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- 1. Potential USAID Support for Military Operations: the Economic Development Dimension Presented at thethe Joint Operational Environment SeminarJoint Operational Environment Seminar Lockheed Martin Center for InnovationLockheed Martin Center for Innovation Suffolk, Va., 26 – 28 JuneSuffolk, Va., 26 – 28 June Juan A. B. Belt Director Office of Infrastructure and Engineering (I&E) Bureau for Economic Growth, Agriculture and Trade (EGAT) USAID
- 2. 2 Outline • Some characteristics of failed & post conflict: they are not good places to promote economic development • Lessons learned from post conflict and other “difficult” situations • USAID Study of “Operating Contracts”: useful to impose discipline of state-owned enterprises (SOEs) • Cuba: USAID/EGAT/I&E used lessons learned in planning process led by US DOC • USAID role in the IA process*: coordination with economic development “branch” of USAID should be improved • Conclusions * Disclaimer: my own personal opinion put forth to establish a dialogue
- 3. 3 USAIDs Strength is Enabling Civil Authority Activities; these Activities Should Begin at the Planning/shaping Phase LevelofEffort Phase 0 PhasesOPLAN activation OPLAN termination Global Shaping Theater Shaping Deter Phase I Seize the Initiative Phase II Dominate Phase III Stabilize Phase IV Enable Civil Authority Phase V Shape Shape OPLAN xxxx Shaping Phase 0 OPLAN xxxx Shaping Shaping Activities Deterring Activities Seizing the Initiative Activities Dominating Activities StabilizingActivities EnablingCivil AuthorityActivities USAID’s Area of Expertise Recognition that there is an early role for engaging In mid-term issues Should USAID be more involved?
- 4. 4 Failed States: Main Economic Characteristics • Financial instability: high public sector deficits, inflation, unstable exchange rates • Socialist (in general), large proportion of productive capacity owned by the state; price controls; weak property rights • Public sector ineffective and corrupt • Doing business difficult: red tape & corruption • Brain drain • Utilities and many SOEs not viable financially • Unemployment high; restrictive labor policies • Physical Infrastructure damaged through neglect POSTCONFLICT IS WORSE – damaged infrastructure as a result of conflict – increased criminal, political & sectarian violence – civil disorder CONCLUSION: Not easy to promote economic growth in post-conflict situations
- 5. 5 COUNTRY USAID PROGRAM SIZE (FY 2006) INDEX OF ECONOMIC FREEDOM Afghanistan 1 nr Colombia 2 73 Haiti 3 135 Sudan 4 nr Liberia 5 nr Kosovo 6 nr Iraq 7 nr Lebanon 8 77 DRC 9 nr Nepal 10 121 Cote d’Ivoire 11 105 Sierra Leone 12 141 Somalia 13 nr -- Only countries with somewhat adequate environment for investment: Colombia and Lebanon --Rebuilding countries: a bad neighborhood --nr: no ranking. No reporting to World Bank, IMF, etc. Ranking for Iraq &Afghanistan forthcoming in 2008 Cuba is ranked 156 of 157 Which country is ranked 157? In General, USAID’s “Rebuilding Countries Lack Economic Freedom
- 6. 6 General Lessons and Considerations • “Models” cannot be imported but lessons can be learned & applied: one of the key roles the Bureau for Economic Growth, Agriculture and Trade “learning and teaching” • Key decisions must be taken by local authorities: buy-in important, need for consultation • Expediency vs. legitimacy: reforms should be made rapidly but are the authorities legitimate? • Who are the potential reformers?; How can we reach out to them during the planning/shaping phase?
