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COMMUNAL SERVICES IN KYRGYZSTAN: A POVERTY AND SOCIAL IMPACT ASSESSMENT1

April 2011

Author: Gabriel Regallet Editor: Ben Slay

Research for comments, not for citation. This paper does not constitute an official statement of the views of UNDP, the United Nations, or its member states.

TABLE OF CONTENTS

I II

Executive summary Water and communal services: sectoral overview Basic characteristics Drinking water supply in urban areas Sewage services in urban areas Solid waste collection and disposal services in urban areas Communal services in rural areas Communal service tariffs Tariffs formation principles Tariffs for water and sewage Waste management tariffs Policy reform in communal services Improvements of legal framework Improvements of the institutional framework Financing issues Prospects for private engagement in service provision Summary and conclusions

5 8 8 9 13 15 18 21 21 23 25 26 26 26 27 28 30 32 32 35

III Poverty trends Income poverty data and trends Income poverty data: assessment and recommendations for improvements Non-income poverty/access to water/sanitation/communal services Affordability: ability and willingness to pay for communal services Household coping mechanisms Customers satisfaction, public information and participation Recommendations IV Social policy issues Kyrgyzstan social policy benefit reform of 2010 Effectiveness of social protection Social protection and water/communal services Cross subsidies Tariff-based measures Cash-based measures

36 40 44 45 48 49 49 54 55 55 55 55 2

Measures to address indebtness and non-payment of the poor Measures to legalize ownership and dwelling rights of the poor Policy recommendations Conclusions References PSIA matrix Annexes Improvements in communal service providers property management Focus group discussion questionnaire Results of FGDs in Bishkek and Osh Institutional structure of State Agency for Social Welfare Tables Revenue/cost ratio for water supply in smaller cities in 2010 Cash flow statement for Bishkek and Osh vodokanals Urban sewage systems Revenue/Cost ratio for sewage service (2005) Legal status of vodokanals based on registration certificates, as of 2010 Residential drinking water and sewage tariffs for oblast centres Collections rates of water supply and sewage tariff revenues in 2009 Level of poverty (2005-2009) Distribution of populations income (2005-2009) Level of poverty by oblast, 2009 Access to communal services for poor and non-poor households, 2007 Water supply sources, distances, and family size, (%) in 2009 Trips and time to fetch water in Issyk Kul Shares of household expenditures among the three poorest deciles allocated to water and sanitation services, and solid waste management by oblast and over 5 years (in %) Share of household expenditures of the poorest and richest decile allocated to WSS expenditures by oblast and over 2005-2009 period (in %) Kyrgyzstans social benefit reform of 2010: key changes Fiscal, social policy trends (2008-2011) Bishkek housing subsidies, as of December 2010 Boxes Private sector WSS service delivery in Kyrgyzstan Public private partnership in communal services: lessons from Yerevan Communal service tariff increases and affordability in Karakol NGOs and consumer protection in Kyrgyzstan Figures Percentage of population in urban areas with access to sewerage (2008) Tariff setting for vodokanals

57 57 57 59 61 64

1 2 3 4

68 70 76 87

1 2 3 4 5 6 7 8 9 10 11 12 13 14

12 12 14 14 19 23 24 32 33 34 36 37 37 40

15 16 17 18

42 51 55 57

1 2 3 4

29 33 42 47

1 2

13 22

3 4 5 6 7 8

Enteric infection incidence rates among children Evolution of residential water tariffs (2007-2010) Willingness to pay higher water tariffs Household perceptions of drinking water quality (2008) Changes in budget spending on social protection and insurance in real terms (2007-2010) Changes in budget spending on subsidies to energy and communal service providers in real terms (2007-2010)

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IExecutive summary
This poverty and social impact assessment of current trends in the communal services sectorunderstood as water, sanitation, and solid waste management servicesin Kyrgyzstan analyzes: poverty levels, and poor and vulnerable households whose welfare could be affected by tariff increases and sector reform; customers perceptions of, and satisfaction with, access to, delivery and prices of communal services, and social protection measures for poor households; and price- and non-price mechanisms affecting vulnerable households access to communal services, and of the policies and reforms affecting them.

Key findings Regarding access to, and quality of, communal services in Kyrgyzstan: Coverage of the rural population with improved water supply has increased since 2004, to reach 50-60 percent of the rural population, due to the construction of new and reconstruction of existing infrastructure (with funding international financial institution and other donors, as well as the central government under the Taza Suu programme). However, less than 25 percent have access to sewerage. For Kyrgyzstans 25 largest cities, drinking water coverage varies from 60-90 percent, depending on the city. It is less than 40 percent for improved sanitation and solid waste collection. Official consumer price data show that household water tariffs rose 87 percent during 2007-2010, with Bishkek posting a 119 percent increase (i.e., more than doubling). Fortunately, the most recent (2009) official household survey data indicate that households in the three poorest deciles devote only 0.35 percent of their expenditures to water and sanitation, and another 0.1 percent to solid waste. This is well below the suggested 4-5 percent international affordability benchmark. However, as part of the national policy dialogue on water issues, the government has pledged to significantly increase tariffs during the next two decades. Should tariffs continue to increase at the rates recorded during 2007-2010, questions about the affordability of these services for poor households will become more important. There is little evidence to suggest that Kyrgyzstans social protection system has a significant impact on vulnerable households access to communal services. Nor are there special benefits intended to promote such access. Regarding the financial and institutional viability of the sector:

The financial viability of many communal service providers is at risk, due to tariffs set below cost recovery levels, coupled with high (35-45 percent) non-revenue water levels2 and inadequate institutional capacity among service providers and the local government bodies that supervise them. Prospects for meeting the investment needs for infrastructure rehabilitation, renewal and expansion from internal sources (e.g., by raising tariffs) are clouded by legal, regulatory, and political uncertainties, and by outdated commercial and managerial practicesparticularly regarding billing and contracting. The national policy dialogue group assessed the financing gap associated with maintaning existing water infrastructure at $37.5 million in 2009. Decentralization initiatives in Kyrgyzstan have transfered significant amounts of water and communal service infrastructure (along with responsibility for its maintenance and service delivery) to local governments. However, there is no national coordinating and regulatory body for communal service provision as a whole; nor are there comprehensive, integrated national water supply, sanitation and waste management policies. There is instead a lack of coordination between water sector policy and policies for related sectors (e.g., housing). Likewise, development policies for communal services sectors are not well integrated into the national annual and medium-term budgeting processes. Regarding customers satisfaction with, and willingness to pay for, communal services:

Survey results about willingness to pay more for better quality communal services are contradictory. Whereas research conducted by the Asian Development Bank and USAID indicate a strong willingness to pay for improved services, UNDP research suggests that a majority of poor customers (in both rural and urban households) are unwilling to pay more for communal services even if their quality improves. Likewise, some survey research indicates that much of the populationincluding poor householdsseems generally satisfied with the quality of communal services. Policy recommendations:

Affordability analyses for communal services, with an emphasis on low income households, should be mandatory for tariff revision and development planning for communal service providers. Such analyses should underpin efforts to protect consumer rights and promote appropriate public participation in communal service delivery. Given the low shares of household (including poor household) expenditures devoted to communal services, it is not clear that social protection measures to improve household access to these services are necessary. Emphasis should instead be placed on mobilizing resourcesfrom donors, as well as from central and local governmentsto reverse the decapitalization of water and communal service infrastructure, and to extend access to these services for households that are not connected to this infrastructure.

Water that is produced but lost before it reaches the customer. These losses reflect leaks (physical losses), theft or metering inaccuracies (apparent losses), and unbilled authorized consumption (e.g., water used in public fountains or for firefighting, or water provided for free to certain users).

A national policy framework for water and communal services, linked to health and environmental protection, and integrated water resources management, should be established. It should be supported by the creation of a national body for water, sanitation, and solid waste policy and investment planning, and for coordination with other relevant sectorsincluding the private sector and non-governmental organizations. The legal responsibilities and division of labour between local governments and service providers should be clarified with disposition of the debts inherited by local communal service providers from central government institutions; application of appropriate contracting and other legal instruments governing the use of municipal infrastructure and assets by service providers, as well as oversight and reporting relationships; and issuance of CDWUUs rights regarding ownership and management of local water infrastructure. International agencies can support these recommendations by: o Helping to accelerate the transfer of expertise and mentoring of Kyrgyzstans experts on water sector management, on affordability assessments, and the like; o Supporting the implementation of the recommendations made by the policy dialogue; and o Supporting research and analysis to develop disaggregated household survey data and qualitative survey results to capture the various dimensions of poverty, vulnerability and social exclusion, pertaining to water and communal services.

IIWater and communal services: Sectoral overview


Basic characteristics About one third of Kyrgyzstans 5.4 million citizens in live in urban areas; two thirds live in rural areas. The water, sanitation and solid waste management systems on which they rely face a series of technical, socio-economic, environmental, geographic, financial, and institutional challenges. Rugged, mountainous topography and many remote locations raise the costs of extending service infrastructure; while seismic activity and harsh climatic conditions drive up maintenance costs. While acces to improved water sources3 in rural areas has improved since 2004, almost half of the population remains without access to adequate drinking systems, and an even higher share is without access to adequate sanitation facilities. While access to drinking water, sanitation, and solid waste management services in Kyrgyzstans 25 cities is better than in rural areas, it also varies widely across (and within) cities. Most of Kyrgyzstans urban and rural water supply and sewage systems were constructed 40-50 years ago. At the time of their construction, they generally met the basic operating parameters of adequate water supply systems: water delivered to the population in sufficient quantity (24-hour service, at adequate pressure) and quality (meeting basic health standards). However, because water was considered a right instead of a business, water supply and sewage systems were constructed without due regard for their financial sustainability. Over time, these systems became increasingly expensive to operate and maintain, because vodokanals4 lacked the necessary funds for adequate repair and maintenance. As a result, much of this infrastructure has undergone significant decapitalization particularly in areas that have not been covered by the governments under the Taza Suu programme (which is co-financed by the Asian Development Bank, World Bank, and other international agencies). At present, many of the 1,074 centralized piped water supply systems in the country do not operate effectively. Official data indicate that the volume of water collected and distributed declined by some 8 percent during 2007-2010 period. In per-capita terms, this decline was more like 12 percent. For households that do have access to piped water supplies, service levels, in terms of reliability, predictability and water quality is often poor. Kyrgyzstans
As in many countries, there are discrepancies in Kyrgyzstan regarding access to drinking water and sanitation services in the data the national government, as opposed to estimates generated by the joint UNICEF-WHO monitoring assessment and by other donors. These discrepancies sometimes reflect different definitions of what constitutes an improved system, as well as a lack of updated baseline data for rural and urban systems. Most figures refer to existing systems that are not necessarily fully functional. In addition, local governments and service providers do not always have good information on the numbers of houses and apartments in each city, or the residents therein. Numbers of people living in informal settlements around big cities are even more difficult to assess. These uncertainties affect estimates of service recipients. 4 The term vodokanal refers to a service provider responsible for potable water and/or sewage supplies. The KKP (republican communal enterprise) acronym refers to providers of solid waste collection and disposal services and possibly, but not necessarily, liquid waste collection and disposal services and/or city improvement services. KKPs include public utilities such as Tazaliks and, to a much lesser degree, private operators.
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Sanitary and Epidemiological Surveillance service reports that, on average, about 2 percent of chemical and 10 percent of microbiological water quality tests failed to reach national norms in 2007.5 These challenges of inadequate access and poor service quality can not be addressed within the financial parameters facing many service providers.6 Even the Bishkek vodokanal does not have sufficient funds to replace parts of the network or do major repairs. In fact, the financial viability of many service providers is out at risk by tariffs that are set below cost recovery levels, coupled with technical leakages and inadequate institutional capacity. Tariffs for water and communal services do not fully cover basic operational costs (e.g., salaries, energy, chemical usage), equipment upgrades and replacement (via a depreciation fund), not to mention the costs of infrastructure expansion. Prospects for meeting the investment needs for infrastructure rehabilitation, renewal and expansion from internal sources (e.g., by raising tariffs) are clouded by legal, regulatory, and political uncertainties, and by outdated commercial and managerial practicesparticularly regarding billing and contracting. Since most household water consumption is not metered, nonrevenue water levels can not be measured accurately; nor can water tariffs be directly linked to actual consumption levels. The absence of water meters also precluded the use of lifeline tariffs (i.e., lower tariffs for small amounts of consumption, to keep basic services affordable for lowincome households). The legal and institutional relationships between local governments (who are formally responsible for communal service provision), infrastructure, and communal service providers remain uncertain. These issues are made more pressing by the fact that Kyrgyzstan is a low income country, in which official household survey data indicate that almost a third of the population lives below the national poverty line. Many citizens of the Kyrgyz Republic believe that they have a right to receive water at nominal cost, and view water supply and sewage as a government problem beyond their responsibility.

Drinking water in urban areas Water service coverage. According to Bishkek and Osh vodokanal representatives interviewed for this research, 90 and 75 percent of these cities populations were provided with safe drinking water in 2010, respectively. (Areas of these cities not covered by the water infrastructure are new settlements, some of which have a quasi-informal character). A 2006

Cited in OECD, National Policy Dialogue on Financing Strategy for Urban and Rural Water Supply and Sanitation in the Kyrgyz Republic, ENV/EPOC/EAP/WATER (2009). 6 Opinions on the financial status, and quality of management, in the water and communal services sector differ widely. Representatives from the Antimonopoly Agency, the Kyrgyzhilkommunsoyuz communal service supplier, and the Community Development and Investment Agency (ARIS) interviewed for this research all agreed that management quality remains problemaric. But while ARIS specialists pointed to improvements over the last five years, Kyrgyzhilkommunsoyuz representatives argued that municipal service providers were nearly bankrupt. Antimonopoly agency specialists agreed that the final situtation was most dire in small cities.

estimate by the Urban Institute7 placed that water coverage in Kyrgyzstans other 23 cities at between 60 and 90 percent, on the basis of census data, registered customers (as specified in residential customer service agreements), and the estimates of vodokanal staff. According to the Urban Institute, most vodokanal directors believe that customers underreport the numbers of users in their household, because invoices are usually based on a per capita usage norm (typically 170 liters/capita/day). Water consumption. Only 3-4 percent of Kyrgyzstans households had water meters in 2010 (less than 8 percent in Bishkek),8 which reduces the accuracy of water consumption estimates. Water consumption norms in Kyrgyzstan vary by location and number of conveniences/cars/animals (i.e., indoor toilets, indoor bath, cows, etc.); they range from 30 liters/capita/day for a street connection to 60 liters/capita/day for house connection, with a maximum of 250 liters/capita/day for apartment blocks in Bishkek, and 210 liters/capita/day for apartment blocks in other cities.9 According to 2010 OECD data, real water consumption for household/domestic needs in Kyrgyzstan are 71.1 liters/capita/day; expert assessments of the average water consumption volume for rural and urban populations range from 50 to 125 liters/capita/day.10 Results of focus group discussions in Bishkek conducted for this research indicate that the installation of water meters allows households with less than four members to reduce their water bill by 25-50 percent. Some focus group participants who paid for the installation of water meters in Bishkek mentioned they recouped their investment (about 2000 som, or $44, per meter) within 9-12 months. However, information from vodokanal staff indicates that water consumption by households with more than four members typically exceeds the relevant norms, in part because households respond to the tariff structure (which links water consumption payments to household size) by under-reporting household size. Water availability. While vodokanals in Bishkek, Osh, and some other cities provide 24hour service, others do not. These included (in 2010) Kok-Jongak (where water was provided for four hours a day), Kyzyl-Kia (7 hours), Kochkor-Ata (8 hours), Nookat (20 hours), Sulukta (12 hours), Uzgen (20 hours), and Isfana and Batken, where service was only provided intermittently. Even 24-hour systems have frequent service interruptions. For instance, participants in focus group discussions held in Osh report that major rainfalls result in service interruptions of 3-5 days due to mud accumulation in the Papan reservoir. Billing and non-revenue water. In developing countries, non-revenue water levels are often above 40 percent; in developed countries, they average about 16 percent.11 However, data are not always available, and what is available is not always reliable, as utilities have incentives

Urban Institute, Development of Performance Improvement Action Plan for Delivery of Local Infrastructure Services, 2006. 8 According to information provided by Chinara Makeshevna, Antimonopoly Agency, 10 December 2010. 9 Such norms are for combined cold and hot water consumption. 10 OECD, Private Sector Participation in WSS in EECCA region: Status Paper, ENV/EPOC/EAP (2010). p.74. 11 N. Tynan and Kingdom, W, A Scorecard for Water Utilities in Developing Countries, online discussion, April 2002.

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to under-report these losses, in order to conceal their own inefficiency.12 Assessments of the extent of non-revenue water in Kyrgyzstan differ. According to 2006 Urban Institute Study and a ARIS 2010 update, estimated leakages in distribution networks are in the 35-45 percent range, as is typical in many developing countries. However, since most systems are not metered and the amount of water pumped into the system and distributed to consumers is not closely monitored, this estimate has an approximate character.13 Interviews conducted in Bishkek and Osh indicate that illegal connections are not a significant problem in Kyrgyzstans cities. This suggests that non-revenue water rates reflect the absence of metering, as well as small leaks in water lines that are not detected (most vodokanals do not have leak detection equipment or portable flow meters). Reducing non-revenue water levels would therefore require significant investments in metering (and not only of end users), as well as more accurate consumer service agreements and improved invoicing (via computerized accounting and billing systems). Vodokanals would also need to examine unbilled authorized consumption and consider reducing the number of entities entitled to receive water without paying for it. Interruptions in water supply, which are often caused by excessive leakage, tend to be a particular hardship on the urban poor, as most cannot afford proper storage facilities and pumps and often have to buy water from vendors. Reducing physical losses will also make more water available and enable water utilities to improve poor communities access to water. Water quality health. In many cities in Kyrgyzstan, water is piped from wells or springs of reasonable quality. But some cities (Kyzyl Kia, Mailuu Suu, Nookat, Shopokov, Sulukta) use solely river water, or use river water as a backup during the dry season. Many pipes are made of asbestos, which can pose health risks (according to the World Health Organization).14 Some 20 percent of Kyrgyzstans water supply systems do not comply with sanitary norms; many lack sanitary protection zones, water treatment plants, and disinfection systems (SES, 2008). Water treatment, where it is practiced, is typically limited to chlorination with occasional water quality testing by the State Sanitary and Epidemiological Surveillance stations. Many systems deliver untreated water much of the time, even in systems relying on river water as their primary source. Additionally, in water systems that deliver water intermittently, the potential for contamination is significant since contaminants can leach into unpressurized pipes. Since there are few as-built drawings of the water system that show the location of other underground utilities (e.g., heating, sewage) and different entities may have constructed the water system over time, chlorination of piped water in Kyrygz small cities is essential if the cities wish to deliver potable water. Revenue/cost ratios for water services. The revenue/cost ratio is a key indicator used to track water suppliers financial conditions. According to ARIS, this ratio for water delivery has
Bill Kingdom, Roland Liemberger, Philippe Marin, The Challenge of Reducing Non-Revenue Water (NRW) in Developing Countries, Water Supply and Sanitation Sector board Discussion Paper 8, Dec. 2006. 13 During the Soviet period utilities were required to keep non-revenue water levels below 18 percent. In other former Soviet republics, utilities continue to report such low levels, even when their actual losses are higher. Source: Frauendorfer, R. and R. Liemberger, The issues and challenges of reducing non-revenue water, Asian Development Bank, 2010. 14 Guidelines for drinking-water quality, Vol. 1, 3rd edition incorporating 1st and 2nd addenda ... World Health Organization 2006. ISBN 92 4 154696 4 ...www.who.int/water_sanitation_health/dwq/gdwq3rev/.
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improved for most (16 of 24) cities during the last four years (see Table 1). Data for the Bishkek and Osh vodokanals paint a similar picture (see Table 2). Still, an unweighted average of these data indicates that, for the country as a whole, revenues are insufficient to cover even the operating costs of providing water servicesnot to mention the costs of maintaining and expanding Kyrgyzstans water infrastructure. Many water utilities have also accumulated significant debts.

Table 1Revenue/cost ratios for drinking water supply in smaller cities (January 2010)
City Balykchy Batken Cholpon Ata Isfana Jalalabad Kant Karabalta Water Co Karabalta Electric Power and Water Supply Industrial Association Kara-Kul (2006) Kara-Suu (2004) Kochkor-Ata Revenue/cost ratio 1.05 0.5 1.02 0.32 1.07 1.50 0.57 1.00 0.33 0.60 1.03 City Kok-Jongak Kyzyl-Kia Mailuu-Suu (2004) Naryn Nookat Shopokov (2008) Sulukta Talas Tokmok (2004) Uzgen (2008) Unweighted average Revenue/cost ratio 1.30 1.08 1.32 1.07 1.02 1.00 0.8 1.175 1.06 1.10 0.95

Source: ARIS 2010.

