water_Resources.pdf 3. International Finance Corportation (2011). Safe Water for all. Washington, DC, USA. P.5 4. Guenther, I. & Fink, G. (2011). Water and Sanitation to Reduce Child Mortality. Policy Research Working Paper 5618. World Bank 5. Biswas, A. & Tortajada, C. (2010). Future Water Governance: Problems and Perspectives. Water Resources Development. 26(2). Pp.129-139 6. United Nations (2010). World Urbanisation Prospects: The 2009 Revision Population Database. Retrieved December 7, 2011 from http:// esa.un.org/wup2009/unup/index.asp?panel=1 7. Jakarta Post (March, 26, 2011). Population Growth of Greater Jakarta and its impact. Retrieved November 28, 2011 from http://www. thejakartapost.com/news/2011/03/26/population-growth-greaterjakarta-and-its-impact.html 18. Tversky, A. & Kahneman, D. (1991). Loss Aversion in Riskless Choice: 8. http://www.thejakartaglobe.com/home/ broken-dike-stops-water-supply-in-jakarta/462899 9. Engineers Without Borders presentation: http://www.slideshare.net/ WaterCentre/designing-for-sustainable-sanitation-floating-toilet-casestudy and Engineers Without Borders: http://www.ewb.org.au/explore/ initiatives/tonlesapfloatinglatrinesproject 10. Tortajada, C. (2010). Water Governance: Some Critical Issues. Water Resources Development. 26(2). Pp.129-139 11. Padawangi, R. (unpublished). Building Markets through Quenching Thirst: Clean Water Supply for the Urban Poor in Jakarta and Manila. Working Paper No.8. New Approaches to Building Markets in Asia. Working Paper Series. Centre for Asia and Globalisation, Lee Kuan Yew School of Public Policy: Singapore A Reference Dependent Model.Quarterly Journal of Economics106, 1039-1061 19. Asia Water Governance Index , Araral, E and Yu, D (2011), Institute of Water Policy. Available at: http://www.spp.nus.edu.sg/docs/AWGI%20 brochure-IWP-LKYSPP%289-10%29.pdf (accessed 1 February 2012) 13. Padawangi, R. (unpublished). Building Markets through Quenching Thirst: Clean Water Supply for the Urban Poor in Jakarta and Manila. Working Paper No.8. New Approaches to Building Markets in Asia. Working Paper Series. Centre for Asia and Globalisation, Lee Kuan Yew School of Public Policy: Singapore 14. Marin, P. (2009). Public-Private Partnerships for Urban Water Utilities A review of experiences in developing countries. Trends and Policy Options, No.8. The World Bank. p.42 15. ADB (2004). Water for Slums: Private Sector Participation in Manila. Published in Bringing Water to the Poor: Selected ADB Case Studies 16. Anand, P. & Kallidaikurichi S. (2010). New Thinking on Water Governance Clearing the Clouds, p.49 17. Marin, P. (2009). Public-Private Partnerships for Urban Water Utilities A review of experiences in developing countries. Trends and Policy Options, No.8. The World Bank. p.134 12. Excerpts from: Nguyen HH (2011). Integrating sanitation marketing into a national program: a case study in Vietnam. Brisbane, Queensland, Australia, International Water Centre. Available at: http://docs.watsan. net/Downloaded_Files/PDF/Nguyen-2011-Integrating.pdf (accessed 20-12-2011)

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Children in Manila sifting through the rubbish in the water for items that can be recycled.

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Principal Investigators
Darryl Jarvis is an Associate Professor at the LKY School of Public Policy. He specialises in risk analysis and the study of political and economic risk in Asia, including investment, regulatory and institutional risk analysis. He is an author and editor of several books and has contributed articles to leading international journals. He has been a consultant to various government bodies and business organisations and for two years was a member of the investigating team and then chief researcher on the Building Institutional Capacity in Asia project commissioned by the Ministry of Finance, Japan. His current research is a large cross-national study of risk causality in four of Asias most dynamic industry sectors. He teaches courses on risk analysis, markets and international governance and international political economy. His email is darryl.jarvis@nus.edu.sg

