338366 Teguh Setiawan | Indonesia | UEIM4 – Solid-Waste Management and Transportation

IHS Erasmus Universiteit Rotterdam

Pro-Poor Public-Private
Partnerships in Solid
Waste Management
UMD6 Solid Waste Management and
Transportation Module
Teguh Setiawan – 338366 - Indonesia

June 12, 2010

338366 Teguh Setiawan | Indonesia | UEIM4 – Solid-Waste Management and Transportation

Pro-Poor PPPs in Solid Waste Management

Introduction
Public-private partnerships (PPPs) theme has gained topical popularity worldwide since it is
believed to be solution for the lacking capacity of local government to provide adequate
infrastructure and public services due to its limited resources, low efficiency and lack of expertise
(ADB, 2008; Forsyth, 2005; Massoud & El-Fadel, 2002). However, most of the PPP projects in
developing countries during 1990-2003 has focused on infrastructure of specific sectors such as a)
telecommunications; b) electricity (generation, transmission, and distribution); c) natural gas
(transmission and distribution); d) transport; and e) water as sewage system (ADB, 2008) which
are more capital intensive. It seems that the PPPs are perceived as the easiest way for local
government to attract private investments to build infrastructure. The private sector on the other
hand, is interested to invest in particular sectors which promise good prospect of returns. SWM
does not seem to be interesting sector for PPPs.

Such partnerships between private sector and public sector have succeeded in many cases. Yet,
many private operators of public services fail or have no willingness to extend services to the poor.
The private sector does not have incentive to extend services to low-income areas because of the
high cost of providing the service and low profits they will get in return. It might be caused by the
assumption that low-income customers do not have payment culture, tenure, and enough
consumption (ADB, 2008). This paper will discuss whether PPPs is the best scenario for SWM
services that benefits all citizens including the urban poor. The review of related literature and case
studies is used to derive key strategies to make PPPs in SWM services are pro-poor.

Solid-Waste Management (SWM) Services

Rapid growth and urbanization in many developing countries comes with environmental problems
in urban areas (Ngoc & Schnitzer, 2009; Sembiring & Nitivattananon, 2010). Together with
increasing population, changing patterns of consumption, increasing income, and industrialization
all together result in increasing generation of waste as well as the types of waste generated, which
means creating environmental problems. Solid waste is the most visible environmental problem in
urban areas. The municipal solid waste includes any refuse generated by households, commercial
activities and other sources whose activities similar to those two (Ngoc & Schnitzer, 2009).

Integrated solid waste management (ISWM) tries to seek for management methods to reduce the
waste at its source before entering the waste stream (Ngoc & Schnitzer, 2009) which includes
selection and application of appropriate techniques, technologies and management programs
(Hoornweg et al., 1999). Sustainable SWM approach aims to offer a chance to prevent waste
through designs based on the full life cycle of the product, similar to natural cycles, which function
without producing waste. The reduce-reuse-recycle-recover (RRRR) principle becomes the
keywords for sustainable SWM. This full life cycle concept is known as cradle-to-cradle
(McDonough & Braungart, 2002). However, dealing with SWM remains a difficult challenge for

1
338366 Teguh Setiawan | Indonesia | UEIM4 – Solid-Waste Management and Transportation

municipalities due to the complexity of the problem. Local government alone will not be able to
succeed in SWM, therefore an integrated approached is needed as described by the UNEP
International Environmental Technology Centre (1996) which suggests that public, private, and
informal sectors can be included in the waste management plan (Hoornweg et al., 1999).

The estimated number 2 billion people living in the slums worldwide by 2030. This inevitable
consequence of urbanization requires sustainable provision of infrastructure and basic services
from the municipality such as water supply and waste management (ITCILO, 2008). Many cities in
the world, especially in developing countries, have faced problems regarding the solid-waste
management (SWM). The municipal SWM is a non-exclusive and non-rivalled public service which
means once it is provided it will benefit all citizens without diminishing the benefit to anyone else
(i.e. who do not pay). Many cities have failed to provide SWM services due to lack of resources that
the SWM capacity cannot handle the amount of refuse generated by households and commercial
activities. The more growing the economic activities, the more garbage being produced and the
more resources needed by local government to take care of the garbage. The growing waste
quantities are directly linked to economic activity, resource consumption, and economic growth
(Ngoc & Schnitzer, 2009; Massoud & El-Fadel, 2002) which means the challenge faced by local
governments to deal with the SWM will also grow. The increasing cost of SWM has made municipal
governments reconsider whether this service should be best provided by the public sector or better
by private sector (Massoud & El-Fadel, 2002).