Water utilities in most of Kyrgyzstans smaller cities have responded to the financial challenges facing them by reducing their operational and maintenance budgets. Such practices may improve revenue/cost indicators today, but at the cost of higher infrastructure repair expenses in the future. Many utilities have also reduced spending on treating discharges. By promoting the spread of water-born diseases, such practices transfer expenses from the water sector to the health system.
Table 2Cash flow statement for Bishkek and Osh vodokanals (in thousands of som)

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On the basis of publicly available data, it is difficult to determine whether the financial situation for most vodokanals is improving or deteriorating. It is clear, however, that national budget expenditures for water supply and sanitation are negligible, comprising less than 0.3 percent of central government budget expe expenditure. These funds are allocated through state transfers to cover operating rather than capital expenditures. In cities where vodokanals vodokanal are unable to meet their operating costs, they typically ically accumulate accounts payable, and rely on revenue transfers from the local government government.

Sewage services in urban areas Of the 19 cities studied by the U Urban Institute and ARIS, sewage coverage is not available to more than 23 percent of the he population (except Bishkek). In n six cities there are no sewage collection systems at all; residents and businesses must rely on sept septic ic tanks or latrines. latrines

Figure 1Urban sewer systems (2008)


100% 81% Share of population with access to improved sewage facilities Share of urban population

40% 25%

37% 29% 20% 11% 23% 7% 25% 16% 3% 4% 18% 11% 9% 5%

Source: UNDP-Kyrgyzstan, The Second Progress Report on the Millenium Development Goals, 2010. 2010

Table 3 presents a summary of the s sewage ewage collection systems in Kyrgyzstans Kyrgyz cities, as assessed by the Urban Institute nstitute and ARIS. Some of these cities had functioning functioni wastewater treatment plants; a few even had biological treatment facilities. However, with ith few investment upgrades and only marginal maintenance in the last twenty years, ars, most of these wastewater treatment plants are not operating at full capacity; some are not operating at all. Most cities sewage works pump the accumulated effluents to a final discharge point a few w kilometers from the facility, typically a dry ravine or small stream. These systems often leak significantly. ly. For example, in Kok Kok-Jangak, sewage no longer reaches its final outfall outfa location; all 13

collected sewage is lost to infiltration. Leaks of this magnitude pose both technical (pipe repairs) and health risks. Since construction of underground infrastructure was often uncoordinated across central and local government agencies and enterprises, water and sewage lines may cross or lie in the same or adjacent trenches. As many water systems operate on an intermittent basis, the potential for sewage infiltration into non-pressurized water lines could be significant. Coupled with the fact that chlorination facilities at many water supply systems are of marginal effectiveness, serious health threats could result.
Table 3Urban sewage systems
City Balykchy Kant Kara-Suu Jalalabad Mailuu-Suu Batken Isfana Kara-Balta Karakol Kara-Kul Sewage system Present Present Absent Present Present Absent Absent Present Present Present System quality* No data unavailable Inadequate Inadequate No data unavailable Inadequate Inadequate Inadequate Inadequate No data unavailable No data unavailable City Kerben Kok-Jangak Nookat Shopokov Sulukta Kochkor-Ata Cholpon Ata Osh Bishkek Sewage system Absent Present Absent Present Absent Present Present Present Present System quality* Inadequate Inadequate Inadequate Inadequate Inadequate Inadequate Inadequate 50% adequate 75% adequate

Sources: Urban Institute 2006; ARIS 2010; UNDP interviews for Osh and Bishkek * Key for system quality: Adequate 50% coverage or more. Inadequate less than 50% of the population are connected to the sewage collection system.

Few data are available regarding the financial sustainability of sewage systems in Kyrgyzstan. Table 4 shows revenue/cost ratios for select sewage service providers, with data from the 2003-2005 period.

Table 4Revenue/cost ratio for sewage service (2005 data)


City Balykchy (2003) Jalalabad (2004) Kant (2004) Kara-Balta UVKH Kara-Balta PO ETV Kara-Kul Sewage revenue/cost ratio 1.06 1.0 2.31 2.28 1.09 0.39 City Kochkor-Ata Kyzyl-Kia (2003) Mailuu-Suu (2004) Shopokov Tokmok (2004) Unweighted average Sewage revenue/cost ratio 0.71 1.01 0.54 1.12 0.8 1.12

Source: Urban Institute, 2006.More recent data are not available.

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Solid waste collection and disposal in urban areas In 2009, some 280 solid waste management companies were registered in Kyrgyzstan. 200 of these were municipal enterprises; 80 were privately owned.15 As in much of Central Asia, there has been virtually no capital investment in the solid waste management infrastructure in Kyrgyzstan in the past twenty years, outside of leadng cities (Bishkek and Osh). This has been coupled with reductions in national government subsidies to local governments and the KKPs responsible for the provision of solid waste management services. Due to these difficulties, waste collection has become much less frequent in most small and medium-sized towns. At present only 39 towns and regional centres, and 95 villages (29 percent of the total number of administrative and territorial units) have municipal waste collection services on a regular basis.16 Most local governments and KKPs are working in very difficult financial conditions, which manifest themselves in a number of ways: Obsolete and poorly maintained equipment that is unable to provide reliable services; Inadequate technologies and management; Inability to find or keep skilled personnel, due to low wages paid in this sector; Household resistance to paying for these services, especially in light of their often low quality and reliability; and, Lack of access to external finance.

In many cases, local governments, which are one of the larger purchasers of solid waste and street cleaning services, have also reduced their purchases, or simply failed to pay for the services they receive from KKPs. Low household incomes likewise make it difficult to collect adequate fees for the provision of essential public servicesparticularly when many households continue to believe that solid waste and street cleaning services should be provided at no, or very low, cost. As a result, there is practically no control over the quantity and quality of services that local governments actually receive from KKPs. Customers and service areas. KKPs typically provide regular collection services in city centers and the adjacent housing and buildings, with service moving out from the center as more land becomes available for communal dumping points. In addition, residences in the outlying areas tend more often to be private houses as opposed to multi-unit apartment buildings. The KKPs may not have the same relationship with these private households as they do with the multi-unit apartment buildings, where they may be providing housing maintenance services and/or toilet pumping services in addition to solid waste removal. (Private houses also tend to generate more waste because of larger yards, gardens, and farm animals, but may also have more financial wherewithal to cart the waste away.) In some cases, KKPs also provide service to subordinated villages outside of the center city, on a pay-for-service basis. In Bishkek, there are two waste operators: Tazalik (the municipal company that covers 90 percent of the city and 96 percent of its population), and AB Trans Ltd., a private operator which
UNDP, Capacity building for the introduction of sustainable waste management principles in the Kyrgyz Republic (2008-2010). 16 UNDP, ibid.
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covers the rest. Areas not covered by regular service consist of 3-5 new settlements (populated by internal migrants) that are not accessible by road. In Osh, a Tazalik municipal company registered in 2004 covers about 60 percent of population. Prior to the June 2010 events, it had about 110,000 residential customers, 1,670 commercial and 287 budget organization customers. Current equipment and service levels. In Bishkek and Osh, and to a lesser degree in larger cities where private companies operate, equipment and service level quality seems to have improved over the last 3-4 years.17 With recent tariff increases, Bishkek waste management companies were able to purchase new equipment (bigger containers and 15 new trucks in 2009). About one metric ton of solid waste is collected daily and transported to landfills in Bishkek. Tazalik Bishkek and AB Trans Ltd collect about 70 percent of the solid waste produced on a daily basis; the other 30% are collected twice or three times a week Osh Tazalik is currently equipped with 500 containers of 1 cubic meter, 50 containers of 6 cubic meters and 26 trucks. About 600 cubic meters of solid waste were collected daily in 2010, up from 100 cubic meters in 2008. Tazalik Osh operates on a five-day weekly schedule. Due to increased budgets for street cleaning, Bishkek city was able to double the number of street cleaners from 400 to 800 in 2010 and increase the number of streets cleaned daily from 23 to 80 over the last three to four years. In many smaller towns, only a part of the city (25-50 percent) benefits from garbage collection services on a regular basis. The remainder of the city is typically cleaned infrequently, sometimes only upon payment by a neighborhood to clean up an open dump. The age of the operating equipment, a lack of spare parts, and inadequate funding make equipment breakdowns frequent, with some companies being unable to operate throughout the day. The failure to provide regular solid waste collection further reduces the collection of fees for these services. Waste storage and collection. Collection costs generally represent 70-90 percent of total solid waste management costs. Collection starts with citizen involvement in storing waste for collection. In many small and medium-size cities in Kyrgyzstan, waste is brought to (formal or informal) dumping points and then piled on the ground. These piles are then shoveled into the back of wagons or dump trucks, or mechanically loaded using a tractor and bucket or a front end loader. These informal dumping points are unsanitary, and if the shoveling is done by hand, collection efficiency is reduced as the equipment stands idle while the waste is shoveled into the wagon or truck. One of the first issues to be addressed in improving sanitation and collection efficiency is therefore improving waste storage. In Bishkek and Osh, the city centre and residential areas are supplied with containers into which customers can throw their garbage bags, and which are emptied regularly. However, both experts and focus group participants note that the sanitary conditions of the collection areas leave something to be desired, as:
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containers in areas with multi-unit apartment buildings are often too small;

Interviews with Pavel Klimenko, Tazalik Bishkek on 13 December 2010; and with Osh City officials on 18 December 2010.

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many residential customers throw their bags beside the containers; and Tazalik employees do not clean up rubbish left on the ground.

In the suburbs and other areas with single-family houses, customers have to wait to bring out their trash until a collection vehicle is in the area, in which case the waste can be dumped directly into the collection vehicle. While this mode of work can improve sanitary conditions at the dumping points and increase collection efficiency, at least one adult must be at home and wait for the truck rather than go to work. In sum: three types of solid waste collection methods are commonly used in Kyrgyzstan. In many cities (e.g., Jalalabad, Nookat, Batken, Isfana, Kok-Jongak, Kara-Suu, Sulukta, MailuuSuu, Kerben, Shopokov, and Kochkor-Ata,) households and businesses make use of informal dumping points on a daily basis. Rubbish at these dumping points is then either shoveled by hand into wagons pulled by tractors, or if the KKP has an operational tractor with a loader, loaded mechanically and by hand into the wagons. The second method entails households bringing their waste to the wagons (or dump trucks) when the tractor and wagon combination is in the neighborhood, and dumping directly into the wagon. This method is used in Jalalabad, Kochkor-Ata, Karakol, Kara-Suu, Shopokov, Nookat, Kant, and Kara-Balta, as well as in some suburbs of Bishkek and Osh. This substantially improves efficiency because it is not necessary to shovel the waste into the wagons. The larger cities excluding Jalalabad (e.g., Balykchy, Mailuu-Suu, Kara-Balta, Karakol, and Kant) typically use a third method of waste collection dating from the Soviet era: side loading, over-the-top, compactor trucks, which collect waste in 0.75 or 1 cubic meter metal bins. In many cases the metal storage bins are old, and there are not enough bins at many locations to store all of the waste that accumulates between collections. Residents and businesses therefore dump waste around the bins. Landfills and recycling. Landfills for most cities in Kyrgyzstan are located on municipal land that is not always legally registered. These areas are typically not fenced (except the main landfills in Bishkek and Osh) and are without environmental protection zoning. In Bishkek, out of 86 hectares of landfill area, 23 hectares are already full. In Osh, out of 62 hectares of landfills, 32 hectares are currently used. In Bishkek, a municipal programme on implementation of the solid waste law was approved in 2006 by the City. The main goal of the programme was to enhance the proportion of waste which is properly collected, sorted and disposed. In addition, the Draft General Layout Plan of Bishkek sought to establish waste recycling stations in each district, thus helping to reduce waste going to landfill and increase recycling. To date however this has not been implemented. The EBRD is contemplating a loan of EUR 14 million and a grant of EUR 8 million to finance priority investments in building the new EU-compliant landfill. A sanitary landfill will be established for disposal of waste including supplementary treatment/disposal facilities to reduce the amount of waste such as recycling. In addition, the existing access road towards the new sanitary landfill will be upgraded. The Bank will assist the City to improve collection of waste through regulated private sector involvement and the City financed investments in new collection vehicles. 17

There are virtually no data on recycling by residential customers. Waste processing and recycling are practically absent.18 UNDP research on the composition and use of solid waste found that informal garbage collectors can earn more in one day (between 500 and 1,000 soms $12-$24) than a teacher earns in a month. Bishkek city officials estimate that these these informal garbage collection activities contribute to the livelihoods of 500-800 people. Informal garbage collectors collect among other things metal, glass, plastic bottles and sell them to middlemen. For instance, plastic bottles are sold for 30 tiyin to middlemen who resell them for 50 tiyin ($0.01) to vendors, who wash and fill them with homemade dairy products and condiments.19 However, such work in landfills can involve significant health risks (e.g., inhaling toxic fumes). The household survey data produced by the Asian Development Banks Issyk-Kul project indicate that 84 percent of households sell household waste for recycling to middlemen, earning an average of 43 som ($1) per day. All poor households stated they sold household waste for recycling, but these households earn less per month (an average of 27 som or $0.60 per day) than non-poor households. A recycling factory was built and commenced operations in 2007 in Bishkek, but it has been closed for financial reasons. In 2000, the Italian ITI company followed by a Japanese company made separate offers to build a waste incineration plant in Bishkek, but these offers were not followed up.

Communal services in rural areas Rural households access to improved water and sanitation services is less than urban households. While improved water facilities are available for some 50-60 percent of the rural population due to the construction of new facilities under the Taza Suu programme, less than 25 percent of the rural population has access to improved sanitation facilities. Pit latrines, mostly without well functioning septic tanks (except in some public placesschools, bazaars, medical centres) are more common. In rural areas, only 3 percent of residential buildings and public facilities are connected to a sewage system.20 During the Soviet period, rural water supply systems were owned by collective and state farms. When these entities were privatized in 1996, most of this infrastructure was transferred to local village administrationswithout budgets for operations and maintenance. The ensuing deterioration in water quality and access gave rise to an outbreak of typhoid fever around the turn of the millennium. The government therefore in 2002 introduced the $70 million Taza Suu water and communal service infrastructure development programme, supported by the World Bank, Asian Development Bank, DFID, and other international organizations. The Department of Rural Water Supply (DRWS) was created, and nvestments in water supply infrastructure were planned for some 1000 villages and seven cities over a six-year period. Community drinking water user unions (CDWUUs) were to be directly responsible for receipt and repayment of credits, operation and maintenance of newly built water systems, and for tariff setting. To
UNDP, Capacity building for the introduction of sustainable waste management principles in the Kyrgyz Republic (2008-2010); see also National Sanitary and Epidemiological Surveillance, www.nature.kg 19 Bishkek Confronts a Waste Management Dilemna, Nov. 9, 2010 http://www.eurasianet.org/node/62345. 20 Taza Suu Programme www.gender.cawater-info.net/.../kyrgyzstan_taza_suu_e.htm.
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participate in the Taza Suu programme, rural communities had to cover 20 percent of total project costs5 percent of which had to be in cash and 15 percent could be in kind (e.g., digging trenches). In addition to supporting the development of CDWUUs, the Taza Suu programme strengthened the decentralized management of rural water-supply systems, as well as helping local communities to better understand the need to collect tariffs in order to cover service costs. By the beginning of 2010, Asian Development Bank and World Bank project work had completed the construction and reconstruction of rural water supply systems in 506 rural settlements covering about 1 million people; 504 CDWUUs had been legally registered. A recent INTRAC report found that 47 percent of CDWUUs are sustainable; 37 would be sustainable if given further support; and 17 percent are not sustainable.21 A second rural infrastructure development phase of the Taza Suu Programme supported by ADB and World Bank is under way, but its implementation was delayed by the April-June 2010 events. Old systems (i.e., those not covered by the Taza Suu programme) are run by the Department of Rural Water Supply, the Sanitary and Epidemiological Service, and local governments. They have not been rehabilitated and are partially or not functioning. Collection of tariff revenues is generally low because of poor service quality. About 500 CDWUUs have been set up under the Taza Suu programme. However, legislation to give CDWUUs ownership over relevant infrastructure still has not been passed. This could undermine the CDWUUss willingness to manage village water supply infrastructure, and so compromise the longer term sustainability of the water systems. Despite its breadth and scope, the Taza Suu programme has only reached one million of Kyrgyzstans 3.6 million rural inhabitants. For the other 2.6 millionas well as for urban residentshopes for improvements in water and sanitation services rest primarily with local governments. Most vodokanals since 2001 have been subordinated to local governments, which are ultimately responsible for the provision of water and sanitation services. Table 5 shows the legal status of vodokanals (according to certificates of registration) in the 25 cities in which they operate. The transfer of assets and re-registration under municipal ownership had been completed in 90 percent of these cities by 2010; in 2005, 70 percent of vodokanals had been under central government control. However, in some cases not all assets have been legally transferred; in other cases the vodokanal is still under the direct control of the national government (see Annex 1 for recent developments). Debts inherited from the previous regime can be a considerable burden for vodokanals.22 This situation would have been resolved by legislation that would have transfered these debts to the central governmentlegislation that was under review at the time of the April 2010 events, and which has not been picked up since.

1.

INTRAC, Building the Capacity of Village Communities to Manage the Provision of Clean Drinking Water: Lessons from Kyrgyzstan, 2010 www.intrac.org/data/.../Praxis-Note-57-Building-the-Capacity-of-Villages.pdf.
22

21

Combined debts inherited from the previous regime before the transfer to municipalities starting in 2006 amounted to a total of about 30 million som (approximately $7 million).

19

Table 5Legal status of vodokanals (based on registration certificates), as of 2010


State Enterprise Cholpon Ata Isfana State Institution Tash Kumyr23 Kok-Jangak Mailuu-Suu Municipal (Communal) Enterprise Bishkek Osh Talas Uzgen3 Kyzyl-Kia Karakol Shopokov Tokmok Naryn Kara Suu Nookat Sulukta Kara Balta Balykchy Municipal Institution Jalalabad Joint-Stock Companies Kochkor-Ata24 Kara-Kul26 Limited Liability Company Kant Osh27 Tash-Kymyr8 Unknown Batken25

*In Kerben water supply services are provided by a Water Users Association. Source: ARIS, 2010.

Although they are legally responsible for communal service provision, local governments in practice often exercise only limited oversight over communal service providers. The oversight that is present is exercised by the local administrations (executive bodies), rather than by the local keneshes (elected city councils). Although the municipal keneshes approve tariffs, this is usually just rubber stamping. After consultations with the regional antimonopoly office, Vodokanals and KKPs file applications with the local governments, who formally set drinking water and garbage collection tariffs in urban areas. Under the current institutional setting, vodokanals and KKPs have limited incentives to operate efficiently. Regulatory oversight in some cases is politicized, with tariff and investment decisions being linked to election cycles. Utilities are often treated as part of the local political apparatus instead of as service providers. Local governments appoint (or remove) water utility directors,28 and provide operating subsidies, investment funds, and other support. In return vodokanals and KKPs are expected to maintain artificially low tariffs, and provide free labour for the municipality. The potential for corruption in such arrangementsparticularly in procurement and in new investment projectsis high. Nor do the arrangements promote the best forms of
Tash-Kumyr has two water supply providers Kyrgyz-Russian LLC Vodkhoz and Suu-Charba which is registered as an institution but it is unclear whether it is a state or municipal institution. The Urban Institute believes that it was registered as a state institution. 24 In Kochkor-Ata water is supplied by a division of Kyrgyzneftegaz. 25 The legal status of the Batken Vodokanal is unclear; it is probably newly registered as a CDWUU. 26 Water in Kara-Kul is supplied by Teplokommunenergo, which is a department of Kaskad Toktogul GES (a branch of Kyrgyztans Power Plants electricity generation company. 27 Osh has two legal entities that are responsible for providing water and sewage services LLC Osh Taza-Suu and Osh Gorvodokanal as a municipal enterprise. 28 The director of the Bishkek Tazalik was changed several times during the last two years, due to allegations of corruption.
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private sector participation in the water sector.29 On the other hand, in larger cities where consumer groups and NGOs are active, oversight seems to have improved: in Bishkek and Osh, annual reports are issued by the vodokanal and tazalik to the city council (Kenesh); and annual consultation meetings with stakeholders (including customers groups) have been introduced (see Annex 2). With the passage of the 2008 decentralization legislation, the vodokanals and KKPs have virtually no linkages with one another, and no organization to provide technical support. The State Agency for Local Government is currently the only indirect umbrella for these organizations. Formation of a vodokanals association was under discussion during the Bakiev presidency (i.e., during 2005-2010). Moreover, there is currently no national coordinating or regulatory body responsible for communal service provision as a whole; nor are national water supply, sanitation and waste management policies promulgated. There is also a lack of coordination between water sector policy and policies for other related sectors, such as housing. There is neither a standard reporting format (except to the tax authorities) nor an obligation to report for vodokanals to the sector decision-makers. Technical and financial information are not being collected and analyzed at the national level. While local governments are responsible for water, sewage, and solid waste mangement services, many do not have the capacity or resources to perform these tasks effectively. In many cases, the decentralization of communal services has meant a loss of economies of scale and higher costs.

