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The World BankWashington DC

Center for Entrepreneurship and Economic Development, Podgorica, Montenegro

Poverty and Social Impact Analysis (PSIA) for the Water Sector Reform in Montenegro

and

Social Assessment (SA) for the Montenegro Tourism Development Project

CEED – Dragana RadevicHermine De SotoSabine Beddies

Arben Bakllamaja

August 2006

With the support from UNITED NATIONS DEVELOPMENT PROGRAMME (UNDP), Podgorica

Table of Contents

Acknowledgements.....................................................................................................................4Abbreviations...............................................................................................................................5Glossary of Terms........................................................................................................................7EXECUTIVE SUMMARY..................................................................................................................8

A. Summary of Key Findings................................................................................8Tariff increases......................................................................................................................9Access to water.....................................................................................................................9Support for the poor..............................................................................................................9Other channels of impact on the reform..............................................................................10

B. Conclusions and recommendations................................................................11PSIA Matrix for the Water Sector Reform in Montenegro.....................................13

I. INTRODUCTION AND METHODOLOGY..................................................................................17Structure of the Report.....................................................................................21

II. COUNTRY AND REFORM CONTEXT....................................................................................22A. Legal Framework by which the system of water-supply is organized in Montenegro......................................................................................................22B. Background of Water Sector Reform in Montenegro........................................23C. The Regional WSC Project for Montenegrin Coast...........................................24D. Institutional Structure of the Water Supply Sector.........................................24

Vodacom.............................................................................................................................25E. Reform Stakeholders.....................................................................................30

Stakeholders that affect/implement the Reform..................................................................30Stakeholders affected positively by the reform...................................................................30Stakeholders affected negatively by the reform..................................................................31Stakeholders with influence over the reform policy.............................................................31

F. Poverty in Montenegro in the Context of the Water Sector Reform...................31G. City Profiles..................................................................................................32

Access.................................................................................................................................32Billing..................................................................................................................................33Collection ratio and enforcement mechanisms....................................................................33Water losses........................................................................................................................33

III. FINDINGS AND ANALYSIS..................................................................................................36A. Impact analysis.............................................................................................36

Tariff increases....................................................................................................................36Affordability and willingness to pay.....................................................................................37Access to water and water services (water network)..........................................................44Subsidies – measures to support the poor...........................................................................50Impact on Economic Development of the Area....................................................................52

Vulnerable Groups: Roma population in Montenegro and water supply problems they are facing with..........................................................................................55

Living conditions.................................................................................................................55Accommodation conditions.................................................................................................56Water supply network and problems...................................................................................56Improvement in the service of the Water Supply Management Company...........................57Ability and willingness to pay water bills.............................................................................57Willingness to pay Water Supply Management Company’s services....................................58Public awareness.................................................................................................................58Subsidies for vulnerable households...................................................................................59Health care..........................................................................................................................59Recommendations and conclusions.....................................................................................59

B. Stakeholders and Institutional Issues.............................................................61Stakeholders and a New Institutional Environment.............................................................61Main issues related to stakeholders.....................................................................................62

IV. CONCLUSIONS AND RECOMMENDATIONS.........................................................................64V. REFERENCES.......................................................................................................................68

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Annexes

Annex 1 – City Profiles 66 Annex 2 – Report on Key Informant Interviews in the Five Project Cities 76Annex 3 – Report on Focus Groups Discussions Held in Podgorica on non-water thematic topics

88

Annex 4 – Report on Focus Groups Discussions Held on Water Thematic Topics 104Annex 5 – Socio - economic Household Questionnaire 115Annex 6 – Terms of Reference for Local Consultant 130Annex 7 – Guidance on the focus and scope for data collection 136Annex 8 – CDM - Potential financial gain for utility by recovering lost water based on the winter tariff in Budva of 0.6 €/m3

137

Annex 9 – Vodacom– Overview of completed activities within the “Intervening measures 1”

138

Annex 10 – Tables and Descriptive Statistics Obtained from HHQs 139

Tables

Table 1.1 Roma population in Montenegro (source: NGO “Početak”) 17Table 2.1 Condition and access to water infrastructure in five project cities 33Table 3.1 Water’s share in the monthly household expenditures by cities 36Table 3.2 Water’s share in the consumption basket 36Table 3.3 Average monthly water bill amounts in project cities (€) 37Table 3.4 The average water bill amounts for water supplied from WSC and other sources in project cities (€)

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Table 3.5 Willing to pay higher price for better quality service (by poverty status) 40Table 3.6 Willing to pay higher price for better quality service (by municipality) 40Table 3.7 Project groups for public campaign (by project cities) 42Table 3.8 The primary problem in water system (by project cities) 44Table 3.9 The effect of piped water shortages on households (by poverty status) 46Table 3.10 The effect of piped water shortages on households (by municipality) 46Table 3.11 Public awareness of GoM water supply reforms 47Table 3.12 Families receiving social assistance 48Table 3.13 Households’ perceptions of the reform impact on employment, especially in tourism sector (in %)

52

Schemes

Scheme 2.1 Existing institutional framework 24Scheme 2.2 Future institutional framework 27

Graphs

Graph 3.1 Problems with the water supply during the tourist season (by project cities) 43Graph 3.1 Problems with the water supply during the tourist season (by project cities) 44Graph 3.3 Average daily water supply, in hours/per season 46

Boxes

Box 4.1 An example of giving a concession for part of the water supply network to private company in municipality of Tivat

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ACKNOWLEDGEMENTS

The study was accomplished with the assistance of many individuals, institutions and organizations, all of whom provided substantial support for the study. We would like to thank Andreas Rohde, Senior Sanitary Engineer (ECSIE) and Task Manager of the Montenegro Tourism Development Project.

The study was undertaken by the Center for Entrepreneurship and Economic Development (CEED), Podgorica under the project management of Dragana Radevic. The CEED research team collected data for the Roma community in cooperation with Roma non-governmental organizations. Special thanks go to Veselj Beganaj for facilitating this communication.

The World Bank team consisted of Hermine De Soto, Sabine Beddies, and Arben Bakllamaja. Our sincere gratitude goes to Anis Dani, Lead Social Scientist (SDV), and Stefano Paternostro, Senior Economist (PRMPR), for their financial support of the study.

Our special thanks go to United Nation Development Programme (UNDP) in Podgorica, especially Miodrag Dragisic for their support in collecting data for the Roma population; this study would have been far less comprehensive without their support.

We also would like to thank representatives of the central government, local governments in the project cities and experts from Water Supply Companies who kindly offered their time and support. We are most grateful to the representatives of the Regional Water Supply Project and donor community including USAID implementers CDM, IRD and Urban Institute for their expertise and the country data they have shared with the team.

We also express gratitude to all the individual consumers and households, and business sector representatives who participated in the survey, interviews and focus group discussions. Without their views, perceptions and opinions, this study would not have been able to capture the poverty and social impacts of the water sector reform.

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ABBREVIATIONS

CG – Central Government

FG – Focus Group

IRD – International Relief and Development

HHQ – Household Questionnaire

KfW – Kreditanstalt Fur Wiederaufbau (German Cooperation)

LG – Local Government

MAFWM – The Ministry of Agriculture, Forestry and Water Management

MEPUP – The Ministry of Environmental Protection and Urban Planing

MONSTAT – Statistical Office of the Republic of Montenegro

NGO – Non-Governmental Organization

PEW - Public Enterprise for water supply, waste water collection and treatment and solid waste disposal for coastal region of Montenegro and municipality of Cetinje

PO – Private Operator

PRSP – Poverty Reduction Strategy Paper

PSIA – Poverty and Social Impact Analysis

SME – Small and Medium Size Enterprises

WB – World Bank

WSC – Water Supply Company

WSR - Waters Supply Reform

1 Euro = 1.22870 US Dollar 1 US Dollar (USD) = 0.81387 Euro (EUR)

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GLOSSARY OF TERMS

Cubic meter: Metric unit of volume equaling 1,000 liters

Euro: The currency of Montenegro (at the time of the study preparation, US $1= €0.804635)

Municipality: Administrative division within the Republic; there are 21 municipalities in Montenegro

MC cities: The fours study sites including Budva, Bar, kotor and Ulcinj.

Service quality: This standard for “hours of supply”‘ and “water pressure”

Region: A local territorial/administrative unit, usually comprising more than one municipality; there are three regions in Montenegro: South (Bar, Budva, Ulcinj, Hereg Novi, Tivat, Kotor), Center (including municipalities Podgorica, Niksic, Danilovgrad and Cetinje) and North (Kolasin, Berane, Bijelo Polje, Andrijevica, Mojkovac, Plav, Plužine, Šavnik, Pljevlja i Žabljak).

Project cities: The collection of all four-study cities considered together including Bar, Budva, Kotor and Ulcinj.

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EXECUTIVE SUMMARY

This study combines a Poverty and Social Impact Analysis (PSIA) and a Social Assessment for both the Water Sector Reform in Montenegro and the Montenegro Tourism Development Project. The study will benefit the implementation of Montenegro’s Development and Poverty Reduction Strategy (DPRS), stakeholders of Water Sector Reform, and beneficiaries/existing customers, particularly the vulnerable groups. The World Bank Tourism Development Project in Montenegro will support creating ecological and economic sustainability of the solid waste and waste water disposal in coastal area in Montenegro, aiming to establish an ecologically attractive, clean coast. The building of regional dump sites such as Lovanja and the sanitation processing of waste water disposed of into the sea, create conditions for high tourism development and availability of healthy drinking water in adequate quantities. Bringing additional water quantities to the Montenegrin coast will support the creation of a positive climate for development and investments in tourism sector. This will influence an increase in the number of employees in the tourism sector, increase the influx of tourists on an annual level, prolong the tourism season and ultimately, reduce poverty in the area.

This report presents the results and analysis of a qualitative and quantitative research, of which the objectives are as follows:

Set baselines to assess consumer/beneficiaries’ perceptions of and satisfaction with current water service delivery and measure the distributional impacts of the water reform on the well-being of various stakeholder groups against those baselines, regarding:

o Willingness to payo Tariff increaseso Access to water through public and private provisiono Inclusion and Support for the poor o Changes in employment for different groups, ando Other impacts of the reform.

To identify and provide insight into some of the main institutional issues and obstacles of the water sector reform.

Provide recommendations for enhancing the pace and sustainability of the reform, as well as recommendations for mitigation of undesired, negative impacts on vulnerable groups of society.

A. SUMMARY OF KEY FINDINGS

General characteristics of the selected cities

All project cities exhibit similar characteristics with respect to WSC managing model (a public company established by the local government) and a similarly high percentage of coverage.

Project cities differ in terms of billing system, collection ratio and level of water losses. Also, they differ in terms of illegal connections, population size resulting from urbanization trends during the last 12 years, increasing numbers of tourists in the summer season, and labor market opportunities.

Also, all project cities have different priorities in relation to the water supply problem:

Kotor – saltiness of the sweet water source during the summer season.

Budva – lack of sweet water capacities during the peak tourism season.

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Bar – substandard infrastructure network for water supply and sewage system.

Ulcinj – diminished water supply system, and poor water quality.

Tariff increases

Currently, creating the tariffs is the responsibility of the WSC, but must be approved by the LG. This is a problem since LG regards water as a social category and not a market commodity. Therefore, the current price covers only operational and maintenance costs, with no funds available for investments.

Pensioners are the most regular payers, while businesses and public institutions are carry debts.

Tariff increases are negatively impacting the most vulnerable categories of the population, such as the urban poor. All stakeholders approve of the introduction of subsidies for vulnerable groups.

Affordability is mainly an issue for poor households identified as recipients of social assistance, households of retirees and Roma population.

Consumers would accept the rise of water prices only if an improved supply of water is provided 24 hours per day, and there is an opportunity to pay bills on a monthly calculation from correctly calibrated water meters.

Households are not ready to accept the high price of installing water meters.

The introduction of two tariffs, summer and winter, is necessary since the tourist industry has to bear the additional costs of water supply in the summer.

A “lack of financial resources” is the main reason why poor households do not pay their bills, while service dissatisfaction is a reason given by well-off families.

Having to use some other water sources during the summer season increases the costs to households.

Access to water

A high percentage of households are connected to the water network. This percentage goes from 90% in Budva to 100% in Ulcinj.

Rural regions have their own WSCs, but substantial problems are caused by illegal settlements that use illegal connections for water supply.

Service quality, meaning “hours of supply” and “water pressure” are the primary problems the water system delivery is facing.

Illegal connections are mostly utilized in illegal settlements without an urban license, and in many households that use WSC water for gardening.

The most common way of overcoming the lack of water is illegal connections. Other coping mechanisms include: (i) filling barrels with sweet water from local sources and out of WSCs in periods when water is available (ii) buying bottled water, (iii) storing water in pools and tanks, (iv) using water pumps.

Support for the poor

The water bill comprises only a tiny fraction of a household’s monthly budget. Still, in each city there are households not able to pay for it. These are disabled persons, recipients of social assistance and the Roma population.

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All stakeholders are supportive towards providing subsidies for those who cannot afford their water bill. Experts’ and consumers’ opinion differs as to what type of subsidy. Consumers think that subsidies need to be in the form of free water provided to the socially vulnerable (lifeline tariff). Keeping in mind that the water bill is not a significant household expenditure and the need for water conservation, experts are suggesting that two tariffs are implemented: a lower tariff for instances where household consumption is below a certain defined optimal per capita consumption, and a higher tariff if the quantity used exceeds optimal levels of consumption.

Other channels of impact on the reform

Employment

o The link between water supply and employment clearly exists. Poor water quality and supply has an obvious negative impact on business opportunities in tourism development. On the other hand, it is expected that improvement of the water delivery system will increase employment opportunities, especially in regard to tourism development but also for investment opportunities for businesses. Better water supply and a greater influx of tourists in the area would support the creation of new jobs in service areas.

o Water supply improvement will lead to a better investment climate in all project cities.

o Very often people don’t consider the relationship between water supply and employment as an important issue.

o Restructuring of WSC and optimizing the organization will cause some unemployment, but some employees already have alternative occupations. This would certainly lead to a reduction of the operational costs of WSCs.

Health

o Due to a lack of confidence in the acceptability of water quality supplied from WSC during the summer, households are using other sources of water for drinking and cooking.

o In some cities, individual cases of diseases caused by contaminated water have been reported.

o Poor sewage system is a problem for illegal settlements and the Roma community in particular.

Extra costs

o Though relatively small in cost (in comparison to overall monthly household expenditures), poor water supply in the coastal area is creating additional costs for households either through buying a pump, water tank or digging a well, or through the additional expense of buying bottled water or driving to the public tap or natural spring. In addition, due to the salty water, citizens of Kotor complain that their household appliances are damaged and have a shorter working life.

o Both households and businesses consider improved water supply beneficial to property values and future investments in the region.

Stakeholders and institutional impact

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Stakeholders of the reform are divided into three groups: (i) those that affect/implement the reform; (ii) those affected by the reform either positively or negatively; and (iii) those that have influence on the reform policy.

To date, except for the legal framework, CG was not involved in providing water supply services. This exception remains the same for the CG involvement (through ownership and managing role) in the work of newly established Vodacom. The role of the CG is to make an effort to unite local governments in one, unique entity, and find the way to solve the water supply problem.

Stakeholders do have necessary information about each other’s roles and responsibilities. However, it seems that sometimes there are overlaps on the CG level between the different Ministries.

Authority over the water supply is transferred to the local level by local government law. WSC’s do not work independently but rely on a LGs board of directors.

There are some stakeholders (LG and some WSCs) that might impede the progress of reform either by refusing to accept new roles and responsibilities assigned to the different stakeholders, by refusing to delegate its authority or because they perceive themselves as being left out of the process.

The WSC are faced with an issue of working closely under the LG and are very often driven by political aspirations of local parties.

The allocation of financial resources from LGs’ budgets is not directed to WSCs as needed. WSCs don’t receive investment resources.

Independent WSC functioning is suggested, but under local government regulations.

The current water law does not predict privatization of WSC companies.

B. CONCLUSIONS AND RECOMMENDATIONS

All project cities on the Montenegrin coast face similar water supply problems. All have a similarly high percentage of water network coverage, but differ to some extent in terms of billing system, collection ratio and level of water losses.

These problems are reflected in tourism development to an equal extent in each of these cities. Water supply is becoming an even greater problem due to large tourism influx in the region. Both LGs and WSCs are aware of the importance of solving these problems as soon as possible in order to facilitate development.

Some problems regarding organizing WSCs into an integrated system exist but these are solvable. Few WSCs addressed their problems to the consultant company Vodacom, which would improve conditions in WSCs in order to gain benefits from the reforms.

Realizing the complexity of water sector restructuring in southern Montenegro, and after analyzing the findings with regard to distributional and institutional impacts of the reform, the study presents a number of policy recommendations that benefit the reform, the stakeholders and the beneficiaries; especially poor households – recipients of social assistance.

The following policy matrix gives a detailed description of recommendations and suggestions.

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PSIA MATRIX FOR THE WATER SECTOR REFORM IN MONTENEGROA. Transmission Channels

Main issues Relevance Proposed Policy Recommendation

1. Tariff increases

Lack of efficient enforcement mechanisms.

All project cities (except Ulcinj) including Podgorica

Improved enforcement through disconnecting non payers; improvement in charging large debtors such are businesses and public companies, supported by a stronger court authority and local government assistance. A consumer awareness campaign should go hand in hand with this, in order to avoid any potential opposition.

Customer perceptions that tariffs are already high and no improvements are visible.

Budva Before a price increase takes effect, consumers need to experience an improvement in water supply quality. Only then will they accept new prices with WSC explanation.

Lack of water bill delivery on a monthly basis.

All four cities, especially Ulcinj

Before water prices rise, WSCs must improve the water bill delivery process and calculate costs on a monthly level.

Billing system based predominantly on a flat rate.

Municipality of Bar and Podgorica, including Kotor due to the damaged water meters

Encouraging citizens by the WSC, and developing paying benefits for water gauge implementation. Citizens need to be informed about this action.

Water is still seen as a social category rather than a market commodity.

All project cities Establishing a transparent calculation of the water price by the WSC and LG and providing subsidies for WSC in case LG decides not to sell the water for an adequate price.

Tourism industry, which is the primary reason for water shortages during the summer, is not contributing to solving the problem.

All project cities There is a need to introduce two tariffs where a higher tariff would be charged during the tourism season and part of the costs transferred to the tourists who are the majority of consumers.

2.Access to

Water Services

Insufficient water capacities during the summer season.

All project cities, excluding Podgorica

Repairing current network, reduction of water loses and ultimately increasing capacities by investing in new resources.

Incomplete network coverage, mainly due to uncontrolled internal migration, leading to illegal constructions and illegal connections, well digging and septic tanks

Budva Capital investments, through donor participation, are necessary to increase the access level and improve access quality, in the framework of the poverty reduction strategy.

Non selective cut off of illegal connections

All project cities Contacting illegal customers is perceived as a better alternative than disconnection, which has not proved successful.

Unsatisfactory water quality due to inadequate sanitary conditions of water reservoirs

Especially for Ulcinj and Kotor

Closing the Lisna Bori spring in Ulcinj, and ensuring its use only as technical water. Preventing salty water in Kotor from being delivered to the households.

Unsatisfactory water quality due to sewage infiltration into water pipes

All project cities Urgency to reconstruct the water network.

Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED) 13


Lack of wastewater treatment plants

All project cities Podgorica is the only city in Montenegro that has a purifying system for wastewater. Existence of these capacities is needed, especially in the coastal area. Continued capital investment and donor cooperation is extremely important.

Citizens’ awareness of water importance and the effects of over consumption on water supply quality

All project cities A public campaign should be provided in each city, with rising awareness as a priority goal. It should reach consumers who use drinking water for gardening, cleaning streets and sidewalks, illegal consumers, owners of agricultural land, and business owners who depend on water. Penalties must be defined in cases of abuse. Active cooperation from government, business and civil society might prove successful.

3.Support for the

Poor

No clear subsidy policy All project cities, especially Kotor and Bar

Criteria for subvention categories should be defined.Cooperation with government, social institutions and LGs is needed. Mechanism for preventing the abuse of subvention rights is needed.

Necessity of installing properly working water meters

Kotor and Buda With such a measure, poor households confirm that they would be in a position to control consumption. With donor support, a program for installing water meters under favorable conditions (2-3 installments) is recommended.

Perceived inadequacy of the lifeline tariff by some experts and households

Budva The subsidy mechanism needs to be defined. Some experts do not agree with the proposed lifeline subsidy mechanism, because water bills are very low, and everyone can afford them. Still, the application of a lifeline tariff implies the presence of meters. Meanwhile, other forms of subsidy, such as increasing the amount of state economic assistance received by eligible households are recommended. In addition to this and a proposed double tariff system (depending on the season) introduction of a block tariff is recommended, which would mean a defined optimal per capita water consumption and a lower price. In cases where a household does not conserve water, entire water consumption should be charged by the higher price. Such an approach would also require properly working and calibrated water meters.

4.Other channels

of impact

Most citizens are not aware of the importance of the water supply for employment

All project cities Organizing awareness campaigns that aim at creating a better understanding of the importance of responsible water service management. This campaign should focus on the direct link between the water supply and employment, and the local economic development of each municipality.

Citizens’ disinterest in participating in LGs decisions

All project cities Developing mechanisms for citizens’ participation in decision making processes.



B. Institutional Issues


All WSCs are owned by LGs All project cities WSCs are under the LGs authority. According to experts, conditions under which the WSC can turn into an independent WSC company should be defined, but under the local LGs’ authority.

Investment problems in WSCs All project cities Property rights between the WSC, the LG and the allocation of financial sources for water supply and investments should be precisely defined.

Problem of political influence on water supply issues

All project cities The selection of members of WSCs board of directors and their decisions depend on the political will of LGs instead of citizens’ desires or experts’ opinions.