- 7. 7 Lessons: Promoting Economic Development in Difficult Situations 1. Introduce market friendly policies: laws & regulations 2. Strengthen market economy institutions: more difficult & time consuming than #1 3. Establish social safety net and/or employment/livelihood programs (difficult & costly) 4. Protect health/education gains: indicators can deteriorate rapidly (USSR) 5. Pursue discipline in existing state-owned enterprises (SOEs) 6. Encourage establishment of new enterprises mostly by improving the enabling environment: #1-4 Three points: – Very difficult even under normal circumstances & much more difficult in post conflict – Necessary: growth necessary for peace (El Salvador example) – Issue: need to move fast but authorities may lack legitimacy
- 8. 8 Discipline for existing SOEs: important because they are usually large in relation to the size of the economy: power, water, telecommunications, ports, factories, hotels, restaurants, etc Encouragement: important to bring new players. In many countries, such as those in Easter Europe, new enterprises have been the main sources of growth •Monitoring and influencing managerial behavior to reward efficient stewardship of assets & to discourage tunneling & asset stripping; performance-based management contracts can play a role •Hard budget constraints on enterprises; requires tariff rationalization and increases •Adequate legal/regulatory environment •Simplifying regulatory and licensing procedures •Providing basic infrastructure is key for establishing the basis for competitiveness and economic growth Lessons: Need Discipline and Encouragement
- 9. 9 Lesson: A Virtuous Circle of Peace & Security, Investment, Economic Growth, Jobs, Peace and Security Jobs Peace and Security Economic Growth Private Investment • Peace & Security required for investment • Investment required for growth • Growth required for jobs • Jobs required for Peace and Security El Salvador, with USAID support, carried out far reaching economic reforms in the midst of implementing the Peace Accords. The growth that ensued made it easier and more sustainable to reinsert ex-combatants. Gangs (“maras”) an issue today
- 10. 10 Lessons: How to Create jobs Before Sustainable Growth Begins- General Considerations • A difficult but important problem • Mantra: programs should be demand driven & community led • Advantages: better information on needs, may lead to reconciliation, bypasses ineffective and inefficient central government institutions & conducive to local procurement (i.e. local construction firms) • Challenges: tension between short term results and sustainability; and possibility of “capture" of program by local power brokers Source: Demand-Driven Approaches to Livelihood Support in Post War Contexts, Piet Goovaerts, et al, ILO-World Bank, 2006
- 11. 11 Lessons: How to Create jobs Before Sustainable Growth Begins- Design Considerations • First: comprehensive mapping exercise of livelihood opportunities and resources & on local capacities, resources and skills • Implement both community-based and individual livelihood support activities • Emphasize farming, fishing and construction & their related support sectors including – USAID contractors have experience in sub-contacting local engineering & construction firms • Prioritize credit provision from the outset
- 12. 12 Lessons for Infrastructure • Infrastructure usually damaged; need to restore rapidly; power most important • USG concentrated on reconstruction of physical facilities & fuel purchases • SOEs: asset stripping, tunneling & plain stealing common • May need to establish “receivership” to provide “discipline” in SOEs • Difficult to get private investment in post- conflict: – high economic and political risk – lack of counterparts – low user rates insufficient to cover costs – low ability of users to pay • Sustainability & private participation should be “on the table” since day one; more difficult in some sectors than in others Easiest: cellular telecom Most difficult: Water & transport, except ports which is easier ($ revenue) Medium: power
- 13. 16 Continuum Between Totally Public and Totally Private --TA and/or outsourcing contracts for certain aspects such as bill collecting Management contracts with incentives for performance Leases Concessions May work if there is full cooperation from managers Introduce discipline; private firm runs company; similar to receivership Private firm operates & maintains; investment funded by public sector Private firm operates & maintains; investment by private firm P U B L I C P R I V A T E Operating Contracts
- 14. 17 Lessons from Study of Operating Contracts • Important EGAT role: “learning & teaching” • Study of operating contracts: performance-based contracts that transfer responsibility for managing operations of SOEs to private firms • Will only present conclusions of study • Dissemination: – Course on use of operating contracts planned for October 2007 – Could make special presentation to US Military • Task Manager and Author of Report: – Allen Eisendrath, I&E; aeisendrath@usaid.gov; 202-712-0483 • Implementation: – proceeding with OCs in Afghanistan & may begin Iraq July 2007 – Would welcome opportunity to cooperate with US military