Communal service tariffs Tariff formation principles. Vodokanals divide total projected costs (overall revenue requirements) by overall projected amounts of water sold or wastewater collected. Volume projection is based on consumption norms for non-metered customers and average consumption for metered customers. The average cost (per m3) so derived is then multiplied by projected volumes of services sold to individual customer groups, to give revenue requirements for that user class. However, if the regulatory body (in most cases, municipal anti-monopoly agency and city administration) determines (for political or social reasons) that an average tariff is too high for households and budgetary organizations, the vodokanal has to propose another cost allocation and tariff scheme. Such deliberations often end with tariffs being increased for commercial and decreased for residential and budget customers, without strong economic justification. Proposals for tariff increases are then sent to the antimonopoly agency in each oblast city, along with explanations and justifications. The proposal is then sent to the financial department of the city/local government for further review and finally to the city kenesh for adoption. Vodokanals use only uniform flat tariffs based on consumption norms that are supposed to cover both fixed and variable costs, in both metered and non-metered systems. As water metering has not become standard practice, utilities in most cases use consumption norms (based on the number of registered residents in a residence) for billing purposes. In Kyrgyzstan, Sovietera consumption norms for cold water for residential customers vary from 170 liters to 250 liters per person per day, depending the type of residence. For commercial and industrial customers

29

OECD, op. cit.

21

whose water use is not metered, billed consumption levels are based on industrial guidelines. Figure 2 describes the tariff setting process in vodokanals. Revenue requirements for water and sewage utilities are established on an allowable return basis. The expenses that can be recovered through water and wastewater tariffs consist of predefined operating costs, depreciation, and interest expenses. Utilities are allowed to also recover profits. Operating expenses (about half of which are salaries and electricity) are used as the basis for determining the acceptable rate of return. Depreciation charges for maintenance and energy price forecasts are also reflected in the tariff, but expenses for infrastructure improvements or expansion are not. Commercial debts and arrears are generally not accepted as justified costs to be covered by of tariffs, but they do appear in cash flow and profit/loss statements. Taxes are treated as justified costs in tariff calculation; they represent 10-15% of overall vodokanal costs. Figure 2Tariff setting for vodokanals in Kyrgyzstan Identification of costs to be recovered in tariffs
Operating and maintenance costs including Depreciation Debt service (interest) Taxes

Allocation of costs to customer groups

Residential

Budgetary Institutions and Organizations

Commercial

Rate Structuring to Recover Costs

Uniform Rate (Fixed and variable component)

Metered consumption charged per: _________________ Cubic meter (or liters)/ per account

Non-metered consumption charged per: _____________________ Consumption norms per person

22

Until now, tariff calculations have not accurately reflected true profitability because provisions for bad debts are not made. In addition, no source of financing has been created for paying overdue bills to energy suppliers. On the other hand, it is not totally appropriate to include bad debts into tariff calculations, as paying customers would cross-subsidize non-paying customers. The average length of overdue receivables ranges from 6-12 months. Although permitted by law, vodokanals do not discontinue services for non-payers as a general practice, which could help the collection process. However penalties for late payment are in place and practiced by most vodokanal enterprises. Customers are grouped in three user classes: residential, budget-funded organizations, and commercial and industrial users. The tariff-setting methodology does not specify the principles by which overhead costs are to be apportioned across user classes. Theoretically, these costs may be based on a users distance from the water source (or wastewater treatment plant), the types of networks that serve user classes, or demand characteristics (e.g., high or low system loads, peak times, etc.). Some vodokanals levy special charges on industrial customers with high wastewater volumes. Household tariffs are set for indefinite periods of time, and can be changed at any time. This creates economic uncertainty for both companies and consumers. For political reasons, household communal service tariffs seem likely to remain unchanged in 2011.

Table 6Residential drinking water and sewage tariffs (per person per month) for oblast centres
2007 Som Bishkek Talas Jalalabad Osh Batken Tokmok Naryn Karakol National 24 9 27 17 8 27 12 9 23 $ 0.65 0.24 0.72 0.46 0.20 0.72 0.31 0.25 0.60 31 10 38 25 8 28 13 9 28 2008 Som $ 0.84 0.26 1.03 0.69 0.20 0.76 0.34 0.25 0.76 37 14 41 25 11 37 15 9 33 2009 Som $ 0.86 0.33 0.95 0.58 0.25 0.85 0.35 0.22 0.76 53 14 41 25 11 37 15 9 42 2010 Som $ 1.15 0.31 0.89 0.55 0.23 0.80 0.33 0.20 0.92 Cumulative growth (2007-2010, in som) 119% 56% 51% 46% 43% 36% 29% 0% 87%

Source: National Statistical Committee, 2010. Such tariffs do not include the technical service fee for cold water (in Bishkek for instance, this fee is 0.38 som per cubic meter).

Tariffs for water and sewage. According to ARIS data,30 the average national tariff for metered consumption in 2010 was three som ($0.065) per cubic meter for residential customers, and 17 som ($0.37) per cubic meter for budget-funded and commercial organizations. Monthly per person tariffs for non-metered consumption are detailed in Table 6. On a national basis,
30

As of January 2011.

23

household water tariffs rose 87 percent during 2007-2010, with Bishkek posting a 119 percent increase (i.e., more than doubling). In addition to nominal per person tariffs, residential customers in apartment blocks pay a technical service fee representing for instance 0.38 som ($0.008) per square meter in Bishkek. According to ARIS data,31 the national average residential sewage tariff in 2010 was about 2.4 som ($0.05) per person per month, varying from 1.8 som per person in Naryn to 3.54 som per person in Bishkek. Collection rates for water supply and sewage services vary widely across Kyrgyzstan, especially for households (see Table 7). Three factors would seem to lie behind these differences: Varying levels of institutional capacity for financial management and revenue collection in different cities; Regional differences in the extent to which households continue to believe that communal services should be provided for free, or at nominal costs; and Possible affordability issues, in the form of income poverty. The deviations from 100 percent household tariff collection rates in cities in regions with relatively high urban poverty ratesIssyk-Kul (Balykchy), Batken (Sulukta, Kyzyl-Kia), Naryn (Naryn city), and Chuy (Shopokov)suggest that household ability to pay may indeed have some impact on collections.

Table 7Collections rates of urban water supply and sewage tariff revenues in 2009
City Balykchy Kyzyl-Kia Shopokov Kant Kara-Balta Naryn Talas Cholpon-Ata Jalalabad 58% 17% 93% 97% 92% 78% 70% 100% Collection rates Households Budget Commercial 78% 83% 60% 100% 94% 102% 96% 68% 97% 94% 80% 113% 79% 92% 35% 80% 100% City Isfana Kok-Jangak Mailuu-Suu Nookat Sulukta Uzgen Bishkek (2010) Osh (2010) Collection rates Households Budget Commercial 89% 36% 85% 41% 53% 86% 93% About 70% 98% 96% 100% 100% 85% 93% 37% 86% 100% 96% 98%

Source: ARIS, 2010; Vodokanal enterprises in Bishkek and Osh.

On the other hand, collection rates seem to have improved in most cities during the past 34 years, except in Bishkek and Osh in 2010. In Bishkek, this rate fell to 93 percent in 2010, from 97 percent in 2009; Vodokanal personel ascribe this to the April 2010 events (related to protests over the doubling of electricity tariffs). In Osh, the monthly collection of revenues from water tariffs fell to 1.5 million som ($33,000) from 4 million som ($87) in the three-month period

31

Ibid.

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following the dramatic June 2010 events, reflecting the destruction of many restaurants and commercial establishments as well as a weakening in fiscal authority. Waste management tariffs. As with water and sewage services, solid waste tariffs are uniform and are based on consumption norms. Budget-funded organizations and households pay for waste removal but not waste disposal. Charges for commercial customers are to cover both waste removal and disposal/treatment costs. Some businesses therefore prefer to transport and dispose of their wastes themselves; some industries build and operate their own waste disposal facilities. Commercial customers also face waste management taxes, levies, and duties, as well as costs of compliance with waste-related regulation (e.g. environmental fees and fines). Households are charged different fixed rates per person depending on whether they live in a house or an apartment. For budget-funded and commercial users, the cost per cubic meter may vary depending on distance from the landfill. Neither volumetric tariffs nor other incentives to reduce or recycle solid waste are in place. The tariff approval process is the same for other communal services: Tazalik companies prepare requests for tariff increases based on operating costs, depreciation of equipment, taxes and anticipated energy costs (especially for oil). The city antimonopoly agency followed by city financial department reviews the requests, which are then sent to the city kenesh for approval and enactement. In 2010, monthly residential waste management tariffs varied from 10 to 25 som ($0.22$0.54) per person. In Bishkek and Osh, tariffs were 20 som ($0.44) per person in a house and 15 som ($0.33) per person in an apartment; pensioners paid 4 som ($0.09). In Osh, tariffs were 20 som per person in houses and 15 som for apartment dwellers. Despite these low rates, tariffs more than doubled during 2007-2009 in Bishkek and Osh. In 2010, budget-funded and commercial organizations paid monthly tariffs of between 90 som ($2) and 305 som ($6.60) per cubic meter, depending on the city and the distance to landfills. In Bishkek, rates were between 80 som ($1.75) and 150 som ($3.25) per cubic meter; in Osh, they were between 200 som ($4.35) and 305 som ($6.60) per cubic meter. Payments for waste management services are typically collected by KKP controllers working on a commission basis. Controllers often need to visit a residence several times in order to collect payment. When the user agrees to pay, the bill is written out. This method does not provide for proper payment monitoring or enforcement; it has been abandoned in many other countries. While household collection rates have improved over the last three years, they remain low in most of Kyrgyzstans municipalities. In 2010, they were about 50 and 75 percent in Bishkek and Osh, respectively; and 50 percent or less in most other cities and localities.32 However, the main source of income (generally more than 50 percent) for KKPs is tariff revenues collected from commercial and budget-funded organizations. In cities with many industries and commercial establishments, revenues from solid waste management tariffs could represent up to 75 percent of KKP revenues. The situation with waste management in Kyrgyzstan is not different from the rest of the region. A 2007 OECD report on solid waste management in Eastern Europe, the Caucasus, and

32

Information provided by ARIS in January 2011.

25

Central Asia33 found that this sector is often afforded a low priority by governments: budget allocations for the sector rarely reach 1 percent of public expenditures. Revenues from user charges are low, because tariffs and collection rates are low (below 40 percent in some small and medium Kyrgyz cities). Tariffs are below international affordability benchmarks; bills amount to some 0.2 percent of householdsconsumption, compared to the 0.75-1.5 percent affordability benchmark sometimes used by the World Bank. Cross-subsidization of households by (especially private) companies is common; likewise, collection and transportation activities tend to be subsidised by revenues earned from waste disposal.

Policy reform in communal services Improvements in the legal framework. The re-registration and transfer of assets from the central government to municipal governments or enterprises, and the clarification of these enterprises legal status, has now been completed in 90 percent of Kyrgyzstans cities and municipalities (see Annex 1). Legal issues remaining to be resolved include: Disposition of the debts inherited by local communal service providers from central government institutions (this is supposed to be resolved by new legislation); The application of appropriate contracting and other legal instruments governing the use of municipal infrastructure and assets by service providers, as well as oversight and reporting relationships;34 and The clarification of CDWUUs rights regarding ownership and management of local water infrastructure.

Improvements in the institutional framework. The communal service sector continues to face important regulatory and coordination challenges.35 Whereas the Department of Rural Water Supplies regulates and coordinates the activities of water suppliers in rural areas, urban water supply services are delivered without support from a national agency with a similar role. There is no sectoral performance monitoring system with targets and indicators related to the quality of services; nor are development activities in this sector linked to Kyrgyzstans country development strategy. In light of these problems, a 2010 OECD study of the water and sanitation sector in Kyrgyzstan recommended the:36 Integration of water and sanitation sector development priorities into the country development strategy; Establishment of a single national regulatory body responsible for water and sanitation services in both rural and urban areas;

OECD/ TACIS EAP Taskforce, Lessons learnt from financing strategies for the municipal waste management sector in selected EECCA countries, 2007. 34 The World Banks Small Town Infrastructure and Capacity Building project is playing an important role in this respect. 35 See http://www.un.org/esa/sustdev/publications/consumption_en.pdf. 36 See http:// http://www.oecd.org/dataoecd/19/54/45552926.pdf.

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Design of specific, measurable, achievable, realistic and time bound (SMART) sector development targets and performance assessment systems; and Publication of annual reports on sector performance. The national regulatory body would be responsible for:

sectoral development policy; tariff methodologies for centrally provided water and wastewater services that would include procedures both for calculating and approving tariffs; the design and implementation of sectoral performance monitoring systems, with targets and indicators related to the quality of services, consumer protection and engagement; and coordination of investment needs.

The activities of such a body would need to be well coordinated with ministries in charge of Housing and Communal Services, Labour and Social Protection, Finance, Antimonopoly Agency, and Environmental Protection, as well as local governments. Financing issues. Profits and depreciation revenues generated by vodokanal enterprises are typically insufficient to fund capital improvements and system rehabilitation. Central budget investment in local infrastructure is typically limited to new settlements around Bishkek and Osh; the 2010 OECD assessment finds that urban water and sanitation needs in Kyrgyzstan have never been addressed by the medium-term budget framework (MTBF) process, and that rural water and sanitation needs have been outside of the MTBF process since 2008. The bulk of Kyrgyzstans local infrastructure needs must therefore be financed externallylocal infrastructure therefore accounted for some 18 percent of Kyrgyzstans externally co-financed $1.5 billion public investment programme in 2009. Key externally funded public investment programmes in the urban water supply and sewage sector include: The World Banks Small Towns Infrastructure and Capacity Building project in 23 towns (almost completed); The Asian Development Banks Issyk-Kul Sustainable Development project (currently at an early stage of implementation); Water supply projects in Bishkek, Osh, Jalalabad, Karakol, and Kara Balta, to be funded by the European Bank for Reconstruction and Development (EBRD), and the Swiss Economic Cooperation Organization; and The Second Rural Water Infrastructure Development Programme, financed by the Asian Development Bank and World Bank since 2009.

Under the World Banks Small Towns Infrastructure and Capacity Building project, a new billing system for communal services was introduced in 14 towns in 2010, in order to raise collection rates, better inform customers about bills and tariffs, and facilitating fast and accurate reporting.

27

The EBRD is considering providing a sovereign facility of up to 20 million to co-finance (with other donors) priority water and wastewater rehabilitation projects in Bishkek, Osh, Jalalabad, Karakol, and Kara Balta. These funds would be on-lent to water companies, to address urgently needed water and wastewater infrastructure needs.EBRD support would also promote access to basic public utilities, tariff reform within affordability limits (including support to low income groups), increased collection rates (possibility with the establishment of the integrated utility bill collection system), and stronger contractual relationships between cities and service providers. Infrastructure needs in Kyrgyzstans water and sanitation sectors have recently been assessed under the national policy dialogue conducted by the European Commission and the OECD, under the framework of the EU Water Initiative.37 This assessment, which focused on the expenditures needed to prevent further deterioration in existing infrastructure and service levels during the 2008-2027 period, estimated the sectors needs at 2 billion som (about $50 million). By contrast, current expenditures in the sector were estimated at less than 500 million som (about $12.5 million), with about 80 percent of these funds going for urban water and sanitation needs, and about 20 percent going for rural needs. In order to fill this gap, the national policy dialogue drafted a financing strategy, under which the government committed to increase: water and sanitation tariffs from their 2009 levels to the maximum affordable level over a 20-year period; collection rates from under 25 percent in rural areas and below 50 percent in urban areas to 60 and 85 percent, respectively, over a five-year period;38 and public expenditures on water and sanitation services, from 0.3 percent of the general government budget in 2009 to 2 percent, over a 20-year period.

Unfortunately, the political uncertainties and economic difficulties that took hold in 2010 have slowed the implementation of the financing strategy. It is expected that the Government established in December 2010 will reactivate the national policy dialogue process with updated estimates and commitments on the financing strategy in order to get ODA funding. Prospects for private engagement in service provision. In 2000, Ministers of Finance, Economy, and Environment from the former Soviet republics met in Almaty and adopted the Guiding Principles for Reform of the Urban Water Supply and Sanitation Sector in the NIS.39 While the Guiding Principles do not advocate either publicly or privately operated utilities, they do call for establishing the legal and regulatory framework for stakeholder involvement, including private sector participation. Since that time, water and sanitation infrastructure in most
OECD, National Policy Dialogue on Financing Strategy for Urban and Rural Water Supply and Sanitation in the Kyrgyz Republic, ENV/EPOC/EAP/WATER (2009). 38 The collection rates mentioned in this study are much lower than those provided in other sources (e.g., ARIS, 2010; see also Table 7). Results from the focus group discussions conducted for this study, and from UNDPs consumer report card surveys, suggest that most households pay their bills on a regular basis. 39 OECD Almaty Guiding Principles, CCNM/ENV/EAP/MIN(2000)6 http://www.oecd.org/dataoecd/16/46/2390168.pdf.
37

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of these countries has deteriorated considerably, while the private sector role in these sectors has grown. In Armenia, for example, private companies provided water services to 53 percent of the population in 2008. The share in Kazakhstan was 41 percent of the population; while in Russia and Georgia, it was at least 25 percent of population.40 The 2010 OECD report finds that Kyrgyzstan has good prospects for attracting national and international private capital into the communal services sector. However, some preconditions, based on the experience of the only WSS private operator in Kyrgystan (See Box 1) and countries such as Armenia (Box 2), need to be put in place in order for Kyrgyzstan to take advantage of these prospects.

Box 1Private sector water and sanitation service delivery in Kyrgyzstan Kant vodokanal owned by OOO Marketing Serviceis the only water supply and sewage private operator so far in Kyrgyzstan (in Kant city23,000 people). It operates under a short-term (3year) lease contract. Lease payments help finance the renovation of the water supply network. The water operator uses its revenues to purchase equipment and improve water supply network services. The company also paid off some 5 million som ($185,000) in debts owed by the previous water supply company. The collection rate of domestic user charges reached 100 percent in 2010. While the private operator has demonstrated a good performance, the short duration of the contract limits the companys ability to attract additional financing. At present, private participation in Kyrgyzstans WSS sector would most likely start with service or management contracts because they allow the operator to assess risks linked to limited information on the conditions of WSS infrastructure and operational performance, they provide the private operators know how to improve the financial viability of WSS services in the short run and test customerssatisfaction with service improvement accompanied by tariff increases while providing flexibility for adjustments in tariff setting and improvement targets. The political environment after the April 2010 events continued to create unfavourable conditions for increased private sector engagement in the water and sanitation sector. By contrast, solid waste management has attracted significant private entrepreneurship. About 80 out of the 180 service providers are privately owned. They usually work in peri-urban areas.

These pre-conditions include: Municipal authorities should define realistic targets and tasks to be performed by private companies. In most cases, it is advisable to separate operational risks (associated with efficiency of utilities) from investment risks (associated with infrastructure expansion). It is often

40

OECD Private Sector Participation in WSS in EECCA region: Status Paper, ENV/EPOC/EAP (2010).

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advisable to start with management and service contracts which mitigate the financial risks borne by a private operator (this route was followed by Armenia). Private operators need policies that make tariffs and revenues predictable in the medium to long term. At the same time, well designed tariff structures can stimulate cost while encouraging full cost-recovery. In Armenia, they are set on a competitive basis, as an outcome of tenders.

