In the context of Afghanistan, political instability, physical insecurity, and slow economic growth often limit the potential for private investment and partnership. As such, it’s not so much about whether or not the government and donors are engaging with the private sector, but rather if they are using the right mechanisms at the right time and with the right partners. Private actors are currently playing a significant, but informal role in Afghanistan’s water and sanitation sector — creating an opportunity to build synergies between the water and sanitation utility and private service providers. However, a lack of regulation and familiarity with private sector engagement mechanisms has prevented the formation of partnerships.
Urbanization Can Promote Economic Growth — or Lead to a Crisis
Afghanistan’s water and sanitation sector is at a critical juncture due to demographic shifts, which include rapid urbanization and the migration of refugees and internally displaced people (IDPs) to the nation’s urban centers. In 2017 alone, more than 200,000 Afghans were internally displaced by conflict and 296,000 returned from Pakistan, according to the World Bank. These migration patterns overwhelmingly tend toward Afghanistan’s urban areas. Kabul, a city designed for a population of around 500,000, is now home to more than 6 million people — roughly 70 percent of whom live in unplanned settlements that are not formally registered or titled with the municipality. This creates barriers to customer registration, bill payment, and, ultimately, cost recovery for utilities. The pace of urbanization presents an enormous opportunity to accelerate off-farm economic growth, but it also presents a challenge for resource-strapped municipalities to effectively deliver basic services to expanding urban populations.
An Urgent Need for Water and Sanitation
At the top of the list of urgent public service needs is greater access to water and sanitation services. With a shrinking water supply and fast-growing demand, the influx of returning refugees and IDPs has exacerbated an already unsustainable situation. The demand for water in Kabul has increased to more than 32 million cubic meters a year, while the groundwater recharge in the Kabul river basin, upon which the city is wholly reliant for its water supply, has dwindled to less than 28 million cubic meters. Much of the funding for water management has been targeted to rural areas while safely managed water remains scarce in urban areas. Sanitation services lag even further behind. There are virtually no networked sanitation solutions in the country, with most households relying on basic pit latrines or under-maintained septic tanks to satisfy their sanitation needs, which can have negative effects on the environment and public health.
The Private Sector Can be Part of the Solution
The private sector plays a large role in water and sanitation service delivery, primarily because the state-owned water and sanitation utility simply does not have the capacity to deliver services to the full urban population. Unregulated private providers charge up to six times more for water and sanitation services than the state-owned utility, dump hazardous wastewater in unmonitored discharge sites, and build infrastructure with varying quality standards. In the absence of standards and regulations enforced by a non-existent independent regulator, private providers disproportionately burden low-income populations, contaminate water sources that endanger public health, and accelerate environmental degradation. Effective partnerships between the utility and private sector providers can help to overcome some of these shortcomings in the near-term as the utility works to build its customer base, expand infrastructure assets, and achieve commercial viability.
Getting Private Sector Partnerships Right
Private sector engagement should be seen as a spectrum of tools and approaches that can leverage the respective strengths of private sector reach and equitable standards for service delivery. The donor community in Afghanistan is well-placed to facilitate a range of partnerships and innovative financing arrangements between the utility and private players, from small-scale service contracts with construction firms for operations and maintenance of existing infrastructure to large-scale investments in wastewater treatment facilities. As the utility considers the variety private sector engagement mechanisms, it is important to evaluate opportunities with the following simple criteria.
- Technical feasibility. Developing mutually beneficial, and therefore sustainable, partnerships means responding to the realities of water and sanitation service delivery in Afghanistan. The current level of technical capacity to design, operate, and maintain infrastructure is low. Rather than investing in advanced technologies that cannot be sustained with existing technical capacity, the utility and private players should focus on smart investments in things like low maintenance sedimentation ponds or straightforward service contracts that bring private service providers into a regulated system.
- Financial feasibility. Private actors will not be interested in partnering with the utility if the partnership does not promise a return on investment. The government and donors can help surmount this obstacle by guaranteeing investments or offering innovative financing solutions, but ultimately these partnerships must be financially viable in the long run. A potential investment in a plastic extrusion facility to produce high density polyethylene pipes in-country — rather than importing from abroad — can be backed up by a guarantee that the utility will be expanding water distribution infrastructure in the near-term.
- Facilitated implementation. Operationalizing private sector partnerships will require facilitated collaboration between the utility and the myriad government institutions involved in public service delivery, including municipalities, the Ministry of Urban Development and Housing, the Ministry of Finance’s Public-Private Partnerships Unit, and the private sector to build awareness of private sector engagement mechanisms and approaches. This represents an enormous opportunity for international donors to have an impact by providing technical assistance to coordinate and raise awareness of private sector partnership models among multiple players.
In addition to these basic factors, private partnerships must also align with the priorities of the government’s national development strategy and the utility’s business plan. As projects are prioritized, donors can support the design of partnership mechanisms, ensuring that the utility absorbs knowledge from the process and fully owns the financing approach. Bringing the private sector into a regulated sector promises to raise quality standards and expand affordable access to water and sanitation services — especially for vulnerable urban communities — filling a critical need in Afghanistan.