Public-Private Partnerships (PPPs) for SWM

Public-private partnerships (PPPs) can be defined as "the transfer and control of a good or service
currently provided by the public sector, either in whole or in part, to the private sector" (Massoud &
El-Fadel, 2002). The local government might want to involve the private sector for some qualities
that the public sector is lacking, namely the expertise, efficiency, and capital, which are required to
improve and expand service (ADB, 2008). Transferring some aspects of SWM services to private
sector does not mean that local government is not fully responsible for those services. A number of
aspects still have to be considered in developing policies and strategic plans in involving private
sector participation (PSP) in SWM services, namely: cost, funding, cost recovery, economies of scale,
efficiency and accountability, governance, and legislation (Massoud & El-Fadel, 2002).

As the increasing amount of solid waste generation has created disposal problems for many cities
especially in developing countries, local governments are often characterised by inefficient
performance or even failure to deliver the services which result in operating deficits, public budgets
drain, overstaffing with people lacking skills and concern. Such failure leads to refuse-burning and
open dumping, which cause more environmental problems. For this reason, inviting for PSP is
considered a reasonable solution.

PSP in the SWM can enter in any stages from cleaning the garbage in the streets, sorting and
recycling, collecting and transporting, to disposal of the waste. All of those stages can involve
different private actors from street garbage pickers to large and multinational companies. Huysman
(2010) mentioned that PSP can involve almost any private actors, namley informal sector, NGOs

2
338366 Teguh Setiawan | Indonesia | UEIM4 – Solid-Waste Management and Transportation

and CBOs, micro and small enterprises and cooperatives, medium firms, and big or multinational
companies. Each actor can participate in different aspects of SWM according to their capacities,
such as street sweeping, households and commercial waste collection, user bill collection,
composting and recycling, transfer stations and sanitary landfill construction and/or operation
(Huysman, 2010).

Towards Pro-Poor Partnerships

The PPP scenarios can reach and benefit the poor provided they are properly conceived. The urge
for pro-poor PPPs has grown worldwide. Concerns are voiced by consumers, NGOs and
representatives of civil society. Growing political will towards pro-poor PPPs and the priority of
development banks to provide loans for projects that support and promote the pro-poor PPPs have
been translated to new approaches targeted to the needs of the poor within the PPP scenarios. In
the end, the PPPs are expected to be able to provide adequate incentives to the participating private
sector, involve the poor, balance either the social or financial risks, and benefits to all stakeholders
(ADB, 2008). From the literature reviews, different kinds of strategies can be applied to promote
the pro-poor PPPs.

1. Policy Reform
To ensure the PPPs in SWM, it starts with the legal framework at the local government policy level.
Everything must be made clear that PPPs project must be committed to low-income groups, the
definition of low-income groups must be understood under common agreement, and the open
consideration of the involvement of existing or potential small-scale providers or informal sector in
the SWM. Partnerships must be made more responsive to the needs and requirements of low-
income consumers in many ways, including both contract provisions or content and changes in the
overall approach to the reform agenda (ADB, 2008).

2. Building Deliberative PPPs

Deliberative PPPs means "partnerships that maximize public debate about the purpose and
inclusivity of collaboration between state, civil, and market actors, as well as achieve the economic
purposes of collaboration" (Forsyth, 2005). Forsyth (2005) argues that deliberative PPPs benefit all
stakeholders, namely investors, state, and citizens, by reducing the costs and possible resistance to
new investment, and by giving the citizens the chance to make partnerships more relevant to local
needs. His study in cities in the Philippines and India showed that when actors really attempt to
address the needs of local poor people, the PPPs seem to work well. However, he concluded that
deliberative PPPs work most effectively when all stakeholders are willing to collaborate to
implement new technologies, and make locally-inclusive forums to discuss these technologies
(Forsyth, 2005).

3. Involving Local Investments

Massoud and El-Fadel's (2002) study on PPPs for SWM in Lebanon suggested that private sectors
that could provide investment should be involved in the waste disposal and transfer systems which

3
338366 Teguh Setiawan | Indonesia | UEIM4 – Solid-Waste Management and Transportation

are more capital intensive, while other opportunities where small and medium enterprises could
participate would be on collection services to aim for cost reduction and improving efficiency since
the most expenditure for SWM is for collection. To encourage local investors serving the poor
communities under PPP, it is crucial to provide incentives in forms of low-cost mechanisms and
low-cost financing for system extension (ADB, 2008; Larbi, 2005). Localized PPPs by collaboration
with local citizens can also reduce the cost of the transfer of technology by allowing them to
participate in the shaping of technology implemented, or in identifying the local needs (Forsyth,
2005). In this regards, a vertical integration of SWM services between small-scale operators and the
public sector is expected to be a better alternative (Ahmed & Ali, 2004).

