Water in Armenia - from Shortage to Abundance

Armenia’s water sector was in a state of despair after the fall of the Soviet Union: the system suffered from increased demand, dilapidated infrastructure, water leakage, wastage, and costly service provision. Realizing that the main reason behind the poor water service was weak management of available resources, Armenia's Government decided to partner with the private sector to introduce significant reforms in the sector. As a result, the sector today is well regulated with an established institutional framework, increased operating efficiency, improved service provision, and greater customer satisfaction.

With World Bank support from 2000 to the present, the Government established successful Public Private Partnerships (PPP) in the water sector. Such private sector participation was viewed by the Bank and Government as an agent of change. They brought about significant reforms to the services. Later, PPP schemes with the engagement of international private operators were successfully implemented in all water utilities in Armenia, yielding excellent results for the development of the water and wastewater sectors.

One of the most stark improvements is the increase in the supply of water to Yerevan residents for 23 hours on average, compared with only 4 hours before the engagement. Areas outside Yerevan now have 17 hours of water supply on a daily basis.

As energy costs were the biggest expense for the utility, operators sought measures to cut energy consumption. Gravity schemes were introduced to reduce pumping and modern energy efficient pumps were installed, ultimately cutting energy consumption by almost 50 percent. This effort reduced one of the biggest burdens on the water supply system and opened room for further improvements.

The fully automatic Dispatch Unit located outside the capital city now allows for monitoring and managing of the Integrated Water Resource Management system in terms of both quality and reallocation of supply, while addressing emergencies in a timely manner. 

Successful PPP projects in the water sector present viable alternative solutions for governments interested in undertaking significant water reforms. Armenia has discovered that it is possible to carry out modernization programs and undertake considerable water sector reforms when partnering with private sector institutions. Some key lessons from this experience are:

PPP is an effective tool to enable sector reforms: The Armenian experience proves that successful water PPPs are one of multiple sector strategies designed to achieve reform. While private operators focused on service management and urgent operational issues by bringing know-how and expertise, the Government ensured long-term sector viability by setting up the right legislative and regulatory environment conducive for PPP.

Government commitment: The Government’s commitment to reforming the water sector proved to be key. Political support has been consistent throughout.

Quality and autonomy of the private partner: The operators were able to: (i) implement an independently designed investment plan; (ii) take some commercial risk; and (iii) properly manage financial resources available and even contribute some working capital.

Building up a partnership: The Armenian experience demonstrates that it takes time to establish a viable partnership in an effort to achieve solid results. Regardless of past experience, a private operator needs sufficient time to understand the situation in a utility and the specifics of the local environment.

Realistic performance targets must be set and good baseline information should be available: Armenia's PPP experience in the water sector demonstrates the need to have realistic expectations about the scale and pace of reforms, as sustainable change doesn’t happen overnight.