- 15. 18 Lessons: General Comments on Operations Contracts as Tools to Introduce Discipline • In times of stress (post-conflict, transitions from socialism, or post-disaster) corporate governance of enterprises deteriorates and asset stripping and tunneling accelerates • Need to establish a “receivership” in the immediate term, to manage utilities on behalf of the “owners” and “customers”, i.e., the citizens; like bankruptcy proceeding • Tendency by USG in post conflict situations to concentrate on reconstruction of physical facilities and fuel purchases; customer-facing functions are often neglected • In the long term, private ownership or concessions may be the most efficient solution but operation contracts are a good solution to provide “discipline” in the interim • Operation contracts are not a silver bullet but one more tool; they have been used successfully for decades
- 16. 19 The Sustainability Challenge for Water, Sanitation & Electricity in Difficult Situations Lessons: Utilities in Many Countries Face a Vicious Circle
- 17. 20 Lessons: Usual Problem Poor Utility Governance & Management Rebuilding infrastructure and turning it over to local public authorities not enough to ensure improved services. Newly rehabilitated facilities are often not properly operated and managed and will fail over a short period of time. Useless to increase supply if interface with customers is broken. Root causes include: • Rampant corruption • Weak utility governance • Bad management • Low rates Mazar e Sharif: “privatization” of power distribution Indonesia: “privatization” of water distribution
- 18. 21 1. Which case problems were addressed? 2. How were operating contracts tendered and awarded? 3. What responsibilities were given to the operator? 4. What incentives did the operator have to improve performance? 5. How well did the incentives work? 6. How were services and cost recovery at the end of the contract? Lessons: USAID Study of the Use of Operation Contracts
- 19. 22 Lessons Analyzed by USAID Location Name Sector Cambodia * BOT, BOO private water companies Water Cote D’Ivoire * SODECI Water Georgia * United Energy Distribution Company Electricity India – Bhiwandi * Torrent Power Franchise Electricity India – North Delhi North Delhi Power Limited Electricity Kosovo Korporata Energjetik e Kosoves (KEK) Electricity Mali * Energie du Mali Electricity & Water Senegal SDC contract with SONES Water Sudan * Yei Electric Cooperative Electricity Tajikistan * PamirEnergy Electricity Uganda * National Water & Sewage Corporation’s Mbale Service Area Water Red = local contractor Black = foreign contractor * = large proportion of poor customers
- 20. 23 Lessons and Basic conclusions of the USAID assessment #1 1. Incentive based operating contracts reviewed are ‘turning around’ poorly performing electricity & water utilities & providing reliable services in difficult situations. 2. The contracts are reducing technical and commercial losses, increasing billing rates and collections, and introducing efficient and accountable management. Electricity meters and wires in Mazar e Sharif
- 21. 24 3. They work in difficult environments— post-conflict situations, disaster relief, desperately poor local economies with weak & corrupt government. 4. No single formula applies to every situation. Models include management contracts (Kosovo, Georgia), divestiture with regulation (North Delhi), incentive-based management contracts with former employees (Uganda) and lease & concession contracts (Pamir; Cote d’Ivoire; Senegal). Lessons and Basic conclusions of the USAID assessment #2 USAID is taking steps to avoid this in Egypt Egypt: New Wastewater Plant Yerevan, Armenia: Defunct Wastewater Plant
- 22. 25 5. Successful designs are tailored to the local situation. Each case is uniquely constructed. 6. Operators should have enough control to be able to manage the business. Employees should get financial gains from better performance. Consumers should not face immediate tariff increases; some service improvement must take place Electricity distribution system Mazar e Sharif Lessons and Basic conclusions of the USAID assessment #3
- 23. 26 Lessons from USAID Study: On-going Applications in Post Conflict and other “Difficult” Settings Afghanistan water, sanitation & electricity Thailand wastewater treatment plant contracts Nagpur & Bhubaneshwar water & sewerage operating contracts Northern Uganda water & sanitation in IDP areas Yerevan water & sewerage lease Montenegro & Georgia Water Reform Initiatives
- 24. 27 Cuba Interagency Planning Process USAID Provided Support Great interest on Cuba after Fidel Castro transferred power to his brother Raul Purpose of slides: illustrate some of the issues related to planning from the Development perspective; planning led by the USDOC