Selection of WSC Director All project cities Selection of WSC director should be based on qualifications and experience, rather than political background.

Water supply regulation agency All project cities Establishment of this agency would improve regional cooperation and improved water supply in urban areas. Still, as recommended by some experts, a regulatory agency is not needed unless privatization of WSC will be organized.

Over employment in WSCs. Employees in WSCs perform their job in private practice

All project cities Systematization and monitoring of working place and employees is needed. The number of employees in WSCs should be reduced. This will lead to optimal organization and lower operational costs.

WSCs’ privatization All project cities Creating conditions for enabling the private sector to provide part of the water service, such as billing, water supply, network maintenance. Experts believe that the private sector would perform these jobs better. Developing strong monitoring systems by LG and WSCs for privatization process.

Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED) 15


C. Legal basis for the Reform


Incompleteness of the legal framework necessary to support the implementation of the reform

On republic level Urgency to proceed with the remaining bylaws and government decisions which are pending.

WSC privatization On republic level Developing regulation preconditions for privatization in the area of water supply and abuse prevention.

Lack of water supply law On republic level Adopting a water supply law, which would include defined tariffs, privatization of part of the WSC, and infrastructure investments.

Court procedure to non payers On republic level There is a need for simplified court procedures in cases of unpaid water bills.

Lack of WSCs protection when disconnecting illegal consumers.

On republic level Protection of WSC companies’ rights in cases of disconnecting illegal consumers.

Lack of law on urban regulations

On republic level Individual and general urban planning would solve illegal building problems and illegal connections to the water system as well.

Lack of harmonization between urban plans and tourism development.

On republic level Harmonization between detailed urban plans and a master plan of tourism development is needed.



I. INTRODUCTION AND METHODOLOGY

The PSIA/SA report analyses the distributional impacts of the proposed water sector reform priorities that the Government is addressing in the following areas: (1) rehabilitation of the existing water and wastewater networks to improve the operation and service quality to meet the increased demand from the tourism industry and completion of the regional water supply scheme to cover current and future water demands of the coastal tourism industry; (2) improvement of the management of the public water utilities to enhance the effectiveness of their operation, and to assign key management positions on the principles of technical expertise and merit; (3) institutional and organizational changes in the sector; (4) improvement of the legal and regulatory framework that would provide for tariffs at cost recovery levels and adequate mechanisms for tariff settings; and (5) establishment of a benchmarking system to monitor and evaluate the sector performance and better allocate resources.

This Study will benefit the implementation of the Montenegro Tourism Development Project as well as the Montenegro’s Development and Poverty Reduction Strategy (DPRS), stakeholders of Water Sector Reform, and beneficiaries/existing customers, particularly the vulnerable groups. The Water Sector Reform in Montenegro is considered to be an important part of the DPRS. As stated in the DPRS, the water supply system in Montenegro is characterized by: (i) unreliable water supply, particularly in coastal and some of the municipalities in the central region during the summer season; (ii) substantial disproportion in the water supply coverage of urban and rural areas; (iii) high depreciation of water supply network, which results in large losses and contributes to a deterioration of drinking water quality; (iv) lack of reservoir capacities and of the equipment for automatic control and management of the water supply system; (v) and inadequately protected extraction of water from almost all water sources.

In addition, one of the key problems of the sector is associated with prices of water supply and sewage services. For a prolonged period, these prices have been set at a lower level than the actual economic cost of water supply and wastewater disposal. Such a pricing policy led to a deficit for maintenance and investments on one hand, while on the other it contributed to excessive consumption. Furthermore, the low collection ratio is a high burden to the proper functioning of the water works companies. According to the DPRS, negative trends observed with the collection rate show that there was a drop by almost 20% in the period from 1998 to 2000. When we calculate the balance between the total bills issued but not collected compared to the total bills issued during one month, we come up with a coefficient, ranging between 3 in Berane and 24 in Cetinje, with an average value of close to 10 when all Montenegrin municipalities are included1.

This reform is intended to improve access to water, in terms of coverage, quantity, and quality of water supply. However, one part of the reform will relate to a new pricing policy as well as to sustainable water management and financial viability of the water utilities. It is expected that the reform will also have negative social impacts, especially on vulnerable groups such as the urban poor.

This paper presents the results and analysis of a qualitative and quantitative research study, assessing the poverty and social impacts of the Governments’ proposed reform measures in the water sector and its implications for the local economy, dominated by the tourism sector. These include but are not limited to the proposed regional scheme, planning to provide bulk water from Lake Skadar for coastal municipalities, and the water supply law covering the entire country.

The guidelines were: What are the key issues and current constraints in the water and tourism sectors?

1 Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute/USAID project (2004)Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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How could those constraints be overcome through different reform options in the water sector?

What are the expected poverty and social impacts of each of the different reform options, i.e. who are the winners and losers of each reform option?

During the analysis of the water sector reform priorities, special attention is given to (a) institutional reform aspects within the decentralized context of Montenegro, (b) financial viability of water utilities through tariff increases to reach cost recovery and establishment of commercially oriented business practices, and (c) any other key reform aspects that accompany the ongoing reform dialogue and/or emerge during the data collection and analysis.

PSIA/SA method– The first PSIA methodology in Montenegro was developed and implemented in the period of February-June 2003, focusing on five cities: four of the coastal municipalities – Budva, Kotor, Bar and Ulcinj; and Podgorica, capital of Montenegro which served as a benchmark for water supply systems with a greater number of consumers (135,000 citizens), good water sources but similar problems relating to low collection ratio and intermittently inadequate water pressure due to a small tank capacity.

Site selection – The cities were selected by the World Bank as stipulated in the Terms of Reference (ToR). Four PSIA sites have been selected in the Coastal Region - three cities that participate in the water sector reform through the proposed regional scheme (under the proposed Bank’s Montenegro Tourism Development Project), and one city outside of the project area, that lies in the vicinity of the regional scheme.

The PSIA was focused on the five cities of Bar, Budva, Kotor, and Ulcinj:

City Selection Criteria Bar Coast: WB project site with actual reform measures, local economy has both

tourisms and industry (port), biggest city on CoastBudva Coast: WB project site with actual reform measures, largest tourist city with huge

water shortage during tourist seasonKotor Coast: WB project site with actual reform measures, UNESCO heritage site with

large number of tourists, no natural sources (except rainfall), low quality water (saltiness, backwater pollution of network creates health issue)

Ulcinj Coast: high tourism development and economic growth potential; environmental sustainability (wetlands); outside of WB project area as comparative PSIA site

Podgorice

In addition, one municipality was chosen to be included in the project as a benchmark: Podgorica, in the central region of the country, the most populated municipality in Montenegro, and administrative, cultural and industrial capital of the country. This approach allows for comparison between two regions and especially having in mind a population increase due to tourism influx during the summer season.

Both quantitative and qualitative data collection techniques were used to gather information on the distributional impacts of the reform. The research techniques employed included:

Desktop review - The research team reviewed the existing literature relevant to the Water Sector Reform in Montenegro. The documents reviewed are noted throughout the footnotes, and reference section.

Key informant interviews at the central government level - A total of nine key-informant interviews were conducted at the Central Government level. Additional interviews were performed to properly address the primary issues raised in some of the meetings with experts. A detailed list of the experts interviewed and their respective institutions appear in Annex 6.

Key informant interviews at the local government level - At least six expert interviews at the local government level were performed for each of the five project cities. Additional interviews were conducted in some cities, depending on the city’s distinctive characteristics. A detailed list of experts interviewed and their respective institutions appear in Annex 6.Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED) 18


Focus group discussions - Five focus group discussions (about 8-10 people with attention to gender-balance) were conducted in each city to gather qualitative feedback from the population on the expected distributional impact of the planned water sector reform, regarding, but not limited to tariffs, quality, employment, access, transfers of taxes. More specifically, discussions provided feedback on the nature of water supply services; the public’s willingness and ability to pay for water supply improvements –(including quality of water); feedback on health issues associated with existing conditions; perceptions of links between current and future water supply conditions and the local economy, especially tourism; perceptions regarding the tourism development potential per se, and its implications for environmental protection and sustainability; and the public’s perspective on institutional obstructions and necessary organizational changes. Five extra focus groups were conducted in Podgorica with experts on agricultural businesses, small and medium-size enterprises, environmental protection, tourism and urban planning.

Socio-economic household questionnaire - The household survey covered four municipalities: Kotor, Budvar Bar, and Ulcinj. The survey was carried out on a purposive representative sample of about 25 households in each of the four cities. It provided statistics regarding population, education, employment, income, and health status. It focused on public perceptions regarding water supply conditions and priority problems with service. The survey polled residents in urban center and periphery; lower and higher elevations; legal and illegal settlements; different poverty levels (poor and non-poor); different ethnic groups; vulnerable and non-vulnerable groups (e.g. large families, retirees, unemployed, IDP, Roma); metered and un-metered households; and connected and unconnected households, particularly an issue for population groups located South of the city Bar and Ulcinj.

City profiles - For each city, our research team prepared a community profile describing the situation of (a) the water supply, (b) the local socioeconomic conditions (tourism, industry, etc.), (c) impacts of the water situation on the local economy and vice versa, (d) the socio-economic situation (including income, (un) employment, ethnic groups), and (e) in regard to water issues - including issues of access to, and assets of water goods and services, tariffs, and the institutional and organizational setup of the water sector within the highly decentralized context of Montenegro.

In addition to described methodology, independent but similar exercise took place among Roma community in Montenegro, since they were recognized as the most vulnerable population.2 Roma in Montenegro primarily live in the central and southern parts of the republic (see Table 1.1): 68.7% of the population lives in the central part, 24.8% in the coastal area and 6.5% lives in the northern part of Montenegro3. Roma choose the central and southern parts of the republic because of better earning opportunities. Crafts and trade are more profitable there and the economic situation is more favorable.

Table 1.1 Roma population in Montenegro (source: NGO “Početak”)Municipality Residentia

l population

RAE Refugees IDPNumber of household

s

Population Population Population

Andrijevica 7227 0 0 58 1074Bar 40283 171 1120 1786 4392Berane 42044 114 850 399 4368Bijelo Polje 59654 26 140 320 1030Budva 12647 41 270 799 986Cetinje 21919 23 150 68 42Danilovgrad 15886 2 10 254 530Herceg Novi 29783 149 1240 2918 714Kolašin 12002 0 0 213 207

2 For more information see Montenegro’s Development and Poverty Reduction Strategy, 2003.3 Vulnerability profile of Roma population in countries that realize Decade of the Roma Integration, UNDP, 2004-2005Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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Kotor 24188 30 240 462 322Mojkovac 11689 0 0 72 157Nikšić 80635 260 1260 1175 1073Plav 20837 0 0 159 1640Pljevlja 42735 9 50 464 121Plužine 5663 0 0 106 2Podgorica 164090 2000 12000 2655 8922Rožaje 24799 38 230 54 1054Šavnik 3983 0 0 11 2Tivat 12336 160 1100 904 890Ulcinj 26139 140 870 357 961Žabljak 5304 0 0 74 9MONTENEGRO 663843 3163 19530 13308 28496

Based on the structure and number of Roma living in Montenegro, the cities of Nikšić, Podgorica and Herceg Novi were chosen for data collection.

While the Roma population of Podgorica and Nikšić does not fluctuate depending on the time of the year, seasonal migration does occur in the coastal cities. Here, the number of Roma increase during the summer tourist season due to the greater opportunities for trade and begging and sometimes, complete Roma settlements move to these cities at this time. Roma later leave the coast when the season is over. As this survey was conducted in October-November 2005, after the tourist season had ended, it was not possible to include all specific Roma groups since some had already left the area.

Herceg Novi was selected as the coastal municipality with the highest number of stable Roma people. There are Roma in this city that have lived there for a number of years and are integrated in the society, dealing in small business and trade, attending school, etc. As everyone else, they face the summer water supply problems caused by decreased hydro capacities and increased consumption by tourists. Podgorica was included as the city with the most domestic and displaced Roma in Montenegro (12,000 according to unofficial research conducted by the “Romski krug” network). The water supply situation in collective and illegal settlements is the most difficult in this municipality. The poor health conditions of this population are caused by a lack of bathrooms, the small number of public taps, the lack of proper sewage systems, poorly arranged accommodation facilities, etc. There are some illegal settlements here that have neither water nor electric power connections. Domestic Roma households living in better economic conditions do exist, however, and they are obliged to pay water bills. While there are no water restrictions in Podgorica, Roma settlements have water supply problems because they are not connected to the network at all and are not provided with basic living conditions.

The Roma population of Nikšić is the second-highest after Podgorica. Water supply there is well provided. All settlements have available drinking water through public taps. Roma do not, however, have running water in their houses or barracks and they do not have bathrooms or toilets or a sanitary network for waste water outflow. They are also facing water shortages during the summer when water is cut for a couple of months.

Quantitative and qualitative methods were used for data collection, as follows:

Secondary data analysis – The survey included collection of existing literature related to the Roma population in Montenegro. Documents used are listed in footnotes or in the bibliography.

Interviews with key stakeholders at the central and local level – Interviews with representatives of institutions at the central and local level, NGOs and humanitarian organizations were conducted. Interviews with relevant experts are in Annex 2.

Focus group discussions (FG) – Three focus groups were organized in project cities with ten participants in each, having in mind equal gender structure. FG participants were selected by age and place of residence and were representative of all settlements suffering various degrees



of water supply problems. During discussions, feedback was obtained regarding the obstacles that the population faces with regards to the quality of service provided by utility companies, drinking water availability, payment of water bills, accommodation problems, etc. Feedback on health conditions of the population as well as causes of disease and recommendations for improvement were given as well. Social-economic questionnaire for households – The household survey was conducted in the three project cities with a sample of twenty households for each city. The sample is not representative of the entire republic but included population in those cities living in vulnerable settlements, poorly supplied with water, facing water shortages in the summer period and without water supply and sewage networks. The survey focused on how people in the sample perceive their living conditions, water supply, prior problems in the system, on their willingness to pay utilities, etc. City profile – The situation overview of the project cities was completed in cooperation with representatives of Roma NGOs. City profiles included information on Roma settlements, accommodation conditions, water supply, education and number of employed persons.

STRUCTURE OF THE REPORT

The Report is divided into five main chapters and 12 Annexes. In addition to the Summary of Key Findings at the beginning of the report, Chapter I describes the objectives of the study and methodology used. Chapter II provides: (i) the legal framework, context and progress of the Water Sector Reform, (ii) a brief description of stakeholders, (iii) a brief description of poverty as it relates to access to water services and goods, and (iv) brief overview of the four selected cities, adding Podgorica as a benchmark and current conditions of the water services in all four project cities. Chapter III gives key findings of the research adding key finding on water supply among Roma population. Chapter IV provides policy recommendations and conclusions, while Chapter V contains references.

Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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II. COUNTRY AND REFORM CONTEXT

A. LEGAL FRAMEWORK BY WHICH THE SYSTEM OF WATER-SUPPLY IS ORGANIZED IN MONTENEGRO

The principle law defining the status of water resources is the Law on Waters (Official Gazette.16/95) adopted in 1995. This Law includes water as a natural resource, waterpower activity, and the exploitation of water for energy purposes and drinking water from springs. At the Montenegrin level this Law regulates all fields, taking into consideration waterpower engineering.

Water supply as an activity of water delivery from spring to end-user is arranged on a local level with the following Laws and decrees:

Law on Local Self-management (Official Gazette. 42/03), which arranges jurisdiction of Local Government for the sector of waterpower engineering.

Law on Public Utilities (Official Gazette. 12/95) includes the supply of water. Law on water-supply and taking away of waste waters and dumping of waste material

in the community: Herceg Novi, Kotor, Budva, Bar, Ulcinj and Cetinje (Official Gazette. 46/91)

Decision on funding a public firm for water supply, treatment and removal of wastewater, and disposal of waste material for the Region of the Montenegro Coast and Cetinje. (Official Gazette. 50/91)

Law on fluoridation of water for drinking. (Official Gazette. 27/94-391)

The draft of the water supply is in preparation, defining the legal framework for successfully performing the water-supply activity. A new Law on Water supply is necessary for the following reasons:

Inadequate structure and organization of the water-supply system (inadequately organized relationships between Local Governance and WSCs).

The present regulation has no provisions for relations in the field of water-supply in an adequate and universal way in harmony with modern requirements, making it impossible to preserve the value of infrastructure, equipment and means, eliding to an insufficient use of infrastructure.

No defined methods of development, inadequate financing of water supply.

Unsystematic and dislocation of regulations, which arrange relations for water supply (water-supply is insignificant as part of waterpower engineering).

Water supply is a complex activity in the public interest that requires key relations to be prepared clearly, consistently and precisely, in a framework of one of the law regulations.

Comparable experiences of neighboring countries and the EU.

Overlapping jurisdiction of Local and Central Montenegrin Government. Some of the Republic jurisdictions should be transferred on a local level (for example, Concessions on springs).

This law will be the foundation for establishing reforms that are predicted by Vodacom, based on following basic principles:

The quality, quantity (optimal or minimal satisfaction) and continuity principle (to provide a 24 hour water-supply).

Intensify the obligation and the responsibility to the community to provide water-supply. Diversify the means of organizing the water supply (public firms, corporations, and

community administration for water supply).



Ensure satisfactory delivery of general conditions for which the Community signs contracts with operators.

Encourage users to change their habits towards water in general, to avert endangering public welfare (for example, set different tariffs for water use as needed and for water used above this pre-determined need).

Ability to cease water supply in instances when the user defaults or irregularly remits payment.

Regulating penalty – clearly define situations of unauthorized water usage and pursue felony prosecution.

Concessions in the water supply only provided by the communities. A sustainable water-supply system – expanding and compensating for water-supply

services on principles of sustainability. Compensation must cover the expenses of production and distribution of water as well as the expenses of the maintenance of the overall system.

Transparency through provision of information to citizens, and published reports.

Changes in the Law on Waters are in preparation; it is currently undecided whether these two laws should be passed individually or as a legal act.

B. BACKGROUND OF WATER SECTOR REFORM IN MONTENEGRO

The water supply system in Montenegro is on average 50 years old. All water supply networks, especially those in the coastal area are characterized by a lack of financial resources for investment in the existing network. Significant loses occur due to this reduction in the collection ratio.

Another significant problem related to water supply at the Montenegrin coastal area is insufficient water sources capacities, which do not meet peak-season needs when tourism increases the population in all coastal cities by as much as 10 times. As a result of migration and illegal constructions in the area (especially in Budva), many illegal connections to the water supply network significantly burden the situation.

Current situation regarding water supply and sewage network have a negative impact on economic opportunities and tourism potential of the coastal area as well as public health concerns. Availability and quality of water supply and wastewater disposal services are one of the main preconditions for coastal tourism development. Previous efforts directed toward commercialization of this sector and creating possibilities for new financing mechanisms (e.g. public-private partnerships) did not result in concrete improvements.

Reforms – The Government of Montenegro put significant efforts towards upgrading water supply systems to the level adequate to tourism development in Montenegro. By creating many financing preconditions and by finding investors, significant investments in water supply network were made recently, reducing the loss ratio. At the same time, reforms conducted by the Government of Montenegro will contribute towards creating an improved financial position of WSCs through increased tariffs, higher billing rates and billing enforcement, disconnection of illegal users, etc.

The Reform follow-up includes uniting WSCs at the local level and attempts to improve overall situation in water supply networks through the following measures: i) to repair local water supply networks and find new local water sources and ii) to improve the billing system.

The water supply system reform, which considers implementation of measures for improvements in fee collections, investments in existing network and reparation of damages, will increase collection ratio, bring higher quantity of water into the system and reduce costs. The existing system results in high costs for entire region; it could be improved only by significant investments and with a different approach to consumers. In addition, new connections through a regional water supply network would create improved conditions for qualitative tourism development.


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Measures for improving regulatory and institutional framework includes adoption of the new Water Law (according to the requirements of the EU General Directives) as well as establishment of the Regulatory Water Agency. Establishment of administrative bodies at the watershed area and strengthening its capacities, as well as improved regulation implementation, especially regarding illegal resources exploitation, are also foreseen. One of the key problems that this sector is facing relates to price controls on the water supply and sewage services, which are traditionally underestimated. Such pricing policy caused enduring lack of resources for investment and maintaining on one side and also contributes to a high consumption rate on the other side. Besides significant investments made in infrastructural points of the water supply and sewage system recently, the water supply at the coastal area is not at a satisfactory level. At the same time, management structure, financial and operational activities of the public WSCs as the sole providers of those services deteriorated. Negative trends were also recorded in the billing system, which decreased by almost 20% in the 1998 – 2000 period.

Current water supply and sewage systems situation could negatively impact on economic condition of households and public health. Availability and quality of water supply and wastewater disposal services are one of the main preconditions for tourism development in the coastal area.

The main documents that regulate the water supply system are as follows: Water Law (Official Gazette of Montenegro, No. 16/95), Law on Local Governance and Law on communal services, which decentralized this sector transferring responsibility to the local governments. Inadequately arranged relations between local governments and WSCs also caused problems in this sector, by insufficiently elaborated legal solutions for investments and financing water supply. In addition, the Law does not prescribe existence of various organizational types for this sector (public utility companies, private companies) and sustainability of the water supply system through defining market-based tariff and billing system.

The law on water supply, wastewater and solid waste disposal in municipalities of Herceg Novi, Kotor, Tivat, Budva, Bar, Ulcinj and Cetinje (Official Gazette No. 46/91) defines a common interest for solving drinking water shortage problems but a comprehensive water supply law does not exist. This law is currently in the preparation process and is in the legislative process in the Montenegrin Assembly.