Box 2Public private partnerships in communal services: Lessons from Yerevan Lesson 1: Strong, sustained government support is indispensable. Passage of necessary laws and policies made it possible for a private operator to manage Yerevans water services. The debt forgiveness law, which offered amnesty to indebted customers who agreed to acquire metered connections, ultimately produced a win-win situation for all stakeholders. Social protection measures for the poor were also introduced. Lesson 2: Public information campaigns are important. Many consumers had to be convinced that tariff increases were necessary, and that they would ultimately benefit from paying their water bills. Lesson 3: Reducing unaccounted-for-water requires substantial investments. Where physical leakages are significant, extensive investments in repairing and replacing water pipes are necessary. Lesson 4. Some contracting flexibility is critical. Inaccurate baseline data may lead to unrealistic contractual requirements for private partners. These inaccuracies are often only discovered once the private operator has acquired practical knowledge of the network. In such cases, the partial renegotiation of contracts should be considered, in order to ensure that key goals (e.g., in improving access to water and communal services) are met. Lesson 5. Giving the private operator control over infrastructure investments is a must. The utility took two infrastructure loans amounting to $45 million. Full control over the disbursement of these funds (including procurement) helped the private operator to deliver maximum results in meeting its contractual obligations. Basic information about Armenia PPP: The first management contract for Yerevan water was signed in February 2000, with the Italian company and the Armenian utility S.C.A.R.L. for 4 years plus one with a management fee of about $3 million. The utility earned $1.58 million in incentive payments over the 5-year management contract, which was 84 percent of the $1.875 million payment possible. A ten-year lease was signed with the Veolia Company in December 2005, on a bid of $.30/m3 for the average rated tariff, which includes all taxes, customs duties, fees, and charges. In both contracts, the private operator fulfilled some performance indicators ahead of schedule. Compiled from www.oecd.org/dataoecd/59/5/44576015.pdf and www.crrc.am/.../Towards%20Performance%20Based%20Utility%20Sector%20in%20Armen.

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Inter-municipal cooperation could increase private sector participation in communal service provision in small and medium cities in Kyrgyzstan, inter alia via pooled bidding or establishing a single utility company which covers several municipalities. Support from the national authorities is needed, particularly to: o Raise public awareness about the potential opportunities associated with publicprivate partnerships; and o Provide methodological and legal assistance to local governments playing the role of contracting authority. The creation of national public-private partnership centers can be important in this respect: Russia and Kazakhstan have established such centers.

Summary and conclusions In Kyrgyzstan, access to improved water sources since 2004 has increased, reaching 5060 percent of the rural population due to the construction of new facilities (with funding from the Asian Development Bank, World Bank, and other donors, via the Taza Suu programme). However, less than 25 percent of the rural population has access to improve sanitation facilities. For Kyrgyzstans 25 cities, coverage for drinking water varies from 60 to 90 percent, depending on the city; it is less than 40 percent for improved sanitation and solid waste collection. Regular municipal waste collection has declined drastically in most small and mediumsized towns. Only 39 towns and regional centres and 95 villages (29 percent of the total number of administrative and territorial units) offer regular municipal waste collection services. Despite some improvements in rural households access to water and sanitation services in the last five years, the sector remains significantly under-funded. Finances need to be mobilized to address the obsolete conditions of urban infrastructure and old existing rural systems, as well as expand infrastructure in rural areas and in new urban settlements. On a national basis, household water tariffs rose 87 percent during 2007-2010, with Bishkek posting a 119 percent increase (i.e., more than doubling). Official household survey data indicate that relatively small shares of housheold expenditures are absorbed by communal services, even for poor households. However, the the government committed to increase water and sanitation tariffs to the maximum affordable level over a 20-year period. The financial viability of many service providers is at stake due to tariffs set below costrecovery levels coupled with high (35-45 percent) non-revenue water levels and inadequate institutional capacity. Prospects for meeting the investment needs for infrastructure rehabilitation, renewal and expansion from internal sources (e.g., by raising 31

tariffs) are clouded by legal, regulatory, and political uncertainties, and by outdated commercial and managerial practicesparticularly regarding billing and contractingin the communal services sector. Because only 3-4 percent of households had water meters in 2010, there are no official data on average per capita residential water use. According to 2010 OECD data, real water consumption for households/domestic needs in Kyrgyzstan are 71.1 liters/capita/day; expert assessments of the average water consumption volumes in rural and urban areas fall into a range of 50-125 liters/capita/day. With the municipalization of communal services, there is no national coordinating and regulatory body for tariff setting and communal service provision as a whole. Nor are national water supply, sanitation and waste management policies being promulgated for urban or rural settlements. There is also a lack of coordination between water sector policy and policies for other related sectors, such as housing as well as a lack alignment between policies and programming in the water and sanitation sector on the one hand, and annual and medium-term budget processes.

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IIIPoverty trends
Official data indicate that Kyrgyzstan experienced declining poverty and extreme poverty

levels both for adults and children during 2002-2008. These were accompanied by reductions in income distribution disparities and rapid increases in average per capita consumption among poor households. The regional distribution of poverty also changed, due to relatively slower rates of decline in northern regions than in the south. Both income and non-income dimensions of poverty differ markedly between urban and rural areas in Kyrgyzstan. Urban households tend to have higher per capita incomes and much better access to central heating, water supply, hot water, bath/shower, sewerage, central gas, and telephones than do rural households.

Income poverty data and trends Kyrgyzstans National Statistical Committee uses two national poverty lines (general and extreme), the nominal values for which are indexed to annual consumer price inflation rates. In 2009, the general poverty threshold was set at $3.20 per person per day; the extreme poverty line was set at $2.

Table 8Poverty levels (2005-2009) 2005 2006 2007 2008 General poverty rate, % of population 43.1% 39.9% 35.0% 31.7% Urban areas 29.8% 26.7% 23.2% 22.6% Rural areas 50.8% 47.7% 41.7% 36.8% Extreme poverty rate, % of population 11.1% 9.1% 6.6% 6.1% Urban areas 6.5% 5.5% 3.2% 3.2% Rural areas 13.8% 11.3% 8.5% 7.7% Poverty gap index (depth of poverty) 10.5% 9.1% 6.6% 7.5% Squared poverty gap index (severity of poverty) 3.6% 3.1% 1.0% 2.6% Child poverty rate (general poverty line), % of all children 0-17 years old Total 43.3% 39.3% Urban areas 29.9% 27.7% Rural areas 49.7% 44.6% Child poverty rate (extreme poverty line), % of all children 0-17 years old Total 8.2% 7.9% Urban areas 5.1% 4.5% Rural areas 9.6% 9.5% Sources: National Statistical Committee, 2010; and UNICEF National Study on Child Poverty and Disparities in the Kyrgyz Republic, 2009.

2009 31.7% 21.9% 37.1% 3.1% 2.7% 3.3% 6.1% 1.8%

37.9% 26.1% 43.2%

4.2% 3.4% 4.6%

As the data in the Table 8 show, the overall poverty rate declined from 43 percent in 2005 to 32 percent in 2009; the extreme poverty rate fell from 11 percent in 2005 to 3 percent in 2009. This decline was highest among the rural population experiencing extreme poverty (from 14 33

percent in 2005 to 3 percent in 2009). Similarly, the child poverty rate 41 declined from 65 percent in 2002 to 38 percent in 2009, while the level of extreme child poverty fell from 29 to 4 percent. A combination of economic growth and reductions in income disparities made possible particularly large increases in average per capita consumption rates among poor households (Table 9).42 While government measures to reduce poverty contributed to this outcome, large increases in remittances during this time also seem to have played an important role. Regional data (Table 10) show that Issyk-Kul, Naryn, and Osh regions have the highest overall poverty rates, while rural poverty rates are generally higher than than urban rates (with the exception of Batken and Chui regions).

Table 9Household income distribution trends (2005-2009)


2005 Gini coefficient (by consumption) Gini coefficient (by income) First quintile (poorest) Second quintile Third quintile Fourth quintile Fifth quintile (richest) Source: National Statistical Committee, 2010. 0.433 4.9% 9.5% 14.5% 22.3% 48.8% 2006 0.446 5.1% 9.7% 15.4% 24.1% 45.4% 2007 0.422 5.2% 9.7% 14.7% 22.6% 47.8% 2008 0.252 0.363 6.8% 10.1% 13.4% 22.2% 47.5% 2009 0.245 0.371 6.4% 9.5% 14.9% 22.1% 47.1%

Poverty and extreme poverty rates are highest in households headed by individuals in the 26-34 age group (36.6 percent) and 35-45 age group (25.9 percent).43 Gender and ethnicity seem to matter: Asian Development Bank survey data from Issyk-Kul indicate that four times as many female-headed households of two to three persons are below the poverty as male-headed households, and that twice as many poor female-headed households of seven or eight people are below the poverty as male-headed households of similar size.44 The gender dimensions of poverty in Kyrgyzstan seem to reflect a combination of reduced income-generating opportunities and capabilities and increasing insecurity and disempowerment, for women.45 The Asian Development Bank survey data indicate that Russian households are poorer than ethnic Kyrgyz households46 in Issyk-Kul. There are no serious studies on poverty rates among ethnic Uzbeks and Kyrgyz in Kyrgyzstans southern regions.47 The main determinants of poverty according to the 2009 NSC data (and other assessments) are: homelessness (particularly street children); living in rural (especially mountainous) areasabout 70 percent of the poor live in such areas;

41 42

UNICEF, National Study on Child Poverty and Disparities in the Kyrgyz Republic, Bishkek, 2009. UNICEF ibid. 43 NSC Household Survey 2005-2009 Graph 5 p.23. 44 ADB, Issyk Kul Sustainable Development Project, PPTA household Survey 2009. 45 ADB Country Gender Assessment, Dec. 2005. 46 ADB, Issyk-Kul Sustainable Development Project, PPTA household Survey 2009. 47 www.osh-reality.info/en/296 ; www.registan.net/index.../info-wrangling-on-kyrgyzstan-continues/

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living in rented apartments in urban areas without registration, which precludes possibilities for receiving social assistance; households with three or more children (especially school-age children) and with three or more adults; unemployment; low education levels; pensioners and retired people living alone (mostly Russians and increasingly Kyrgyz elders left behind when their children migrate to other countries).

Table 10Regional poverty rates (2009)


Region Total National 31.7% Batken 31.5% Jalalabad 36.9% Issyk-Kul 46.1% Naryn 44.1% Osh 38.3% Talas 33.0% Chui 21.2% Bishkek 13.2% Source: National Statistical Committee, 2010. Urban population 21.9% 35.2% 22.4% 37.8% 34.9% 27.3% 24.9% 30.5% 13.2% Rural population 37.1% 30.3% 42.3% 49.4% 45.8% 41.9% 34.4% 19.2% ----

Kyrgyzstan is also characterized by high levels of transient poverty as many households have little or no capacity (e.g., savings) to resist shocks to their welfare.48 Income poverty is also a key cause of food insecurity in Kyrgyzstan, which has a chronic character. Food insecurity comes with large family sizes, low education levels, low access to land and irrigation (for poor families in rural areas), the inability to procure proper agricultural inputs to secure good harvests, small numbers of animals, absence of markets and attractive prices for farm products, and low-paid and irregular wage occupations. These factors produce diets lacking in varied, nutritious food and especially expensive items such as animal products. Consuming less food and reducing its quality and variety are common coping mechanisms. Another coping mechanism is for women to forego food in favour of their children and families. Starting from childhood, especially in the rural areas, girls are often given less food than boys, and women only eat after men have eaten.49 Such practices increase food insecurity and malnutrition among women and girls. Despite reductions in income disparities and relatively rapid growth in average per capita consumption expenditures among poor households during 2002-2008, the prevalence of food insecurity seems to have remained surprisingly stable, while food insecurity appears to have worsened for vulnerable groups in Issyk-Kul, Batken, and Naryn. In addition, shocks such as the harsh winter and high food and fuel prices of 2008, and decreased remittances from migrants, in
UNICEF Regional Office for CEE/CIS, Questionnaire on Child Poverty and Wellbeing during the Financial Crisis One Year On, 2010. 49 WFP, Second update on the food security and nutrition situation in the Kyrgyz Republic, 2009.
48

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2009 provoked transitory food insecurity.50 The June 2010 events in the south also caused temporary food shortages between June and September.

Income poverty dataAssessment and recommendations for improvements The poverty methodology used in Kyrgyzstan is problematic because the poverty and extreme poverty thresholds are defined according to the costs of purchasing three consumption baskets (for children, adults and elderly people) which do not reflect realities. National experts say that the guaranteed minimum consumption level that is set at 3,600 som per year should be closer to 6,000 som to better reflect actual living costs in urban areas.51 Moreover, there are discrepancies between: the poverty data produced by the National Statisical Committees household surveys and by social passports (a set of documents certifying the status and family income of recipients of social benefits); poverty data recorded by national/oblast level agencies versus local government social agencies; and data on consumption expenditures produced by household surveys as opposed to national income accounting. Whereas household survey data indicate no change in overall poverty levels and a decline in absolute poverty levels in 2009, data on the composition of GDP for that year show a 13 percent decline in the real value of individual consumption expenditures.

Recommendations to address these weaknesses include the following: Increased support to the National Statistical Committee (perhaps within the framework of the ongoing EU budget support programme) to improve poverty and extreme poverty measurement and monitoringinter alia by clarifying the different minimum consumption baskets, Links between household survey data, social passports, and the guaranteed minimum income (which serves as the basis for many social assistance programmes) should be strengthened. Improvements in Kyrgyzstans poverty monitoring and assessment methodology that were agreed upon prior to the April 2010 events should be translated into laws and regulations, in order to create common understanding and baseline among various government agencies and donors,

WFP, ibid. UNICEF Regional Office for CEE/CIS, Questionnaire on Child Poverty and Wellbeing during the Financial Crisis One Year On, 2010.
51

50

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National research and analysis with greater use of disaggregated poverty data, in both administrative and survey data, should be supported. Complementary qualitative surveys to capture the various dimensions of poverty, vulnerability and social exclusion (including effects of natural disasters and climate change on livelihoods, living conditions and coping strategies of people affected) should also be supported.

Non-income povertyaccess to communal services Non-income dimensions of poverty differ markedly between urban and rural areas in Kyrgyzstan. Many urban families have much better access to basic services such as a central heating, water supply, hot water, bath/shower, sewerage, central gas, and telephones than do rural households. However, one third of the urban non-poor do not have access to at least one basic service (according to the household survey data collected by the National Statistical Committee). Thus, a much greater share of the population suffers from at least some aspects of deprivation than just the people defined as poor in the official survey data (Table 11).

Table 11Access to communal services for poor, non-poor households (2007)


Indicators Private ownership of house (% of households) Living area per capita (square meters) Water supply-indoors (% of households) Water supply-outdoors (% of households): - In the yard - In the street Sewerage and adequate sanitation (% of households) Telephone (% of households) Power supply (% of households)
Source: World Bank, Kyrgyz Republic Poverty Assessment, 2007.

Urban Non-poor Poor 92% 91% 13 9 66% 29% 27% 7% 54% 61% 100% 41% 30% 27% 28% 100%

Rural Non-poor 97% 16 11% 35% 54% 11% 23% 100%

Poor 97% 12 3% 27% 70% 3% 12% 100%

Reliance on unsafe water sources (such as surface waters) has important consequences, particularly for poor households. These include the costs and time of transport to fetch water, health costs, lost economic opportunities, and costs of water treatment at home. Access to water. Official data indicate that the volumes of water collected and distributed declined by some 8 percent (12 percent in per capita terms) during 2007-2010 (see Table 1). While the severe winter of 2007-2008 and the drought of 2008 may have contributed to this outcome, the absence of improvements during 2009-2010 can not be explained by unfavourable meteorological or hydrological conditions. They may instead reflect the growing weaknesses of Kyrgyzstans water infrastructure. Information about the source of drinking water and distance to that source can provide important indicators regarding non-income poverty.

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Table 12Water supply sources, distances, and family size (2009)


Total 32% 23% 32% 7% 6% 100% 50% 50% 0 46% 18% 27% 4% 6% 100% 46% 54% Household sizeNumbers of children 1 2 3 4 5 or more 29% 27% 20% 8% 10% 26% 27% 29% 19% 10% 31% 33% 37% 47% 42% 8% 7% 10% 21% 26% 6% 7% 5% 5% 12% 100% 100% 100% 100% 100% 56% 44% 48% 52% 46% 54% 69% 40% 29% 71%

Central water supply system Own water pump Public water pump Open water source Other sources (truck, bulk water) Total Distance to water source: Less than 100 meters More than 100 meters

Source: National Statistical Committee living standards survey data, 2009.

As the data in Table 12 indicate, only half of Kyrgyzstans population live close (less than 100 meters) to drinking water sources. This distance grows for large families: some 70 percent of households with five or more children must walk at least 100 meters in order to fetch drinking water. Moreover, whereas only 7 percent of Kyrgyzstans households had to rely on open water sources, this share rises to 26 percent for families with five or more children. According to the 2008 UNDP Citizen Report Card study, the average rural family spends up to 31 minutes a day to fetch drinking water for its daily needs; disadvantaged households spend 33 minutes a day, Residents of Talas oblast spend up to 40 minutes to fetch water for the family, while disadvantaged households in that region spend up to one hour. As is the case in many developing countries, women in Kyrgyzstan are much more likely than men to be engaged in collecting water for household use. In the South, it is customary for women and children to fetch water from standpipes and other sources. In the North, however, the situation may be more nuanced. The Asian Development Banks Issyk-Kul Sustainable Development project found that, whereas women are more likely to undertake longer journeys to collect water during the summer time, men are more likely to do this in the winter (Table 13).

Table 13Trips and time to fetch water in Issyk-Kul

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Health risks associated with unsafe water and sanitation. The health risks associated with consumption of unsafe water are well documented in Kyrgyzstan. Many poverty characteristics, such as high infant mortality rates, increasing deaths and lost productivity among people contracting infectious diseases (especially typhoid and acute intestinal infectionssee Figure 3)are associated with inadequate access to improved water and sanitation sources. In 2007, about 30 percent of schools and 20 percent of kindergartens were not supplied with water from centralized systems. In combination with poor hygienic behavior, this causes high levels of children parasitic diseases. About 45,000 parasitic diseases are recorded annually in Kyrgyzstan. According to an April 2009 epidemiological survey on human intestinal parasites (helminthes) conducted in Osh oblast,52 41 percent of schoolchildren harboured at least one parasite species. Statistics released by the state Sanitary and Epidemiological Surveillance service produces show that diarrhoeal diseases caused by unsafe water are responsible for 16 percent of child mortality cases, and 5 percent of adult mortality (due to parasite infestation). The Asian Development Bank survey data from Issyk-Kul show that 22 percent of women were afflicted with parasites, compared to 13 percent for men.53

Figure 3Enteric infection incidence rates among children under 14 years (per 100,000 people)

Source: UNICEF Child Poverty Report, 2009

The annual economic damage from those diseases is about $100,000 according to data provided by Sanitary and Epidemiological Surveillance service. According to data of Chemonics Inc and the Finnish Environmental Institute, water-born diseases result in about $125,000 in annual losses in Kyrgyzstan.54 Treatment of these cases absorbs a significant share of household
52 53

R. Steinmann and SES (2009): Epidemiological Survey on Human Intestinal Helminths, UNICEF. ADB, Issyk-Kul Sustainable Development Project, PPTA Household Survey 2009. 54 Taza Suu Programme www.gender.cawater-info.net/.../kyrgyzstan_taza_suu_e.htm.

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income for poor families.55 Significant numbers of rural households seem to be unaware of the links between unsafe water, unsanitary toilet facilities, and contracting waterborn diseases and incurring major treatment expenses. Access to solid waste disposal services is also limited for a majority of the population. 2009 household survey data indicate that large numbers of rural households (60 percent in northern oblasts and over 70 percent in southern oblasts) dispose of their solid waste by burning or burying it. In urban areas, by contrast, solid waste collection services are available to 60-97 percent of households. Figure 4Household water tariff trends (2007-2010; June 2007 = 100)
220 200 180 160 140 120 2007 100 2008 2009 2010

UNDP calculations, based on National Statistical Committee operational data.

Household water tariff trends. Figure 4 shows that, between mid-2007 and mid-2010, household water tariffs doubled. (By contrast, consumer prices during 2007-2010 rose by 44 percent.) While these water tariffs remain low, combined with other communal services they are a growing burden for low-income households, whose budgets are also stretched by rising prices for food, energy, and other essentials (see Table 14). Official household survey data indicate that poor households in 2009 devoted significant shares of their budgets for foodstuffs (in Osh76 percent; in Bishkek66 percent). Expenditures of households in the poorest decile group for all communal services (including for energy and housing) range from 3 percent of household budgets in Osh to almost 9 percent in Bishkek. In sum, these data indicate that poor households in Kyrgyzstan are also likely to live in areas without running water and wastewater services, and do not benefit from convenient solid waste management services. They often suffer from serious water shortages, poor water quality,
Anectodal evidence suggests that treatment of a serious diarrhoeal case in the Ferghana valley costs about $40, while a severe diarrhoal case with medical intervention and hospitalization costs a minimum of $80. By contrast, the average monthly wage in Kyrgyzstan is about $150.
55

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wastewater pollution, and poor urban and rural environmental sanitation, which is conducive to waterborne diseases and parasites. Poor households spend more time and travel greater distances (often on foot) collecting water. They have less capacity to cope with pollution and degraded environments, and suffer from increased exposure and risks to surface and ground water and air pollutionfurther adding to the burdens of poverty.

