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Effects of Governance Models in Transition Countries

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Name of the Asset | Effects of Governance Models on Affordability, Sustainability and Efficiency of the Water Services in Three Transition Countries (Armenia, Hungary, Romania)
Type of Asset | Working Paper
Date | September 2013



Political changes after 1990 have led to radical social and economic changes in Central and Eastern Europe (CEE) and the Commonwealth of Independent States (CIS). Countries in the region have started a decentralization process from a highly centralized system of state-owned enterprises within a planned economy, and have moved towards increasingly private sector-dominated market economies. This research presumes that the process of development in transition countries has a similar, common point of origin, but that post-transition emerging institutional structures reflect the different historical, economic, and political realities of individual countries; and that this has an effect on the outcomes of the transition processes.

The analytical framework of this paper is based on the general typology of water organizations along the static dimensions of privatization and decentralization. The empirical evidence gathered for this study is based on the analysis of water sector decentralization and the privatization trends in two countries of Central Europe (Hungary, Romania) and one from the Caucasus region (Armenia). Outcomes of water management are measured by affordability, sustainability and water service quality, which are also influenced by external factors, such as the level of economic development or geography. 

Findings support the main hypothesis of the paper: It is not the general economic framework (privatization vs decentralization) that primarily influences the quality of water services, but other critical factors including conflict management, capital investments – or overinvestments – poorly designed incentives, low accountability, inadequate tariffs and service risks. Thus, post-decentralization, dynamic governance factors, i.e. incentives, accountability schemes and the rule of law mainly define water service performance.

  • József Hegedüs (Metropolitan Research Institute (MRI), Budapest, Hungary)
  • Mária Papp (Metropolitan Research Institute (MRI), Budapest, Hungary)
  • Gábor Péteri (Metropolitan Research Institute (MRI), Budapest, Hungary)
  • Adriana Pienaru (Metropolitan Research Institute (MRI), Budapest, Hungary)
  • Afrodita Popa (Metropolitan Research Institute (MRI), Budapest, Hungary)
  • Andrea Tönkő (Metropolitan Research Institute (MRI), Budapest, Hungary)
Country and/or Region | Hungary, Armenia, Romania
Funder(s) | The Australian Agency for International Development (AusAID), Department for International Development (DFID), UK, the French Ministry of Foreign and European Affairs, Inter‐American Development Bank (IDB), International Development Research Centre (IDRC), Open Society Institute (OSI), The Partnership for African Social and Governance Research (PASGR) and the World Bank.  
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