- 25. 32 Cuba Key Problem: Electric Power • Reliance on subsidies from Venezuela: $2 billion? • Electricity tariffs very low for households; do not cover costs • Generation plants deteriorated: lack of maintenance & the use high sulfur crude oil as plant fuel • Distribution & transmission network deteriorated: lack of maintenance and hurricanes • Blackouts/civil disturbances in 2004-06 • Castro solution of small gensets costly to operate but have added distributed capacity to system rapidly (1,000 MW?) • Positive developments in 2006/7 – Energy efficiency program (mandatory) – Energas/Sherritt gas plants (376 MW; 500 in future) • GOC claims: – Installed capacity: 3,400 MW; – Peak demand: 2,500 MW • If true, blackouts less likely Secondary distribution network after Denis, July 7, 2005Juan A. B. Belt, Power Sector Reforms in Market and Transition Economies: Lessons for Cuba
- 26. 33 Cuba: Infrastructure Priorities Slide 1 #1 Develop Infrastructure Strategy: ideally, in support of local officials; who are the potential reformers (“good guys”) #1 Power – Plan A: support UE to improve control systems to introduce discipline & minimize asset stripping and tunneling – If A not feasible, Plan B: performance-based management contract to introduce discipline & minimize asset stripping and tunneling – Minimum investment to “keep the lights on” – Develop laws, regulations and institutions to encourage private participation #2 Water and sewerage – Main issue is to avoid deterioration that could have a rapid effect on health standards. Opportunity for asset stripping and tunneling low in Havana and Varadero (foreign operator) – Sector reform can follow but introducing private participation much more difficult than in power and telecommunications
- 27. 34 Cuba: Infrastructure Priorities Slide 2 #3 Transport sector • Airport and port security • Private participation in port and airport operations quite possible: revenues denominated in foreign exchange • Mechanisms to improve the management and maintenance of the highway & road network #4 Telecommunications • Foreign partner so less need to introduce discipline • Introduce competition, which would require renegotiation of exclusivity agreement – Land lines – Cellular – Submarine cable • Cuba’s highly educated population can benefit from modern telecommunications and export ICT services (“near shoring”)
- 28. 35 • Main information gaps – Level of subsidies from Venezuela – Fiscal situation today & after regime change – Financial accounts of Union Electrica and CUPET – Information on potential reformers • Issues – Initially authorities will lack legitimacy; constitutional issue – Need far-reaching reforms to improve position in Index of Economic Freedom – Property claims; political issue in US (Fla & NJ, particularly) – Fiscal issue – Power sector – “Mafias” may try to take over SOEs; all major enterprises are run by former military officers Cuba: Information Gaps and Issues
- 29. 36 • Schematic organization of USAID: role of EGAT, main Washington Economic Development unit • US Department of Commerce Planning for Cuba: infrastructure contribution by EGAT • Future challenges • These slides represent my personal opinion Next Slides: USAID Role in IA--Present Situation and Future Challenges
- 30. 37 USAID Schematic Organigram USAID Administrator (also Director of Foreign Assistance) S/CRS 4 regional Bureaus (different from State) DCHA •OMA •OFDA, etc •DG •ST •LT Global Health EGAT •Macro •Business support •Agriculture •Environment •Credit •Infrastructure (I&E) formal link with OMA & S/CRS DCHA ST except DG OMA link w. military EGAT: mainly Long Term focus Ad hoc involvement w. military Formal links I&E-OMA
- 31. 38 USAID: Possible Contribution to IA Process? Illustrations from Cuba Infrastructure Asset Shaping to dominating Stabilizing Enabling Direct hire Planning, budget, TORs for next phases, analysis of situation w. public sources & Intel Physical/institutional assessment, initial discussions with authorities, supervision of consultants Discuss long-tem strategy for sector, including role of private sector IQCs Not involved except to carry out specific studies; security issue Physical/managerial assessment Operations contracts & other support to SOEs Regular contracts Not involved Not involved Privatization support, energy efficiency highway & port concessions
- 32. 39 Organizational Challenges/Changes (this refers to the economic development “branch”) • Challenges: – EGAT weak formal links with military – USAID’s workforce mostly in the field; limited backfill in DC; lack of experienced economists/private sector officers – Specialized ‘stove pipes’ within USG – No funding for planning or contingencies at USAID/EGAT – No culture of participating in exercises at USAID/EGAT – Some may question working with military • Potential improvements: – NSPD-44 – Whole of Government approach to R&S – Country Reconstruction and Stabilization Group (CRSG) – Interagency Management System (IMS) • Integration Planning Cell (IPC) • Advance Civilian Team (ACT) • Field Advance Civilian Teams (FACTs) – Active Reserve Corps and Civilian Reserve Corps – More information sharing, exercising, and planning with DOD – Formalizing the role