C. THE REGIONAL WSC PROJECT FOR MONTENEGRIN COAST

The solution for problems at the regional level started in 1976, with the establishment of the public company “Regional WSC Crnogorsko primorje” for water supply, collecting and treating wastewater and storage of solid waste in the coastal cities of Montenegro, including Cetinje. The Regional WSC project realization started in 2000. The Government of Montenegro owns 100% of this company.

The Regional WSC “Crnogorsko primorje” specializes in the following fields: all activities related to construction of systems and facilities for supplying water; treating and disposing of liquid waste and treating of solid waste; managing this system and facilities; servicing and reconstruction of facilities; research studies and projections for the construction of new facilities; and information systems and statistical-analytical data bases regarding water supply.

Current position of this company is connected to the Government of Montenegro and direct investments in the water supply sector in the coastal area. In the future, reform envisions getting additional water quantities from Skadar Lake as well as the cooperation with local Water Supply Companies. The idea of water supply for Montenegro from Skadar Lake was initiated in the ‘70s. Through the implementation of this project, the long-term solution for the water supply for the Montenegrin coast (Herceg Novi, Kotor, Tivat, Budva, Bar and Ulcinj) and Cetinje will be found. The total capacity is 1,400 l/s and the water will be used from the Karuc Spring – Skadar Lake.

In addition to the above mentioned water supply for coastal region will be resolved through the monitoring and reducing losses in the network, investments in the current infrastructure and



building the new facilities. In addition, new tariffs will be imposed as well as subsidies for vulnerable groups.

However, from an institutional point of view, there are still some problems related to joining the local WSCs and regional common WSC into one assembly, which could function on common principals.

D. INSTITUTIONAL STRUCTURE OF THE WATER SUPPLY SECTOR

Considering future institutional framework, the water supply sector is to be divided into sub-sectors.

The first sub-sector is important for the region and related to the water supply system from the main spring at Skadar Lake to local water supply networks, or in other words, to local water companies, as its users are managed by the Regional water supply public company “Crnogorsko primorje".

The second sub-sector is locally oriented and includes the local water supply systems in coastal cities; from the connection at the Regional system to water supply for end users. The local water supply and sewage service companies manage these systems. Vodacom has been founded to provide services to local water supply companies in the area of investments, billing, accounting, etc. and plays a role within the entire sector’s scheme.

Currently, in the area of Montenegrin coast, water supply is provided by local companies called “Water Supply and Sewage Companies” that were established before (in some municipalities) but mainly after the Second World War. Existing institutional framework is presented by scheme 2.1

In 2001, a unique Public regional company for water supply, waste water, treatment, and solid waste disposal was founded, “AQUA REGIA” headquartered in Budva. The establishment of that company was supported by WSC of Herceg Novi, Kotor, Tivat, Budva, Bar, Cetinje and Ulcinj. However, the imposed concept of “Aqua Regia” did not work.

Vodacom

After failing with the previous “AQUA REGIA” concept from an institutional aspect, the program for improving the water supply was realized in cooperation with KFW; the German Government decided to realize a new concept based on a “bottom-up” principle, according to the Ministry of Tourism initiative in 2003.

Therefore, Vodacom was established as a multi-municipal waster and wastewater service company owned by participating municipalities. Vodacom is in charge of investments management and other services provided to WSCs. On the other hand, Vodacom services are paid from water tariffs.

Until now, four municipalities have taken part in the company’s establishing process: Herceg Novi, Tivat, Budva and Bar as well as the Central Government. The act of establishing the company defines its municipalities, which pay for the initial investments by taking a part in the ownership structure and thus receive a partial management role.

The program of measures and activities consists of four parts:- internal measures of WSCs in municipalities,- intervening measures,- optimization of existing water sources, and- new local water sources.

In order to meet conditions determined in an agreement between the Government of Montenegro and KFW, the WSC immediately started the internal measures program in order to improve its performances.


25


The internal measures predict the following:- updating the data base of consumers,- improving procedures for water meter key reading,- improving the billing procedures, - short term investment coordination, and- correction of tariffs for water and sewage.

Scheme 2.1 Existing institutional framework




100% ownership of PEWResponsibility for regional water supply, wastewater treatment and solid waste

disposal

Water Supply Company

Municipality

Municipal investment Institution

100% Ownership for WSC and investment institution

Condition for water supply and wastewater disposal

Tariff setting which covers O&M costs only

Investment institutionHerceg Novi

Investment institutionTivat Municipality of

Tivat

WSC Kotor

WSC Budva

Investment institutionKotor

Investment institutionBudva

Investment institutionBar

Investment institutionUlcinj

WSC Bar

WSC Ulcinj

Municipality ofKotor

Municipality ofBudva

Municipality ofBar

Municipality ofUlcinjGOVERNMENT

OF MONTENEGRO

PEWPE «CRNOGORSKO PRIMORJE»

WSC TivatInvestments funded from municipal budget

Takeover of the investments once they are finished

Water Source Fee

Municipality ofHerceg Novi

WSC Herceg NoviEXISTING INSTITUTIONALFRAME WORK

COSTUMERS

27


The WSCs of municipalities undertook steps toward implementation of the billing system by using banks and post offices. In WSCs there were some corrections in software programs, in order to get more qualitative and comparative data, i.e. unification of calculation systems. The proposal on financial report forms was submitted and WSCs must use it for reporting their activities to the Municipality Secretariat every month.

With a new calculation system, the mistakes that payment collectors are making would be eliminated and better communication with customers will be provided. According to the research, the reaction of customers is favorable and the sole criticism is related to the slow water meter key reading procedure. However, in the initial period the slow water meter key reading is normal. The previously used billing system (by using cash office and bill-collectors) will be gradually minimized and they will consider phasing out this way of charging.

The “Intervention measures I” include providing a new quantity of water and accumulation of water because of sanitary issues in six coastal municipalities and the municipality of Cetinje, while the final result of those measures would be a total of 166 liters per second of new water. The measures conducted in 2004 resulted in an approximately 10% improved water supply.

“Intervene measures II” will be financed by the Norway Bank credit and its implementation will be performed only in cities that are members of “Vodacom”. “Intervene measures II” include: the installation of water meters, and reconstruction and rehabilitation of the water supply network. Water supply system reforms on the local WSCs level include: reduction of illegal connections, and an increase in the billing ratio and replacing of water meters. A reduction of employees in these companies is also predicted. Updated results of these measures are4 as follows: decrease of water losses, up to 20% more water in the system and a profit rise in WSCs of about 30% compared to the same period of time last year.

Results of activities conducted so far show that there are large reserves in the system, as well as through further detection of the losses and improvements of the network and objects in the network, water supply of the coastal area could be significantly improved. Therefore, Intervene measures II currently undertaken will be focused on resolving those issues.

In every LG, excluding Herceg Novi and Kotor, the water supply during the season was regular. In these two excluded LGs, WSC is specific, and that is the main reason for minor problems, but in general, the situation is evaluated as good and significantly better than last year. It is important to mention that the WSCs’ directors agreed that, in addition to a favorable hydrologic situation, the influence of measures undertaken is very significant with special emphasis on Budva where there were significant problems and the media in terms of a negative tourism campaign used that. According to experts, evaluation of the relationship between activities undertaken and the hydraulic situation is 70:30 in favor of solving the water supply problems important for tourism development in the entire Republic.

The project of building reservoirs, measurement stations and the water pipes system that was just completed is US$8 million worth and financed by the US Congress through USAID and the CDM program.

The following scheme 2.2 is presenting future institutional framework.

4 The results of interventional measures and example of cost savings, by returning water in system are in Annex 11.Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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Scheme 2.2 Future institutional framework



E. REFORM STAKEHOLDERS

In the following analysis stakeholders are divided into three groups (i) stakeholders that affect/implement the reform, (ii) stakeholders that are affected by the reform either positively or negatively, and (iii) stakeholders that have influence on the reform policy.

Stakeholders that affect/implement the Reform

Central Government (CG) – the Central Government plays a key role in the completion of the legal components of the reform. The responsibilities of CG are to draft and propose laws to the Parliament and issue bylaws. Also, as presented in the scheme 2.2, CG will provide guarantee for loan repayment, while municipalities will provide guarantee for the contract with PEW for additional quantities of water. Also, CG has a temporary role in Vodacom Board.

Ministry of Tourism – initiated solving the water supply problems by organizing local WSCs and by starting the water supply improvements in the Montenegrin coastal area. The Tourism Development Master Plan could only be implemented by executing this infrastructure development at the same time.

Ministry for Agriculture, Forestry and Water Management – recommends economic policy measures regarding water management; monitors water management development with an emphasis on water sources use, water pollution protection, protection from harmful influences that water might cause; construction, maintenance and reconstruction of water supply facilities; creating programs on water protection; developing water management basis and balances; creating water registry, water management facilities and buildings, spring flows and anti-corrosive works; constructing water supply facilities in rural areas without service; creating programs on protection from harmful influences caused by water; suggesting laws and other regulations regarding water management; considering submitted documentation related to water management approvals and permits; monitoring constructions of investment facilities; cooperating with other governmental authorities, and scientific institutions; and completing obligations toward other countries in the water management sector. This Ministry does not directly influence the water supply reform, but some of its authority overlaps with other ministries as can be seen from the list of activities above.

Ministry of Environmental Protection and Urban Planning – authorized for the water supply sector. The draft of the Water Supply Law is in the preparation process and some authorities within the water supply sector, such as concessions, would be transferred from the central to the local level. To some extent, authority regarding the water supply sector under this Ministry overlaps with those under the Ministry for Agriculture, Forestry and Water Management.

The Regional water supply company (PEW) – will take over responsibility for construction, operation and maintenance of the regional water supply system, wastewater treatment and solid waste disposal. Within the upcoming reform process, PEW will contract municipalities (under Vodacom) for purchasing additional quantities of water from the regional water supply system. On behalf of the municipalities involved in the project, PEW will use the World Bank loan for completion of the regional water supply system, with a guarantee of payment provided from the Central Government. Local Governments – the Reform is expected to improve the water supply situation for LGs in terms of a billing rate increase, infrastructural improvements, and assistance and investment projects. The Reform requires active involvement of LGs regardless of a political basis for their decisions in the water supply sector.

Stakeholders affected positively by the reform


30


Local Governments – will have improved water supply systems, along with a better picture on the profitability of water supply companies, and better conditions for planning further tourism development.

Water Supply Companies – The reform will improve water supply service to consumers. Increased income through tariffs that cover both O&M and investment costs should increase viability of the WSC, eventually leading to sustainability and profitability of the companies.

Customers (public, businesses, and households) – are expected to benefit from increased access and availability of quality running water at a higher pressure for more hours per day and more days per week, leading gradually to a continuous water supply. Improved water supply will have a significantly positive impact on tourism development, which is the main pillar for development of the coastal area of Montenegro. Better water supply will facilitate further Greenfield investments in tourism development and consequently increase employment. Continuous water supply will increase living standards for the population of this area and prevent loses caused by using salt water for household devices.

Stakeholders affected negatively by the reform

Very poor households – the reform will lead to a price increase that will further negatively impact the social status of very poor households. It is necessary to determine subsidy schemes for socially vulnerable households, retired persons, disabled persons and the Roma population.

Unauthorized household users – the reform predicts restricted measures for illegal consumers and their disconnection from the network. This group includes inhabitants of illegal settlements and those with illegal connections.

Unauthorized business users – unregistered legal entities that have cisterns and are selling water in settlements without a water system. Those businesses will be negatively affected by the Reform, as well as unregistered businesses that use water in their industry. Due to restricted measures and a unique metering system they will be forced to register, which might cause negative reactions.

Stakeholders with influence over the reform policy

The government and the water utilities are significant stakeholders with influence over the reform policy. Since CG is serving as a guarantee for the loan, it is obvious that its participation is important and necessary. On the other hand, as final users of the reform results, WSC are crucial and there is a need for fostering the cooperation in the triangle CG, LGs and WSCs.

F. POVERTY IN MONTENEGRO IN THE CONTEXT OF THE WATER SECTOR REFORM

Montenegro has steady growth potential, with the GDP per capita in 2004 at around € 2,4705

and expected real GDP growth rate at 4.5% in 2005-20076. According to the National Development and Poverty Reduction Strategy (DPRS)7, the national poverty rate is 12.2%, with Roma, refugees and internally displaced persons the most vulnerable. The poverty rates for the above mentioned groups are twice that of the general population. However, different indicators support the multidimensional concept of poverty, additionally improving conditions for some of those groups and the entire population in general.

According to the report on Poverty in Montenegro: Around 72% of the Montenegrin population are supplied through public, and another 11% through independent water supply systems. On 5 Source: Center for Entrepreneurship and Economic Development (CEED), Montenegro Business Outlook #14, July 20056 Source: Economic reform Agenda for Montenegro, 2002-2007 – Report and Recommendations7 Source: Development and Poverty Reduction Strategy (DPRS), Government of Montenegro, November 2003Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

31


the other hand, as little as 39% of the population is connected to public sewage system. More than one fifth of the population experiences interruptions in water supply, while problems with substandard quality of drinking water occur in some municipalities.

The water supply and sewage system is characterized by: (i) unreliable water supply, particularly in coastal municipalities and some municipalities in the central region during the summer season; (ii) substantially disproportionate sewage systems and water supplies in urban and rural areas; (iii) erosion of the water supply network, which results in large losses and contributes to deterioration of drinking water quality; (iv) the lack of reservoir capacities and of the equipment for automatic control and management of the water supply system; (v) inadequately protected extraction of water from almost all the water sources, and (vi) insufficient sewage connections.

Consideration to PRSP Strategy share of water supply costs in the overall expenditure of poor households will be monitored through household surveys (part of the monitoring and evaluation process), and an adequate subsidy program will be defined. Subsidies will be realized through directs transfers to public utility companies and will cover part of water consumption costs of the poor. In addition to project subsidies, measures intended to improve the access and quality of drinking water include: (i) measures for improving water supply systems in rural areas, (ii) measures for improving water supply to urban locations where some socially marginalized groups reside, (iii) decreasing water supply interruptions, particularly in the southern and central regions, and tourist municipalities through construction of the regional water supply system, (iv) measures to reduce water losses in the network and to improve the drinking water quality, and (v) measures to protect currently used and potential drinking water springs.

Descriptive data obtained from the present study in the four selected cities showed that 35% of surveyed households ranked the lack of water as their most urgent problem. About 95 percent of households have access to tap water, while the daily supply in summer season averages only 10 hours.

This research presents the situation in urban areas on the Montenegrin coast. The research does not include rural areas with populations at a lower standard of living facing water supply problems. Those areas have independent water supply utilities provided by the Government of Montenegro and foreign donor organizations.

Water supply services quality correlates to location and poverty. In this respect, the PSIA will specifically explore the relationship that exists between poverty and access to water in the illegal settlements.

G. CITY PROFILES

This section provides an understanding of similarities and differences among the five selected cities regarding issues of access, billing, coverage, collection ratios and water losses. Detailed city profiles are included in Annex 1.

For all project cities water works are in municipal public ownership, operating as municipal public enterprise. The oldest water systems are those in Bar (established in 1935) and Kotor (first organized water supply recorded in 1939). In general, water supply systems are out of date and should be rehabilitated and inadequate parts of the system should be replaced. The widespread problem is a lack of modern monitoring equipment, and insufficient tank capacities. Despite the fact that the majority of consumers have water meters incorporated into the connections and consumption is calculated on a monthly basis, a significant number of water meters are not calibrated regularly, while more than two fifths (43%) of water meters in Kotor should be replaced due to non-functionality.

Access

The five cities are quite different in regard to population size, ranging from 16,000 inhabitants in Budva to 170,000 in Podgorica. As indicated in table 2.1, population size has increased during the last 12 years in Podgorica, Budva and Bar, contributing to the deterioration of the



water infrastructure. In addition, the population size in coastal municipalities drastically increases during the summer season. For example, off-season there are 18,000 customers in the water system in Budva. During the summer season, the number of consumers increases to 100,000.8 Internal migration and tourism development caused illegal construction and a significant number of illegal connections, especially in coastal cities.

Tourism influx during the summer season creates tremendous pressure on the water supply network, which leads to a water deficiency. Insufficient water supply raises problems of water quality, in particular a problem of salt water in Kotor, due to poor structural conditions. In Ulcinj, they utilize springs that lack sanitary license, and the resulting problems caused by bacteriological contaminants.

All five cities provide water supply services for urban areas, while the majority of rural areas and suburbs have independent water supply networks and springs that are not part of the official water supply network. The network coverage is rather significant and goes from 90% in Budva to 100% in Podgorica. Billing

Billing represent similar characteristic in all five cities, where the metered consumption is the prevailing method. In Kotor, Budva and Ulcinj, most consumers have water meters incorporated into their connections, while in Podgorica and in Bar, the water consumption is combined with flat rate. One of the problems with billing is a large number of malfunctioning water meters. This percentage goes from 7% in Bar, up to 20% in Podgorica and 43% in Kotor. Often, those households using water for their gardens pay a flat rate, which is perceived as unfair by others. Water consumption is calculated on a monthly basis; water bills are hand delivered and can be paid on the spot (such as in Kotor) or in the WSC or Post office (Podgorica).

The PSIA has attempted to explore the relations between the type of billing system and consumer behavior toward water conservation, payment of the water bill and financial situation in the cities. While this will be elaborated in ensuing chapters, in general one can say that consumers are interested in having properly functioning water meters so they can be charged according to their consumption, especially those who use water for their gardens. Also, this would help them to control the consumption. The high cost of installing water meters has been recognized as a problem especially for poor families.

Collection ratio and enforcement mechanisms

The collection ratio is seen as a combination of affordability and willingness to pay. It is additionally an indicator of the efficiency and financial viability of the water companies. As such, the collection ratio can be viewed as an indicator of the absolute necessity to define new strategies and/or mechanisms for improving enforcement.

In general, there are serious problems with collection practices all over Montenegro. The collection ratio is highest in Ulcinj (85% for persons physically present) and lowest in Podgorica (collectibility at the households is about 15-20% at the first month). On the other hand, balance between the total bills issued but not collected compared to the total bills issued during one month in Podgorica is 1:9, in Budva 1:5, in Bar and Kotor 1:7, while in Ulcinj it rises to 1:20. This significantly endangers capability of WSC to regularly and properly maintains the network.

Enforcement mechanisms differ from one municipality to another. Disconnections are effectively used, especially from the point of view of water supply companies. However, as confirmed by the expert in Ulcinj this is not always the case. “…It happened that in the area of Pinjes we disconnect water seven times in a twenty day period. After we leave, he turns on the valves and has water again.” In Podgorica, charges are filed if water is misused or if bills are unpaid, but the judicial system is lengthy. On the other hand, in addition to an educational campaign, citizens believe that a better quality of water supply will increase the collection ratio.8Source: Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute (2004)Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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Water losses

Water losses are present in all selected cities. Water losses are seen as a combination of the dismal technical condition of the network (damage to the pipelines, outdated pipelines and bad intakes) and human factor, such as consumer behavior toward water consumption (illegal connections). The largest losses are in Podgorica and in Kotor (60% each). Main causes for this are an obsolete infrastructure, illegal connections and a flat rate method of billing. Such losses cause further negative implications on consumers’ satisfaction regarding the water supply.

Table 2.1 presents a summary of basic socio-economic and technical data that relate to this analysis. It provides a better comparison of the five project cities, especially when analyzing the distributional impact of the reform.



Table 2.1 Condition and access to water infrastructure in five project citiesPodgorica Budva Kotor Bar Ulcinj

Area (km sq)9 1,441 122 335 598 255Population (2003 census data)10 169,132 15,909 22,947 40,037 20,290Population (1991 census data)11 145,696 11,538 22,112 34,282 19,667Population growth ratio, 2003 16% 37% 3% 16% 3%Unemployment rate, 200412 18.1% 13.5% 22.1% 16.5% 22.6%Families receiving social assistance (%) 2,430 (4.7%) 78 (1.4%) 146 (2%) 275 (2%) 249 (4%)Main economic activities (water related) Services, manufacturing

industry, agricultureTourism and

servicesTourism and

servicesTourism and services,

Food processing servicesTourism, fishery and

agricultureMain economic activities (not water related)

Transportation, trade Construction, trade

Transportation, trade

Transportation, trade Trade

Water utility coverage area Municipal Municipal Municipal Municipal MunicipalBilling system Predominantly flat rate

combined with metered consumption

Metered consumption

Metered consumption

Predominantly flat rate combined with metered

consumption

Metered consumption

Tariffs13

For physical persons For companies

0.315€/m3

1.104€/m30.60 €/m3

1.20 €/m30.7014 €/m3

1.50 €/m30.6015 €/m3

1.20 €/m30.455€/m3

1.30 €/m3

Last price increase April 2003 June 2003 December 2002 October 2003 March 2004Collection Ratio (%) 15-20 60 30 60 85Water losses (%) 60 30 60 37.5 40Hours of supply16 20 - 8 12 12Monthly household income (EUR)17 240 185 225 194 122Population having access to water service (%)

100 90 99 98 100

9 Statistical Yearbook, 2003.10 Monstat, Population census 2003.11 Monstat, Population census 2001.12 Source: Institute for Strategic Studies and Prognoses, ISSP13 Source: Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute (2004)14 The water price usually doubles in the summer season.15 Actual price= water+sewerage+fees; during the summer season, price is doubled and amounts 1.20 €/m316 Average during the summer season.17 No contributions included, Monstat, May 2005Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED) 35


III. FINDINGS AND ANALYSIS

In order to understand the influence of reform on all stakeholders at Montenegrin coast, the following issues were analyzed: a) the impact of the water sector reform and b) support or opposition of reform by (i) stakeholders, and (ii) institutional structures, as well as the impediments to reform. In addition, specificities of water supply among Roma community in Montenegro were analyzed in the context of the water supply reform.