Affordabilityability and willingness to pay for communal services Two concepts must be distinguished while assessing communal service affordability: ability to pay and willingness to pay. This distinction is particularly important in the case of Kyrgyzstan as water is free good is a common misperception among the population. Ability to pay reflects the share of household income that must be devoted to procuring the good or service in question. Although there is no universally recognized benchmark for communal services affordability, the allocation of 4-5 percent of household expenditures for water and sewage services is generally regarded as an acceptable international threshold.

Table 14Shares of household expenditures among the three poorest deciles allocated to water and sanitation (WSS) and solid waste management (WM) services by oblast, 2005-2009 2005 2006 2007 2008 2009 WSS WM WSS WM WSS WM WSS WM WSS WM Batken 0.1% 0% 0.1% 0% 0.1% 0% 0% 0% 0.1% 0% Jalalabad 0.3% 0.1% 0.3% 0.1% 0.2% 0.1% 0.2% 0% 0.2% 0% Issyk-Kul 0.4% 0.1% 0.3% 0% 0.6% 0.1% 0.4% 0.1% 0.7% 0% Naryn 0% 0% 0% 0% 0% 0% 0% 0% 0.3% 0% Osh 0.1% 0% 0.2% 0% 0.2% 0% 0.1% 0% 0.2% 0% Talas 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Chui 0.7% 0.1% 0.2% 0.1% 1.0% 0.2% 0.9% 0.2% 0.8% 0.2% Bishkek 1.0% 0.2% 1.5% 0.2% 0.8% 0.2% 1.2% 0.3% 1% 0.3% National 0.25% 0% 0.3% 0% 0.3% 0.1% 0.35% 0.1% 0.35% 0.1%
Source: NSC, Household survey 2005-2009

The data in Tables 14 and 15 indicate that the shares of household expenditures devoted to water, sewerage, and solid waste services among the three poorest deciles are rising, but as of 2009 were still quite lowan order of magnitude below the 4-5 percent benchmark. They also suggest no major differences between the poorest and richest deciles, in terms of shares of expenditures devoted to communal servicesexcept in Bishkek, where these shares are 1.6 and 0.8 percent, respectively. Likewise, there are no major differences among oblasts. This apparent stability in the shares of household expenditures devoted to communal services during 2005-2009a time of sharply rising tariffsmight be explained by several factors. One of these would certainly be the rapid growth in household incomesat least during 2005-2008. However, many of those included in the bottom income deciles are in fact pensioners, the unemployed, and members of other vulnerable groups, about whose consumption patterns relatively little is known. 41

Table 15Shares of household expenditures in the poorest and the richest deciles allocated to water and sanitation expenditures by oblast, 2005-2009 2005 2006 2007 2008 2009 Poor Rich Poor Rich Poor Rich Poor Rich Poor Rich Batken 0.1% 0.3% 0.1% 0.1% 0.1% 0.1% 0% 0.1% 0.1% 0.1% Jalalabad 0.3% 0.5% 0.3% 0.2% 0.1% 0.4% 0.4% 0.2% 0% 0.3% Issyk-Kul 0.2% 0.4% 0.3% 0% 0.6% 0.2% 0.5% 0.3% 0.7% 0.5% Naryn 0% 0% 0% 0% 0% 0% 0% 0.1% 0.5% 0.1% Osh 0.1% 0.2% 0.2% 0% 0.3% 0.1% 0.2% 0.1% 0% 0.2% Talas 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Chui 0.1% 0.2% 0.1% 0.2% 1.4% 0.2% 1.2% 0.6% 1.0% 0.4% Bishkek 0.7% 0.5% 0.2% 0.6% N/A 0.7% 1.3% 0.5% 0% 0.5% National 0.2% 0.3% 0.1% 0.2% 0.5% 0.1% 0.3% 0.3% 0.3% 0.4% Source: NSC, Household survey 2005-2009

Impact of tariff increases. The data in Tables 14 and 15 suggest that communal services are at present affordable, even for poor households. However, should tariffs continue to riseas per the agreement between the government and donors participating in the national policy dialoguethen affordability issues will become more pressing. Box 3 provides an example of how these issues could be handled.

Box 3Communal service tariff increases and affordability in Karakol The Asian Development Banks Issyk-Kul project conducted an affordability study to assess the implications of the water, sewage, and solid waste tariff increases in Karakol needed to reach full cost recovery levels. Based on estimates for average household incomes, household size (4.0 persons) and water consumption (90 liters/person/day) in 2009, affordability levels for water, sewerage, and solid waste tariffs were forecast for five-year intervals from 2011 to 2035. This analysis suggests that the tariff increases needed to reach cost-recovery levels would be affordable. However, a viability gap fund would need to be created during the initial years of operation to fully recover costs, including those associated with asset replacements. Tariff affordability analysis for water and sewage

Source: ADB Issyk Kul Sustainable Development Project, Vol.1: Karakol City Level Infrastructure Plan, December 2009.

Willingness to pay. In addition to economic affordability, socio-political considerations are equally important in determining whether/how much tariffs can be raisedas the April 2010 events remind us. At issue is whether households are willing to pay higher communal service tariffs, which in turn depends on popular perceptions regarding governance in the communal service sector. Willingness-to-pay studies can therefore shed light on affordability concerns. 42

However, while several such studies have been conducted on public services in Kyrgyzstan since 2006, they have generally not addressed household willingness to pay for more for communal services.56 The two most relevant willingness-to-pay studies are the Asian Development Banks Issyk-Kul study mentioned above, and the Citizen Report Card survey done by UNDP Kyrgyzstan in 2008.57 This survey was conducted in 120 local governments and covered 6,000 respondents. These results suggest that respondents were generally satisfied with communal services; and that 60 percent were not ready to pay more for water services, even if service quality were to improve (see Figure 5).
Figure 5Willingness to pay higher water tariffs

Source: Citizen Report Card Survey, UNDP, 2008.

The ADB Issyk-Kul survey found that 22% of respondents did not currently pay, and were not prepared to pay, for communal services.58 Another 57% stated they were not prepared to pay more than they currently paid. 20% of the respondents were willing to pay up to 25 percent more than current levels, and only 1 percent was willing to pay up to 50 percent more. Two thirds of respondents stated they would connect to a public sewer if one were near their house; some 56 percent of poor household respondents stated they would also connect. However, a third of all respondents, and 44 percent of poor household respondents, stated they would not pay for the connection. Some 42 of households would pay up to 500 som ($11) for a connection, 18 percent would pay between 500 and 1,000 som ($11-$22), and 6 percent would pay between 1,000 and 5,000 som ($22-$100) to be connected to a sewer.

For example, the USAID satisfaction surveys conducted annually since 2006 have no such question. (USAID Decentralization and Local Government Program, Satisfaction of the urban population of the Kyrgyz Republic with services provided by urban local governments and public utility enterprises (2006 2009).) 57 For more on this, see http://www.developmentandtransition.net/Single-Article-Issue.118+M537ebf78098.0.html. 58 ADB TA 7228 KGZ: Volume 8, Social Assessment (2009).

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Focus group discussions in Bishkek and Osh, participants in which were mostly poor and extremely poor communal service users, were conducted in late 2010 as part of this research (see Annex 4). Questions were asked about willingness to pay higher tariffs for communal services, if the quality of these services were to improve. About 85 percent of the respondents were not willing to pay more. Reasons given included: We have no money left; our income is not enough. We (urban residents in apartment blocks) are satisfied with current service levels. We already pay for technical services and never see anyone from the vodokanal doing repairs or improvements. Even if tariff did not increase in Osh, our income fell drastically this year.

These three surveys suggest that poor households in particular are not ready to pay more for communal and energy services. Whether such views can be easily changed by public awareness and education activities is an interesting question.

Household coping mechanisms The combination of frequent service interruptions, tariff increases, and low income levels triggers various household coping mechanisms. These include: Non-payment. Vodokanals and KKPs data on accounts receivable and payable do not provide information on non-payment by residential customers. However, the results of the 2008 UNDP Consumer Report Card survey (and, to a lesser extent, of the focus group discussions conducted for this research) suggest that some poor and vulnerable households are occasionally unable to pay their utility bills. Some customers try to make official arrangements with service provider, to extend the period and frequency of payments (for instance, to 20 payments over a year). Some try to make informal arrangements with the collector of the company. Many do not pay until they have the cash to do so. However, this is a costly solution since penalties for late payment are common. Use of alternative drinking water sources. According to the official 2009 survey data, low-income households that are not connected to a central system experience frequent water shortages and attempt to find water from alternative sources, such as purchasing bottled water or water from tanks as well as unsafe open air sources. The 2008 UNDP Consumer Report Card survey data show that in Chui, Issyk-Kul, and the three southern oblasts (Batken, Jalalabad, Osh), vulnerable households more frequently draw water from unsafe sources such as rivers, lakes, springs and irrigation canals. Households in IssykKul and Talas oblasts were most affected by the unreliability of outdoor public water pumps during periods of scarcity. Unsafe storage practices: The UNDP Consumer Report Card survey data indicate that, due to shortages or frequent service interruptions, a majority of rural residents store water in containers that may not always be sterile enough to prevent contamination, during water scarcity times. 44

Withdrawal from or not registering with service provision networks: There are no studies showing any withdrawal from water supply services. However, participants in the focus group discussions conducted for this research stated that some low income households in peri-urban areas are more likely to withdraw from, or not register with, solid waste collection services. They are therefore more likely to dispose of their waste either at home (by burning and burying), in public places, or via unauthorized dumping, with possibly unfortunate environmental consequences. Living with poor sanitation facilities: In urban and sub-urban areas not connected to central sewage systems, low-income households are more likely to opt for pit or public latrines, or not to make any improvements to their existing unsafe latrines, for cost reasons.59 Most public latrines are in poor condition and unhygienic; using can be dangerous, if they are located in areas where personal security is low.

Consumer satisfaction, public information, and participation Within the framework of this research, focus group discussions concerning the quality and pricing of communal service provision were organized.60 Of particular interest are how the results of these discussions compare with similar studies conducted within the framework of 2008 UNDPs Citizen Report Card survey, and the USAID Satisfaction Survey of the urban population with the services provided by urban local governments and public utility enterprises during the 2006-2009 period, especially in regards to: household knowledge, behavior, and perceptions regarding the quality and affordability of communal services; capacity and willingness to pay; inclusion and support of the poor through different mechanisms; institutional issues of communal service delivery; and perceptions regarding potential tariff increases and sectoral reform.

Somewhat surprising, these three studies found that a majority of respondentsincluding from poor householdsare generally satisfied with the communal services provided by vodokanals and KKPs. Rural respondents to the UNDP Consumer Report Card survey gave drinking water services a 3.8 score (out of a possible 5 points) in 2008; some two thirds of the participants in the focus group discussions held for this research in Bishkek and Osh were

See Formative research for hygiene promotion in Kyrgyzstan. 2005 www.heapol.oxfordjournals.org/cgi/content/full/20/4/213 60 The focus group discussions (the results of which are provided in Annex 4) differ from other surveys on communal services in that they: (1) are not based on a representative sample; and (2) focus on low-income respondents.

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likewise satisfied. In n 2009, 69 percent of urban residents were satisfied with the service. service 61 This was a significant improvement on the situation in February of 2008, when 41 percent of urban residents expressed dissatisfaction with water supply services (up from m versus 35 percent in 2007). 62 According to the same USAID survey, p poor households were re slightly less satisfied with these services than non-poor poor households (6 (65% compared to 75%). Customers in southern cities are less satisfied with service quality than c customers in the North. In line with the USAID survey data, the 2008 UNDP Consumer Report Card survey found a similar picture, with 75 percent of non-poor poor respondents and 65 percent of poor respondents being satisfied with the overall quality of drinking water ter services (Figure 5). Most focus group discussion participants indicated that solid waste removal services s have improved over the last years, but problems of collection for people living outside city centres, cleanliness, and unsanitary conditions around containers in multi-apartment building areas remain remain. However, when asked specific questions related to quality of service, water, and infrastructure, focus group discussion participants expressed dissatisfaction and concerns related to drinking water ter smell and taste, high repair costs in apartment blocks, interruptions and wornworn out pipes.

Figure 6Household Household perceptions of drinking water quality (2008)


Households generally 75% 65% Disadvantaged households

30% 21% 4% 5%

Always good quality

Not always good quality

Usually poor quality

Source: UNDP Consumer Report Card (2008).

The UNDP Consumer Report Card explained this apparent paradox by reference to low expectations on the part of respondents, reflecting perhaps their perceived inability and powerlessness to influence local governments and service providers capacity to improve the situation, and a lack of alternate options options. Almost half the villagers interviewed by for the UNDP Consumer Report Card research we were of the opinion that they could not influence the quality of
61

USAID Decentralization and Local Government Program, Residents Residents of Kyrgyz Cities Evaluate their Local Governments, June 2009, sgradwal@ui.kg sgradwal@ui.kg. 62 Ibid.

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water services; for poor households, this share rose to 70 percent. However, only one respondent in ten reported lodging a complaint to the government bodies dealing with drinking water supply. In addition, focus group discussion participants recommended that service providers: offer free (or subsidized) installation of water meters (although this solution was more preferred by pensioners and smaller households than by larger households); provide more understandable information on metering, billing and tariffs; offer more flexible payments arrangements to people facing a shortage of funds; pay more attention to leaks and floodings in old buildings where high concentrations of poor households reside live in majority (including withdrawal of the monthly technical maintenance fee); and consult with customers in order to assess perceptions of quality and prices, and therefore avoid further protests and unrest caused by the last electricity hike.

These perceptions point to the challenges facing consumer protection in Kyrgyzstan (see Box 4). Key consumer rights, as identified by the United Nations Guidelines for Consumer Protection,63 include protection from hazards to health and safety; the promotion and protection of consumers economic interests; consumer access to information; consumer education; availability of effective consumer redress; freedom to form consumer groups, and opportunities for such organizations to present their views in decision-making processes; and the promotion of sustainable consumption patterns. These guidelines stipulate that consumers should be provided with information on: Service standards, consumption norms, and permissible interruptions in service provision; Levels of and rules for establishing prices and tariffs, including the ex ante provision of information about their changes; Procedures and forms of conflict resolution; Performance of service providers; Available privileges and subsidies, as well as information about the procedures and documents needed to receive them; and The current situation and challenges in the sector, and reform measures.

The Aarhus Convention on access to information and justice, and public participation, in environmental matters was signed by the Kyrgyz Republic in 2001. This can be used to promote public participation in the urban water sector reforms, including the following main forms: information; public participation in decision making processes; and access to justice. Further to lobby of civil society groups such as the Pensioners Association, there are now quarterly

.EUWI & OECD EAP Task Force, Costing MDGs on Water Supply and Sanitation in the Kyrgyz Republic and Selecting a Preferred Scenario through a National Policy Dialogue, Bucharest, Nov. 24-25, 2009.

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consultation meetings with LSGs and communal service providers (See Annex 2 for schedule) and an annual meeting with representatives of the various ministries.

Box 4NGOs and consumer protection in Kyrgyzstan Only a few of the thousands of non-governmental organizations registered in Kyrgyzstan work on protecting consumer interests, and especially the interests of low-income customers. The Public Association of Social Defense of People L.M Fomovoy (created in 1996) is the largest NGO defending the rights of pensioners and the disabled in Kyrgyzstan, with 3,000 members organized by oblast chapters. L.M Fomovoy frequently intercedes with national and local government agencies, and communal service providers, to improve pensioners access to affordable communal services. L.M Fomovoy has lobbied inter alia for: free installation of water meters for pensioners, followed by billing on real consumption; simplifying the administrative process to apply for subsidies; holding regular information and consultation meetings between local governments and communal service providers on the one hand, and customers on the other.

Unions of domicile owners (condominiums), which work in oblast centres, Bishkek and Osh, have lobbied the government and parliament to: revise and approve a new housing code; and install free meters for low-income apartment owners.

Source: Interviews with representatives of both organizations, December 2010.

Instead of quality concerns, affordability (lack of financial resources) was given as the main cause of the focus group discussion participants dissatisfaction with water and sanitation services. Some 40 percent of focus group discussion participants indicated that the share of their incomes absorbed by energy and communal services (including energy) are above the 25 percent international benchmark. These surprising resultswhich are in line with those of the 2008 UNDP Consumer Report Card surveyare difficult to reconcile with the official household survey data. Moreover, many low-income focus group discussion participants said that social assistance did not help address affordability problems, either because they were excluded from this assistance because administrative difficulties (e.g., the inability to produce appropriate documentation), or because of the small size of these allowances.

Recommendations Although the most recent official survey data indicate that communal services are at present affordable for all household groups in Kyrgyzstan, this may not be the case much longer if tariffs continue to rise and if household incomes do not recover strongly from the shocks of 2009-2010. Affordability analysis should therefore play a key role in tariff policies in these sectors. In particular, it is recommended that:

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Local government bodies responsible for tariff setting should also be responsible for affordability analysis, which should consider low income users ability to pay for communal services, the presence or absence of coping mechanisms (and their consequences), and psychological reasons for resistance to paying higher tariffs. Quality assurance for these analyses should be conducted by the Ministry of Economic Regulation or other bodies with proven capacity. Affordability analyses should promote consumer protection and public participation in the reform of the communal services sector, in order to: o protect the public interest from arbitrary decisions and abuse of monopoly powers by service providers; o ensure public support for possible reforms (including higher tariffs, where such are justified); and o possibly revise standards for water consumption, as well as quality of services.

Affordability assessments should be required as part of feasibility studies for large investment projects.

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IVSocial policy issues


Social protection measures seek to ensure that socially vulnerable groups access to basic goods and services is not constrained by low incomes. Actual and potential reforms in the communal services sector envisage higher tariffspossibly making these services less accessible to low income households. Additional financial support could therefore be needed for low income households. According to OECD recommendations,64 social policy measures applied to communal services should: Ensure equal access to water so that customers are able to satisfy their vital physiological and hygienic needs regardless of their economic situation; Support access by the most needy households (targeting); Ensure that low income households can afford to purchase a basic minimum level of water services; Create conditions that encourage customers to conserve water; Provide social assistance that reflects the availability of budget funds; Be simple and effective to administer and monitor; and Avoid negative side effects.