- 33. 40 Conclusions • Post conflict countries: achieving economic growth & job creation difficult but necessary • To increase probability of success, economic development issues must be considered at the earliest stage • Cannot neglect the customer-facing functions of utilities • Operating contracts can be one more tool to promote discipline in SOEs • USAID: unique capabilities in economic development may not be fully utilized • USAID/EGAT effectiveness in support of the US military can be improved
- 34. 41 Questions? Juan A. B. Belt jubelt@usaid.gov 202-712-4137
Notas del editor
- Models can not be imported but lessons can be learned from the experiences of other countries While international consultants can assist importantly, key decisions must be taken by the authorities. A group of highly qualified GOC officials should lead the reform effort; USG can work with the authorities to develop a strategy for the sectors. Who are these potential reformers? Tariff adjustment, protection of vulnerable groups, compensation for claims, and private participation policies must be formulated in the context of national policies dealing with those subjects. In other words, sector reforms can only succeed if they are coordinated with the policies guiding reforms in other sectors
- Introduce market friendly policies immediately, including unifying and liberalizing the exchange rate and prices (electricity rates). Do not forget the microeconomic foundations of competitiveness including corporate governance and making it easy to do business Strengthen market economy institutions. A long term process that would require training in disciplines such as economics and business administration, law, etc. Establish social safety net, as income is likely to decline rapidly Protect health and education gains to avoid the rapid deterioration experienced in Russia and other countries. Adequate water and electricity may be as important or more important than direct health interventions Pursue discipline and encouragement (next slide)
- The public views provision of good water, sanitation and electricity supply as a key indicator of whether things are moving in the right direction. Providing basic infrastructure services is an important factor in rebuilding public order and establishing the credibility of governance. In most post conflict situations, infrastructure expenditures are a high percentage of the total Post conflict or post-disaster; urgent need to build infrastructure. There is a tendency by the USG in post conflict situations to concentrate on reconstruction of physical facilities and fuel purchases; customer-facing functions are often neglected. In times of stress (post-conflict, transitions from socialism, or post-disaster) corporate governance of enterprises may deteriorate, and asset stripping and tunneling accelerate. There may be a need to establish a “receivership” in the immediate term, to manage utilities on behalf of the “owners” and “creditors”, i.e., the citizens. Similar to bankruptcy proceeding. Water, power and telecommunications are economic goods and should be sold at some price that at least recovers O&M. In the long term, private ownership or concession agreements may be the most efficient solution but operation contracts may be a good interim solution to provide “discipline” in the interim period. Operation contracts are not a silver bullet but just one more tool; they have been used successfully for decades. Sustainability & private participation should be “on the table” since day one
- Collier, P. and A. Hoeffler. 2001. “Greed and Grievance in Civil War.” Washington, D.C.: World Bank.
- The Private Sector’s Role in the Provision of Infrastructure in Post-Conflict Countries: Patterns and Policy Options Jordan Schwartz, Shelly Hahn and Ian Bannon, World Bank, August 2004 Sectoral Trends in Investment “An analysis of the sectoral trends of PPI in post-conflict countries shows telecom investments materialize immediately after peace, particularly mobile telephony. All of the countries analyzed had at least one private mobile operator investing in the country after emerging from war. Electricity generation and distribution projects started to emerge three years after conflict and increased in frequency after five years. Transport and water projects were also seen in these countries but only sporadically. The emergence of cellular phones is now one of the first indications that a country is emerging from conflict. In fact, the implementation of licensing and interconnection rules in post-conflict countries often requires the adjustment of existing arrangements since mobile operators are often established before governments are fully in place and recognized by the donor community. It is clear that the mobile operators respond to investment opportunities without the regard for long-term stability that other infrastructure investors require. In Iraq, the open bidding for regional mobile licenses held in October 2003 attracted 200 consortia of firms all seeking two year licenses. The cost recovery period for these greenfield investments is a fraction of the other sectors.”