A. IMPACT ANALYSIS

Tariffs are becoming crucial both for consumers and utility companies. Due to the shortage of funding by WSC management, continuous investments in the water supply network are not otherwise feasible. While water companies increase tariffs to cover costs, consumers must suffer the consequences. Main stakeholders as regard to tariffs are: WSCs, local governments, POs and all types of consumers, especially vulnerable groups and businesses. As a result of the decentralization process in Montenegro and the fact the WSC are public companies established by the local government, with its representatives dominating in the WSC Board of directors, LG is becoming an important player in setting up the tariff policy in the water sector. The LG is authorized to approve the minimal water price suggested by the WSC. Water sector reform envisions an increase of the price of water since the current price does not include necessary funds for investments but only operational costs and costs of maintenance of the network.

Tariff increases

However, before moving to the issue of tariffs and their level, for success of the water supply reform in Montenegro, collection ratio and illegal connections must be controlled.

Collection Ratio - Data received from the experts in the WSC are confirming low level of collection ratio in almost all cities in Montenegro, and specifically in those covered by the reform project. The highest collection ratio is in Ulcinj (85%); in Bar and Budva it goes up to 60% (for two months), while collection ratio in Podgorica is only 15-20% in the first month. For all project cities, the main reason for non-payment is a long-standing attitude of entitlement. The public believes that water must be given to them and that there is no reason to pay for it. As suggested by the expert from PEW: “In order to increase the percentage of payment, non-selective punishment and disconnection of those who pay irregularly should be carried out.” On the other hand, it is interesting that all focus groups’ participants are confirming that pensioners are the most loyal in terms of paying water bills regularly. To some extent, this is confirming that the water bill is not a burden some budgetary item for Montenegrin households, meaning that they can afford it. Reasons for low collection ratio should be found in other areas such as a general attitude towards water as a commodity and satisfaction with the service, as it will be discussed later.

The main problem in the existing billing system – In all cities covered by the study, the billing system is computerized while consumption is calculated on monthly basis.

In three out of five municipalities the billing system is completely based on metered consumption. For Podgorica and Bar the billing system is predominantly flat rate combined with metered consumption. Though metered consumption in Kotor is predominant in the billing system, the fact is that because of the damaged water meters (43%) a flat rate is imposed.

The billing system on the flat rate is perceived as a problem since households are not motivated to save water. On the contrary, such households are using water for their gardens. Flat rate for households in buildings is also cited as unfair since costs for water are overestimated for some families and underestimated for others. In addition, citizens who are paying metered consumption are dissatisfied since they have lower consumption but higher bills. In addition, as stated by focus group participant “installation of the water meter would allow us to control water consumption”.



Urgency for universal metering – Universal metering is a priority issue, which will affect the way households will handle increased tariffs. One of the measures that WSR predicts within the Vodacom is introducing a universal metering system. Currently, there are not enough water meters in the network. This measure would enable detection and reclaiming of loses in the network caused by leaking and illegal connections.18

The cost of water meter installation, however, represents one of the problems illustrated by FG discussions in Podgorica: “We asked about water meter installation but WSC informed us that we should pay all water bills before installation. We would accept to purchase and install water meters under the condition that it would reduce future bills by that amount”. In this case, a water meter costs €50 and the consumer owns it. Most citizens could not afford it. Two options are suggested: i) installation free of charge for poor families, ii) the possibility of partial payment within the water bills for other consumers. In addition, WSCs must replace many damaged water meters and must improve the water meters’ calibrating process.

A good example based on installation of water meters is WSC from Tivat. Water meter coverage is to 100%. The result of this is significant collection ratio, which amounts to 92% in Tivat.

Current water price – According to WSCs experts, current water price is sufficient only for covering operational costs of water exploitation and distribution to customers, but not for investments in the infrastructure. In addition to this, the low collection ratio and significant debts are preventing sustainability and deterring profitability of this sector.

According to the household survey (HHS), 70% of households (represented by heads of households) know the current water price. The average water consumption per household in Bar is to 20m3, in Kotor 17m3, while 60% of the total sampling do not know their monthly water consumption. The average monthly water consumption per household, according to the research, is to 7m3 or 234l/per day, which is the average consumption on the National level. Citizens consider the current price as the optimal one and its increased level would be justified only by an improved water supply. That improvement would be reflected through a 24 hours a day water supply.

Affordability and willingness to pay

The water bill is not a significant share of consumption basket but water shortages are causing additional costs. Water’s share in household’s total monthly expenditures19

varies between cities as well as depending on the season (sees Table 3.1). In general, the monthly water bill accounts for about 4 percent of household expenditure/income during the summer. According to this, it would seem quite plausible that affordability should not be an issue for most families. However, the reported water bill is very often accompanied by additional expenditures relating to drinking water. Especially in the summer when lack of drinking water occurs regularly, families are forced to cope by obtaining the water from other sources. Therefore, families often buy water from vendors, travel to get the water from natural springs or public taps, buy water tanks and pay additional money for electricity in cases where they have pumps. For example, household surveys showed that electricity bills increase up to 10% due to the use of the water pump20. Non measurables are costs in time when families must travel to get water from other sources, to reschedule usual daily activities or face shortened life spans for house appliances in cases where salt water is utilized. For example, PSIA household survey in Kotor confirmed that shortage of piped water affect the households, causing: work at night (47.4%), purchase of more expensive water from vendors (45.6%) or 18 Vodakom, An overview of intervention measures 1, in 2004 installed 41 water flow meters Annex 11.19 Total households monthly expenditures were defined through the household survey conducted for the purposes of this PSIA as reported household’s costs of leaving including: food, transport, rent, education, health and medical services, clothing and shoes, heating (other then electricity), electricity, water, telephone, entertainment, and other expenditures. As reported, average monthly households expenditures amount about 530 EUR. The survey was undertaken in the period May 2005. 20 Source: PSIA Household Survey, May 2005Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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fewer guests during tourism season (7%) for households involved in renting the rooms. This last consequence (fewer guests during tourist season) is even more important for businesses who report this being a problem in 52.2% of cases.



Table 3.1 Water’s share in the monthly household expenditures by cities

Water's share in the consumption basket

Summer WinterBudva 3.2 2.1Bar 5.0 4.9Kotor 3.8 3.6Ulcinj 4.9 5.1MC/avg 4.2 3.8

Source: PSIA Household Survey for the water sector reform in Montenegro, May-June 2005

For the purposes of comparison, water’s share in the monthly household’s expenditures calculated based on the household survey data for the entire Montenegro accounts 1.3% with around 10 EUR of average bills (ISSP, Household Survey April 2004). Though, due to the different methodology, this data are not fully comparable, it should be noticed that average water price in the southern cities is 38.5% higher comparing to the average price on the national level. Also, comparing the size, households in south have less members (2.9) then those in the central and northern part (3.35). We conclude that water’s share in the monthly household expenditures in the south is caused not only by higher price but also larger consumption per capita.

Despite the fact that south of Montenegro is the region with the highest living standards in the country, some pockets of poverty exist. Just in the last year, every fourth surveyed family had a time when they did not pay their water bill. This percentage is higher in Bar and Kotor (36%, each). Out of all surveyed households, in 14% of cases, the main reported reason for not paying the water bill was lack of money, while other were not happy with the service and some of the respondents claimed not to be receiving the bill. Other reported reasons for not paying the water bill were “not being in a region”, or high aggregate totals as a result of not paying the bill for couple of months in a row. In some cases, irregular payments of water bills are caused by neglecting consumer’s requests. As focus group participants stated, a responsive service provider is an important part in building up customer loyalty.

“We were paying water bills regularly until the moment we started to receive very large bills. It was consumption of 750 m3 for our four-member family. I have called the water supply Company to come and check because there were business offices on the ground floor and I assumed a mistake had been made. They didn’t want to come, and I became obstinate and didn’t want to pay anymore, at my own damage.” FG participant in Podgorica

If classified by poverty status, poor and economically vulnerable households21 face higher water costs compared to the total household expenditures. Table 3.2 shows that water bills for poor households are above the average of all households in the project cities. This suggests that an increase in tariffs will be a heavier burden for poor households in cases where overall consumption and income is not changed.

Table 3.2 Water’s share in the consumption basket

Water's share in the consumption basket

Summer WinterPoor 5.2 4.9Economic vulnerable 4.4 3.6Non poor 3.1 2.5

21 Poverty groups have been created comparing reported household expenditures per capita with official poverty line (amounting 116 EUR per month per person). Poor are the households with per capita household expenditures below poverty line; economically vulnerable are households with per capita expenditures below poverty line increased for 50% (category recognized in the official document representing Poverty Reduction Strategy), while those with per capita consumption above the level of poverty line increased for 50% are considered as non poor. Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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Source: Household Questionnaire for PSIA for the water sector reform in Montenegro, May-June 2005

Better water quality, no restrictions in water supply and better water pressure are key requested improvements. Though more then 50% of surveyed households raised their concerns regarding high price per cubic meter, when asked about the most important improvements in piped water supply, only 9% of household heads stated lower price as the third priority. For all of them, more important are: better water quality, building of adequate infrastructure, no restrictions in water supply, better pressure and discontinued service to illegal consumers. Some participants noted that they may accept a higher price if they had access to water during the entire day so that “water is no longer a category in the public’s heads that burdens them” (FG participant, Kotor) and if water were of good quality, to avoid the cost of bottled water. For participants of the focus groups in Bar and in Ulcinj, health consequences caused by water quality are an important concern. “People are afraid to use the drinking water because of several cases in which entire families have been hospitalized due to contaminated water. You should advise citizens not to use the water for drinking if there is the possibility of reduced water quality.” (FG participant from Bar)

In Ulcinj, particular concern is raised when water from the spring Lisna Bori is used. Often, the water tastes like mud and is yellow in color, or sometimes, it tastes like gas. Water is not being filtered enough. “Kids here have problems with their teeth and kidneys due to bad quality of water, it is contaminated due to bacteria, and nobody is warning the population about it.” (FG participant from Ulcinj)

For households in Kotor that very often have salty water, one of the concerns is consequent increase in household expenses since the life span of appliances that use water is reduced (boilers, washing machine, dishwasher, etc.)

No restrictions in water supply and better pressure are primary requests of businesses as well since that influences the quality of their tourist product and weakens their competitive position. “The market exists and competition is great on an international level. If you are missing or are inadequate in your supply of any one of these segments -- water, road, and beaches -- you are out of the game. The market dictates this. Even if you offer tourists all of the conditions or attractions, if the service in hotels is unsatisfactory, you are again out.” (participant of the focus group on topic tourism)

An expert on the central level is emphasizing the importance of a good water supply as an infrastructure issue, the lack of which prevents tourism development. “With no municipal presumption, no paved roads, no paved sidewalks , insufficient lighting and green areas, with water supply problems, soil pipe, waste, we will have huge problems with investors, because none will come here to build.” In general, a tariff increase should not have a negative impact on the population; still, vulnerable groups should be subsidized. Having in mind that the water bill is not a significant share of the households’ budget, experts believe that a tariff increase would not have a negative impact on population in general. Also, the point of view in terms of the level of tariff increase differs. While representatives of WSC advocate higher tariff increase under the excuse that there is not enough money for necessary investments, those experts outside of WSC have the opposite view. An expert from an international organization involved in water supply reform on the coast is confirming that a tariff increase though not significant is necessary, but only after some other measures are undertaken, for example: rational operations of WSC, cutting employment and restructuring of the water sector in Montenegro.

“The prices of water will increase for certain, although not dramatically, perhaps 10% or 20%. However, significant savings mean rational operations, less consumption of spare parts, cutting employment, rational management, reorganization, and restructuring of that sector. The significant savings are achieved through this. The price of water must be compared to the purchasing power of the population. However, 10 to 20% will be enough, with other measures, such as a reduction in employment. In my knowledge in the coastal area, redundant labor is 20-50% of the total figure.”



The average water bill during the season amounted to €20, while amounting to €15 during the off season. Minimum bill amount in both cases was €2 and maximum was €50. Table 3.3 gives the average of reported water bills in project cities during the season and out of season.


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Table 3.3 Average monthly water bill amounts in project cities (€)Budva Kotor Ulcinj Bar

Season 28.00 18.50 20.00 11.00Out of season 17.00 18.00 16.00 9.00

Source: Household Questionnaire for PSIA for the water sector reform in Montenegro, May-June 2005

Higher water bills during the summer season are understandable if we assume the impact of the summer houses and also of the family tourism that boost the water demand during the season. It should be mentioned here that almost 75% of interviewed households generate more then 50% of total household income from tourism as well as that 77% is involved in renting-out private rooms. Though they complain that income generated from tourism during the season decreased during the last three years, official data are showing that last summer season was the best one in the post-war period. Income from tourism is increasing through increased level of tourists coming to the country and through attracting better paying tourists from all around the world (confirmed by higher percentage growth of foreign tourists coming to Montenegro). This is confirmed by the experts who believe that those with greater consumption percentage should pay more, since they could transfer part of their costs to tourists.

Higher totals on water bills are obvious in Budva where WSC introduced a double tariffs system. In Kotor citizens are buying bottled water with no variations in the bill amount, supporting the findings related to damaged water meters.

Other water sources used during the summer season increases household expenses. The table 3.4 shows that citizens of Budva, Kotor and Ulcinj annually have significant costs for getting the water from other sources. Though amounts in Budva, Kotor and Ulcinj on annual basis are similar, it should be noticed that there are much less people living in Budva and to some extent in Kotor as well, then compared to Ulcinj throughout the year. Season covers three months of the most extensive tourism activity, while month reflects average expenses through the year (both on and off season). Bar is the only city where households did not report costs for water purchasing, which could be explained by water supplied from natural sources and cisterns.

Table 3.4 The average water bill amounts for other sources in project cities (€)Source Period Budva Kotor Ulcinj Bar

Other sources

Month 20.00 18.00 10.00 0.00Season 60.00 59.00 30.00 0.00Year 131.00 136.00 131.00 0.00

Source: HHS, PSIA Montenegrin coastal areaAmong those who reported an increase in the price per cubic meter during the last year, 50% reported no significant impact on their household budget; 25% of households reported reduced water consumption to afford the bill; while an additional 25% restricted other expenses to be able to pay the increased water price. At the same time, 75% of those respondents noticed no change in water supply after price increase, while 25% reported longer hours of supply.Tariff increase should not stand alone. As stated by experts, tariff increase not accompanied with a campaign to increase collection ratio would bring WSC nowhere: regular payers would be additionally burdened while those who do not pay now, would not pay after tariffs are increased either. At the same time, if the economically vulnerable population is excluded, according to the experts’ opinion, others could afford higher tariffs especially if it is taken into consideration that the water bill is a relatively low household cost. Furthermore, if households are ready to pay more for buying drinking water from vendors or to travel out of the city or to buy water pumps, they could afford higher tariffs as well. Business representatives believe that higher tariffs would bring WSC to the lower collection ratio, while if accompanied with service improvement, tariff increase could bring higher profits for those involved in tourism industry.

“If the WSC decide to increase water price, we would definitely have to accept it as we already accepted increases in the electricity power price and phone impulse price. If I may make a suggestion, I’m interceding for gradual price increase instead of sudden. With a gradual price increase consumers could notice improvements in water supply system and



would accept it more easily and pay bills on a more regular basis”. Focus Group Podgorica WSC expert confirmed the fact that local government approves of a suggested price increase is a problem since local government considers water to be a social category. Also, for 60% of surveyed households in Bar, 45% those in Ulcinj, and 47% of surveyed households in Budva, paying the water bill is the households’ fourth priority out of five stated. All experts confirmed that pensioners are the most regular payer of the water bills, though with most limited income.

“The question is: why is it that the pensioners with low incomes pay the bills the most regularly? It is because they have established this habit from the time when they were young and starting to form families and build their houses. They knew that water bills must be paid and that commitments must be fulfilled, and what you consume, you have to pay for. Today this is not the case. This is the reason for pensioners being the best customers.”

Willingness to pay is highly connected to satisfaction with the service. Willingness to pay is primarily related to issues such as attitude and satisfaction with the service. All focus group participants confirmed willingness to pay more for drinking water, if provided with increased access and water quality, and improved service quality. Here “good service” would mean monthly issuing of the water bills, working water meters and improved water supply including good quality of water, access 24 hours and good water pressure. Almost 60% of surveyed household members confirmed willingness to pay more if better water supply is provided. Only exception are the citizens of Budva who believe that current price is already high enough and should not be inflated. Those households willing to accept higher tariffs for improved water supply suggest a tariff increase up to 17%, while economically vulnerable households reported acceptable increase up to 10%. However, gradual increase of water tariffs is suggested.

In its simplest form, the result above is no different from what many other studies have found in the now vast literature on the willingness to pay for water—that households want improved water service and that they are willing to pay for these improvements.

Standard rule of thumb in defining an affordability measure in water supply and sanitation services is 5% of monthly household expenditures. If we apply the same standard here, we could say that households in Montenegro can afford higher water tariffs. Still, due to greater consumption and higher water prices in the south of the country, some groups like poor people are on the very border of affordability or even below it. On the other hand, for those involved in tourism activities the final tariff increase is expected to be transferred to the tourists.

All the experts interviewed agreed that the current water tariffs do not cover the cost of the service. On the other hand, improving situation in WSC by price increases would cause a negative reaction among citizens unless better water supply is provided in a short period of time. It is necessary to increase billing payment rate and reduce distribution loses.

For most project WSCs, only about half of the water consumed is actually billed. Leakages, many illegal connections and damaged water meters are the primary causes of inappropriate billing. In addition, citizens consider water as a non-economic category they should pay for.

Reforms taken by the Vodacom consider possibility of making payments in post offices and by bank account. Those possibilities are available for citizens of Budva and Kotor. In most cases, payments were made to bill collectors or directly in the WSC office.

Obviously, citizens do not consider water as an economic category and water supply system as a service that should be paid. “Water price was social category for years and nobody paid for it except legal entities, which do not exist any more. WSCs survived by billing those legal entities”. Therefore, the water bill is in fourth place among the high priority bills in households.

Willingness to pay is noticeable in households where monthly calculations are accurate and bill distribution is regular, appropriate water metering is used and there is an improved supply. Improvement is related to good quality, 24-hours water availability and good water pressure.


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WSC experts believe that the primary problem is a lack of awareness of a paying obligation and that water should be paid for.

The last water price increase – Water prices in Budva increased from €0.40 per m3 to €0.60 per m3 in May 2004. As confirmed by the focus group participants in Budva that forced poorer households to reduce other expenses in order to pay water bills. However, positive changes in terms of the water supply quality, as the result of increased tariffs did not occur. Still, citizens expect that higher tariffs should be accompanied by improved water supply service. As stated by a focus group participant in Budva “The WSC must present a concrete calculation, and show the reason for charging a higher price for water.”

Future increase of water prices – When asked if they would be willing to pay a higher price per month for a 24-hour supply of water of good quality and pressure, households answered differently depending on their economic situation. As presented in the table 3.5, a significant percentage of each poverty group (more then two fifths) would be willing to pay a higher price for better quality service. However, the percentage of an acceptable increase differs and goes from 10% for poor up to 25% for those non-poor.

Table 3.5 Willing to pay higher price for better quality service (by poverty status)

Yes Average tariff increase

acceptablePoor 42% 10%Economically vulnerable 45% 15%Non-poor 41% 25%


On the other hand, as shown in Table 3.6 average percentage of acceptable water price increase is rather similar if different project cities are taken in consideration, while percentage of those that would be willing to accept such a change differs among the cities. The most willing to accept a higher price are the households in Bar, while the least inclined for that are households in Budva. The reason given for households from Budva that would not accept tariffs increase is that they consider current water prices to be too high. Also, FG participants in Budva confirmed that the last price increase (May 2004) was not accompanied by improved water supply service.

If we consider the entire sample of the households in project cities, 43% respondents would be willing to pay a higher price for better quality service, at an increase of no more than 17%.

Table 3.6 Willing to pay higher price for better quality service (by municipality)

Yes Average tariff increase

acceptableBudva 20% 18%Bar 64% 19%Kotor 52% 16%Ulcinj 36% 17%MC/avg 43% 17%


According to experts’ opinion, a price increase would burden regular payers and that would additionally cause an even lower collection ratio. “Nothing would be achieved since some of them would continue not to pay and there would be fewer bills paid on a regular basis”.

“If the WSC decides to increase the water price, we would definitely have to accept it as we already accepted the increase in electrical power price and phone impulse price. If I may make a suggestion, I’d intercede for a gradual price increase rather than a sudden. With the gradual price increase, consumers could notice improvements in the water supply system and



would more easily accept the price increase and pay bills on a more regular basis”. FG Podgorica

Most experts interviewed believe that the price increase could endanger the position of poor and economically vulnerable households. They suggest that WSC has to improve current conditions by using some other methods. At the same time, excluding poor households, most experts believe that citizens in the coastal area could afford to pay water bills since it is one of the lowest bills. “If they are willing to purchase water in the supermarket or to travel out of the city to provide water or to pay electricity bills for pump systems, they should be willing to pay higher price for more qualitative supply”. WSC expert

Need to define two tariffs system – According to experts and FG participants, coastal cities should have winter and summer tariffs. Significant numbers of tourists and financial influx for budgets of households and legal entities during the summer months would enable easier payments of water bills. Therefore, households could accept a higher summer tariff because of an increased households’ income from tourism receipts. On the other hand, the tariff increase is justified by full exploitation of both water and technical capacities that WSC has available.

The model that should be used for defining tariffs is consumption quantity. “Hotels have a greater consumption percentage and they should pay more. Besides, they could transfer part of their costs to tourists because Budva would not have problems with water supply if there were no tourists at all.” Experts from Budva believe that this is the way in which the water supply problem in Budva will be solved.

Billing improvement – A low water billing rate causes greater debts that WSC cannot collect. WSC experts agreed that if the billing collection completely succeed, existing tariffs would be sufficient for covering operating services and small investments. In average, the billing rate in project cities is 60% for households and 20% for legal entities.

