How can we understand the political economy issues and risks in the water sector?

Political Economy Analysis in the Urban Water Sector

What is it and how can it help? 

Political Economy (PE) analysis uses elements like stakeholder analysis, institutional and governance analysis, and risk assessments to identify potential political economy challenges to urban water projects. PE analysis examines potential interference from local governments and mayors in utility operations, the role of water in political campaigns, and patronage, which diminishes the accountability of utility managers to consumers. It may also be used as an input to the Bank’s Operation Risk Assessment Framework  which is mandatory for all Investment Lending operations.

When does it work best? 
  • PE is particularly beneficial in contexts of prospective reform and where governance (as opposed to resource) factors pose constraints to the development of the urban water sector.
  • PE assessments can be quite useful for ESW or to initiate business development.
  • A long term horizon to obtain buy in from clients and obtain consensus is important, if not prerequisite.
How do I use it? 
  • Sample terms of reference for Political Economy and governance analysis in urban water are available in the Water Paper (see below) and from the Water website (The ToR have been used often and adapted to different contexts).
  • A project or sector political economy assessment may cost around US$30-$50,000, while an in depth/participatory assessment could run up to US$100,000 (this would also involve technical assistance to incorporate the recommendations for action into strategic or operational work).PE assessments will almost certainly require additional financing (TFs etc.)
  • Each case study generally takes 9 months to undertake including the planning, coordination with the relevant task teams (agree on methodology) and actual assessment.
Where has it been used? 
  • PE analysis has been applied in various forms in a number of countries including Senegal, Chile, Tajikistan, Ghana, Panama, and Pakistan.
  • Applications include retroactive as well as real-time assessments at the time of project preparation/ supervision that help task teams better engage in the sector.
  • Some specific examples include: Utility reform in the Panama case study through the investment project for IDAAN water utility; PPP arrangements for the Accra Water Utility in Ghana to assess the transition private sector options for the next phase of the water program; and Sector engagement entry point for resuming work in Pakistan where the Bank has not been active in urban or rural water for 10 years.
What are its limitations? 
  • PE analysis often raises politically sensitive issues, which may limit the scope for external diffusion and/or the terms in which findings are expressed.
  • It can be difficult to balance focus and depth when developing a scope for PE analysis.
  • It is difficult for TTLs to fund PE analysis from existing budgets or from regional or sector-based funding. Additional financing will usually be necessary.
Where can I go to learn more? 
  • Water papers: Approaches to Conducting Political Economy Analysis in the Urban Water Sector – The note includes learning from the case study series, and guidance/steps along with practical tools for TTLs in the sector who wish to undertake PE analysis. The note also includes a sample Terms of Reference as well as an ORAF template for the urban water supply and sanitation sector that teams can use as a reference.
  • Political Economy Community of Practice: Political Economy Community of Practice - part of the governance sector; however, its applications are cross-cutting. The CoP maintains a roster of practitioners trained in this methodology, including water specialists. They will also review TORs.