- The Private Sector’s Role in the Provision of Infrastructure in Post-Conflict Countries: Patterns and Policy Options Jordan Schwartz, Shelly Hahn and Ian Bannon, World Bank, August 2004 “Beyond the telecommunications sector, the attractiveness of PPI in post-conflict countries drops precipitously. Power projects remain somewhat attractive particularly for generation or, at least, when supply and distribution are bundled. Yet retail risks make distribution privatization difficult, particularlyin the early years of post-conflict. For example, attempts to privatize the distribution companies of Albania in the early 1990s went awry over fears of collection. Investors felt that the severing of illegal connections and the collection of cost recovery tariffs would be nearly impossible after civil disturbances led to the raiding of armories and the subsequent arming of households throughout the country. Within transport, seaports received the majority of PPI investment, probably due to the hard currency earning potential of container terminals and the ability of bulk facilities—such as coal or iron ore—to be incorporated into vertically integrated logistics systems. By comparison, lingering security concerns (including de-mining), massive reconstruction costs, and the slow rebounding of traffic levels combine to make rail and road investments difficult. A port, as a single location investment, can be secured more easily than investments in network assets such as railways and roads which remain vulnerable to sabotage and interruptions in isolated corridors. In order to overcome these risks, the government may pursue arrangements which do not require immediate and large-scale mobilization of investment capital and which do not depend on steep increases in user fees. While such arrangements do not allow for the mobilization of large-scale financing, they may help to bring private sector efficiencies and management back to key transport systems in the early years of post-conflict reconstruction. Political risk insurance may be considered as a risk mitigant as well.”
- During a conflict, the capacity of public sector water, sanitation and electricity departments and utility corporations often declines dramatically. The basic capacity to run an infrastructure business is often damaged by conflict, corruption, and social disorder. When the capacity of the public sector service providers declines, there are several predictable consequences for public services. These include: Deteriorating quality and regularity of service; Declining revenue collection Cash deficiencies that lead to reduced maintenance and collection effort Deteriorating physical facilities Unhappy customers Over time, it is common for the “customer facing” end of the business to break down almost completely. We often see collection rates below 33%, which is so low that the business is seriously financially damaged. This often leads to a vicious spiral of decline in a utility, as depicted in the graphic
- If there is deep rooted weakness in corporate governance and management, reversing this decline through “capacity building” often cannot succeed. This is because the problems facing the utility run deeper than just weak capacity of the staff.
- Other points that were considered (or that will be considered, include: How did operators cope with violence and civil disruption in their service areas? What other support did the contractor have to ensure the effectiveness of the contract? This would include, for example, capital investment funds, police and judicial support, exemption from civil service employment rules, and so forth. What was done to sustain services at the end of the contract?