Positive example: WSC Tivat recorded billing rates of 96.5% in 2004 and 91% in 2003. This rate is to 90% on a monthly level, depending on the season. Large numbers of weekend-tourists are paying their bills for the entire year and therefore the domiciled population does not have significant debts. This is the only case of such a high collection ratio in Montenegro. According to Tivat’s WSC Director, this is the result of habitual bill payment by the population here and the constant presence of WSC’s working teams in the field so they could turn off water supply immediately in cases of nonpayment. Water meters are provided for all consumers. Promptness notes and court proceedings motivate the non-payers. No consumer has yet to be disconnected from the network.The WSC in Tivat is the only one in Montenegro that conceded part of its network and water supply to a private company ten years ago. The private company is obliged by contract to charge tariffs determined by the WSC and local government and to provide quality water supply service, which further resulted in increased bill collection rates.

Need to improve collection ratio and enforcement – Households interviewed believe that WSC should improve enforcement by: 1) cutting-off non-payers (37%), 2) cutting off illegal connections (36%) and maintenance of the water supply network (23%), while remaining 4% have other suggestions. Following the opinion of the customers in each of the project cities, cutting-off illegal connections is necessary to get improved enforcement in Budva (65% of respondents), while in Bar, Kotor and Ulcinj, the most necessary is better enforcement in cutting off non payers (44%, 50% and 40% of respondents, respectively). Keeping in mind the poverty status of respondents, for poor households improved enforcement of WSC is necessary in cutting off of non-payers, while non-poor believe that cutting off illegal connections requires immediate improved enforcement.

According to the HHS, three methods for improving enforcement that would bring the best results in their neighborhood in project cities are as follows: Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

Example from Germany: water supply in Germany is more expensive for private persons than for the legal entities because their industry is using technical water for their activities instead of quality and drinkable water. CDM expert

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Public awareness campaign Financial penalties for late payments Disconnect non paying customers, monitor these customers and charge for the re-

opening of the water connection.

For the poor and economically vulnerable, the most effective would be a public campaign regarding the importance of water conservation, while non-poor think that a such campaign should be accompanied with cutting off illegal connections at customers’ expenses.

According to most citizens interviewed, primary groups to be included in the campaign are households (45%) while equally important are also business and public institutions (27.5% each). Taking financial status of the respondents into consideration, the order of project groups is virtually the same for poor and economically vulnerable households (households, public institutions, private sector) apart from non-poor households that put priority on former public institutions in the private sector. In the focus group discussions, public and private sector representatives interviewed stated here that their sectors should be pressed even more since they are the largest non-payers.

The beneficiaries differ much more depending on the city. As shown in the Table 3.7, households should be the primary focus of a public campaign in Bar; while in Budva it is the private sector. In Kotor and Ulcinj, public institutions are recognized as the priority focus for a public campaign on the importance of water conservation.

Table 3.7 Stakeholder groups for public campaign (by project cities)

Households

Private sector

Public institutio

nsBudva 36% 52% 12%Bar 87.5% - 12.5%Kotor 48% 12% 40%Ulcinj 12% 40% 40%MC/avg 45%

27.5%27.5%


Most experts from WSCs stated that the collection ratio would increase if restrictive methods for non-payers and illegal connectors were applied. The problem with non-payers’ disconnection is common water meters in the buildings, meaning that cutting off individual consumers is not possible. In addition, WSCs’ representatives believe that bill distribution and revising of an existing consumer’s database should be undertaken. Other technical measures are related to the repair of water meters, installation of new meters and regular calibrating and maintenance.

“Non-regular payers should be simply disconnected and enforced to pay in this way. Besides, Montenegro has a lot of cell phone users and all of them pay phone bills on a regular basis and therefore their phone lines should be disconnected if they do not pay water bill. Cell phone is on the top of the priority list and could serve as a good way for sanctioning water bills non-payers“. An expert

FGs representatives stated that more regular water consumption metering, regular bill calculation and enabling payment during weekends would improve the collection ratio. By implementing these methods, the monthly water bill would be made affordable.

Access to water and water services (water network)

Main stakeholders: Service quality is the best way to measure the impact the reform is having on consumers. Main stakeholders regarding this transmission channel are the GoM,



Ministry of Tourism, donor community, WSCs and local governments, as well as consumers, who are the main beneficiaries.

As could be seen from the city profiles, network coverage is good (between 90 and 100%). However, increased population in summer months as a result of tourism causes water shortages in the coastal cities. According to WSC experts, current capacities of available water springs are insufficient to meet needs during three months of the summer season. Data received from WSCs22 shows that each city covered by the study faces a certain number of days with inadequate water pressure. In Podgorica this is only during the period from July to September, for 3-4 hours/day and only for those consumers from the upper parts of the distribution network due to a small tank capacity. In Budva, 50 days per year all consumers are facing inadequate pressure while 5% of consumers have no water supply during the night either. The situation in Bar is that for 60 days during the period July-September consumers have inadequate water pressure while 3% of consumers in the more elevated parts complain about insufficient pressure; about 1% of the citizens do not have water at all and there is not enough tank capacity. In Kotor, restrictions in water supply are imposed for the period of 2-3 months/year. About 120 consumers (2%) do not have water during the night. In Ulcinj 10-15 days of inadequate water pressure is caused by the non-harmonized consumption and the lack of tank capacity.

In addition to the problem of insufficient water sources, large distribution loses due to an aged infrastructure, misuse, many illegal connections, water overuse and flat rate billing contribute to a water shortage.

Graph 3.1 is showing the primary problems with the water supply during the tourist season by project cities, as reported by interviewed households. Being able to identify several problems (multiple answer question), respondents in Kotor stressed salty water as being a significant problem, while all other problems (supply/volume, reliability of the water supply and safety) were also highly emphasized. On the other hand, for respondents in Budva and Bar, inadequate pressure and unreliable water supply are causing the most problems during the tourist season. Ulcinj experiences similar problems, but a smaller percentage of households are reporting those.

Graph 3.1 Problems with the water supply during the tourist season (by project cities)

0102030405060708090

100

MC Budva Bar Kotor Ulcinj

Supply/volume Unreliable Salt Safety All mentioned

Due to the migrations from northern Montenegro and following the path of tourism development, coastal areas of Montenegro faced significant illegal construction in last ten years. This was not prevented due to the lack of strict controls from the local governments. Illegal construction was followed by illegal connections to the water supply network. Since the water supply network as constructed cannot handle such an increase in the number of consumers, water shortages are not a surprise. This is particularly prevalent in Budva, with the greatest tourism influx during the summer months. 22 Source: Urban InstituteSecond Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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Inadequate water pressure and water shortages have forced people to find alternative solutions. For instance, illegal connections are the most common coping mechanism regarding water access. The percentage of people having one or more illegal connections is highest in Ulcinj. Illegal connecting to the water supply system in most cases was done by households themselves or with the assistance of their friends. In some cases these are private plumbers employed in WSC (cases reported mostly in Budva).

The main water sources during water shortages: When the main water sources are not available, the first alternative is filling drums with water from local springs and from WSC when it is possible. Citizens as well as the business sector pay additional costs, primarily for transportation. Poor and economically vulnerable households are forced to use this alternative water supply as well.

Another way is purchasing bottled water, which is common for citizens of Kotor and Budva. This additionally increases household’s expenses. In average, households purchase 5 liters per day by €0.5. On average, households utilize 20 liters of water from public taps daily. This possibility is available for citizens in Kotor and Ulcinj who also purchase bottled water to a great degree as well as citizens in Budva and Bar. Citizens in Budva and Bar are forced to purchase bottled water due to a lack of natural water springs.

Additionally, this situation leads to “entrepreneurs” who are dealing in the illegal water trade and distribute water to neighborhoods in Bar, Kotor and Ulcinj suffering from complete water shortages.

The third source is water warehousing in cisterns and pools. Citizens in Ulcinj also provide water reserves by building concrete pools next to their houses (so called “sandza”). Hotels in Ulcinj and Baru in the beach area also make use of wells in order to meet the demand during the summer season.

Cisterns and wells are used for water accumulating and collecting. Well-off households possess water tanks with a capacity of 500l in Budva and Ulcinj and they are mostly individual owners. Collective tanks are more frequent among the poor population in Ulcinj with a capacity larger than 500l.

Living conditions and a lack of resources are the two main reasons why households do not have water tanks. In most cases when a household possesses a cistern, it is 500l capacity and that is sufficient.

Graph 3.2 Main source of water when drinking water is not available, by cities

0

10

20

30

40

50

60

70

80

90

100

Water stored intank

Piped water fromthe neighbors

Public taps Buy water fromvendors

Fill buckets whenwater is available

MC Budva Bar Kotor Ulcinj



Table 3.8 shows the primary problems in the water system as identified by the households interviewed. In terms of technical problems in the water system, generally the most important is lack of access to the piped water supply network, while in Budva it is limited hours of water supply. Perception that water is unsafe is a far more serious problem in Bar and Ulcinj (70.8% and 67%, respectively, in comparison to 57% for the entire sample). In terms of service quality, unreliable supply is the greatest concern; this is particularly a problem in Kotor (70.8%). Also, two fifths of respondents in Ulcinj reported that WSC technicians take bribes (40.9%). Regarding reported operational problems, high price per cubic meter and excessive consumption or misused water are the greatest concerns. The price of water is particularly a problem for households interviewed in Kotor, while excessive consumption or misused water are the primary water system problem for citizens in Bar.

Table 3.8 The primary problem in water system (by project cities)MC Budva Bar Kotor Ulcinj

TechnicalLeaking pipes 11.5 12.0 16.0 28.0 0.0Lack of access to piped water supply network 38.5 0.0 48.0 32.0 63.6Low pressure 20.8 28.0 24.0 20.0 9.1Limited hours of supply 27.1 52.0 12.0 20.0 27.3Other 2.1 8.0 0.0 0.0 0.0

QualitativePerception that water is unsafe (lack of trust, taste, color, smell) 57.0 45.8 70.8 44.0 66.7The water is unsafe 36.6 45.8 12.5 56.0 33.3Other 6.4 8.4 16.7 0.0 0.0

ServiceUnreliable water supply 55.9 62.5 58.3 70.8 27.3WSC technicians take bribes (are corrupted) 10.8 4.2 0.0 0.0 40.9Delays in repair and maintenance by WSC 20.4 8.3 33.3 16.7 22.7Non responsive customer relations 9.7 12.5 8.4 12.5 9.1Other 3.2 12.5 0.0 0.0 0.0

OperationalThe price per cubic meter is too high 53.3 59.1 16.0 79.2 59.2Dissatisfaction with the unmetered billing 5.4 4.5 4.0 8.3 4.5Dissatisfaction with the cumulative metering in the apartment building 5.4 4.5 12.0 0.0 4.5Too much water is used or misused 33.7 22.7 68.0 12.5 27.3Other 2.2 9.2 0.0 0.0 4.5

Need for repair of an existing network: “The problem is comparable to the barrel leaking all over the place and which was inadequately or not invested in for more than 20 years. Until you reduce loses it will be very difficult to provide an appropriate or improved water supply. The main issue is what is least expensive in order to reduce loses? The question is whether to provide new quantities of water or patch the hollow system?”

Current distribution loses are large and amount to 60% on average, from city to city. Distribution loses in Kotor amount to 60% of total exploited water and 30% in Budva. Technical loses are caused by an antiquated infrastructure. It is necessary to repair the current infrastructure by replacing old pipes, repairing damaged valves and water flow meters and to reduce loses to 25-30% on average. In this case the quantity of water in the system would increase, costs of loses would be reduced and investments in new water sources could be initiated.23

Need for dividing technical and drinking water: Most citizens use drinking water for irrigation of gardens, green areas, washing walking paths, cars, etc. It is necessary to designate 23 See in annex 11 and CDM - potential financial gain for utility by recovering lost waterSecond Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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substandard quality water (Spring Lisna Bori in Ulcinj, small local wells in Budva) for these kinds of needs. Citizens of Kotor use processed sea water for those purposes but are complaining of the effect they have of washing streets with this water. Rising numbers of FG participants in all project cities stated that investments in reconstruction and extension of the existing system are needed to improve the water supply conditions and the overall hygiene of the city. “Technical, refined sea water, which has been used to clean pavements, is not efficient. The city is dirty.”

Quality of water: According to most sources, water quality is satisfactory, except in individual cases. Poor water quality is present in Ulcinj. Concerning water sources used, the worst quality of water for drinking and food preparation is in Kotor and Bar. The highest percentage of the population in Ulcinj uses water from wells for drinking and food preparation.

Citizens of Bar are satisfied with their water quality, but have a water shortage problem. Citizens of Budva are facing problems of poor quality water and water with sand. Citizens of Kotor are dissatisfied with water quality and salt content. Citizens in Ulcinj are not satisfied with water quality and quantity from the Lisna Bori spring.

Regarding the water supply quality, priorities are the daily availability of water expressed in hours and a guaranteed supply. The third priority is the water pressure. Due to poor water quality, citizens are complaining of short working life of devices that use water. The private business community is facing the same problems and high costs as a consequence.

Need to improve reliability of water supply and quality of access: According to the HHQ research, citizens stated that water distribution loses and pipe leaking are the biggest technical problems that WSCs are facing in all four cities. There is also insufficient water supply, which is on the top of the list for population in Budva. Supply service is not reliable with permanent shortage and restrictions in water supply.

In addition to previously mentioned information from experts regarding availability of water during the year, household surveys confirm that the most reliable 24-hours daily water supply is in Bar. All other cities do not have running water every day on a monthly level, averaging 11 days during three summer months and 2 days during the winter without water. The longest period of water supply restriction was in Kotor, lasting 15 days and in Budva for 10 days. The average water supply restrictions in Ulcinj were 5 days per month, while the shortest water supply restrictions were in Bar. Concerning the water supply problems, Kotor is the most vulnerable during the winter season.

Households on average have 10 hours daily of water supplied from WSC. The most vulnerable are citizens of Kotor due to 16-hours long restrictions in some neighborhoods. During the winter season, running water from WSCs is available on average 17 hours. The most vulnerable cases are in Ulcinj, with running water available for 2-hours per day during the summer season.

Graph 3.3 Average daily water supply, in hours/per season



0

5

10

15

20

25

Budva Bar Kotor Ulcinj

Summer Winter

Consequences of water shortages for most households are night work and purchasing of water in stores for a higher price. Table 3.9 and 3.10 confirm this dependence on the city and poverty status of the respondent. Lack of financial resources are forcing poor households to combat water shortages by working at night (64.3% of poor households in comparison to 37.5% of those non poor). Impact of losing guests during the tourist season is the largest in Ulcinj and Budva, while households in Bar and in Kotor did not report such problems.

Table 3.9 The effect of piped water shortages on households (by poverty status)

Work at night

Purchase more expensive water from

vendors

Lose guests during tourism

seasonPoor 64.3% 28.6% 7.1%Economically vulnerable 50.0%

42.9% 7.1%

Non-poor 37.5% 56.3% 6.3%Source: PSIA Household Survey for the water sector reform in Montenegro, May-June 2005

Table 3.10 The effect of piped water shortages on households (by municipality)

Work at night

Purchase more expensive water from

vendors

Lose guests during tourism

seasonBudva 26.3% 63.2% 10.5%Bar 66.7% 33.3% 0Kotor 36.4% 63.6% 0Ulcinj 81.3% 6.3% 12.5%MC/avg 46.7% 46.7% 6.7%


Priorities in water supply improvements reflect problems that exist in each city. According to citizens surveyed, those problems are: shortage and quality of water in Budva and Kotor; water quality, price and supply on regular basis in Ulcinj; while priorities in Bar are construction of WSC, reducing the illegal consumers and lower water price.

Improvement of the wastewater outflow: Awareness of the need for solving issues on sewage network was expressed by 16% of citizens. Network connection is not established for 20% of households, mostly in Ulcinj and Kotor. This problem is less prevalent in Budva. The second listed priority is cleaning the sewage holes. In addition, citizens of Kotor and Budva suggested better maintenance of the sewage network and solving the problem of wastewater drainage into the sea.


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Citizens of Bar and Kotor are in most cases interested in connecting into the sewage network and they are willing to pay for it. Citizens must pay on average €70 per household for a connection to the sewage network. Citizens of Ulcinj expressed the highest willingness for this connection. An average monthly sum that households could afford is €10, regardless of their social situation. They are willing to pay €5 per visit for cleaning of the sewage access opening on a regular basis.

Improvements in the wastewater disposal system that citizens suggested vary from city to city, depending on problems they are faced with. Citizens of Bar insist on construction of the sewage system in the city, in Kotor on purifying wastewater before its drainage into the sea, while in Bar and Ulcinj, residents stated that they do not face significant problem of this kind. Only citizens of Bar stated an average monthly production of wastewater per household (17m3).

Citizens interviewed do not know the average daily production of solid waste in their households. According to the sampling it is necessary to develop a mechanism of educating the population in methods of solid waste disposal and importance of payments for such services.

In the case of wastewater, most citizens know the price of this service provided by the Water Utility Company. The bill for this service is incorporated into the water bill. Citizens show greater care for certain problems according to their severity.

In 2003, citizens of Budva and Kotor faced severe problems of local waste disposal and transportation of the solid waste out of the city zone. According to the HHQ research, citizens know that the price of this transportation amounts 0.5€/m3 of solid waste.

Need for increasing public awareness: Familiarity with the governmental policy on water issues is very poor. Citizens know almost nothing or very little about water supply activities and are informed through public TV stations. Second listed sources of information are local TV stations in Budva, Kotor and Ulcinj. The information source in Bar where a local TV station does not exist is the radio station.

Table 3.11 gives concrete percentages on public awareness regarding Government reforms in the water supply sector, by poverty status of respondents and by project cities. As the table 3.11 shows, citizens in Budva and in Bar are less informed about measures of the central and local governments to improve the water supply, while this percentage is much higher among the poor households (60.0%).

Table 3.11 Public awareness of GoM water supply reforms

Nothing Somewhat

informedAdequately informed

Budva 57.7% 26.9% 15.4%Bar 52.0% 28.0% 20.0%Kotor 36.0% 40.0% 24.0%Ulcinj 33.3% 45.8% 20.8%MC/avg 45% 35% 20%Poor 60.0% 24.0% 16.0%Economically vulnerable 32.3%

41.9% 25.8%

Non poor 45.5% 36.4% 18.2%Source: PSIA Household Survey for the water sector reform in Montenegro, May-June 2005

Most respondents believe that the National Government could improve water supply system by supporting local governments. All respondents are aware that the local governments are responsible for water supply and they agreed with that.

Work of Water Supply Company (WSC)

Need for developing better relationship between WSCs and consumers: All participants interviewed expressed dissatisfaction with WSCs’ services. Among those services



are: speed in repairing broken pipes, water meter repair, and damages to water supply network repair. Citizens are not well informed of the ability to lodge complaints about the WSCs work. They believe that positive steps could not be achieved at all. Half of all respondents are not aware that within the WSC exists an office for complaints. In cities with permanent shortage problems, such as Kotor and Ulcinj, residents know about these offices.

Mistrust is obvious as well, in cases of damages to the water supply network, since 40% of them called for private plumber, while WSC dispatched its repair crew 3 to 5 days later.

In cases where citizens were charged for the report on water supply problems, they usually contacted WSC and its staff. Concerning repair requests, citizens of Budva and Ulcinj mostly rely on WSC staff, while those in Bar and Kotor in this situation call private plumbers.

When complaining about the water supply services, citizens in 70% of cases address complaints to WSC. In Budva, they address complaints to local government as well.

Subsidies – measures to support the poor

Main stakeholders Local government is authorized to provide subsidies for poor and economically vulnerable households. Rules for defining subsidy conditions vary from municipality to municipality. In those cases, local government decides solely from case to case. One of the main problems that should be solved is subsidies schemes and determination of beneficiaries.

In Podgorica, there are subsidies for those consumers who fall into the category of social cases; as confirmed by WSC experts, these expenses are not covered by anyone. In Budva, subsidies are available for recipients of social assistance and refugees. Officially, there are no subsidized consumers in Bar, but still, there are 39 consumers that receive subsidies for 10m³/month. In Kotor, there are no subsidized consumers, while in Ulcinj subsidies are available for the disabled.

Table 3.12 Families receiving social assistance

Number of households

% of total population in the city

Budva 78 1.4Bar 146 2Kotor 275 2Ulcinj 249 4Podgorica 2,430 4.7

Source: Ministry of Labor and Social Welfare

Subsidies for vulnerable groups should exist. Again, though the water bill is not a significant share of total household expenditures, the majority of experts interviewed believe that higher tariffs would endanger economically vulnerable households. Those are: refugees, internally displaced persons, the Roma community and recipients of social assistance. Therefore, for such groups subsidies are necessary. One expert is emphasizing the importance of “setting up transparent criteria to determine which social groups should receive subsidies.”

When it is about the type of subsidies, the ideas are different, depending on the perspective of the respondent. This is how representatives of WSC think that subsidies for vulnerable groups should be provided by the Central Government through the current social protection programs (family material support etc.). According to expert opinion, subsidies should be provided by the Central Government to the vulnerable groups. Mainly, respondents are in favor of cash subsidies along with social assistance that such households are already receiving from the central Government. In Ulcinj, lifeline tariff is proposed as a channel to support vulnerable groups. In Podgorica, in addition to those who receive social assistance, households with handicapped members were recognized as a vulnerable group that should receive subsidies for water consumption. In this city, lifeline tariffs are proposed but the mechanism should “be very Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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sensitive since people don’t like to be marked as poor in the public eye. Nobody likes it.” (FG participant in Podgorica)

Focus group participants in Budva think that “subsidies as a permanent solution cannot be conducive to positive effects, especially in the long term.”Though confirming that water should be billed based on the actual consumption, almost all surveyed heads of household supported the idea to facilitate paying the water bills for those households that are economically vulnerable.

