Market-Based Sanitation Solutions
Say what you will about the Millennium Development Goals (MDGs), but they have helped focus the world community’s attention on the development agenda. And even if you do not agree with the goals themselves, having goals and targets has been very helpful in terms of mobilizing attention and resources.
And in this context, the good news for those who follow the MDGs dialogue is that at least some portion of MDG 7 target C - to halve, by 2015, the proportion of people without sustainable access to safe drinking-water will be met (the world is much further from meeting the goal for sanitation, however, though progress has been made). The bad news is that these achievements may not be sustainable. Sustainability measures themselves have never been part of the MDG agenda, but MDG 7.C is an excellent illustration for why they must be, as we look beyond 2015.
Sustainability is fragile for many reasons, many of which I have touched on before in previous Plan blog articles. One that is fundamental - and of particular relevance to WASH - has to do with the operation and maintenance (O&M) costs related to investments in water and sanitation facilities. Governments, donors, Non-governmental organizations, and communities have systematically underestimated the funding required to maintain coverage levels over time (or the lifecycle of the project or program); as a result, we are now seeing the predictable degradation of many of the service levels achieved earlier.
So how do we tackle sustainability in Water, Sanitation, and Hygiene (WASH)? The consensus – and buzz word of the day - tends to be “market-based” solutions. The International Finance Corporation (IFC), always a bellwether of donor thinking around the role of the private sector in development, has the Selling Sanitation Initiative, a joint project of IFC and the World Bank’s Water and Sanitation Program. The initiative, as a recent IFC publication seeks to, “…lower market barriers, attract private investment and spur innovation by helping firms better understand consumer needs at the base of the pyramid.” Furthermore, it will “…provide support to manufacturing firms to design new products, strengthen rural distribution mechanisms, and actively promote sanitation to consumers currently without access.” There you go: problems solved. What is not to like about this?
On the face of it: nothing. It is a good idea to catalyze the power of the market and private enterprise. It makes a lot of sense to look at opportunities to leverage the profit motive, the energy of entrepreneurship, and the concept of risk, to address and sustain sanitation objectives. There are many intriguing experiments applying these concepts to sanitation around the world. But why are we having a hard time bringing to scale market-based solutions?
In part this is because market-based solutions require bringing together disciplines, experiences, networks, and skills sets that are not usually seen working together. It requires bringing into global health expertise, a knowledge of private sector development. Experts working on all things pertaining to private sector development are not always, and mostly have not been, the same experts who have been involved in water and sanitation. Development practitioners and organizations too tend to operate in silos.
Moreover, too many projects jump right to the need to improve market-based solutions without understanding either what drives markets or who are exactly the players in those markets, what are their roles, and how they respond to incentives. As a result, our technical designs are themselves sometimes flawed, neither replicable nor scalable...and ultimately are not themselves sustainable.
Organizations like Plan are increasingly learning about and understanding the power, and the limitations, of leveraging markets and the private sector. For example, in Indonesia, a country that aims to be 100% Open Defecation Free (ODF) by 2014, Plan has been one of the most successful NGOs (a fact acknowledged by the Government of Indonesia) in getting the communities with which it is working to be 100% ODF. Plan's success is due to a variety of factors, including our work on Community-led Total Sanitation (CLTS). Our efforts have also focused on sanitation marketing and stimulating the domestic private sector, including training over 200 artisans as part of an effort to catalyze non-subsidized latrine construction - critical in terms of the market's longer-term sustainability. The Plan team in Indonesia acknowledges, however, that it has more to learn about engaging the private sector in a sustainable and scalable manner, and the thinking about non-subsidized latrine construction is itself still evolving.
Plan Cambodia's work on the Global Total Sanitation Fund (GSF) is another good illustration in this regard. Plan has taken a facilitating role in stimulating demand and organizing supply chain responses through greater social marketing measures.
Among the key lessons Plan has learned about leveraging the market and the profit motivation is that working effectively with market-based approaches means moving from being the organization supplying solutions to the organization enabling discussion, analysis, information, and access to the right knowledge networks. It means accepting that there will be less control and more risk, and being up front about this with our partners, beneficiaries, and donors.
While the profit motive can be a powerful incentive, it can also lead to perverse outcomes. My Plan USA colleague and respected WASH authority, Darren Saywell noted in a recent visit to Cambodia to review the GSF that private sector responses to widespread social marketing of latrines meant that local masons were busy focusing their energy and investment on the high-end, high-specification latrines where, of course, profit margins were the greatest. As a result, social marketing efforts had led to a market with a choice of only two products: the rudimentary self-supply by the householder (one step above open defecation, and highly fragile) or, as he describes it, the ‘Taj Mahal’ latrine, a bricks and mortar number retailing for $400 - not exactly what market-based advocates had in mind. Given the scale and the risks faced by the local, small-scale entrepreneur, it is logical that their interest tends to be on the higher margin products. It is not clear that local production would, at least in the short-run, be able to effectively and sustainably respond with more modest, lower margin products. So sometimes the local market may not be able to produce what we need, at least not without additional interventions.
Finally, it bears reminding ourselves that market-based solutions first require markets that work. Until we have a better understanding of why some markets are not working, market-based solutions may be interesting, but not very sustainable. This too takes time, and it means investing in better situational analyses and tools. It also means that in many cases there is basic work to be done to bring about improved policy, regulation, legislation, that help support private sector growth and sustainable markets. Until these are in place, sustainable market-based solutions in WASH at scale are less likely to emerge in the localities where they are needed. Indonesia is 128 and Cambodia is 133 out of the 185 countries ranked by the World Bank on business enabling environment. It is relatively expensive for business of any type to operate in these countries. It is also relatively risky. Under these conditions why would we expect any small scale entrepreneur to want to enter and compete in what is still a new and very untested market?
This is all to say that market-based solutions for sanitation are intriguing and they need to be explored. However, they are not yet a magic bullet.