- August 2005: Organized and chaired a panel on energy in Cuba at the Annual Meetings of the Association for the Study of the Cuban Economy (ASCE); 2005-06: Exercises with SOUTHCOM (economics and infrastructure) Early 2006: CAFC II August 2006: paper at ASCE on power sector, which was distributed. Will be published by the U. of Texas http://pdf.usaid.gov/pdf_docs/PNADG827.pdf September 2006 to present; Department of Commerce Economics Working Group (Infrastructure); Humanitarian Assistance WG includes energy and water October 2006 to present Joint paper with DOE on energy, a request from the Secretary of Commerce to DOE; paper presented to NSC December 2006 October 2006 to present Papers on water, telecommunications, transport August 2006 to present: study of use of performance-based management contracts for utilities in post conflict situations; data gathering has begun in Afghanistan (Allen Eisendrath) October 2006 to present: Implementation Plan for Infrastructure; in draft for approval by DOS and DOC June 2007 CRSG established for Cuba
- Breakdowns in the Guiteras thermoelectric Sherritt Boca de Jaruco, 40 km east of the capital. The plants belong to Energas S.A, a joint venture set up between the Cuban state-owned companies Cupet (Cuba Petróleos) and Unión Eléctrica and the Canadian corporation Sherritt International to foment and make use of technologies capable of cleaning and processing natural gas. . From late 2005, when the generators were installed, to September 2006, they achieved a capacity of more than 1,000 megawatts -- three times the installed capacity of the Guiteras plant, which took over seven years to build. Sherritt expands generation in Cuba Financial Post; Ottawa Citizen; Montreal Gazette; Vancouver Province; Reuters; Bloomberg news Published: Thursday, June 07, 2007 Mining and energy company Sherritt International Corp. said yesterday it plans to increase electricity generation in Cuba to 500 megawatts using gas from coastal oil fields. This is part of Sherritt's $1.25-billion investment plan to expand its nickel, oil and gas, and electricity businesses in Cuba over the next three years, executive chairman Ian Delaney said. Delaney said work will start immediately on the next phase to raise installed capacity to 500 MW from 376 MW at present.
- #1 Develop Infrastructure Strategy. USG should support reformers #1 Power sector is in the midst of a crisis, and the situation will deteriorate rapidly if Cuba loses Venezuelan oil subsidies. Reliable power absolutely necessary for economic growth and to support the health and education sectors. Lack of power can result in protests and in increased migration Plan A: support UE to improve control systems to minimize asset stripping and tunneling Plan B: performance-based management contract Minimum investment to “keep the lights on” Develop laws, regulations and institutions to encourage private participation #2 Water and sewerage sector has suffered from lack of investment but services are presently not declining markedly, and already there is private participation through concessions to AGBAR (Aguas de Barcelona) in Havana and Varadero. Main issue is to avoid deterioration that could have a rapid effect on health standards --Water sector reform could follow
- THESE ARE COMMENTS FROM PAUL MARTIN ON MY ORIGINAL SET OF SLIDES If possible, from your perspective what are some of the present/future operating, administrative and policy challenges that USAID faces when planning and conducting field operations. This discussion might help focus our concept writers on how they need to better plan military support to such tough ops such as Stability, Humanitarian and pre-crisis Shaping "regional development operations. Do you see any value in discussing some of these present/future organizational challenges that limit your IA capabilities?
- Presently, USM has strong/formal links with DCHA EGAT/I&E may have the next strongest links in USAID through OMA/DCHA & S/CRS I&E has been the office outside DCHA with greatest participation in NDU & S/CRS courses, planning exercises with military, etc, I&E has participated in 4 planning exercises with SOUTHCOM I&E is heavily involved in supporting USAID Missions in rebuilding countries; Opportunity for collaboration strong in Afghanistan, Iraq & other post conflict Issue: how can the economic development resources of USAID support the IA process in a structured way rather than in an ad hoc way (“hey you system”)
- Workforce is only 2000 direct hires worldwide Save for OMA, little constant engagement, no holistic or sectoral approaches taken to address root problems DOD 3000.05 is the DOD approach to integrating civilian functions in R&S environments. NSPD-44 will enable civilian agencies to partner with the military in reconstruction and stabilization operations: it will identify existing capacity, needs, gaps and priorities The CRSG serves as the central coordination point for the USG effort and prepares the whole-of-government strategic plan to transform the conflict or address state failure. The plan includes a common USG strategic goal, a concept of operations, the major essential tasks the USG must undertake, including with international partners, and resource requirements to achieve stability in a two-to-three year time frame If DOD issues a warning/planning order to the Combatant Command, the CRSG sends to the COCOM an Integration Planning Cell (IPC) made up of relevant interagency planners, regional and sectoral experts. The IPC supports the