“Selective tariffs should be introduced for those who save water and are socially vulnerable, but are not illegal consumers; then, provide them a certain number of water cubic at production price.”

No subsidies for business sector. Experts believe that businesses should not receive any subsidies at all. On the other hand, representatives of businesses propose subsidies for the business sector as well as a further decrease of the water price for entrepreneurs and SME sector since that would enable to decrease the operation costs and create new jobs (FG in Budva). In Bar, participants of the FG with some tourism related business were also in favor of providing subsidies for the business sector, while the director of WSC was not supportive to this idea. On the contrary, according to his opinion no subsidies should be provided unless the person is a recipient of the social assistance program. Everyone agrees that subsidies to citizens should be under the authority of the Central Government. In Ulcinj, one expert interviewed believes that local government should take care of subsidies for citizens, while the business sector is advocating subsidies for those SMEs that are depending on water (through lower price). In Kotor, representatives of the business community are strongly advocating water subsidies for businesses since they “will bring money to the municipality, and in that way, endangered groups will not be endangered any more… Local authorities have to be interested in their local businesses so they would compensate 70% of subsidies, while the Central Government would subsidize a smaller portion, 30%, since it is in its best interest that the city lives.” (FG participant in Kotor)

The expert for the international organization is strongly against subsidies for business sector.

“In the case of companies, without exception, they should not be subsidized, even if they need water to produce something. In which case, these sources should be included in the calculation of final prices for their products. Large consumers pay higher prices here, even double, while smaller consumers pay less. This is not economically logical. So the subsidies should be avoided, except in the case of socially vulnerable persons.”

Representatives of the WSC also think that it would be good if WSC would receive grant support for capital investments and this is considered as an important subsidy for them.

Need to improve mechanisms for the identification of beneficiaries According to the HHQ survey, all citizens interviewed would support subsidies for households that cannot afford to pay their water bill. According to this, the Government should include subsidies and discounts for households that cannot afford their water bill into the Water Supply Reform Plan.

Concerning subsidies, both experts’ and FG participants’ opinions are closely correlated to living standard in their cities. Thus, experts and FG participants in Budva think that the population should not receive subsidies due to the quality of living conditions. Selective tariffs should be provided for socially vulnerable categories, such as retired persons, Roma population and consumers that conserve water. Montenegro should provide fees for all of those categories. Social institutions should prepare the list of persons that belong to those categories.

Business sector representatives believe that businesses that pay their bill on regular basis should also be subsidized. All WSC experts expressed an opposite opinion. WSC experts think that businesses are direct beneficiaries of the water supply system, based on which they generate income and therefore should be the most regular payers. According to them, the business sector should not have any subsidies related to water consumption and payments.



Most WSC experts believe that WSC should use subsidies for investment purposes. It was suggested that GoM should provide favorable electricity prices for WSCs since costs for electrical power is a significant item in their expenditures.

Choosing the best subsidy policy – Data collected from different sources indicate a need for introducing subsidies for vulnerable groups. A household survey conducted shows that citizens interviewed, regardless of their category, support introduction of subsidies and discounts for households that cannot afford their water bill. However, “the mechanism should be very sensitive because people do not want to be labeled as poor in public. Nobody likes it”. FG participant in Podgorica

In general, WSCs’ experts think that water should not be supplied for free. According to them, the best solution is the introduction and definition of subsidies and certain discounts in billing for vulnerable households. It was suggested that the discount should amount to 30 to 50%.

FG participants believe that it is necessary to provide social assistance packages for the socially vulnerable that would include some measures in addition to the water bill.

Keeping in mind the scarcity of water resources in the coastal area and lack of public awareness regarding the importance of water conservation, as well as the necessity to protect vulnerable groups, water supply subsidies should be defined as a way to both: 1) encourage consumers to conserve water, and 2) protect those who are vulnerable. Therefore, a combination of different subsidies schemes is proposed. It is suggested that households pay a lower price if their total monthly consumption is below a certain level per capita per month. In instances when a households’ overall consumption is above the defined limit, total water consumption is charged at a higher price. Such a tariff scheme is possible only if all households have properly working water meters. On the other hand, for vulnerable groups as identified earlier (recipients of social assistance) the lifeline to services through 20 liters per capita per day would be provided. Since social assistance programs are centralized at the level of the Government, central government will provide such subsidies for social cases.

Impact on Economic Development of the Area

The primary needs and problems of citizens in project cities

According HHQ survey, primary problems that citizens of coastal area face, ranked by importance, are as follows:

Shortage of money for buying principle food products and satisfying non-food needs Insufficient quantity and pressure of water Insufficient drinking water supply through the piped network (shortage of water) Potable water is unsafe / unclean Lack of sewage

The most serious problems that citizens of Budva face, ranked by importance are as follows: Bad roads/inadequate access Insufficient coverage of the water supply network Crime Water price (tariff) is too high The necessity of paying bribes for provision of goods and services

The most serious problems that citizens of Bar face, by order of importance are as follows:

Bad roads/inadequate access Crime The necessity of paying bribes for provision of goods and services Insufficient coverage of the sewage network Poor response of local government in cases of water and sanitation problems

The most serious problems that citizens of Kotor face, by order of importance are as follows: Bad roads/inadequate access Insufficient coverage of the water supply network


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Insufficient coverage of the sewage network Poor housing conditions Problems with power supply

The most serious problems that citizens of Ulcinj are facing with, by order of importance are as follows:

Poor response of local government in cases of water and sanitation problems Poor housing conditions Insufficient coverage of the sewage network Unsafe sanitation Poor drinking water supply through the piped network (shortage of water)

Evidently, the water supply is one of the top five problems that citizens in each of the project cities identified.

Tourism development and households’ income

Necessity of solving water supply problems because of tourism opportunities development: All respondents agreed that a good water supply is a precondition for tourism development and investment opportunities in the southern region of Montenegro.

“This is a huge problem costing Montenegro a lot of money that is not invested due to water supply problems. The water supply network does not cover a significant part of the coastal area. On the other hand, foreign investors are interested in building hotels in that coastal area. When the water supply improves, the business, investment and new job opportunities would improve as well.” Expert opinion

Households’ research showed that incomes did not improve for the last three years due to the overall economical situation in the country in project cities. The primary economic activity of most households dependent on tourism is room rentals.

In order to operate in the tourism industry, households must obtain a permit and they in most cases have it. That is a legal permit for room renting, restaurant use or permit of motor scooters and boats.

Most experts and FG participants agreed that private households offering accommodations should be regulated and registered for the purposes of tourism development. Legal regulations regarding legalization of illegal construction and connections established on the supply network are also necessary.

Budva and Ulcinj are cities where the highest percentage of the population is dealing in tourism and is economically dependent on those activities. Therefore, income from tourism amounts to 60% of total household income. As citizens stated, a decrease in tourism income by 20% was recorded in the last three years.

In Bar, hotels do not face water supply problems after they made an agreement with WSC for a 24-hours supply. According to households, reduced visits are directly connected to poor water supply. “Tourists do not visit a city that is facing water supply problems”. Some households in Budva solved this problem by digging wells and pools for water collection.

Experts and tourist workers consider waters supply as the most significant problem that influences on tourists’ satisfaction and their return in subsequent years. Water shortages in business cause longer night work and loss of guests. FG participants and experts expressed concern regarding a lower number of guests, considering a qualitative water supply as one of the preconditions for a qualitative tourism service.

Businesses depending on water supply recorded lower incomes due to water shortage and economic life of machines that use salt water or water with sand and stone content.



Necessity of prolonging the tourist season: Luxury tourism development that would prolong the tourist season and create new job opportunities basically has a water supply problem. A master plan for tourism development predicts a luxury tourism industry, priority focus of hotel industry and its staff toward that goal.

According to citizens, tourist season currently starts at the beginning of June and continues to the end of August. The season peaks for only one month, from 15 th of July to 15th of August. This short seasonal period is when households generate most of their annual income. In addition, tourism is the main developmental industry in the Montenegrin economy and it is necessary to invest in the development of conditions enabling this type of tourism. Changes in employment for the local economy and in particular for the tourism industry

The ways in which the water sector reform is expected to influence employment is more or less the same for the entire coastal area since all project cities are focused on tourism development. All the experts interviewed believe that the reform will enhance the attractiveness of project cities, which will be manifested through an increase in the number of tourist flowing into these cities. This, in turn, will have positive implications for the businesses themselves and at the same time it will contribute to increasing municipal funds from tax collections. As confirmed by the representative of the Ministry of Tourism, “poor water supply in Montenegro coastal area back in 2003 caused penalties to the tour operators due to the complaints from tourists.”

According to respondents, the water supply reforms of the Government of Montenegro would be visible in all four cities and would have positive consequences on employment. Solving this problem would improve business opportunities and therefore create new job opportunities. All the experts interviewed believe that the water supply improvement would create a more qualitative service and increase the number of tourists. In this way new job opportunities and businesses would be created.

Qualitative data from interviews with businesses in the service sector, mainly bars and restaurants, revealed that business owners expect their businesses to grow after water supply situation improves.

According to the HHS survey, water shortages influence and reduce employment opportunities, especially in the tourism industry. Also, current water shortages reduce business opportunities and investments and households’ property values. On the other hand, it is expected that waters supply reform (WSR) will increase opportunities for employment especially in regard to tourism, as well as business opportunities, investments and property values. The Table 3.13 shows that citizens expect positive steps regarding employment opportunities by solving water supply issues. As shown in the table below, current water shortages restrict employment opportunities for poor households more than for the others (88.5% vs. 77.3% according the opinion of the non poor households).

Table 3.13 Households’ perceptions of the reform impact on employment, especially in tourism sector

(in %)

Current water shortages

restrict employment opportunities

WSR will increase opportunities for

employment

Current water shortages reduce

business opportunities,

investments and property values

WSR will increase business

opportunities, investments, and property values

Yes No DK Yes No DK Yes No DK Yes No DK

Budva80.8

11.5 7.7

57.7 3.8 38.5 57.7 15.4 26.9 34.6 15.4 50.0

Bar64.0

16.0

20.0

40.0 36.0 24.0 56.0 36.0 8.0 36.0 52.0 12.0

Kotor88.0 4.0 8.0

48.0 16.0 36.0 52.0 12.0 36.0 52.0 20.0 28.0


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Ulcinj 100 0 0 100 0 0 100 0 0 100 0 0

MC/avg83.2 7.9 8.9

61.4 13.9 24.8 66.3 15.8 17.8 54.5 21.8 23.8

Poor88.5 0

11.5

57.7 23.1 19.2 76.9 11.5 11.5 53.8 38.5 7.7

Economically vulnerable

87.1

9.7 3.2 71.0 12.9 16.1 71.0 9.7 19.4 67.7 9.7 22.6

Non poor77.3

11.4

11.4

56.8 9.1 34.1 56.8 22.7 20.5 45.5 20.5 34.1

On the other hand, reforms could reflect on problems of employment in WSCs as well. WSCs’ reform would reduce the number of employees. According to all respondents, an over employment problem exists and some of workers could be fired by the reform implementation. Over employment is currently causing a lack of productivity of the water supply service. Staff employed in WSC are working as entrepreneurs and repair damages and breakage in the afternoon hours as well.

It is very possible to connect the tourism industry with agricultural development in the back-coastal area. Focusing on the tourism market on the coast is a great opportunity for agriculture producers in this area. Dealing with agriculture as a coping mechanism in coastal areas is recorded only in Ulcinj. According to the HHS survey, they generate income based on locally grown produce. Qualitative water supply is very important for this population. On the other side, those water consumers are illegally connected to the water supply network in their city.

Other channels of impact of the reform

Health: Cases of diseases caused by poor water quality were recorded only in Ulcinj. Those cases were caused by usage of water from the Lisna Bori water spring during the summer months. This water spring does not have a permit to be used and is contaminated by bacteria.

The majority of those interviewed are purchasing bottled water in stores during the summer because they are concerned by the poor water quality.

Living conditions: Considering the living conditions, the situation in the project cities is good. All of them possess connections to the electricity grid. Some neighbors in Ulcinj are not covered by the water supply system. Most of them have a bath inside the house as well as an indoor tap, except for some economically vulnerable households in Kotor.

Almost all households possess a washing machine, except for poor households in Ulcinj. Dishwasher is used in 40% of households; the lowest percentage is in Bar and it is related to households’ financial abilities. Citizens of Kotor do not use a washing machine and dishwasher on a regular basis due to water shortage and salty water.

Sewage service: The impact on employment is largely, but not totally dependent on the water supply situation. The importance of an adequate sewage service is perceived as especially relevant to the tourist industry, and it has clear implications for the future economic development of coastal cities. Wastewater is currently drained directly into the sea without previous cleaning treatment. Based on conversations with stakeholders, the conclusion is that the lack of adequate treatment of wastewater has an influence on tourists’ return to this region.

Vulnerable Groups: Roma population in Montenegro and water supply problems they are facing with

Living conditions The social and economic conditions of every city are reflected in the Roma population. The southern part of Montenegro is richer and more developed, which is why the living conditions of the Roma people in this region, their position in the society and their outlook are all much better than in Podgorica or the northern part of the Republic.



Living conditions of the Roma are also influenced by their specific, traditional way of life. Their lives are determined by very “strong” patriarchal family relationships where interrelations with members of other communities are considered as a kind of separatism. In addition, extreme poverty is caused by low or absent incomes, which further cause poor nutrition and health conditions and the short lifespan of this population24.

Accommodation conditions The type of accommodation facilities where a typical Roma family lives is a barrack or house, which is a small structure made of solid material but of poor quality. Living conditions are different for domestic and displaced Roma. Domestic Roma households have their own accommodation with adequate property documentation. These families have for the most part lived in the region for a long time and own living facilities made of solid material similar to those owned by the non-Roma population. In addition, a number of these households are quite a bit smaller than those of Roma refugees and IDPs living in collective centers and illegal settlements.

Most Roma families live in illegal settlements and these are the most vulnerable. Illegal settlements have accommodation units which are very small, made of wood and cardboard, with poor isolation and earth floors. Access roads are very poor. Road infrastructure within these settlements does not exist. Water supply is provided through pipes from the nearest settlements and most of the inhabitants obtain water from public taps.

“Barracks are wooden and plastered with mud. Households obtain water supply and sewage tanks by them. Houses located near water sources are constantly exposed to the risk of flooding due to hard rains and the fact that the road lies above the foundation of the houses. Therefore, families must themselves dig ditches otherwise their barracks would become rotten.” (FG participant in Nikšić)

A long-standing problem that all Roma settlements face is that these have been illegally constructed. Roma are constantly afraid that their houses could be demolished. “If they could legalize our houses, so we would not be afraid every day”. “In the settlement, 70% of the Roma population was born as Montenegrin, but in illegally built houses. My father built two small rooms twenty years ago, without any credit assistance, and he is afraid now that it could be torn down. If they will not permit building, they should do so from the start instead of reacting later”.

Solving water supply problems is closely related to the above-mentioned problem. The Roma population does not consider that connecting their barracks or houses to the water supply network is worth the effort since these may be torn down eventually. With regards to electric power, 95% of interviewed households are connected to the supply network, while 82% are connected to the water supply network. Different ways and types of access to the drinking water supply are used in all three project cities.

Water supply network and problems Water supply problems in Roma settlements depend, in part, on the situation in the cities where these settlements are located. Thus, water shortages are a problem during the summer for the Roma as well as the non-Roma population in Herceg Novi and Nikšić due to a general lack of water capacity in those cities at that time. It is evident that collective Roma settlements, consisting of barracks and houses are better provided with water supply and sewage networks than temporary illegal settlements.

24 More than 71% of Roma in Montenegro are younger than 30 - Vulnerability profile of Roma population in countries that realize Decade of the Roma Integration, UNDP, 2004-2005Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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With regards to drinking water sources, there are differences among cities and settlement types. The main drinking water source in Herceg Novi for all of the respondents is the municipal water supply.

Roma settlements in Nikšić, except the Brlja Place, are covered by the water supply network. For most citizens, the main drinking water source is the municipal water supply. For Brlja and the Steel Works Factory areas, public taps are used and a local water supply network. There is only one public tap in the Brlja Place which is used by 15-20 families in the summer as well as in the winter season. “When the water supply is cut, we are waiting until nightfall to fill the water balloons. The waiting line is too long because all of us use only one tap”.

FG participants complained about the local population because running water is being used for gardening during the summer months, which leaves the Roma without drinking water. The Trebjesa settlement, located within the Kličevo community, is near the bauxite mine, therefore, every household is connected to the water supply network. Low water pressure is a problem here however.

The water supply situation is very bad in the Konik and Vrela Ribnička settlements where most of the Roma population of Podgorica live. According to focus group participants, neither settlement has water supply network connections for all households. Inhabitants in those settlements mostly use public taps as a water source. The water source is on average 100m far from houses. Water is usually transported in water balloons or by rubber hoses to each accommodation unit. Besides the municipal water supply system, wells and rivers are the main water sources. Kakaricka Gora and Vrela Ribnička in Podgorica are the most vulnerable, with the worst water supply conditions. Water sources are 200m to 300m far from houses. The time needed to get water from the spring 200m away is 30 minutes. The FG participants, concerned about their living conditions, decided to organize themselves and jointly with foreign donors installed a water supply system for households in the illegal settlements. “We found donors for installing hoses and 30 houses are now connected to the water supply and that cost €500”.

The settlement under the Kakaricka hill is not connected to the water supply or sewage system. ”They are bringing water in balloons loaded on donkeys”. The situation is better in Camp I and Camp II because they are connected to the municipal water supply network and they have public taps. When asked about the most frequent problems regarding water and water supply in their settlements, FG participants answered that the water shortage during the summer months is the most pressing problem.

Improvement in the service of the Water Supply Management Company The Roma population in Podgorica is interested in having an improved sewage system in the Konik and Vrela Ribnička settlements. In the Kakaricka Gora settlement, inhabitants are interested in having water sources closer to their houses or in introducing a water supply network in the settlement. Inhabitants of the Vrela Ribnička settlement would like to have new water pipes, a sewage system (second listed improvement) and constant water inflow. Inhabitants of Herceg Novi suggested constant water inflow and better water pressure, while their second suggestion related to safe and clean water. Inhabitants of Nikšić suggested better water pressure and constant water inflow, especially in summer months, as well as the introduction of water supply network connections in the houses. Ability and willingness to pay water billsMore than half of the interviewed households in project cities did not pay their water bills on a regular basis. All households in Herceg Novi received water bills regularly, while this was the case for 62% of households in Podgorica. The average bill in Podgorica was €7, in Herceg Novi €9 and in Nikšić €5 per month.

Every Roma household in Herceg Novi has installed its own water meter and billing is calculated based on actual consumption. Roma stated that the price of water in this city is 0.65



€/m³ and consider this to be the highest in the region. Participants are also aware of what is included on the water bill, mentioning sewage services, for example. They are willing to regularly pay those dues because otherwise they will be disconnected from the water supply network.

In Nikšić, 35% of interviewed households have a water meter installed and the Water Supply Management Company conducts bill collection, based on actual consumption. The Roma stated that they do not pay water bills on a regular basis primarily because of a lack of money: “When we have money, we pay bills, but if there is no money, we do not pay. Roma households were never disconnected from the water supply network.” Adding to the problem of paying bills is the fact that billing service is not prompt. Delivery of bills occurs once in four to five months and Roma households cannot pay these accumulated debts.

In most cases, Roma displaced from Kosovo are illegally connected to the water supply network and they do not pay bills for water and electricity. Authorities allow this since, as they said: “utilities should be reimbursed by the international organizations.”

In Podgorica, bill collection and installation of water meters varies from settlement to settlement. According to the survey, 50% of interviewed households in Podgorica have a water meter, 20% pay the same bill amount regardless of consumption, while 20% of households do not have a water meter installed.

Inhabitants of Konik and other settlements stated that they do have water meters but that they pay a flat rate for the water, sometimes in the amount of €80 per month. The same occurs in the illegal settlement. A special problem exists with the billing service. Roma households stated that bill collectors are fake, misrepresenting themselves as employees from the Water Supply Management Company and that these impersonators charge €10 - €15 per month without offering any invoices.

“I know that 100 m3 costs €3 and I do not want to pay other people’s dues. I want to receive an invoice from the Water Supply Management Company instead of some private invoice”.

“We complained to the Water Supply Management Company and they told us that we are obliged to pay. We do have a water meter and sometimes it calculates €20-€30 per month, while sometimes the amount is €100 although the water meter is functioning correctly”.

In addition, FG participants stated that they were forced to pay water meter installation and that it amounted to €50. This policy of the Water Supply Management Company should be implemented in cooperation with social welfare services since they have records on the material conditions of each family. However, this was not done in this situation and Roma households had to pay money even though they could not afford to.

Willingness to pay Water Supply Management Company’s servicesAccording to Roma families in Podgorica, an affordable service charge for establishing a sewage system connection would be about €85; according to families in Herceg Novi that amount would be about €70 and families in Nikšić say they could afford about €34. Affordable rates for channeling waste water outflow also vary between project cities. In Nikšić and Podgorica, 40% of Roma would not be willing to pay this service, while households in Herceg Novi would be willing to pay for this service on average €3.5 per month. In Podgorica, only Roma with a regular monthly income would pay €5 per month. The main improvement that Roma households in the three project cities would expect relates to installation and maintenance of sewage systems. This would be a precondition for achieving normal living conditions in other settlements as well. Inhabitants of the Steel Works Factory Settlement in Nikšić gave as a precondition the maintenance of a sewage system which would include manholes, this due to the fact that they face many problems during the rainy days. An affordable rate for the cleaning of septic tanks on a regular basis varies depending on the financial situation of each household. In Podgorica, the average amount is to €12, in Herceg Novi €26 and in Nikšić €17.

