GoAL WaSH Bosnia and Herzegovina

Goals

  • Provide technical assistance to the Government of the Federation of Bosnia and Herzegovina to establish a legislative and institutional framework for the water supply and sewerage sector.
  • Develop a draft methodology for tariff setting for water supply and sewage services in Bosnia and Herzegovina that shall define tariffs enabling costs recovery. The methodology should also include detailed guidelines for developing a business plan to improve financial and operating performance.
  • Develop a proposal on the best administrative positioning of the Regulatory Body for tariff setting of communal affairs of water supply and waste water collection and treatment services. Define tasks and competences of that body, including necessary amendments of Law(s) on Communal Affairs.
  • Test the prepared tariff setting methodology, providing support for its implementation in two selected pilot communities (one per each of the two BiH constitutional entities, namely Federation of Bosnia and Herzegovina and Republika Srpska), all in order to justify its applicability and effectiveness and enable replication in other local communities.

Weak economic governance and poor infrastructure, caused by years of bad maintenance in Bosnia and Herzegovina’s water sector, is preventing satisfactory delivery and long-term sustainability of water services. The key long-term challenge in Bosnia and Herzegovina’s water sector is the lack of financial sustainability of water utility companies. Capacities to appropriately manage finances are limited. Accounting and budgeting practices comply with neither national legislation requirements nor international professional standards. Financial analysis capabilities and the associated ability to undertake strategic financial planning are also inadequate. As a result, water utilities are incapable of investing in their equipment, infrastructure maintenance, or development. They also lack performance-based management systems and rarely assess public satisfaction with their services. If these institutional weaknesses are not addressed, not only will the current problems with water delivery and quality control persist, but efforts to improve them will not be sustained in the long run.

The present level of crisis in water supply in BiH, where several water utilities are under bankruptcy and many hardly survive daily operations, is an opportunity to finally achieve changes in the sector. Moreover, the Stabilization and Accession Agreement with the EU is expected to be finally approved during 2015. The EU integration process will have a positive impact on the water sector and will induce improved inter-sectoral coordination and cooperation, what is presently lacking.

  • Develop a methodology for water and wastewater tariff setting. The methodology should enable all operative costs to be covered, including all investment costs, still these costs have to be minimized and justified.
  • Prepare a study with proposal on the best administrative positioning of the Regulatory Body in the process of tariff setting of water supply and wastewater collection and treatment services.

 

Achievements

In 2017 the tariff methodology was tested in two municipalities, Tesanj and Teslic. The testing resulted in that both pilot utilities introduced new accounting procedures to be able to have proper control of the different costs. Both utilities have also prepared action plans for water losses reduction. The pilot testing is continued in 2018 with the municipalities of Trebinje and Ljubuski.

The Government of Federation of Bosnia and Herzegovina has proposed changes of the Water Law, which include request for a tariff methodology rulebook. These changes are now pending approval by the Parliament. In they are approved the key principles that the tariff methodology recommends are expected to be met. Responsible Ministry of Agriculture, Water Management and Forestry has requested UNDP to support the drafting of the tariff methodology rulebook.

Contact

Ms. Alisa Grabus (external)

Energy and Environment Sector Associate
alisa.grabus@undp.org

Dr. Alejandro Jiménez

Programme Director
alejandro.jimenez@siwi.org

Ms. Lotten Hubendick

Programme Officer
lotten.hubendick@siwi.org