Commander in integrating the evolving civilian components of the USG strategic and implementation plans into the military plan for operations. To support existing field operations and/or establish new operations, the CRSG (with a Principal-level decision) may deploy an Advance Civilian Team (ACT). The ACT forms the S&R interagency “command staff” for the Chief of Mission to coordinate and support the execution of the USG strategic and implementation plans for S&R. The team serves under Chief of Mission (COM) authority and can operate with or without U.S. military involvement. If regional field units are needed, the ACT becomes a headquarters entity and multiple Field Advance Civilian Teams (FACTs) may be established. FACTS provide the COM with maximum capacity to implement S&R programs while covering activities at the regional or local level. When required, FACTs will integrate with US or other military forces to maintain maximum USG/coalition unity of effort Active Reserve will on onboard DH ready to deploy CRC-upon receipt of funding—will be candidates devoted to R&S
- Lessons learned from Mugisha (Makerere University), Sanford V. Berg (Director, Public Utility Research Center, University of Florida) and Gaddi Ngirane Katashaya (Associate Professor, Makerere University) paper. 1.Use incentive regulation to better employ the firm's superior information. NWSC is effectively the “regulator” of a set of utilities, using performance/management contracts to promote cost-containment, service quality, and network expansion. 2.Prioritize regulatory goals and design incentive regulation to achieve stated goals. The weights placed on different objectives (like reductions in unaccounted-for water and increased connections) are specified in the incentive fee component of managerial compensation. 3.Link the firm's compensation to sensitive measures of its unobserved activities. Achieving performance targets determines the performance fee. However, NWSC is still monitoring inputs as a proxy for managerial effort. 4.Avoid basing the firm's compensation on performance measures with excessive variability. The three components of the management fee are designed to exclude elements that are volatile. 5.Limit the firm's financial responsibility for factors beyond its control. The base fee passes through uncontrollable costs. Of course, distinguishing what is controllable and uncontrollable requires a deep understanding of production processes and input markets—so NWSC needs to re-visit the division periodically. 6.Adopt broad-based performance measures where possible, unless their variability is excessive. The incentives incorporated in the management fee reflect a few key objectives. 7.Choose exogenous performance benchmarks. This criterion is yet to be fully implemented. Ideally, the managerial rewards should reflect the performance of specific utilities relative to a benchmarking group. This approach would require more comprehensive analysis of costs—so unique conditions facing each utility are accounted for. Currently, the incentive fee is for improved performance over time. 8.Allow the firm to choose among regulatory options, while recognizing the interdependencies among the regulatory options that are offered to the firm. At present, there are discussions between local managers and NWSC; however, NWSC still utilizes a one-size-fits-all approach to incentives. Still, both the performance fee and the incentive fee allow managers to focus on targets that can be achieved in the most cost-effective and timely manner. 9.Promise only what can be delivered, and deliver whatever is promised. NWSC adheres to the explicit contractual reward system, though the stretch-out system reflects a more flexible approach to meeting targets. 10.Plan for the rare, unforeseen event, but minimize after-the-fact adjustments to the announced regulatory policy. Contingency planning is one element of NWSC procedures. One advantage of the present system is that litigation is not an issue—but that does not mean that dispute resolution can be totally ignored, since local managers need to be convinced of the legitimacy of the incentive formula and fairness in the way reported outcomes are utilized for rewarding high performance.
- Operators get base fee if they achieve basic service targets. They also earn a performance fee and an incentive fee get a profit sharing if they exceed each year’s gross profit target.- Base Fee = Fixed costs + 75% of controllable costs. Controllable costs are variable costs such as direct materials and variable overhead that are usually considered controllable by the manager. Here direct labor is considered uncontrollable. Costs are categorized as controllable or uncontrollable in the Sixth Schedule of the Mbale operating contract (in an annex). Performance Fee = 25% of controllable costs * weighted number of service standards achieved divided by 100. (Weights total 100. )Service standards include indicators dealing with water sold, operations (unaccounted for water, percentage of reported leaks fixed etc.), service (new connections, % of customer complaints responded to etc.), finance (cash operating margin, billing etc.) Incentive Fee = X% times COM times a sum of weighted factors including unaccounted for water, working ratio, connection efficiency and collection period COM = cash operating margin = Revenue receipts – Operating expenses The incentive formula applies only ifis applicable only if the achieved cash operating margin > a Minimum cash operating margin