Public awarenessAccording to interviews, Roma do not know much about the Government's water policy -- as many as 90% know nothing about this issue. The Roma population in Podgorica believes that Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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the Government will improve water supply conditions in their community, while in other cities Roma are skeptical when it comes to governmental measures. Specifically, half of the Roma interviewed believe that there will not be any improvements. Roma in Herceg Novi are aware of the regional water supply problem and therefore expect that the Government will solve their problems. The Roma population in Nikšić and Podgorica believe that the local government is responsible for the problem. According to them, the local government should create a separate budget to assist them with this problem but such a thing has not happened yet. FG participants in Herceg Novi stated that many humanitarian organizations played a more significant role in water supply and sewage system improvements. Awareness of the possibility of filing complaints at the offices of the Water Supply Management Companies, in cases of poor water supply service, is highest in Podgorica (90%) and least in Nikšić (37%).

Subsidies for vulnerable households The Water Supply Management Company of the Municipality of Niksic has already provided subsidies for vulnerable groups. A FG participant stated the following: “I belong to the vulnerable group and receive Family Material Support in a monthly amount of €83. My total debt for electric power is €983 and the Electric Power Company of Montenegro told me that I could pay part of this amount now and the rest, in payments that could be made by the Social Security System.” The participant added an important point which was that everyone who receives Family Material Support has to apply at the Water Supply Management Company in order to be released from payments. When asked if the Government should release vulnerable households from water bill payments, 95% of families stated positively. FG participants in Podgorica believe that the Government should provide subsidies for poor and vulnerable households. “The Government should assist us at least with water supply problems!”

Health carePersonal hygiene is one of the challenges that should be met by the Roma people in order to avoid discrimination when communicating with the non-Roma population. Changes in their way of living are unavoidable. A good water supply system would contribute to better living conditions, health and personal hygiene habits. FG participants are aware that the proximity of garbage dumps is very dangerous for inhabitants of several Roma settlements, especially children. They are also aware that many Roma people survive on what they can collect from the dumps such as secondary materials, food and other disposed of goods. They also mentioned the problem of waste burning which can seriously injure the health of inhabitants as well. As the participants said, inhabitants of Camp II, which is located near city dumping grounds, are primarily threatened by this situation, some of them suffering heart and lung diseases which cause terrible problems in their already difficult lives. “The director of the Water Supply Management Company promised that the waste would not be burned any more, but they are still doing so. There was a wall but it is ruined“.

Recommendations and conclusions

The intent of this survey was to obtain a general picture of the Roma position and to better understand their poverty level and vulnerability from the perspectives of water supply and accommodation conditions.

The Roma integration process signifies complete social integration, including interactive relations between Roma and non-Roma populations. A major obstacle to this process is the very mentality of Roma people, as well as their lifestyle and different value system which keep them at odds with other populations. They themselves are aware of the barriers that exist due to their way of thinking: “The Government does not have the power to change our awareness. We need education on all levels”.

Resolving the plight of the Roma is a complicated process which includes solving water supply problems in order to improve their health and personal hygiene. In this way, children would be less discriminated against in schools and the number of children attending school would increase. The number of adult Roma working regular jobs would also increase.



Better water supply systems and proper drainage of wastewater outflow would also improve the general living conditions of the Roma population. In order to make it feasible to begin such improvements, it is necessary to legalize the facilities where Roma people live. The survey shows that problems faced by Roma communities are very complex and that solving one problem requires resolving another one beforehand. Regarding the Roma integration issue, success requires that everybody be involved: local governments, the non-Roma population and the Roma population, to start.

Regarding the resolution of water supply problems, the following are necessary: Increase the number of Roma households with access to drinking water. The

situation would be improved by investments in new water channels and pipes to accommodate many new connections and consumers.

Increase percentage of Roma living in accommodation units with interior water supply connections.

Take measures to protect current water sources, as well as potential water sources in rural areas.

Legalize consumers and regulate the billing system in Podgorica. Roma with regular monthly incomes are willing to pay water bills and to install water meters. However, many families are struggling to survive and cannot afford to pay water. These families should receive subsidies or other assistance from social welfare programs.

FG participants believe that the Water Supply Management Company (WSMC) in Podgorica should implement a plan to improve the bill collection process so that bills are collected in an organized and timely fashion and reflect actual consumption. A control on WSMC employees would prevent collection abuse, which occurs in some settlements.

A better-informed Roma population about the services provided by the Water Supply Management Company and the various methods of paying for these, would reduce abuse in bill collection. Additionally, closer cooperation between representatives of Roma communities and the WSMC is necessary. Representatives of the water supply companies stated that Roma are not interested in employment with those companies, but that there are jobs available for them.

Poor access to water causes the poor health conditions of the population, although representatives of the Roma population believe that they have become immune to all problems.

Activities that need to be started are as follows: Epidemiologic monitoring in order to ensure hygienic conditions for Roma. Increase the number of health professionals who communicate with Roma. Educate the Roma population in the matter of personal hygiene and epidemic

prevention and increase their awareness of the importance of these issues.

The second most significant problem that Roma people face in their settlements is the lack of sewage systems. Open sewage channels in Roma settlements with unprotected septic tanks cause health problems. The mixing of wastewater and drinking water often causes hepatitis and stomach diseases, especially among children. All settlements are affected and Roma who attempt to seek solutions at the utility companies experience discrimination there and are told that services are available only in emergency situations.

According to the survey, the Roma are willing to pay for sewage network connections and consider this to be the best solution to their problems. Therefore:

It is necessary to increase the number of constructed/reconstructed sewage systems in Roma settlements and increase the number of households connected to the municipal sewage system.

It is necessary to construct or repair existing public bathrooms in illegal settlements.

Water supply and sewage system problems can not be solved before solving housing problems. Many Roma families live in illegal facilities which they do not own. Roma in all settlements are afraid that their homes may be torn down. They are aware that very few of them possess


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property documentation for their homes and mentioned having problems with city building authorities.

In order to solve these problems, the following needs to be done: Complete legalization and enforce property rights before addressing water supply

problems. Water supply problems can not be solved before solving accommodation problems. “It is not worth it to invest in this system.”

Construct new and reconstruct existing accommodation facilities for Roma, to reduce the number of Roma households living in barracks, to expand their living space and to increase the number of houses with bathrooms.

Local governments in all municipalities consider these problems to be marginal ones. These problems actually require significant financial resources and defined property rights. Since Roma families do not own their homes, investments for improvement are postponed. Local governments conduct few activities and these, only in emergency situations when existing temporary solutions such as septic tanks and channels can not hold pressure.

One of the solutions for establishing better communication between the Roma population and local governments and institutions is the appointment of a Roma representative in municipal bodies which would advocate solutions for their problems. Better living conditions for the Roma population, which means installment of quality water supply systems, proper garbage disposal and adequate accommodation, would increase the psycho-physical readiness of children and adults for integrated education and employment processes as well as for acceptance by the non-Roma population.

The social integration of the Roma people and an increase in the number of educated Roma would create the conditions necessary for their employment. This would improve their material situation and prevent greater poverty.

B. STAKEHOLDERS AND INSTITUTIONAL ISSUES

Chapter II provided a description of the roles and competencies of each of the stakeholders. This part provides an in-depth analysis, which aims to identify stakeholder issues and institutional gaps and obstacles, which interfere with reform implementation.

Stakeholders and a New Institutional Environment

Data obtained has revealed the current readiness of the Government of Montenegro, Ministry of Tourism and local WSCs for solving water supply problems through the Vodakom project of uniting local WSCs.

Currently, WSCs in Montenegro have not been recognized as efficient organizations but rather “arms” of local governments with political parties’ representatives sitting in the Board of Directors of WSC. Lack of expertise of those running WSC operations was a factor but also limited maneuvering space, since LG considers water to be a social category, created a poor image of WSC in public opinion. Poor water supply and a tariff increase not accompanied by adequate improvement in the water supply service further supported this view. Therefore, all stakeholders are looking forward to the reforms, recognizing this as an opportunity to improve water supply service in the coastal area of Montenegro.

An expert of an international organization is confirming that WSC should be an independent service, rather then a municipality company. “These companies are usually understood as sources of income for the municipality. Usually management boards of these companies mirror the structure of local parliaments. This situation is not good; it leads to strange situations and conflicts of interest, because the same people are on the board of directors and are debtors of a company if, for example, they work in the municipality. This concept is not good.”

One CG expert believes that the establishment of Vodakom with CG as a shareholder at the very beginning is an important issue since it would facilitate coastal municipalities to reach a consensus through mutual cooperation and organization. However, both Vodakom and WSC



should have adequate and capable staff that has a grasp of the political dimension. As confirmed by an international expert “WSC directors should be experts rather then political appointees. …Unless they act strictly as experts, no matter how right they are they will make the entire situation problematic, which will lead to distancing among the municipalities and Vodakom.”

While the director of the existing Water Directorate supports the idea of establishing an agency that would serve as regulatory body, CG experts see no meaning in establishing an Agency for Water Supply Regulation. Despite the decentralization process, he suggests that some of the functions of smaller WSC (i.e. Niksic, Savnik, Pluzine) could be merged by combining the technical and human resources into one place, in order to make their work more efficient. An expert of an international organization agrees that a regulatory body is not necessary if there is no privatization in the water sector. In case of privatization, the regulatory agency is necessary but it should be financed from the water supply activity and partially from state funds. The role of this agency would be to regulate private investments in the sector and to ensure that the investor has a reasonable and not excessive profit.

The opinions regarding private vs. public management of WSC are divided: while everyone agrees that private companies would be more efficient in improving enforcements, they are at the same time afraid that the privatization of water supply sector would directly lead to a significant tariff increase. Therefore, in the case of privatization in this sector, clear legislation is necessary as well as either some kind of LG control over private operators or setting up a Regulator Agency. Otherwise, there is a fear that private operators will hurt living standards of the population through a tariff increase.

Based on collected data, the most recent characteristics of the water supply sector are: Inadequate water supply system structure and organization (inadequately determined

relations between: local governments – WSCs); Non-systematical and dislocated regulations used for determining water suppliers’

relationships (supply is a marginalized part of the water industry). Water supply is a complex activity of public interest, and it requires key relations to be determined clearly, permanently and precisely within one legal regulation;

Interlock of LGs’ and CG’s authority; some of the Republican authorities should be transferred to local level (e.g. water spring use concessions);

Water resources and water supply management are not clearly defined in Montenegro; It is evident that authorities responsible for the water supply system on the Montenegrin

coast should be divided on local and regional levels. Regional level should be under the authority of regional water supply management, while local water supply should be under the local WSCs;

According to the Law on local management, water supply management is decentralized and is under LGs’ authority;

CG is creating laws and through information on water supply is recognizing and solving problems in that area together with local self-government. The Central Government is also trying to provide financial resources through more favorable credit lines that could be used for solving water supply issues.

According to Montenegrin experts, the Central Government, with all respect to local governments, is indicating ways and directions by which local governments could develop their water supply systems, such as:

Most WSCs’ experts stated that allocation of the LG budget is often uneven, and that it is necessary to have more understanding for investments in WSC;

Possibility of private and public sector cooperation for billing, maintaining and water distribution to the customers (Merkur in Tivat as an example);

The current Law on water does not define WSC privatization issue.Main issues related to stakeholders

Independent functioning of WSCs – An independent WSCs is an issue that should be solved for WSCs’ interest. WSCs do not receive funding for their development, while the land construction fees fund LGs and it should be used for WSC infrastructure investments. LGs as WSCs’ founders have not paid off their liabilities to the WSCs.


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“WSCs should be organized as a partnership of central government and LGs. Central government must assure clear regulations and technique standards for WSC work. According to those standards, LG should develop into a companies’ organization. This would enable further development and urbanization of the infrastructure.” WSC Expert

WSC dependence on LG decisions – The problem of WSC management by the board of directors lies in the fact that selection of board members depends on local political party composition. There are only two representatives of WSC in a board that counts seven members. In that case there is a conflict of interest. People employed in LG for example, and in some other company at the same time, could be directors in one and debtor to the same institution as well. LG board decisions are often under political influence.

Politics involved in reforms and the need for stabile institutional organization – One of the risks of reform is involving politics, meaning that reforms will depend on the political attitude of certain LGs. It is not possible to meet the needs of all LGs at the same time. Vodakom’s public function is managing services for meeting consumers’ needs, and very often that will be one of many LG’s interests. This could lead Vodakom to separating from LGs.

Understanding reforms as WSC privatization – Most citizens understand reforms as privatization or a preparation for the privatization process of WSC. One Montenegrin expert said: ’’With WSC the situation is a little different, regarding privatization. We had one unsuccessful try with regional WSC, which developed as a public-private company. That project had no effect. Managing must be private, but local government must have control, price control, and control of social categories.”

Need to improve legal framework– What the reforms lack are clearly defined technical regulations and procedures, representative of the critical moment of reform.

Utility service law regulates water supply problems to be solved by the local government. Republican level regulation regulating this activity does not exist. Local governmental law predicts that LG should manage water supply, and the Government regulates official policy on water supply. Current law regulation does not consider water supply as an independent service, does not define liabilities of consumers, neither does it protect WSC assets in the case of illegal connections.

Large dispersion of current law regulations – Existing problems that are not included in law regulations are: large dispersion of regulation in a water industry, over which many government bodies have authority. In this way, some ministry authorities overlap. Experts from Montenegro and WSC expect that the new water supply law will solve and define specific authorities.

Knowledge and information dissemination – Private sector representatives are afraid that reforms will only remain on paper and not be carried out. They suggest defining in advance a monitoring system and a system of regular, periodic reports about undertakings and their effects.

Existence of water supply regulatory agency – On the one hand, the water companies merging is suggested, enabling a single, united company to work more efficiently and reduce administrative costs. Existence of this type of agency means the initiation of privatization, and profit distribution regulation within this sector. On other hand, the idea of establishing a regulatory agency, to supervise activities in all the water companies, concessions, water resources, water protection and hydrodynamics and water supply industry. The water law is in the process of preparation and it should define water agency issues.

One director of the WSC stated that the Agency for water supply regulation would not be necessary if a ”regional WSC already existed and collected a percentage of each investment with no result in either the field of water supply or waste water disposal”.

Joint work of water and sewage services – current working conditions under these two systems are not appropriate and further investments in both are needed. Division and individual privatization are not possible without previous living standard increase.



Corruption of WSC employees – many FG participants cited corruption cases of WSC employees. In addition, many WSC employees provide some private water supply services after working hours. Most of the respondents in this and HHS research stated that WSC employees often assisted providing illegal water supply connections.

Bad communication between WSC and consumers – The public is not informed enough on current changes, activities, donors. Many complain of not knowing that there are particular offices in the WSC where they can lodge complaints.


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IV. CONCLUSIONS AND RECOMMENDATIONS

This study should be seen as part of a wider context of tourism industry development in Montenegro. As a starting point, the primary problems and limitations, which prevent development of the tourist sector in the country, are as follows:

Inadequate or substandard system of water supply in the Montenegrin coastal area Absence of the Republican Urban Plan where needs and capabilities for development of

the Montenegrin Coast and Communities would be defined Absence of a system for diverting and refining waste water in coastal region Substandard road infrastructure. The problem of poor roads in Montenegro is a

substantial restriction for development of tourism. Absence of citizens awareness that Montenegro depends on tourism. Absence of local solid waste material dump (with the exception of the Lovanja dump)

In the water supply sector for the Montenegro Coast, based on opinion of citizens as consumers and local experts, basic problems are:

Insufficient water source capacities of all coastal towns during tourist season Substandard water supply system infrastructure Inadequate quality of water Large number of illegal connections Poor cooperation between water supply companies and citizens High percentage of loses on the main water supply network Improperly working water meters and flat rate billing Low collection ratio.

A participatory monitoring and evaluation (PM&E) process would be beneficial to undertake. In this process, indicators based on the challenges above would need to be established. In the PM&E, primary stakeholders would actively select and manage the interventions, and take the lead in tracking and making sense of progress toward achievement of self-selected/jointly agreed indicators/results. This PM&E process will improve results and sustainabililty of interventions by empowering primary stakeholders: (information, capacity building; collaborative learning; and influence).

A project social impact analysis would be beneficial to assess the impact of the Montenegro Tourist Development Project.

The Water Sector Reform in Montenegro is an important undertaking due to the significance of the tourism industry for the country’s development and the current socio-economic situation in Montenegro. The ultimate goal of this reform is to offer better quality service to more customers. In this regard, this study has highlighted the urgent need for certain activities. A list of more detailed recommendations follows:

Public awareness of the obligation of water bills payment and conservative use of drinking and technical water. Low collection ratio accompanied with tariffs that do not include investment costs is an additional burden on WSC. The most regular payers are pensioners. Since there is no understanding of water importance, there is a need to organize an adequate public campaign to educate citizens on their obligation to pay for water as well as to conserve water. Cutting off irregular payers should also be accompanied by such a campaign to insure that no opposition is created.

Strategy for tariff increase – All the data available leads to the conclusion that tariff increases should be implemented only after consumers believe that access has improved significantly to justify another increase. This is particularly important in Budva since citizens have not seen any improvements in water supply since the last tariff increase. All respondents confirmed that citizens could accept the water price increase as part of an improved water supply system. In that case, a price increase should be implemented gradually in increments of 10%. It is necessary to define water charges and explain this decision to citizens as well as the dual tariffs for institutions and households.



Need to consider subsidy policies for poor households – All stakeholders agree that it is necessary to define subsidy policies for the most vulnerable (mostly recognized as social assistance recipients and Roma households). However, while residents would prefer to have a lifeline tariff to be introduced, experts believe that water bills are low and that subsidies are not necessary. In contrary, they advocate that a block tariff is introduced, in such a way that a certain optimal water quantity is charged by a lower price, while in cases where households exceed a given per capita water consumption, the entire consumption is charged by the higher tariff. This should lead to water savings and more responsible behavior of consumers (eliminating unnecessary watering of the gardens etc.) It is necessary to establish closer cooperation between LGs, CG, WSCs and civil society regarding necessities on this level.

Consumer representation and consumer panels – Though such influence of the consumers would be important and in the direction of democratic development, as suggested by the experts, this could not work since consumers (households) cannot agree on other less complex issues. Anyway, it is recommended that business sector representatives take over an initiative in such a process since for them it will be easier to recognize their own interest and to set up such councils to participate in decision making processes that can influence WSC work. This should help to establish better cooperation between WSCs or LG and customers. It is necessary to inform the population about current reforms and related changes as well as of donors and investments for improving water supply system.

Reduction of water distribution loses would increase available water capacities without additional inputs from alternative sources. Projects for repairing many damages and water distribution loses are currently in the process. In addition, an entire campaign regarding installment of properly working water meters should be undertaken. Since the study showed that poor households are not willing to pay current costs of water meter but are interested in billing based on the actual consumption, a donor supported program to pay for water meters in 2-3 installments should be introduced.

To distinguish ownership of the water supply system between LG and WSC – It is necessary to clearly define the mechanism for financing and authority that LG and WSC have as well as to increase the level of independence of WSC as a public service. This is very important so that WSC accepts responsibility for its performance rather than to hide behind decisions of LGs. More concretely, WSC should be lead by experts and not political figures. Also, LG should not consider water as a social category but rather a market commodity that should have an accurately set price.

New legal regulation – By defining the new Law on water supply, authorities in the water supply sector would be defined as well. This Law would also include regulation and conditions for the privatization process.

Establishment of the Agency for billing in each city – this type of agency would assure more qualitative and complete consumers’ data base and documentation on the billing rate for the water and sewerage services. This is not a priority measure since privatization of WSC is still not planned.

Formulate strategic human resource development plans for WSC – According to the WSC experts, WSCs need a clearly formulated strategic human resource development plan. Research showed that most WSCs employ too many workers. Cost reduction and optimal work of WSCs should also include systematization of work places.

Possibility of partial privatization of the WSC – All experts at the Republican level and in WSCs suggested privatization of certain segments of the water supply such as billing, water supply network maintenance and water distribution to consumers. Therefore, further promotion of public-private partnership in water service delivery is necessary.

Calling to multi sector partnership - Water supply and wastewater are established as a public sector service that requires investments in order to achieve higher standards and sustainable development. Therefore, partnership between the public and private sectors would improve their work.


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Conducting feasibility study and cost-benefit analysis on exploitation of the Karuc water spring – According to technicians, a cost-benefit analysis completed 30 years ago showed that constructing this system is not feasible. Thus, the feasibility of this project is doubtful due to the unreliable water quality from that spring.

Research on perception of population living in the Skadar Lake area on water usage from the Karuc spring. The suggestion is to develop a feasibility study on water use from the water spring Karuc for supplying the entire Montenegrin coastal area. The study should include examination of water quality, consequences that exploitation might have on plants, animals and birds, local authorities and population.

With respect to tourism development sectors, the research pointed out the following:

1. Urban plan of the Republic to be developed. In 2001, Parliament of Montenegro adopted a Decision to start developing an urban plan for the Republic of Montenegro, covering the period until 2020. The campaign for developing such a plan is an opportunity to complete the transition process in this area (reform of the system and adoption of the new Law); to evaluate and put together sectoral strategies and programs; to set up a network of capable institutions; to create a base for the development of GIS (Geographic Information Portal); and to provide a qualitative basis for conducting developmental politics and urban planning. In addition to the above mentioned, it is necessary to develop general and detail urban plans for each municipality as well.

2. Regional networking of those employed in the tourism sector and agricultural producers from rural areas of Montenegro. Increase public awareness about the market needs of the tourism and agricultural business sectors.

3. Development of the road infrastructure – As one of the primary problems, both experts and households singled out bad road infrastructure. The main precondition for high quality tourism is definitely a good quality road infrastructure and regional connections.