Kyrgyzstans social benefit reform of 2010 On 1 January 2010 the new law On state benefits in the Kyrgyz Republic, which sought to increase effectiveness of social protection, entered into force. The law and its implementing regulations sought to better target social assistance to the poorest households, by minimizing inclusion and exclusion errors in determining household elibility for the means-tested (unified) monthly benefit.65 Before this law was adopted, the programme it represents was piloted, with assistance from the European Commission and UNICEF in six rayons and one city (one rayon per oblast) of Kyrgyzstan.
These changes sought to increase the coverage of low-income families with children by making children without birth certificates eligible for the monthly benefit,66 and by extending the duration of these benefits for children until they reach three years of age (before it had been 1.5 years). The average size of the monthly benefit increased from 136 som ($3.7) in 2008 to 172 som ($4.0) in 2009 and 242 som ($5.3) during January-September 2010. Monthly benefit recipients are also eligible for additional cash benefits to help offset the impact of food price increases, which are funded by the World Bank and European Commission.67 When introduced in
Key Issues and Recommendations for Consumer Protection: Affordability, Social Protection, and Public Participation in Urban Water Sector Reform in Eastern Europe, Caucasus and Central Asia, OECD, 2003. p.13 65 The new legislation renamed the unified monthly benefit as the monthly benefit for poor families with children. 66 Children without birth certificates can be enrolled in this programme for three months. During this time, a social worker is to assist the families in obtaining the relevant documents. 67 This programme, which was introduced in 2008, is to be assumed by Kyrgyzstans state budget when the donor resources are fully spent.
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2008, these top-offs were 35 som/month; starting from 2010 their size was increased by 5 to 40 som/month. However, it is not clear that coverage of poor households has improved; the number of monthly benefit recipients actually fell from 370,800 (7 percent of the population) at the end of 2009 to 361,500 people as of 30 September 2010. Nor is it clear that the benefit is large enough to make a difference for poor households; 242 som was less than 4 percent of the average monthly wage reported during January-September 2010. It appears instead that, because of their much larger size, and because pensioners tend to live in larger households, pensions continue to do a better job of reducing poverty than does the monthly benefit. Table 16Kyrgyzstans social benefit reform of 2010: Key changes Old version New version
Unified monthly benefit Guaranteed minimum consumption level 240 som ($6) (2009) Children in poor families and some vulnerable adults Rayon (district) department of State Agency for Social protection Was not taken into account in calculation of family income Disaggregated by oblast (province) Jogoku Kenesh (parliament) Monthly benefit for poor families with children (monthly benefit) Guaranteed minimum income for assessing family income levels, hence monthly benefit eligibility 320 som ($8) (2010) Children in poor families only A local government commission, which makes initial assessments of applicant families Family eligibility now linked to livestock, consumer durables in its possession68 Disaggregated by rayon (district) Government

Item
Title

Welfare threshold guaranteed by the government Monthly income threshold Eligible categories State office receiving applications in rural areas Household ownership of livestock, durable goods Level of disaggregation of norms for imputed income from agricultural land State body authorized to change imputed income norms and other details of the benefit calculation

The monthly social benefit, which is mostly received by people with disabilities who are unable to work, is another relatively large (and arguably more successful) social assistance instrument. The 2010 reforms detached this benefit from the guaranteed minimum consumption level; the new flat rates that were introduced (in the range 1,000-2,000 som$22-$44 per month) were increased to reflect higher energy and food prices. The number of beneficiaries had increased from 62,200 at the end of 2009 to 66,100 as of 30 September 2010. The average size of the monthly social benefit also increased substantially, from 827 som ($19) per month in 2009 to 1,509 som ($33) per month during January-September 2010. At 22 percent of the average
In particular, family eligibility is now linked to: (i) the numbers of cows, sheep, and goats, in its possession; and (ii) whether the family has less than three types of the following durable goods: car, tractor, horse and carriage, truck, colour TV set, automatic washing machine, refrigerator.
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monthly wage reported during this time, 1509 som could have a significant impact on the incomes of recipient households. However, the monthly social benefit is not able to reduce poverty in other households. Likewise, the extent of exclusion and inclusion errors associated with this benefit is not clear. Kyrgyzstans social benefit reform also reduced the number (from 38 to 25) and monetized many categorical benefits (which have objectives other than poverty reduction) that had previously been delivered in-kind (see Annex 5 for list of benefits and beneficiary categories). The cancellation of 13 beneficiary categories (which was heavily contested in Parliament and elsewhere) reduced the number of categorical beneficiaries by some 25 percent. Still, as of December 2010, some 54,000 beneficiaries were registered and received at least one kind of categorical benefit, the amount of which was in the range of 1,000-7,000 som ($21-$149) month (depending on recipient category). The impact of these cancellations was offset by increases in the monthly benefit and monthly social benefit, as well as in pensions. Employees of organizations funded from the state budget, with monthly salaries of less than 1000 som ($22), also received 200 som ($5) per month compensation for the higher energy and communal service tariffs introduced in January 2010. Kyrgyzstans social insurance system is based on the following programmes: Pensions, for retired persons, loss of breadwinner, disability; Unemployment insurance; Allowances for temporary disability, maternity benefits, funerals; and Medical insurance, which finances discounts for the most important and necessary medicines, and some health protection services (inpatient and out-patient treatment).

Since 2006, men may retire on pension at the age of 62 years and 8 months, while women may retire at 57 years and 8 months. Pension benefits consist of a: Base component, which is set at the level not less than 12% the average national wage for the preceding year, and is indexed to average wage growth. As of 1 October 2010, the base component was set at 1,000 som ($25) per month. First insurance component, which is determined by previous earnings, prior to 1996. Second insurance component, which is calculated on the basis of accumulated contributions from 1996, and which is managed on the basis of individual accounts. According to the head of the Social Fund, 500 million som ($12.5 million, or about 3 percent of total pension liabilities in 2010) had been already accumulated as of September 2010.

In addition, pension top-offs to compensate for growing energy prices were introduced in July 2009 and January 2010. The average monthly pension in Kyrgyzstan increased from 1,426 som ($36) at the end of 2008 to 2,808 som ($60) at the end of 2010 (according to Social Fund data). The ratio of the 52

average pension to the average wage also increased during this time, from 25 to 39 percent. According to IMF data, the share of GDP devoted to pensions doubled during 2008-2010, rising from 4.4 to 9.0 percent during this time.69 The growth in pension spending is partially due to the top-offs to compensate for the energy tariff increases, as well as to promises made during the presidential and parliamentary elections in July and October 2010, respectively. In July 2009, the cumulative (employer + employee) payroll tax rate was increased from 27 to 27.25 percent, reflecting a reduction in the employer rate (from 19 to 17.25 percent) and an increase in the rate for employees (from 8 to 10 percent). This increase did little to reduce Kyrgystans extensive informal labour market, in which wages are not subject to taxation by, and which is a key cause of the low monthly pension benefits. Still, pension benefits remain much larger than most forms of social assistance. Social protection institutions. Kyrgyzstans social protection institutional framework is divided into three layers: national, rayon (district), and local government (see Annex 6). The main state bodies are the State Agency for Social Welfare under the Government (which prepares policies, strategies, and norms for the monthly benefit, the monthly state benefit, and categorical benefits), and the Social Protection Fund, which manages pensions and social insurance. The 2010 social protection reform delegated to local governments powers that had belonged to the Ministry of Labour and Social Protection, and rayon agency for social protection, in the following areas: Preparation of social passports and poverty mappings; Identification of household needs and community-level forms of support; Analysis of poor household living conditions; Registration of documents for state benefits; and Preparation of lists of poor people in need of humanitarian assistance and registration of applications for humanitarian assistance.

Since the new social protection legislation was adopted in some haste in December 2009, local governments were not fully prepared for their new functions, particularly in terms of benefit calculations. The ensuing confusion is probably responsible for the reported reductions in the numbers of monthly benefit applications in 2010. Few private companies and non-governmental organizations (NGOs) are involved in advocating for better social protection measures for the poor. Private initiatives are often ad hoc and based on family and clan networks. The Pensioners Association and the unions of apartment owners are among the few NGOs that provide assistance and lobby for their constituents. Some NGOs supported by international groups provide support to street children and homeless people. While social support networks remain integral to everyday life in Kyrgyzstan,70 the breadth and depth of these networks seem to have diminished for poor households, especially in rural areas. (Moreover, many of the non-poor seem to be increasingly reluctant to help impoverished relatives.)
69 70

IMF Kyrgyzstan Country Report (October 2010). K. Kuehnast & N. Dudwick, Better a hundred friends than a hundred rubles, Kennan Institute, 2002.

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Currently there are few donors involved in the reform of social protection on in Kyrgyzstan. The European Commissions budget udget support programme rogramme with the Ministry of Finance (2007(2007 2010) included technical assistance to improve the targeting of the monthly benefits. b UNICEF contributed to the programme by co co-funding the means testing pilot in six rayons and one city. UNICEF has ongoing programmes for poor children and their families families.71 The he IMF programme for Kyrgyzstan under the Exogenous Shocks Facility, which began in December 2008, 2008 called for increasing the top-offs offs to the mon monthly thly benefit and monthly social benefit payments from 35 to 40 som/month. However, only the first tranche ($25 million) of this programme me was released; 72 subsequent disbursements were withheld due to governance concerns concerns. Some $34 $ million was disbursed in September 2010 under the IMFs Rapid Credit Facility. Together with the World Bank, the European Commission ommission has financed monthly benefit top-offs offs to help offset the impact of food price increases. And budget support provided by the Russian Federation and other bilateral donors helped finance significant increases in social expenditures during 2009-2010. 2009

Changes in budget spending on Figure 7Changes social protection and insurance, in real terms* (2007-2010) 2010)
84%

Figure 8Changes Changes in budget spending on subsidies to energy and communal service providers, in real terms* (2007-2010) (2007
10% 8%

1% -1% 12% 2007 -5% 2007 -1% 2008 2009

-5% 2010

2008

2009

2010

* Nominal increase in social benefits paid out divided by change in the consumer price index. UNDP calculations, based on National Statistical Office data.

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UNICEF, National Study on Child Poverty and Disparities in the Kyrgyz Republic, 2009 2009. The previous authorities decision in September 2009 to place a substantial portion of the saved bilateral assistance received in 2009 in investments overseas raised concerns about governance and safeguards of public resources (IMF Country Report No. 10/336, October 2010).

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Effectiveness of social protection Resources. Budget data provided by the National Statistical Committee show that social protection expenditures nearly doubled in 2010, to 11.1 billion som ($240 million) from 5.6 billion som ($130 million) in 2009. In real terms, this amounted to an 84 percent increase (see Figure 7). This followed a smaller but still solid increase (12 percent) in 2009, and represents an important departure from previous trends. Spending increased relative to GDP as well: IMF data indicate that social transfers rose to 9.4 percent of GDP in 2010 (see Table 18). Kyrgyzstans social protection index, as calculated by the Asian Development Bank, had risen to 0.62 in 2009the third highest value of the 31 Asian and Pacific countries surveyd in that year.73 However, much of the growth in budget spending that underpinned this social policy expansion was due to grants provided by bilateral donors: as a share of GDP, these rose from under 2 percent in 2008 to 11 percent in 2010. Such increases may not be sustainableparticularly if the economy does not recover strongly from the recession of 2010.

Table 17Fiscal, social policy trends (2008-2011) Share of GDP devoted to: 2008 2009 2010 Budget revenues 25.9% 28.5% 29.6% - Grants 1.9% 5.3% 11.0% Budget expenditures 26.2% 36.6% 40.5% - Household transfers 5.0% 6.8% 9.4% - Pensions 4.4% 6.1% 9.0% Budget deficit -0.3% -8.1% -10.9% Public debt 48.5% 59.4% 70.0%
* Social Fund expenditures. Source: IMF country report (KyrgyzstanOctober 2010).

2011 30.0% 1.9% 34.2% 9.0% 8.6% -8.2% 68.2%

Coverage. Despite these increases, average (per recipient) payments of both the monthly benefit and the monthly social benefit remain at or below 20 percent of the extreme poverty threshold. Both benefits cover small numbers of people (less than 430,000). UNICEF74 estimates that both programmes exclude at least 60 percent of the poor, especially poor people without children, people unable to produce a social passport and other documents, and many rural residents. This relatively poor coverage reflects the fact that most of the 2009-2010 growth in social protection expenditures was due to increases in non means-tested programmes, particularly pensions and categorical benefits (due to their monetization). This growth also reflects efforts to replace budget subsidies to energy and communal service providers with higher social assistance payments (see Figure 8).

See http://www.adb.org/Documents/Books/Social-Protection/Volume2/Part3.pdf; and http://www.adb.org/Documents/Books/Social-Protection/Volume2/Part5.pdf. 74 UNICEF Regional Office for CEE/CIS, Questionnaire on Child Poverty and Wellbeing during the Financial Crisis One Year On, 2010

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Social protection and communal services Policies to make communal services more affordable for low-income households can either reduce communal service tariffs or increase incomes for poor households. The former can take the form of budget funding of service providers, or cross-subsidizing services provided to households at the expense of higher tariffs charged to other user groups (including via the introduction of lifeline tariffs). The later take the form of social assistance targeted at low-income households. Cross-subsidies are present in virtually all communal services in Kyrgyzstan. Commercial and budget-funded organizations pay much higher tariffs than residential customers; for solid waste tariffs in Bishkek and Osh, this difference is an order of magnitude.75 Residents of singlefamily houses generally pay lower water and sewage tariffs than urban apartment residents. Since the latter are generally poorer than the former, such cross-subsidies have a regressive character. Lifeline tariffs are not used for households in Kyrgyzstan: these require accurate metering of consumption; and according to the Antimonopoly Agency, only 3-4 percent of households have water meters (8 percent in Bishkek). While full metering and flat volumetric tariffs will be introduced under the Asian Development Banks Issyk-Kul Sustainable Development project, lifeline tariffs are not anticipated, since tariff increases are to be gradual and are intended to keep the share of poor household incomes devoted to water and sanitation expenses below the 4-5 percent threshold.76 Installation of apartment and block meters should be also encouraged to reduce water consumption in cities, given the stress on water resources.77 An investment of about 45 million som ($1 million) would be required for this. In Bishkek, pensioners pay a reduced monthly tariff of 4 som per person for solid waste collection, instead of the 15 som paid by other residential customers. This was the result of a lobby of the National Pensioners Association. But this reflects more a categorical than a propoor approach to tariff-based measures. Cash-based measures. With the December 2009 legislation, in-kind categorical benefits for communal services are no longer provided. As a result, no special programme protects lowincome households access to communal services. Instead, monthly benefits, the monetized categorical benefits that replaced in-kind privileges in 2010, and housing allowances, are the most relevant instruments in this respect. Monetized categorical benefits are now paid to 25 beneficiary categories representing some 54,000 beneficiaries in December 2010. The majority of beneficiaries fall into three categories: people with eye and ear disabilities (19,000), workers with hardships (7,500), and people who participated in overseas military assignments during the Soviet period (6,000). Since categorical benefits are not means tested, they do not have a pro-poor character: the State Agency for Social Welfare estimates that only 5 percent of categorical benefits recipients
Meeting held with Mr. Pavel Klimenko of Bishkek Tazalik on 13 December, 2010 and with Osh Tazalik representatives on 17 December, 2010. 76 See Box 3. 77 See 2nd Progress Report on MDGs.
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are poor or extremely poor.78 Beneficiaries in about half of these categories receive a monthly allowance of 867 som ($18) for for communal services, including energy. Pensioners and other beneficiaries who stopped receiving in-kind compensation in December 2009 received an increase in their pensions and other allowances covering 50 percent of the increase in communal service fees including energy. At the same time, recipients of the monthly benefit, monthly social benefit, and pensions for whom categorical benefits had previously been paid directly to communal service providers also received an additional 200 som ($4.50) per month to cover higher electricity tariffs. These allowances were not removed when the electricity tariff increases were rescinded in April 2010. However, it is not certain that such allowances will be linked to future tariff increases of communal services.

Table 18Bishkek housing subsidies (as of December 2010) Family composition 1 person 2 persons 3 persons Social norm for housing (square meters) 35 35 42 Monthly cost of utilities without lift: 687 without lift: 1090 without lift: 1550 according to the social with lift: 722 with lift: 1125 with lift: 1592 norm for housing (som) Maximum household 2,225 4,400 income (som/month) 16% of household 565 687 income (som/month) Total benefits 465 som ($10) 515 som ($11) Source: Bishkek Housing Subsidy Centre, December 2010. 5,520 883 801 som ($17)

4 persons 56 without lift: 2061 with lift: 2123 7,094 1,135 1137 som ($24)

Residents of Bishkek, Osh, Karakol, and Naryn cities that do not qualify for these 25 categorical benefits can apply for housing subsidies at the municipal Center of Housing Subsidies. In Bishkek, households devoting more than 16 percent of their income to utilities are eligible for Bishkek housing subsidies, which defray expenditures on central heating, gas, hot and cold water supply, elevator maintenance and solid waste removalbut not electricity. According to the Bishkek Housing Subsidy Centre, there were 15,096 household subsidy beneficiaries in 2010, up from 3,522 in 2009. About 90 percent of these recipients are single pensioners, low income families, and the unemployed. Total funding for Bishkek housing subsidies in 2010 was 19 million som ($413,000)12 million som of which came from the municipal budget and 7 million som from the national budget. Table 19 provides an overview of these subsidies. The experience of the Bishkek Housing Subsidy Centre (and similar institutions in other CIS countries79) shows that housing subsidies can protect low-income households from major tariff increases. However, such housing subsidy programmes are often based on average consumption standards, which do little to encourage conservation of water (and energy) use.

Meeting with Tatiana Petrovna, specialist of compensation allowances, State Agency for Social Welfare, 21 December, 2010. 79 World Bank, Water, Electricity and the Poor: Who Benefits from Utility Subsidies? 2006.

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Measures to address indebtedness and non-payment of the poor There are no disaggregated data on non-payment among residential customers. The problems of indebtedness and non-payment should be addressed at the political level by enforcing payment discipline for all customers, especially better-off households and budget organizations which are among the highest non-payers.80 However, compliance from households can be demanded only when the state meets its own responsibilities and pays wages, pensions and other social benefits on time. Where appropriate, debt restructuring should be developed to address already accumulated arrears. The threat of disconnection should be maintained as the ultimate sanction against chronic non-payers, but it should not be invoked against low-income households. Collective disconnections for both non-payers and paying consumers living in the same apartment blocks should not be allowed. Accumulated arrears can also keep low-income households from receiving social benefits to which they would otherwise be entitled, since applicants must produce a certificate of registration from the local authorities, which may choose not to do so for applicants who are in arrears on their communal service obligations. Renters may also be prevented from receiving social benefits because landlords are sometimes unwilling to register them in their apartments, for tax reasons. Measures to legalize ownership and dwelling rights of informal settlements The lack of clearly defined ownership or dwelling rights and as a consequence, of family registration particularly in informal settlementsis a major cause of exclusion from access to water, sewage, and solid waste collection services. While growing numbers of internal migrants live in informal urban and peri-urban settlements in Bishkek, utility networks are often not extended to these settlements, due to their informal legal status and lack of roads. At the same time, residents in these settlements do not have strong incentives to invest in ensuring access to these networks, when they face the threat of eviction. Efforts by the national and municipal goverrnments to formalize the legal status of these settlements and their dwellings may be needed to improve lowincome households access to basic communal services. If this is not possible, the municipality may need to consider measures to ensure that the informal service provision that often prevails in these settlements meets minimal consumption and health standards.

Policy recommendations Expand the use of means testing (or proxy means testing) beyond the monthly benefit and monthly social benefit to categorical benefits as well, in order to better target social assistance to the most vulnerable households. Increase the monthly benefit allowances, possibly by expanding donor top-offs, in order to strengthen the poverty reduction impact of this social assistance instrument. Simplify application and registration procedures for recipients of monthly benefits and housing subsidies, to reduce the risk of exclusion errors.

80

Meeting with Bishkek vodokanal, Mrs Bekova Anara Djumagazievna, Head of Customers Dept, Dec. 8, 2010.

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Discipline against relatively wealthy households and budget organizations should be enforced with service cut-offs in the event of prolonged non-payment of communal service bills. By contrast, low-income households (i.e., with recipients of means-tested monthly benefits or housing subsidies) should be able to restructure their accumulated debts on favourable termsparticularly as these do not seem to comprise a large share of utilities overdue accounts receivable. The accelerated installation of subsidized water meters (e.g., via connection subsidies) for poor households (registered with social protection system) should be encouraged, for two reasons. First, this makes possible the linking of billing to actual consumption, which is a precondition for the introduction of lifeline tariffs that can protect low-income households from unintended side effects of tariff increases. Second, metering encourages conservation at all income levels. The technical maintenance service fee for cold and hot water should be reconsidered, because customers have to pay for their repairs anyway and it penalizes most poor households living in old building with wornout pipes. The National Agency of Local Governments and the National Association of Municipalities should be supported by donors, in the provision of methodological tools and approaches, good international practices, particularly in the area of housing subsidies and legalizing service provision in new urban settlements. Many non-payment difficulties can be avoided if low-income households are able to space their utility payments out (e.g., weekly, monthly) rather than making infrequent, large payments (e.g., quarterly). Vodokanals should be more willing to accommodate flexible payment schedules. More generally, vodokanals should work with social protection agencies and housing subsidy centres to better inform customers about tariffs, billing methods, and the types of assistance that are available.