Research Associates
Johannes Loh is working as a Research Associate at the Lee Kuan Yew School of Public Policy. He holds a Masters degree in Public Policy from the Hertie School of Governance in Berlin. His previous research experience includes international student mobility, visual political communication, aid governance and public sector reform in developing countries. Recently, he completed a research project on Success Factors for Police Reform in Post-conflict Situations with the German Technical Cooperation. Prior to joining the Lee Kuan Yew School of Public Policy he has also worked for the United Nations Environment Programme in Geneva, Transparency International Nepal and the Centre on Asia and Globalisation in Singapore. His email is johannes.loh@nus.edu.sg and you can follow his updates on trends in pro-poor policies in the region on Twitter @AsianTrendsMon

Phua Kai Hong is a tenured professor at the LKY School of Public Policy and formerly held a joint appointment as Associate Professor and Head, Health Services Research Unit in the Faculty of Medicine. He is frequently consulted by governments within the region and international organisations, including the Red Cross, UNESCAP, WHO and World Bank. He has lectured and published widely on policy issues of population aging, healthcare management and comparative health systems in the emerging economies of Asia. He is the current Chair of the Asia-Pacific Health Economics Network (APHEN), founder member of the Asian Health Systems Reform Network (DRAGONET), Editorial Advisory Board Member of Research in Healthcare Financial Management and an Associate Editor of the Singapore Economic Review. His email address is spppkh@nus.edu.sg

Nicola Pocock is a research associate at the LKY School of Public Policy. She is also the research manager at aidha, a non profit financial education and entrepreneurship training school for migrant women, especially domestic workers, in Singapore. She holds a BA from Warwick University and an MSc from Kings College London. Prior to joining the LKY School of Public Policy, she interned as a Fast stream trainee in the UK civil service at the Home Office and as a research volunteer at Amnesty International. Nicola has also carried out social work in Marseille, France as a European Union sponsored youth volunteer. Her research interests span health and social policy, health systems financing, social impact assessment, gender, migration and financial behaviours. Her email is sppnp@nus.edu.sg and you can follow his updates on trends in propoor policies in the region on Twitter @AsianTrendsMon #health

T S Gopi Rethinaraj joined the Lee Kuan Yew School of Public Policy as Assistant Professor in July 2005. He received his PhD in nuclear engineering from the University of Illinois at Urbana-Champaign. Before coming to Singapore, he was involved in research and teaching activities at the Programme in Arms Control, Disarmament and International Security, a multi-disciplinary teaching and research programme at Illinois devoted to military and non-military security policy issues. His doctoral dissertation, Modeling Global and Regional Energy Futures, explored the intersection between energy econometrics, climate policy and nuclear energy futures. He also worked as a science reporter for the Mumbai edition of The Indian Express from 1995 to 1999, and has written on science, technology, and security issues for various Indian and British publications. In 1999, he received a visiting fellowship from the Bulletin of the Atomic Scientists, Chicago, for the investigative reporting on South Asian nuclear security. His current teaching and research interests include energy security, climate policy, energy technology assessment, nuclear fuel cycle policies and international security. He is completing a major research monograph "Historical Energy Statistics: Global, Regional, and National Trends since Industrialisation" to be published in Summer 2012. His email address is spptsgr@nus.edu.sg

Taufik Indrakesuma is a research associate at the Lee Kuan Yew School of Public Policy. He is a recent graduate of the Master in Public Policy programme at the Lee Kuan Yew School of Public Policy. He also holds a Bachelor in Economics degree from the University of Indonesia, specialising in environmental economics. Taufik has previously worked as a Programme Manager at the Association for Critical Thinking, an NGO dedicated to proliferating critical thinking and human rights awareness in the Indonesian education system. His research interests include behavioural economics, energy policy, climate change mitigation and adaptation as well as urban development policy. His email is taufik.i@nus.edu.sg

The Lee Kuan Yew School of Public Policy is an autonomous, professional graduate school of the National University of Singapore. Its mission is to help educate and train the next generation of Asian policymakers and leaders, with the objective of raising the standards of governance throughout the region, improving the lives of its people and, in so doing, contribute to the transformation of Asia. For more details on the LKY School, please visit www.lkyspp.nus.edu.sg