4. Engagement of Informal Sector

A study in Indonesia also suggested that the informal sectors have great potentials to be involved in
the SWM, especially in collection and recycling activities which is very labour intensive (Sembiring
& Nitivattananon, 2010). However, involving informal sector in the SWM might not favourable by
local government since the involvement of the informal sector needs additional cost and, with
limited resources, it is difficult for local government to adopt any policies that requires additional
cost. Besides, the informal sector is often stigmatized as illegal disregarded by decicion makers in
policy making.

Integrating the informal sector in SWM faces difficult challenges. The role of informal sector in
SWM is often underestimated by local authorities. This informal sector in SWM includes waste
pickers and itinerat/stationary waste buyers (Ahmed & Ali, 2004). Sembiring and Nitivattananon's
(2010) study shows that the informal sector actually plays a significant role in diverting recyclable
materials. The informal collecting and recycling activities in Bandung city deal with at least 13% of
Bandung's MSW, involving more than 2915 people. For the local authorities, the informal sector
contributes to SWM, but they require basic service needs and social rights that might cost a lot of
resources to formalize them. On the other hand, applying their own collection system and
technology will limit the contribution of the informal sector.

Therefore, in order to integrate the informal sector as privatization of part of the SWM services, the
first step is to improve the ability of the informal sector to add value to the collected materials so
that their income will increase, so will their quality of life. The next step is by strengthening their
alliance by a recycling cooperative to improve their strength to build partnerships with other actors
(Sembiring & Nitivattananon, 2010).

5. Pricing Mechanism
The pricing structures of the services must be arranged to ensure the private operators can make
profits. These pricing schemes should be made affordable for poor people either by progressive
pricing or subsidies (ADB, 2008; Larbi, 2005).

4
338366 Teguh Setiawan | Indonesia | UEIM4 – Solid-Waste Management and Transportation

Concluding Remark
PPPs should no longer be viewed as the fastest way to get investment to build costly
infrastructures, nor as a panacea for budget related problems of local governments. The decline of
PPPs caused by concerns that PPPs projects often exclude the poor from the system has led to the
search for alternative way of doing the PPPs. For local governments are remain responsible for
provision of services all citizens, a new approach towards pro-poor PPPs should be developed.

Five key strategies derived from the literature can be identified as follows: i) policy reform to
emphasize the pro-poor PPPs; ii) deliberative PPPs to ensure all local stakeholders to be involved;
iii) involving local investors; iv) informal sector engagement; and v) pricing mechanisms that can
ensure the poor people can pay and the local operators can profit.

However, those strategies must always consider the local context and therefore might not work for
all situations. Involvement of local actors and identification of the needs of local poor people are
also crucial to be considered.

References
ADB (2008) Public-Private Partnership (PPP) Handbook. ADB. Retrieved 9 June 2010 from
http://www.adb.org/Documents/Handbooks/Public-Private-Partnership/
Ahmed, S. A. & Ali, M. (2004) Partnerships for solid waste management in developing countries:
linking theories to realities. Habitat International, 28, 467-479.
Forsyth, T. (2005) Building deliberative public–private partnerships for waste management in Asia.
Geoforum, 36, 429-439.
Hoornweg, D., Thomas, L. & Varma, K. (1999) What a Waste: Solid Waste Management in Asia,
Washington DC, The World Bank.
Huysman, M. (2010) Scope and Practice of PSP in SWM. Powerpoint presentation on Urban
Environment and Infrastructure Management at Institute for Housing and Urban
Development Studies. Rotterdam, IHS Erasmus Universiteit Rotterdam.
ITCILO (2008) Public-Private Partnerships for Urban Poverty Reduction: Interregional Training and
Knowledge Sharing Workshop (Ref.: A901126). Workshop flyer. Turin, ITCILO. Retrieved 9
June 2010 from http://www.euroasia-uclg.ru/files/Flyer.doc
Larbi, E. (2005) PPP and the Poor in Water Supply Projects: The Ghanaian Experience. WELL
Factsheet. Retrieved 10 June 2010 from http://www.lboro.ac.uk/well/resources/fact-
sheets/fact-sheets-htm/RSA PPP and the poor.htm
Massoud, M. & El-Fadel, M. (2002) Public-Private Partnerships for Solid Waste Management
Services. Environmental Management, 30:5, 621-630.
McDonough, W. & Braungart, M. (2002) Cradle to Cradle: Remaking the Way We Make Things, New
York, North Point Press.

5
338366 Teguh Setiawan | Indonesia | UEIM4 – Solid-Waste Management and Transportation

Ngoc, U. N. & Schnitzer, H. (2009) Sustainable solutions for solid waste management in Southeast
Asian countries. Waste Management, 29, 1982-1995.
Sembiring, E. & Nitivattananon, V. (2010) Sustainable solid waste management toward an inclusive
society: Integration of the informal sector. Resources, Conservation and Recycling, (Article in
Press).