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Conclusions
Despite an 87 cumulative increase during the 2007-2010 period, official household survey data indicate that tariffs for water, sanitation, and solid waste do not pose an affordability problem for the poor and extreme poor, representing less than 1 percent of their expenditures. Data from surveys regarding customer satisfaction with these services are more ambiguous: whereas some surveys indicate high levels of satisfaction, others point to a less rosey picture. Some surveys also indicate that communal service affordability is, in fact, a concern for low-income households. In any case, should communal service tariffs continue to increase (as per government commitments), and if household incomes do not bounce back sharply from the downturn of 2009-2010, affordability concerns will become more pressing. Thanks in large part to the Taza Suu programme (supported by donor funding, especially from the World Bank and Asian Development Bank), access to improved water sources has improved since 2004. Thanks to infrastructure reconstruction and the construction of new facilities, 50 to 60 percent of the rural population no whas access to improved water sources. However, less than 25 percent have access to sewerage. For Kyrgyzstans 25 cities, the coverage for drinking water varies from 60 to 90 percent (depending on the city), while less than 40 percent of the population has access to improved sanitation and solid waste collection services. The financial viability of many service providers is at stake due to tariffs set below cost recovery level coupled with high (35 to 45 percent) non revenue water levels, and inadequate institutional capacity. Institutional reform should begin with efforts to strengthen sectoral coordination mechanisms, for public, private, and third sector organizations, and for national and international actors. This implies better coordination between water sector policy and policies for other related sectors (e.g., housing) as well as closer alignment of the financing of communal services with national annual and medium-term budget processes. The national policy dialogue conducted sponsored by the European Commission and the OECD/EAP Task Force could offer a very useful platform in this respect, particularly in terms of linking policy reform to donor support. A national regulatory body responsible for water supply, sanitation, and solid waste management services in urban and rural areas should be established. Such body would be responsible for sectoral development policy, tariffs, consumer protection, key investment projects, and other strategic issues. The activities of such a body would need to be well coordinated with those of other state bodies in charge of Housing and Communal Services, Labour and Social Protection, Finance, Antimonopoly Agency, Environmental Protection, and Local Self Governments. Although official poverty rates in Kyrgyzstan dropped sharply during 2002-2008, this progress seems to have halted since then. These data indicate that more than 30 percent of the population lives below the national poverty line. Poverty rates are higher in rural areas, in households with many children (three or more) and headed by women, in

60

households where the family head is unemployed, and in households that are excluded from the social protection system. UNICEF estimates that 60 percent of the poor are excluded from the monthly benefit and monthly social benefit programmes, and that these benefits remain at or below 20 percent of the extreme poverty threshold. The use of means teasting (or proxy means testing) needs to be expanded beyond the monthly benefit and monthly social benefit, and applied to categorical benefits as well. This should be combined with the simplification of application procedures for the monthly benefit and housing subsidies, and top-offs from donor funding. The accelerated installation of subsidized meters for poor households (registered with social protection system) in apartment blocks should be encouraged, for two reasons. First, this makes possible the linking of billing to actual consumption, which is a precondition for the introduction of lifeline tariffs that can protect low-income households. Second, metering encourages conservation at all income levels. Affordability analyses, with an emphasis on low income households, should be mandatory for tariff revision and development planning for communal service providers. Such analyses should underpin efforts to protect consumer rights and promote appropriate public participation in communal service delivery. The official household survey data indicating that communal services are affordable for households at all income levels should be supplemented by additional research to generate disaggregated data according to income and expenditure categories, livelihoods and occupations, gender, age group, ethnicity, locations (urban; peri-urban; rural), and access to centralized water, sanitation, and solid waste disposal networks. The impact of homelessness, transient poverty, migration and remittances should likewise be reflected.

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REFERENCES ADB TA 7228-KGZ: Issyk Kul Sustainable Development Project Final Report Volume 8: Social Assessment ADB, Kyrgyz Republic: Community-Based Infrastructure Services Sector Project (Supplementary Asian Development Fund Grant), 2009 ADB Kyrgyz Republic:Country Gender Assessment, Dec. 2005 Armenia PPP experience compiled from www.oecd.org/dataoecd/59/5/44576015.pdf and www.crrc.am/.../Towards%20Performance%20Based%20Utility%20Sector%20in%20Armen DFID Kyrgyz Republic, Formative research for hygiene promotion in Kyrgyzstan. 2005 www.heapol.oxfordjournals.org/cgi/content/full/20/4/213 EBRD, Can Poor Consumers Pay for Energy and Water? An Affordability Analysis for Transition Countries, 2005 EUWI & OECD EAP Task Force, Costing MDGs on Water Supply and Sanitation in the Kyrgyz Republic and Selecting a Preferred Scenario through a National Policy Dialogue, Bucarest, Nov. 24-25, 2009 EUWI EECCA Technical Secretariat, Country Situation and Priorities: Kyrgyzstan, 2005 Frauendorfer, R. and R. Liemberger, The issues and challenges of reducing non-revenue water, Asian Development Bank, 2010 Government of Armenia, Follow up to Armenia pilot PSIA, Final report, 2004 Government of the Kyrgyz Republic, Taza Suu Programme www.gender.cawaterinfo.net/.../kyrgyzstan_taza_suu_e.htm Halcrow Group Ltd & UNICON, Scaling Up of the Social Protection Index for Committed Poverty Reduction. Volume 13: Kyrgyzstan Country Report Final version, November 2007 INTRAC, Building the Capacity of Village Communities to Manage the Provision of Clean Drinking Water: Lessons from Kyrgyzstan, 2010 www.intrac.org/data/.../Praxis-Note-57Building-the-Capacity-of-Villages.pdf Bill Kingdom, Roland Liemberger, Philippe Marin, The Challenge of Reducing Non-Revenue Water (NRW) in Developing Countries, Water Supply and Sanitation Sector board Discussion Paper 8, Dec. 2006 National Statistical Committee, Household Based Survey, 2005-2009

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OECD Almaty Guiding Principles CCNM/ENV/EAP/MIN(2000)6 www.oecd.org/dataoecd/16/46/2390168.pdf OECD, Pricing Water Resources and Water and Sanitation Services, 2010 OECD Private Sector Participation in WSS in EECCA region: Status Paper, ENV/EPOC/EAP (2010) OECD, EAP Task Force, Affordability, Social Protection, and Public Participation in Urban Water Sector Reform in Eastern Europe, Caucasus and Central Asia, 2003 OECD/TACIS, EAP Task Force, Lesson Learnt from Financing Strategies for the Municipal Waste Management Sector in Selected EECCA Countries, 2007 OECD, Task Force for the Implementation of the Environmental Action Programme for Central and Eastern Europe, Caucasus and Central Asia Group of Senior Officials on Urban Water Sector Reform, National Policy Dialogue on Financing Urban and Rural Water supply and Sanitation in the Kyrgyz Republic, ENV/EPOC/EAP/WATER (2009) OECD Private Sector Participation in WSS in EECCA region: Status Paper, ENV/EPOC/EAP (2010) R. Steinmann and SES, Epidemiological Survey on Human Intestinal Helminths, UNICEF, 2009 UNDP ECIS, Fast Facts from Kyrgyzstan, www.europeandcis.undp.org/uploads/public1/files/.../KYR_FF_16_02_11.pdf UNDP Kyrgyz Republic, Capacity building for the introduction of sustainable waste management principles in the Kyrgyz Republic (2008-2010) UNDP Kyrgyz Republic, Citizen Report Cards and Local Services in Kyrgyzstan, Final Report, 2008 UNDP Kyrgyz Republic, Second Progress Report on the Millenium Development Goals, 2010 UNICEF, National Study on Child Poverty and Disparities in the Kyrgyz Republic Bishkek, 2009, UNICEF Regional Office for CEE/CIS, Questionnaire on Child Poverty and Wellbeing during the Financial Crisis One Year On, 2010 The Urban Institute, Development of Performance Improvement Action Plan for Delivery of Local Infrastructure Services, Final Report, 2006 USAID, Kyrgyz Republic Household Energy Analysis and Proposed Social Protection Measures, 2008 63

USAID Decentralization and Local Government Program, Residents of Kyrgyz Cities Evaluate their Local Governments, 2009 Water Supply and Sanitation Collaborative Council, Public Funding for Sanitation: The Many Faces of Sanitation Subsidies (Geneva, 2009) WHO, Guidelines for drinking-water quality, Vol. 1, 3rd edition incorporating 1st and 2nd addenda, World Health Organization, 2006 ISBN 92 4 154696 4 www.who.int/water_sanitation_health/dwq/gdwq3rev/ The World Bank and United Nations Development Programme Albania, PSIA, Decentralization and Water Sector Privatization in Albania, 2004 The World Bank, Water, Electricity and the Poor: Who Benefits from Utility Subsidies? 2006 The World Bank, Poverty and Social Impact Analysis (PSIA) for the Water Sector Reform in Montenegro and Social Assessment (SA) for the Montenegro Tourism Development Project, 2006 The World Bank Kyrgyz Republic, PPTA, June 2009 World Food Programme, Second Update on the Food Security and Nutrition Situation in the Kyrgyz Republic, 2010.

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Topic 1. Tariff increases

PSIA Matrix for the Reform of Communal Services and Social Protection of the Poor in Kyrgyzstan Relevance Policy recommendation Main issues Lack of reliable data on Mainly for local Affordability analyses for communal services with an emphasis on low income customer affordability and governments, households should become an integral component of tariff revision procedure. willingness to pay Vodokanals, KKPs Affordability analyses should ensure the protection of consumer rights and promote public participation in the reform of communal services. Water is still considered as a social good only. Customer perceptions that tariffs are already high and no improvements are visible Customers have no say in tariff setting Mainly for local governments, Vodokanals Mainly for local governments, Vodokanals, KKPs Mainly for local governments, Vodokanals, KKPs Mainly for local governments, Vodokanals, KKPs Adopting transparent methodologies for calculating water, sanitation tariffs and providing subsidies for the poor. Need for sustained awareness raising of the public and policy makers about importance of economic criteria in water management. Before proceeding with further tariff increases, customers should experience at least some improvement in access and quality. Simultaneously, open and transparent public awareness campaigns need to be conducted. Consumer panels and other consultation mechanisms should be introduced, more effectively implemented. Recent consultation processes in Bishkek on communal services should be systematized over the coutry. A sustained effort at installing water meters needs to be made, including via connection subsidies. For solid waste, tariffs should be based on weight or volume, with extra fees for disposal of hazardous materials.

2. Improving access to water, sewage, and solid waste services

Tariffs are based on consumption norms, precluding accurate billing and discouraging conservation Incomplete network coverage, mainly due to uncontrolled internal migration and informal settlements and lack of equipment Cut off of illegal connections, especially in new setllements Unsatisfactory water quality due to inadequate sanitary conditions of water sources and water reservoirs Unsatisfactory water quality due to sewage infiltration into water pipes

Mainly for Ministry of Finance, local governments, Vodokanals, KKPs

Capital investments, through donor participation, are necessary to increase access level and improve access quality, within the framework of the Country Development Strategy. Implementation of the financing strategy for Urban and Rural Water Supply and Sanitation, created in 2009 through the national policy dialogue. Contracting illegal customers is perceived as a better alternative than disconnection, which has not proved successful It is necessary to set up water protection zones and fence landfills, improve chlorination processes. Water quality should be regulalry checked by the Sanitary and Epidemiological Surveillance. Vodokanals should be equipped with testing labs. Urgent repairs to water and sewerage networks are needed.

Mainly for local governments, Vodokanals, KKPs Sanitary and Epidemiological Service , Vodokanals, KKPs SES, Vodokanals

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Lack of wastewater treatment plants 3. Improving low-income households access to communal services via social protection Exclusion of many poor and extremely poor households Monthly benefit allowances and subsidies are too low to make a difference in payment of communal services Most poor households do not receive any support for communal services

Mainly for local governments, Vodokanals Mainly for local governments and State Agency for Social Welfare Mainly for LSGs, Min. Finance, and State Agency for Social Welfare Mainly for local governments, Vodokanals, KKPs, and State Agency for Social Welfare Mainly for local governments, Vodokanals, KKPs Mainly for Min.Finance, DRWS, VK, KKPs, LSGs Mainly for local governments, Vodokanals, KKPs Mainly for local governments, Vodokanals, KKPs Mainly for local governments, Vodokanals, KKPs Mainly relevant for natl institutions (Min. Agriculture, Agency for LSG, SES),VK, KKPs and LSGs

Accelerate construction of treatment plants in priority cities, with donor assistance. Expanding use of means testing, especially for categorical benefits. Housing registration modified to facilitate access of poor households to social protection Increase monthly benefit allowances and subsidies to offset future WSS tariff increases

4. Institutional issues

Incomplete transfer of infrastructure, shares in Vodokanals, KKPs to local government ownership Lack of investment funds into WSS sector Lack of adequate management capacity and oversight of service providers Absence of measurable performance indicators in VK and KKPs Low esteem with which customers regard communal service providers

Housing subsidies and other instruments of support should be better assessed, targeted to the poor with improved subsidies. UNDP can play an important role by providing methodological tools and best international pratices. Vodokanals and KKPs should work with social protection agencies and housing subsidy centres to better inform customers about tariffs, billing methods, and the types of assistance available. Finalize the process started in 2004 for those Vodokanals and KKPs where it has not yet been completed.

Linkages between rural and urban WSS infrastructure needs and the MTBF and annual budget making processes Relaunching the NPD and updating the National Policy Dialogue funding scenarios More technical and financial assistance, as well as management training, to improve management information systems, oversight functions, is needed.

Local governments need to formulate performance indicators for service providers based on clear objectives, outputs, outcomes, and methods of verification. Vodokamals and KKPs should undertake efforts to improve transparency, formulate communication strategies, establish public relations units meet regularly with consumer groups. Urgent need to articulate a national water supply and sanitation strategy, the legal and institutional framework and government decisions which are pending to introduce the sector reform.

5. Legal issues

Lacunae in legal, institutional frameworks necessary to improve communal service delivery

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Need to set up a national regulatory body for rural and urban areas 6. Private sector participation Private companies do not enter loss-making sectors. Without this entry, prospects for better management, infrastructure repair/development, reductions in technical losses, are uncertain. The public is not well informed about successful examples of public-private partnerships, particularly in communal services. Current legal and regulatory framework is not ready for PPP. Mainly for local governments, Vodokanals, KKPs Vodokanals, KKPs should: gradually raise tariffs toward full cost-recovery levels; seek public-private partnership on the basis of management contracts, with external technical assistance.

Mainly relevant for VK, KKPs and LSGs

Public information and awareness raising is needed regarding benefits, pitfalls, and conditions for public-private partnerships in communal service provision.

Ministries and LSGs

Developing regulatory preconditions for public-private partnership in the area of water supply, sewage and solid waste management.

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ANNEX 1Improvements in communal service providers property management


City Balykchy Vodokanal KKP It is registered as a state enterprise with It is registered as a municipal enterprise. The state assets. If/when assets are transferred LSG should implement a Use Procedure into municipal ownership, it should be re- covering any municipal assets. registered as a municipal enterprise. In the meantime, a Use Agreement should be put in place for any municipal assets given for use by the Vodokanal. The Shopokov City Improvement Enterprise (providing water, sewage solid waste, and minimal city improvement services) is registered as a municipal enterprise. The City Administration should implement a Use Procedure covering any municipal assets. It is registered as an LLC. The City does It is registered as an LLC. The City does not not intend to change its legal status. The intend to change its legal status. A Use LSG should implement a Use Agreement Agreement should be put in place for any new covering any municipal assets. municipal assets provided for use. Kara-Balta PO ETV and the Vodokanal It is registered as a JSC. The City does not are state enterprises with state asset. The intend to change its legal status. A Use City Administration has asked EBRD to Agreement should be put in place for any new assist with the merger of the water supply municipal assets provided for use. operations of the two companies, subject to the result of a Feasibility Study. Vodo kanal is a municipal enterprise. It is registered as a municipal enterprise. The ADB, SECO and EBRD will support LSG should implement a Use Procedure management improvement during the covering any municipal assets. rehabilitation project. The assets were transferred into It is registered as a JSC. The City does not municipal ownership. It was re-registered intend to change its legal status. A Use as a CDWUU and a Use Procedure put in Agreement should be put in place for any new place. municipal assets provided for use. It is registered as a municipal institution. The JKH Department is registered as a state The LSG should implement a Use institution and Spetsavtobaza is registered as a Procedure covering any municipal assets. state enterprise. They should be re-registered as a municipal institution and a municipal See EBRD potential support in Section 2 enterprise respectively. Thereafter, the LSG should implement Use Procedures with each entity covering any municipal assets. It is registered as a state enterprise with It is registered as a JSC. The City does not the state assets. If/when assets are intend to change its legal status. A Use

Shopokov

Kant

Kara-Balta

Karakol

Batken

Jalalabad

Isfana

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Kara-Kul

transferred into municipal ownership, it should be re-registered as a municipal enterprise. In the meantime, a Use Agreement should be put in place for any new municipal assets given for use by the Vodokanal. Water is supplied by Teplokommunenergo which is a department of Kaskad Toktogul GES a branch of JSC Electro-Stancia. The City does not intend to receive property into municipal ownership. A Use Agreement should be put in place for any new municipal assets provided for use.

Agreement should be put in place for any new municipal assets provided for use.

Municipal Property Department may be liquidated as a separate legal entity and operate as a Department within City Administration structure

Kerben

Kara-Suu

It is registered as a state enterprise, but should be re-registered as a municipal enterprise. The LSG can use the model Charter and the model Use Procedure.

Kok-Jongak

It is registered as a state institution, but should be re-registered as a municipal enterprise. The LSG can use the model Charter and the model Use Procedure.

Kochkor-Ata

Mailuu-Suu

Water is supplied by a division of JSC Kyrgyzneftegaz. The City does not intend to change the legal status or to receive property into municipal ownership. A Use Agreement should be put in place for any new municipal assets provided for use. It is registered as a state institution, but

The existing JSC Aksy Meenet is not operating. The City Administration intends to register a new municipal KKP. The LSG can use the model Charter and the model Use Procedure. It is registered as a JSC. The City does not intend to change its legal status but would like to revise the current Charter. For that purpose, the LSG can use the model Charter. It should also implement a Use Agreement covering municipal assets provided for use. The Municipal Property Department is registered as a state institution. This should be changed to a municipal institution either through revision of the existing certificate or liquidation of the state institution and the creation of a new Municipal Property Department within the City Administration structure. According to the City Administration, the KKP was recently registered as a municipal enterprise. The LSG should also implement a Use Procedure covering any municipal assets.

It is registered as a state institution, but should

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Nookat

Sulukta

Bishkek

should be re-registered as a municipal enterprise. The LSG can use the model Charter and the model Use Procedure. It is registered as a state enterprise with state assets. If/when assets are transferred into municipal ownership, it should be reregistered as a municipal enterprise. In the meantime, a Use Agreement should be put in place for any new municipal assets given for use by the Vodokanal. It is registered as a state enterprise, but should be re-registered as a municipal enterprise. The LSG can use the model Charter and the model Use Procedure. In July 2009, EBRD signed a loan and grant for 11 M to replace water pipes and submersible pumps, drill new boreholes; install water meters, acquire equipment for pipe-laying, maintenance and repairs. It includes measures to improve its financial and operational performance.and developnew tariff policy to enable the company to cover its costs while protecting low income families from hardship EBRD

be re-registered as a municipal enterprise. The LSG can use the model Charter and the model Use Procedure. It is registered as a JSC. The City does not intend to change its legal status. A Use Agreement should be put in place for any municipal assets provided for use.

It is registered as a JSC. The City does not intend to change its legal status. A Use Agreement should be put in place for any municipal assets provided for use. The city envisages to reform Tazalik management system.

