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Regulation, Markets and Poverty

Edited by Paul Cook and Sarah Mosedale

Regulation, Markets and Poverty incorporates the main policy implications arising from theoretical and empirical research into competition, regulation and regulatory governance in developing countries. This analysis often challenges conventional wisdom and draws on the work of leading experts from a range of disciplines.
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Chapter 13: Water Subsidies and the Poor


INTRODUCTION It is a Millennium Development Goal that the number of people without sustainable access to safe drinking water should be halved by 2015. But we are not on target to achieve this, particularly in sub-Saharan Africa and in impoverished settlements. This problem is urgent – so what is to be done? How can policy-makers and regulators make it easier for poor people to access safe water? These are questions addressed in this chapter. Until about 15 years ago most water supplies were provided at heavily subsidized rates by the state. However, in many developing countries the poorest and most isolated were not connected to the piped network, so did not benefit from subsidies. Many people, therefore, depended on smallscale, often informal, private water sellers (Mitlin, 2002). As part of the general drive towards pro-market reforms, privatization of the water supply became widely prescribed. It was argued that the state was failing to do the job and that the private sector would be more efficient and so more able to invest in expansion that would benefit the poor. Furthermore, water was to be regarded as an economic good that should be priced to reflect its cost because subsidies ‘distort’ the market and fail to encourage the efficient use of water (Mitlin, 2004). Also, less political interference was expected under privatization, making it easier to charge the higher prices needed for investment and to pursue non-payers. Surveys suggested that many poor people would be able to pay...

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