Private Sector Participation and Regulatory Reform in Water Supply: The Southern Mediterranean Experience

Abstract

The southern Mediterranean region faces one of the most important water crises in the world. The combination of aridity, foreign dependency, climate change, misallocation of the resources and escalating human demand make water supply a primary issue for health, economy and poverty reduction. In this context, institutional reform of the water supply sector is of great interest. Thus, the aim of this study is to examine the water regulatory framework in southern Mediterranean countries and the development of private sector participation in the context of water crisis.

The first part of the study presents the scope of private sector participation in water supply and its different forms around the world. An extensive review of 22 empirical tests and 48 case studies on the effect of private sector participation in water services has been conducted. This survey shows that private sector participation, per se, in water supply does not systematically lead to gains in efficiency. Reforming the institutional framework is an essential prerequisite for delegating water services.

Afterward, the paper focuses on the southern Mediterranean region. It compares institutional arrangements, recent regulatory reforms and experiences with private sector participation in water infrastructure in Algeria, Egypt, Jordan, Morocco and Tunisia.

Finally, the study presents a monitoring scorecard to analyse the institutional organisation of the water sector and to assess the future of private sector participation. The Water Sector Analysis Scorecard developed in this study is intended to be applied to more countries in the future. It is now being implemented at the OECD for a broad review of private sector participation in water supply and sanitation infrastructure in more than 30 developing countries.

Keywords: Private sector participation, Privatization, Water, Regulation, Middle East, North Africa

JEL Classification: L95, L33, L43, N57, N55