Osh

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ANNEX 2: Focus group discussion questionnaire FOCUS GROUP DISCUSSION NUMBER: LOCATION: NUMBER OF PARTICIPANTS: 1.LIVING CONDITIONS 1.1 Do you live in: a) individual houses: b) block apartments: How many of you live at third floor and higher: c) How many of you rent the apartment or house: How many of you own it: 1.2 You are: a) Head of family: b) Single head of family: indicate number of men: and number of women: c) How many children are in your household: d) How many adults are in your household: 1.3 Your level of education: a) Incomplete primary school: b) Complete primary school: c) Incomplete secondary school: d) Complete secondary school: e) University: f) Vocational training school: 1.4 How many of you are: a) working to earn income: b) at home or not earning an income: c) disabled or sick: d) retired (without receiving a pension): e) pensioner: f) other (specify): 71

1.5 Social protection allowances: indicate total number of FGD people receiving such allowances: 1.6 How many of you receive: a) Monthly benefits for children: b) Monthly social benefits: c) Compensations (veterans, widows, handicapped): d) Compensations for communal services from Bishkek (Osh) municipality: e) other social allownaces: 1.7 Your ethnicity is: a) Kyrgyz: b) Russian (Uzbek in Osh) c) other ethnicity: 1.8 Your total household average monthly income is: a) below700 som per adultnumber of participants: b)between 700 som and 1,000 som per adult -- number of participants: c) between 1,000 and 2,000 som per adult -- number of participants: d) higher than 2,000 som per adult -- number of participants: 2. ACCESS AND USE DRINKING WATER SUPPLY 2.1 Do you use drinking water from Vodo Kanal system? YES: NO: 2.2 Do you have a meter for water? YES: NO: 2.3 If YES, did you pay for it? Number of people: Was it installed free? Number of p: 2.4 Do you use shower or bath? YES: NO: 2.5 Do you use washing machines? YES: NO: 2.6 Do you use drinking water for gardening? YES: NO: 2.7 Do you use drinking water for car washing? YES: NO: 2.8 If you do not use Vodo Kanal system, which source of water do you use: 3. QUALITY OF SERVICE OF VODO KANAL How would you rate the quality of the following services: 3.1 Quality of water (appearance, smell, taste)? 72

3.2 Availability of water per 24 hour? 3.3 Pressure of water per 24 hour? 3.4 Time taken by Vodo Kanal to repair any interruption of service? 3.5 Accuracy of your water bill? 3.6 Regular delivery of your bill? 3.7 Methods to pay your bill? 3.8 Access to Vodo Kanal customer services when you have a problem? 3.9 What are the main problems with water and sanitation: a) technical problems (leaking, low pressure, limited hours of supply, waste of water) b) quality problems (water is unsafe or not healthy; taste, odour, colour) c) service (billing, prices, payment, corruption) 4. ACCESS AND USE OF SEWAGE AND OTHER SANITATION SYSTEM 4.1 Do you use sewerage from Vodo Kanal system? YES: NO: 4.2 Do you have toilets inside your apartment or house connected to a sewage system? YES: NO: 4.3 If not, what sanitation system do you use: 4.4 Do you share toilets with other households? YES: NO: 5. GARBAGE COLLECTION 5.1 Do you have access to municipal garbage collection services (Tazalik or others)? YES: NO: 5.2 If not, how do you dispose of your solid waste? 5.3 Do you recycle some of the waste (glass, paper, plastic, metal) and sell it? YES: NO: 5.4 How would you rate the quality of the following services: 5.4.1 Regular collection of garbage? 5.4.2 Proximity of garbage collection site from your residence? 5.4.3 Accuracy of your garbage collection bill? 5.4.4 Regular delivery of your bill? 5.4.5.Methods to pay your bill? 5.4.6 Access to customer services of the garbage collecton company when you have a problem? 5.4.7 What are the main problems with garbage collection: a) technical problems (irregular collection, too much distance of the collection site) b) quality problems (garbage is not properly collected; the site stinks..) c) service (billing, prices, payment, corruption) 73

6. PAYMENT OF YOUR BILLS 6.1 What you pay for communal services: a) Your households average monthly or yearly payment for drinking water in som? b) Your households average monthly or yearly payment for sanitation in som? c) Your households average monthly or yearly payment for garbage collection in som? d) Your households average monthly or yearly payment for all communal services except energy (electricity; gas; coal..): e) Percentage of your household income for all communal services (except energy)? 6.2 Do you pay your bills of communal services each month: YES: NO: 6.3 If NO, can you explain the reasons: 6.4 Do you have accumulated debts for these services? IF SO, do you try to take arrangement for payment with the company? Did the company cut the service? 6.5 Are the prices of communal services too high, normal, low? 6.6 What do you think of price increases of communal services over the last 2 years? 6.7 What was the impact of these increases on your household income? Did you change the way you use these services? 6.8 Would you be willing to pay higher prices per month if you get better services of communal services such as 24 hours of supply, good pressure, good quality of water, good repair services, better access to customer services, better collection of garbage? 6.9 Do you receive any assistance to pay for your bills of communal services? YES: NO: 7.0 IF YES, what kind of assistance you receive: from the city (centre of subsidy for communal services), ministry of social protection, others? 7.1 What improvements do you think are necessary to help the households living in very poor conditions use communal services? a) increased monthly benefits or compensations for communal services better targeted to very poor people and households? b) helping poor households to better plan and manage their income and expenses over the month? c) forgive debt arrears for very poor households? d) install free water meters for the very poor so that they can manage their consumption? e) Other measures? 8. MANAGEMENT OF WATER AND SEWERAGE AND SOLID WASTE COMPANIES How do you think these communal service companies should be made more accountable to customers and improve their management: 8.1 by stronger control of city deputies? 8.2 by creating an independent regulatory authority? 8.3 by creating management boards where customers are represented? 8.4 by allowing national or international companies to manage these services with a regulatory authority? 8.5 by setting up an official complaint handling mechanism for customers? 74

8.6 by informing customers with annual reports and accounts and other useful means? 8.7 by having customer service offices in different parts of the city? 8.8 by involving customers and very poor customers in a consumer panel or other consultation mechanisms dealing with tariffs and customer services at the company level? 8.9 by permitting households to choose among multiple competing suppliers of communal services? 9.0 Complaint a) Have you made an official complaint to Vodo Kanal or Tazalik or to Bishkek municipality on your bill or on the services of these companies? YES: NO: b) Did you get a response to your complaint? YES: NO: c) Were you satisfied by that response? YES: NO: Explain:

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ANNEX 3: Results of FGDs in Bishkek and Osh


Participants in six focus group discussions (three in Bishkek, three in Osh, held in December 2010)81 were asked a series of semi-open, closed, and multiple-choice questions on these topics, on the basis of a special questionnaire developed for this purpose (see Attachment 2).82 Random sampling techniques were not used; the the municipal Social Development Agency in Bishkek and Osh facilitated the selection of participants. The information obtained from these surveys was validated by crosschecking with other sources and results from comparable surveys in Kyrgyzstan. Sample description. Eight to 12 respondents (60 in total) participated in each focus group discussion. In Bishkek, some participants came from distant suburbs that are only connected to standpipes because ownership of their land and house is not fully legalized. In Osh, some participants were living in temporary shelters after the June events. The selection of the target participants was based on the criteria described below; the percentages shown below represent the real representation size: Having access to the communal services (drinking water, sewerage, garbage collection) even with irregular schedule and standpipes: 100% of respondents; Living in houses: 34% of respondents; apartments: 66% of respondents. Representation of households living below the: o poverty line (with a monthly per-capita income of 963 som$90): 40% of respondents; o extreme poverty line (with a monthly per-capita income of 640 som$14): 30% of respondents; and
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Representation of households that are headed by:

The three sessions in Bishkek took place in the meeting room of the Eldon Consulting Company on Togolok Moldo; in Osh, they were conducted in a downtown public school, in the apartment of a condominium supervisor and in a community centre. Meetings were conducted in Russian and Kyrgyz in Bishkek and in Kyrgyz and Uzbek in Osh. 82 The questionnaire used in these discussions was based on comparable research instruments used to analyze water, sewage and solid waste services in Kyrgyzstan (via the ADB Issyk Kul social survey and UNDPs citizen report cards), and in Armenia and Montenegro. The questionnaire is divided in eight sections that cover living standards, access and use of drinking water, quality of service of vodo kanal, access and use of sewage and other sanitation systems, solid waste collection, payment of bills and other financial considerations, management of service providers and complaint mechanisms.

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o A single parent: 60% of respondents, out of which 40% were female headed households and 60% were male headed households; Households with: o elderly persons and pensioners: 34% of respondents; o disabled members: 15% of respondents; o numbers of children under age 18 living in the same household: 1-2: 22% of respondents; 3-4: 54% of respondents; and 5 or more: 24% of respondents. o Numbers of adults: 1-2: 31% of respondents; 3-4: 53% of respondents; and 5 or more: 16% of respondents. Representation of: o Men: 34%; and o Women (66%) Representation of various age groups: o 18-30 age group: 16% of respondents; o 31-45 age group: 44% of respondents; and o 45 and older age group: 40% of respondents. Representation of households with various ethnic backgrounds: 77

o Kyrgyz: 52% of respondents; o Russian/Ukrainian: 24% of respondents; and o Uzbek: 24% of respondents. Location of apartment in apartment buiding: o lower floors: 73% of respondents; and o upper floors: 27% of respondents. Representation of households: o With water meters: 2% of respondents; and o Without water meters: 98% of respondents. 41% of participants were earning an income; the rest were staying at home, with no income (23%), disabled or sick (15%). Some were pensioners or retired without pension (21%). The high representation of pensioners and retired comes mostly from Bishkek participants since they were identified as a particularly vulnerable group by the municipal Social Development Agency. Among the participants who earned an income, some were teachers, some had part-time or non-permanent jobs, some were working in bazaars (mostly Uzbeks in Osh). 82% of participants earned less than 2,000 som ($43) per month. 54% of the participants received social protection allowances, mostly housing subsidies for communal services (52%) and monthly social benefits (21%). The participants in Osh (mostly Uzbeks with larger families) mentioned that they could not receive social protection allowances because the social agency refuses people who own their house. Only renters are eligible, according to them. Results: 95% of participants had access to vodokanal systems; the remaining participants lived in suburbs or temporary shelters and relied on public standpipes. Only two people had cold water meters. One respondent had gotten it for free, while the other (a pensioner) installed the meter at her own expenses and recuperated her investment in less than a year. Most participants did not know about the benefits of meters, and were reluctant to install them, even if the meters were free. Most participants had access to a shower and/or bath in their residence and had a washing machine. Very few participants used water for gardening; none used it for car washing. 78

Table 29:Social protection allowances

Table 30: Type of social protection allowances

Free coal:8%

No: 46%
compensations: 18%

monthly benefits: 1%

Yes: 54%
monthly social benef its:21% subsidies f or communal services:52%

Table 31: Access to drinking water

Gardening: yes: 15%

Washing machine: Yes: 54%

Meter paid: 1%

Shower and bath: Yes: 61%

Access to VodoKanal : 95%

Meter free:1% Access to other source: 5%

Most participants (80%) reported being generally satisfied with the quality of drinking water and the services of the vodokanals. 79

o Pressure was described as normal; in some places in Bishkek and Osh there are seasonal problems; some people at higher building floors have pressure problems especially in Osh but this was not mentioned as a general problem. o Interruptions and repair time: service interruptions for mandatory maintenance occur during 1-2 days per year. Respondents mentioned that they receive a 24-hour advance notice for other repairs. Such repairs usually last 3-4 hours but there have been some cases of longer repair when a major pipe breaks. In Osh repairs can take 2 to 4 days when it rains or snows. o Billing accuracy was considered normal. About 10% of participants complained that they are charged too much or that they do not understand their bill. o Regular delivery of bill was considered normal but not by some participants in suburbs. In Osh respondents reported being billed and paying quarterly. o The three most common methods were the post office, vodokanal controler or vodokanal office, or at the bank. In Osh people made payments either through the vodokanal controler or through their household supervisor. o Access to vodokanal customer services: when problems appeared, 50% of participants reported callin the vodokanal directly and calling the household administrator. Some participants in both cities complained that they have difficulty reaching the vodokanal customer service (hotline). Most participants said they go to the vodokanal office when they have an important problem. Main problems identified by focus group participants: Technical: some respondents live in old apartments with old pipes that need to be repaired often; they reported experiencing regular basement flooding and related problems. These repairs are expensive; on average it costs 12,000 som ($250) for the vodokanal to clean the pipes. Some participants complain that they have to pay twice for the same service, in the form of monthly technical maintenance fees and repair bills. Quality: tap water sometimes smells of chlorine and stains pots. Service: most participants (especially in Bishkek) considered their bill too high compared to their real consumption; some pensioners wondered why their bill is based on a daily consumption norm of 230 litres per person when they use much less. The monthly technical maintenance fees charged by the vodokanal were also considered too high for the service they receive. 80

Access to the vodokanal sewage system: 60% of the participants reported having access to central sewage systems; the remaining 40% use pit latrines, mostly without septic tanks. 55% of the respondents reporting having toilets inside the residence; 45% reported having them in the building. 12% said that they share the toilets with neighbours. Access to municipal waste collection: 73% of the participants reported having access to the communal solid waste collection service. Respondents living in the suburbs were less likely to have access to this service. Respondents not using the municipal service burn or bury their waste, or drop it public places, or dump it in the field. Only 2% od respondents reported recycling their wastes; these were residents of city centres with access to such a facility. Regularity of service was considered good by more than 60% of the focus group participants. Respondents in suburbs and with individual houses not living in the centre were less satisfied. 60% of respondents reported having access to a collection site within 100 m; the remaining 40% are beyond 100 m. Respondents living further from the city centre generally reported greater distances to the nearest collection site. 86% of the focus group participants reported being satisfied with bill accuracy and delivery: most (55%) make their payments to the household supervisor, followed by payment to condominium supervisor and Tazalik controler ( 35% each) and at the post Office (10%). On the other hand, many respondents complained about sanitary conditions in the locations of the collection containers (especially in the summer), and about their (small) size. Singificant amounts of garbage are left outside the containers; garbage left outside containers is not collected, but rather sorted through by homeless people. Matters seemed worse in suburbs than in the city centers. b) service: some mention irregular collection (about 40%); participants mention they are charged penalties for late payment even if the company is wrong. In Bishkek suburbs, people say they pay too much for the insufficient service they receive They have to wait for the truck and throw garbage bags in the trucks themselves. In Osh participants have difficulty to control their bills and do not understand the details of the bill since they are paying quarterly and twice a year. Only condominium supervisor goes to Tazalik for complaint or problem solving. Tariffs, payments, and social protection. 65% of the focus group participants reported that, on average, monthly payments for drinking water and sewage were in the range of 50 to 100 som ($1-2). 38% of participants reported average monthly payments for garbage collection in the range of 60 to 100 som; 22% reported less than 4 som (pensioners) and another 22% reported payment in the range of 100 to 200 som (large families).

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Table 34: Average monthly household payment for water and sewage (% )
>50 soms: 9%

<300 soms: 3%

100-200 soms:20%

200-300 soms: 3%

50100 soms: 65%

Table 35: Average monthly household payments for solid waste


100-200 soms: 22% 15-30 soms 1%

30-60 soms 17%

>10 soms: 22%

60-100 soms 38%

Bishkek participants reported that monthly payments for all communal services (except energy) averaged 1,000-1,500 som ($21$32), with great variations between winter and summer. Osh participants reported average monthly payments of 500-1,000 som, due to lower tariffsalso with seasonal variations. City residents reported devoting higher shares of their household budgets to communal services compared to suburban residents. While a majority of respondents reported that they pay their monthly bills on time, close to 82

40% said they are unable to do so, because of insufficient income. About 20% participants report accumulated debts for communal service payments. For these respondents, tariffs are too high. Some participants negotiated installments in 20 payments rather than 12 over a year. Some participants in Osh reported having debts because their homes had been destroyed or damaged during the June events. They still had obligation to the vodokanal from these old residences, in addition to the costs associated with their new residences. Requests for discounts were refused by the vodokanal. 60% of the focus group participants believed that tariffs are too high (for their income). 40% of respondents consider them normala share that rose to 80% for residents in the Osh and Bishkek suburbswhere connection to communal service networks are more limited, and residents are more likely to have to make do with standpipes and no garbage collection. Price increases over the last 2 years: These were seen as a serious problem by most respondents in Bishkek, albeit less so in Osh. About 80% of the focus group participants from Bishkek said that the price of utilities had doubled in last 2 years, and that this was the reason for the April revolt. These tariffs are seen as unaffordable; even with social benefits. During the fall 2010 elections, promises were made to reduce tariffs, but this had not happened, according to respondents. Specific comments included:

Table 37: % of household income for all communal services:


25-30%: 11% <15%: 3%

>35%: 16%

15-20%: 2%

30-35%: 29%

20-25%: 39%

Our pensions were increased by 200 som, but tariffs more than doubled and we lost more; all services, food and health care services and drugs increased [in price]. 83

Tariffs increased by 65% while our pensions increased by 15%. We dont understand the tariff structure. I have to pay 20 som in transportation costs each time I go to pay my utility bill.

Impact of tariff increases on household income. More than 80% of respondents reported that these tariff increases were not compensated by pension or income increases; in Osh, problems of falling living standards were made worst by the June 2010 events which destroyed many restaurants, bazaars, small workshops and homes. People complained mostly about heating, hot water and energy. Some respondents reported that they had reduced water and electricity consumption, as well as expenditures on food and health care, and on clothes and shoes for children. One pensioner installed a water meter but reported that poor people cant afford the costs of doing so (2000 som$42). Many respondents living in suburban areas did not feel the impact of the higher tariffs, because they are not connected to the relevant grids. Willingness to pay more for better services? 85% of the focus group participants reported that are unable to pay their utility bills because they are unaffordable. In addition, most respondents residing in apartment blocks in the city reported being satisfied with current service levels. Both groups said they were not ready to pay more even if service providers promise to increase service quality, since they already pay for technical [repair] services for cold and hot water supply, and never see anyone from vodokanal doing improvements or repairs. How should the impact of tariff increases on poor households be mitigated? Virtually all respondents favored increased subsidies/benefits targeted to the poor. By contrast, virtually all respondents believed that helping poor households to better budget would not be useful, as the poor already know how to manage their meager resources. 84% of respondents agreed that poor household debts to utility companies should be forgiven, and strongly objected to the imposition of penalities on household debts incurred because of material hardships. Those respondents (16%) who were in principle opposed to debt forgiveness (because of risk of abuse) agreed that such a mechanism should exist for extremely poor and families with many children. Most pensioners and people living in small households supported installing water meters, believing that this would decrease their monthly bill. In Osh, however, interest in metering was smaller, possibly because of larger family sizes and the belief that the current system suits them better. About 20% of the respondents called for tariff reductions, while a majority thinks the government should do more to provide employment opportunities, raise pensions, and provide higher subsidies for low-income households and widows with kids. Some wonder why they pay so much for water and electricity when our country is rich in water.

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In terms of governance issues, 97% of focus group participants agreed that service providers should be more accountable to municipal/local governments. In Osh, 2 people said they do not trust councelors and prefer that the condominium association exerts that control. Respondents were divided on the creation of an independent regulatory authority, with a majority rejecting the idea. The costs of setting up a new bureaucratic structure, and fears of corruption and collusion with communal service providers, were given as reasons for this opposition. A majority of respondents living in apartment blocks say that the condominium association should have authoritiy to control service providers. While Bishkek respondents favoured the creation of management boards with consumer representation, this mechanism was not supported in Osh, unless these boards would be very decentralized. Whereas respondents in Bishkek favoured informing customers with annual reports and accounts, respondents from Osh where considered this a waste of time and money. Interestingly, the idea of setting up service offices close to the customers was supported by less than 40% of the respondents, and not by any from Osh. The fear was that this would result in tariff increases for the poor. Respondents claimed that know well the vodokanal and Tazalik bill collectors, and that their offices are accessible (even if there are significant transportation costs associated with going there). Less than 40% of respondents were in favour of setting up or strengthening official complaint mechanisms. Instead, the emphasis should be on improving the existing consumer service hotlines. In Osh, customers often discuss problems or complaints with the company controlers when they come to collect the bills. Only 10% of the respondents had introduced formal complaints (all for vodokanal services); all but one respondent reported receiving an answer and 70% were satisfied with the answers they received. One respondent in Bishkek complained four times to the vodokanal and initiated a court case because old pipes were leaking and regularly flooding her basement. After a year of procedures, the vodokanal repaired the leak at its cost. But two other respondents who had introduced complaints for the same kind of problems had this far been unable to get the vodokanal to make or pay for the repairs; these complaints were still active after 10 years. Some 75% of respondents were in favour of involving customers (especailly from low-income households) in consumer panels and other consultation mechanisms. However, they were doutful that companies would be willing to do this. Some typical comments: I dont expect our voice will be heard. Tariff increases should at least be announced in advance. Being consulted is our dream especially on tariff increase and costs of services, we support this idea. At least condominium and household supervisors should be part of these consultations since they are daily in contact with us and know about our problems. The vodokanal sometimes conducts such meetings for apartment blocks. These are useful avenues for us to explain our shortage of money to pay bills.

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Proposals to strengthening the roles of market forces and entrepreneurship did not find favour with the respondents. Only about 25% (mostly men, and all the ethnic Uzbek participants) favoured allowing households to choose among multiple service providers. Introducing such competition in solid waste collection seemed most feasible; respondents did not believe that introducing competition at the vodokanal level would be possible. Most respondents (80%) seemed to oppose this idea because of fears of too many management changes and possibly higher tariffs. Proposals to allow national and international companies to manage these services were only supported by 20% of respondents (all men). While there was support for this approach in solid waste collection, it was considered impossible for natural monopolies in water and sanitation. Many respondents in Bishkek added that Bishkek vodokanal management should be improved but not privatized. Their views and uncertainties suggested that many respondents needed to learn more to make informed decision about introducing competition.

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ANNEX 4: Institutional Structure of State Agency for Social Welfare (national and rayon levels)

Board

State Agency for Social Welfare under the Government of Kyrgyz Republic

Department of social protection and humanitarian assistance

Center of rehabilitation of people with limited health possibilities

Center of medicalsocial expertise and rehabilitation of people with limited health possibilities

Republican enterprise of prostheticorthopedic goods

Custodial institutions for disabled children and old people

Rayon and city departments of social protection

Inter-rayon and specialized medical social expertise

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