4. In order to foster development of medium and small business, there is a need to reduce administrative barriers, high taxes, as well as to reduce grey economy participation. There is a lack of knowledge and skills in the tourism sector, as well as a marketing strategy for small companies.

An Illustrative case study from Tivat WSC

Box 7.1 An example of giving a concession for part of the water supply network to a private company in the municipality of Tivat

In 1998, WSC Tivat signed a contract with the private company “Hidromont – Merkur” regarding assuming responsibility for water supply in the region of the water supply system pump station Topliš in Tivat.

By signing the contract, this private company assumed responsibility to provide water supply, safely and with quality during the entire year, following communal policies and regulation of local government for ten years.

With this concession, WSC Tivat managed to provide an improved water supply in this area, to enhance reconstruction and modernization of the water supply network, to introduce rational business organization and obeying the actual paying power of certain groups of customers.

Private company «Hidro-Mont» assumed responsibility for workers that were employed in WSC Tivat, depreciation of goods and equipment of the WSCT, on-going and investment



maintenance, as well as to conduct necessary repairs with no delays. In addition, the company is obliged to manage proper functioning of the equipment, machinery and pumps and to prevent their collapse. Company is obliged to provide water for the end consumers in a quality and safe manner, as well as to set the price of water in accordance with local decisions regarding water tariffs. On behalf of compensation for use of pump station, Hidromont is obliged to transfer 20% of its profit to the WSC.

WSC Tivat will accept and consider prolonging the current contract; each investment for purchasing, replacement or embedding of equipment or parts; or construction of new objects in water supply system Topliš. The value of the investments will be seen as a paid concession fee.

Tivat is the only municipality in Montenegro, which has annual collection ration above 91%. Certainly, such WSC management contributed to achieving mentioned results.


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V. REFERENCES

MONSTAT (Statistical Office Of The Republic Of Montenegro) 2003. Census of population in Montenegro, Podgorica

Materials Used In Desktop Review

Hermine G. De Soto, et al. 2001. “Social Assessment.” The Albania Municipal Water and Sanitation Project. Social Assessment. The World Bank, Washington, DC.

Republic of Montenegro. Ministry of labor and social welfare, “Montenegro Poverty Reduction Strategy Paper.” 2005. Podgorica

Radevic, Dragana and Beegle, Kathleen, 2002. “Living Standards and Poverty in Montenegro in 2002.” ISSP , Montenegro and World Bank, Washington D.C.

Urban Institute. 2004. “Diagnostic Assessment of Montenegrin Water and Sewerage Works”. Montenegro, Podgorica

Republic of Montenegro. The Ministry of Agriculture, Forestry and Water Management, “Water Supply Law”, (Sl. 16/95)

Republic of Montenegro. Ministry of Justice and Ministry of Finance “Law on Local Self-Governance” (Sl. 42/03)

World Bank. 2003. “A User’s Guide to Poverty and Social Impact Analysis.” Poverty Reduction group and Social Development Department, Washington D.C.

Material describing the water and tourism situation in the four study sites

ISSP/UNDP. 2003. “Household Survey of Roma, Ashkaelia and Egyptians, Refugees and Internally Displaced Persons”. Podgorica, Montenegro

UNDP, 2004-2005. “Roma vulnerability profiles in countries that realize Decade of Roma Integration”

Center for Roma Initiative, 2005.”Survey on Roma Women's Position in Nikšić”, Nikšić,

Montenegro

Government of Montenegro, 2005. “National Action Plan on Decade of Roma Integration 2005-2015 in Montenegro”, Podgorica,

ISSP/UNDP, 2005. Montenegro “Human Development Report in Montenegro”, Podogrica, Montenegro

The World Bank, 2003. “Roma in an Expanding Europe Breaking the Poverty Cycle” Washington D.C.

Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute/USAID project (2004)

Co Plan, Sabine Beddies, Hermine de Soto and Arben Bakllamaja, 2005. “Decentralization and Water Sector Privatization in Albania”. A Poverty and Social


http://www.vlada.cg.yu/eng/minpolj


Impact Analysis. The World Bank, Washington DC, and United Nations Development Programme, Tirana, Albania.

Civil Engineering Faculty. May 2001. ”Water Power Engineering of Montenegro” Montenegro. Podgorica


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Annex 1 – City Profiles

PODGORICA

Type of ownership Public ownership; Podgorica municipality is the owner.

Population (2003 census data)25 169,132Population (1991 census data)26 145,696Population growth (1991- 2003, %) 16%Unemployment rate, 200427 18.1%Households receiving social assistance 2,430 (4.7% of all households)Main economic activities (water related) Services, manufacturing industry,

agricultureMain economic activities (not water related)


Billing system Predominantly flat rate combined with metered consumption

Tariffs28

For individuals For companies

0.315€/m31.104€/m3

Last price increase April 2003Collection Ratio (%) 15-20Water loss (%) 60

1. Local socio-economic conditions

Municipality of Podgorica is administrative, industrial, educational and cultural capital of the country. It has an area of 1441 km². Major economic resources for the city include trade, construction, manufacturing industry, services and agriculture. The unemployment rate is 18.1%.

During transition years, there has been a significant increase in population of Podgorica as result of free movement of population, mainly from the north or rural areas. The population of Podgorica increased from 39,653 inhabitants in 1991 to 152,025 in 2003, with a population growth rate of 16.1%. Around 2430 households, which represent 4.7% of all households located in Podgorica, are under economic assistance.

Except Podgorice, another settlement marked as an urban area is Tuzi. Just in period from 1971-1991, population number in Podgorica doubled, while the growth rate of population is decreasing. Tuzi settlement is recording increasing growth rate of population.

Ethnicity: Montenegrins (57%), Serbs (26.2%), Albanians (5.4%), Muslims (2.6%), Croats (0.6%) and others (8.2%).

Economy: Municipality of Podgorica has great economic potential making it significant factor of influence on the entire economy of Montenegro. More then two thirds (41%) of all companies registered in Montenegro are located in Podgorica. The total number of registered business organizations is 7,118, while the most frequent organization form is Limited Liability Company (3.974) and entrepreneurs (2,480). The most viable economic activity is trade (3,638 of registered companies are involved is some type of trade), then transportation (1,025). The most important roads are modern high road (length 54km) which connects Podgorica with the coastal area, then railroad Belgrade-Bar which connects north and south of the Republic, and airport Golubovci, the main pillar of transportation facilities during the tourism season.

25 Monstat, Population census 2003.26 Monstat, Population census 2001.27 Source: Institute for Strategic Studies and Prognoses, ISSP28 Source: Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute (2004)Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED) 74


Tourism: Podgorica has it own tourist potential and possibility to enrich tourist product of Montenegro, through business, transport, and recreational, hunting, sport and congress tourism. Also, agricultural activity is very much present (the total surface of agriculture land that belongs to the municipality of Podgorica is 61,224ha). In the flat area of the municipality, there is a great potential for growing the vegetables, while northern part of the municipality is more suitable for continental species of fruits and cattling.

Large number of underground water flows makes this municipality well known according its healthy drinking water.

2. Water Supply

Excluding small number of households, municipality of Podgorica, is fully covered by public water supply network. In Tuzi, 86% of households is covered by public water network, while additional 9% of households do have own wells. Something about 5.3% of population doesn’t have water in the flat/house, which is unacceptable for capital of the country. In Tuzi this percentage goes up to 10%. The situation in neighboring villages is unsatisfactory, since only half of the population is covered by the water supply network, while remaining 50% (about 2,500 households in total), posses their individual wells.

The water network of Podgorica covers 43km2, which represents 51% of the entire city surface covered by General Urban plan.

Aside to the resident population, Podgorica is hosting additional almost 8,500 of refugees and internally displaced persons (5.1% of resident population29) which also use the water from the public water network.

3. Water system in Podgorica and water supply problems30

Pipeline system was established in 1953, and at that time water was delivered through public fountains. In 1965, capacity of the pipeline was 200 l/s and two reservoirs, one at Gorica and the other at Ljubović. Three areas for water intake through the wells were formed as follows: at Zagorič in 1968, Konik in 1972 and Ćemovsko polje in 1999. The greatest system upgrade was done in 1965 when Mareza spring was enlarged and pipeline DN 800 put into function. Important deficiencies of the system include lack of enough tank capacity (20,000 m³ were meant to be executed in Ljubović). Other problems include the old network, which causes a lot of losses at the system and lack of modern monitoring and functional system. The total number of inhabitants connected to the distribution network is 135,000 that means 100% of connectivity.

Inadequate water pressure is present only during the period from july to September for 3-4 hours/day and only to the consumers from the upper parts of the distribution network due to small tank capacity.

Billing and collection practices: Consumers’ connections are equipped with water meters and consumption is calculated on monthly basis. Law does not calibrate some of the water meters within the time framework provisions due to the limited capacity of the calibration department. It is estimated that about 20% of water meters should be replaced. Bills are delivered once a month, personally. Collectibility at the households is about 15-20% at the first month, while the balance between the total bills issued but not calculated compared to the total bills issued during one month is approximately 1:9.

Subsidies: Consumers registered in the Center for social work are subsidized and these expenses are not covered by anyone

29 Source: Strategy for Resolving Issues of the Refugees and Internally Displaced Persons in Montenegro, April 200530 Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute (2004)Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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As the enforcement mechanisms, disconnections are used and they are effective. Also, filing charges are used if water is misused, while file charges against debtors are also used.

Water loss: An estimation of unaccounted water quantities goes up to 60%.

BUDVA

Type of ownership Public ownership. Podgorica municipality is the owner.

Population (2003 census data)31 15,909Population (1991 census data)32 11,538Population growth (1991- 2003, %) 37%Unemployment rate, 2004 13.5%Households receiving social assistance (%)

78 (1.4%)

Main economic activities (water related) Tourism and servicesMain economic activities (not water related)

Construction, trade

Billing system Metered consumptionTariffs33


0.60 €/m3

1.20 €/m3

Last price increase June 2003Collection Ratio (%) 60Water loss (%) 30


Budva is one of the oldest settlements on the Adriatic coast. It has an area of 122 km². The population of Budva increased from 11,717 inhabitants in 1991 to 15,671 in 2003, with a population growth rate of 37%. Majority of inhabitants are located in urban area of Budva (83%).

The population of Budva is significantly increased during the summer season, while attractiveness of this tourist destination caused a lot of illegal construction in last couple of years.

Ethnicity: Montenegrins (45.4%), Serbs (41%), others 13.6%.

Tourism: industry is main developing force of economy of Budva. Existing natural resources and developed tourist infrastructure represent solid background for further investments and economic development of this area. There is a strong correlation between main industry and water supply in Budva. With no good water supply, all other aspects of tourist product are neglected. However, during the season, number of consumers is increased form more then 10 times which cannot be supported by current infrastructure and therefore, restrictions in water supply are often.

2. Water Supply

Situation with water supply in Budva is relatively satisfactory, if taken in consideration the public network covers that 92.6% of citizens, while 96.5% has pipelines in their flats/houses. Budva is using three natural springs, wells at “Dobra Voda” spring in Buljarica, and spring “Podgor-Sjenokos” which is shared with Cetinje. Low altitude or topographic barriers caused 31 Monstat, Population census 2003.32 Monstat, Population census 2001.33 Source: Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute (2004)Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED) 76


that water from all springs (excluding Piratac and Loznica) is executed to the consumers artificially. There are no problems with water quality.

3. Water system in Budva and water supply problems

Company water supply functions as municipal public company. Company is in charge for providing following services: water supply, fecal sewerage and storm drainage.

The system was formed in the 60s by in taking water from "Rezevici" spring. System upgrade was done in 1972 - "Podgor" and in 1994 - "Sjenokos" - by intaking overflowing water from the joint spring shared with Cetinje.

There are 18,000 consumers in the system, while during summer season; the number of consumers is increased to 100,000.

There is a lack of appropriate equipment so leaking detection mechanisms are poor. Additional problem are broken parts and need for new capacities. It is necessary to remove "bottle neck" at the intake pipeline leading from Reževići spring to Sveti Stefan34.

Collection ratio: As other municipalities in the region, Budva is facing problems with collecting the money from costumers. There is no unique registry of all connections in the municipality. Buildings are not distinguished from houses and there is no simple relation: one water meter-one consumer. Collectibility at the households is 30% for the first month and 30% more for the second. Subsidies are provided to families receiving social assistance and displaced persons (almost 8% of all inhabitants – 1260 refugees and internally displaced persons). Enforcement mechanisms (e.g., fines for illegal connections, termination of service for non-payment) disconnection and filing charges are used. There is no enough pressure during the tourist season (for approximately 50 days) while 5% of consumers do not have water supply during the night.

Water losses – Estimated water losses go up to 30%.

Since water is artificially (by pumping) brought to the consumers, electricity expenses are additional burden for Water Supply Company.

Billing: The water price for households is 0.60€/m³, and doubled for companies. Consumers mostly have water meters incorporated at their connections. If they do not have them, lump sum is calculated at the amount of 5m³/member of the household. Water meters are calibrated regularly. About 1% of summer residences have dysfunctional water meters.

34 Source: Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute (2004)Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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KOTOR

Type of ownership Public ownership. Municipality of Kotor is the owner.

Population (2003 census data)35 22,947Population (1991 census data)36 22,112Population growth (1991- 2003) 3%Unemployment rate, 2004 22.1%Households receiving social assistance (%)

146 (2%)





0.70€/m3

1.50€/m3

Last price increase September 2003Collection Ratio (%) 30Water loss (%) 60


Municipality of Kotor has an area of 335km2. The population of Kotor increased from 22,112 in 1991 to 22,947 in 2003, with a population growth rate of 3%. Urban area represented 74% of the entire municipality. The population significantly increased in some areas of Kotor (like Risan and Dobrota, where number of inhabitants doubled).

Ethnicity: Montenegrin (47%), Serbs (30.1%), Croats (7.6%), Muslims (0.4%), Albanians (0.3%), and others (9.6%).

Impact of the water supply on the local economy: Kotor is facing with water problems for a long time already. Number of tourists visiting this municipality is lower when compared to Budva and Bar, but still represent significant source of city’s income. Just in 2004, more then 36,000 of tourists visited Kotor, which is more, then 60% of its population number.

2. Water Supply

Majority of inhabitants of urban area (95%) are connected to the public water supply network; 92% of inhabitants do have pipelines into their apartments/houses.

Excluding consumers in the area from Perast to Old City Kotor covered by Orahovački springs, during the summer season there are restrictions in water supply. When it is about other settlements, restrictions depend on richness of Grbaljski springs and Vrmac as well as their saltiness.

In addition to resident population, there are about 2.2% of refugees and internally displaced persons. Consumers are considered to be owners of holiday houses as well.

3. Water system in Kotor water supply problems38

The water supply company is publicly owned. It is in charge of providing following services: water supply, fecal sewerage and storm drainage. First organized water supply in Kotor began before World War II. The biggest upgrades were executed in the 80s and 90s.

35 Monstat, Population census 2003.36 Monstat, Population census 2001.37 Source: Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute (2004)38 Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute (2004)Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED) 78


Out of five springs, during the summer season saltiness is increased at Skurda, Spila and Orahovac. Water system works at two seasonal regimes. During winter season, Skurda spring is used and by pumping through two main tanks, Kotor is supplied with water. During the summer season, when a water shortage is evident, Orahovac spring is mainly used with direct water pumping into the system so that problems usually occur due to bad electricity supply.

There are 22,800 inhabitants in Kotor that use the water system, out of which 99% are connected. Restrictions are imposed for the period of 2-3 months/year. About 120 consumers do not have water during the night.

Billing and collection ratio: Since all consumers have water meters incorporated at their connections, water consumption is calculated on monthly basis. However, water meters are not calibrated regularly, while 43% are broken and should be repaired. If the water meter is broken, lump sum charged amounts 6m³/member of the household, while for legal entities an average from the previous period is calculated. Water bills are hand delivered and are paid on the spot. Mail delivery is used only for the customers who live in other cities. Payment collection percentage for the first month is 30% and additional 30% for the second month.

Water losses: Out of the completely produced water, 40% is recorded and 60% represent the losses. The network is out of date and there are illegal connections.


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BAR

Type of ownership Public ownership. Bar municipality is the owner.


275 (2%)

Main economic activities (water related) Tourism and services, Food processing services

Main economic activities (not water related)


Billing system Predominantly flat rate combined with metered consumption

Tariffs41


0.60€/m3

1.20€/m3

Last price increase October 2003Collection Ratio (%) 60Water loss (%) 37.5


Municipality of Bar is the largest port of Montenegro. It has an area of 598km². The population of Bar increased from 34,282 inhabitants in 1991 to 40.037 in 2003, with population growth rate of 16%. Aside to resident population, there are almost 4,000 of refugees and internally displaced persons (9.3% of total population) living in Bar. The most prominent economic driving forces in Bar are port of Bar and railway Belgrade-Bar, as well as tunnel Sozina. Food processing industry is also developed for last more then 50 years (company Primorka) focused on production of olive oil and pomegranate juice.

Ethnicity: Montenegrins (47%), Serbs (28%), Albanians (8%), Muslims (6%), Croats (1%), and others (10%).

Tourism: Good road connections, sandy beaches, large number of sunny days, and many natural beauties attract many both domestic and foreign tourists. Additional resource is Skadar Lake and its coast, which has been reserved from urbanization during transition years and has many development potentials. For the purposes of nautical tourism, a marine with 982 spots is about to be constructed. Since 2002, number of tourists visiting Bar increased from year to year (88,477 in 2002; 106,870 visitors in 200442). Such increase of consumers definitely influences water supply quality in municipality of Bar, and especially tourist places like Šušanj, Sutomore, and Čanj.

2. Water Supply

About 98% inhabitants of Bar, Sutomore and Virpazar are supplied with water from public network. In Old Bar this percentage is somewhat lower, since certain percentage of inhabitants are supplied from local water supply network.

Among the households that are individually supplied with water, more then 60% are using water from wells, while 20% are using springs, and 15% are using water from tanks. Out of 329 households that use spring water, 174 are using not properly equipped springs.39 Monstat, Population census 2003.40 Monstat, Population census 2001.41 Source: Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute (2004)42 Monstat, 2004Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED) 80


3. Water system in Bar and water supply problems

The water supply company operates as municipal Public Utilities Company. The owner is the municipality of Bar. It is in charge for water supplies, fecal sewerage and storm drainage.

Water company was founded in 1935 and has been upgraded periodically since then by including all significant carst springs that exist around Bar. Today, water supply company in Bar is covering Bar, Sutomore and Čanj as parts of the unique system, and has separate unit and water supply system in Virpazar. There are 10 overflow stations at the system so that enough pressure could be obtained at all parts of the system.

Water supply system is out of date and should be rehabilitated while inadequate parts of the system should be replaced. Widespread problem is the lack of modern monitoring equipment in such a complicated system.

Water losses – About 37.5% of water is considered as lost in the network due to the technical losses, damages on the pipelines, old pipelines and bad intakes etc. In addition, significant contribution to these losses are uncontrolled and unidentified consumption because illegal connections.

However, it is important to notice that water supply company in Bar posses properly designed cadastre of water installations, which is an important precondition of organized inquiry of damages, in order to reduce losses. Unfortunately, cadastre is not regularly updated.

Billing – The current billing system is based on predominantly flat rate combined with metered consumption. There are different prices for water depending on the season (0.6 €/m³ for the period from October 1- April 30 and for the period May 1 - September 30 if more than 15 m3/household is consumed 1.2 €/m³). Officially, subsidies still do not exist. However, 39 consumers are subsidized for 10m3/month.

Payment collection percentage for the first month is 60% and the most difficult problems water company have with illegally connected consumers changing the water meter on their own free will. In addition, water meters are not calibrated regularly. There are about 1,000 broken water meters.


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ULCINJ

Type of ownership Public ownership. Ulcinj municipality is the owner.


22.6 (4%)





0.70€/m3

1.50€/m3

Last price increase March 2004Collection Ratio (%) 30Water loss (%) 60


Municipality of Ulcinj is located at the southern part of Montenegrin coast. It has an area of 255km². The population of Ulcinj increased from 24,217 inhabitants to 20,290 in 2003, with population growth rate of 3%. Aside to resident population, water consumers are refugees and internally displaced persons located at Ulcinj (almost 3% of total population).

Ethnicity: Albanians (72.1%), Montenegrins (11,9%), Serbs (7,4%), Muslims (3,4%) and others (5.2%).

Tourism: With more then 20km of beaches, out of which 15km are nice sandy beaches, with more then 6,000ha of agricultural land and more then 88,000 of olive trees, medical characteristics of send, mud and mineral sulphur water, Ulcinj represents respectable economic-tourist potential for development of all kind of tourism (elite, nautical and health tourism), as well as for development of agriculture. As a tourist destination, Ulcinj is highly dependent from good water supply. This very much influences its economic performance.

2. Water Supply

Water supply company in Ulcinj is in charge of following services: water supply, fecal sewerage, storm drainage, public hygiene, green areas and parks, city’s solid waste dump etc.

Urban population of Ulcinj is almost completely supplied from public network. In other settlements, this percentage goes up to 70% of inhabitants.

Majority of households (94%) do have pipelines in their homes (flats/houses). Among the households that have individual water sources, 60% use spring water, 34% water from wells, while 6% rely on tanks.

Water supply system of Ulcinj consists from two subsystems: water supply of Ulcinj and water supply system of Vladimir. Aside to organizational relationship, those two systems do have technological connection as well since share the same spring - Lisna Bori.

Thank to the credit received from KfW bank amounting 300,000€, two wells equipment has been improved, so water supply system is better prepared for tourist season.43 Monstat, Population census 2003.44 Monstat, Population census 2001.45 Source: Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute (2004)Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED) 82


3. Water system in Ulcinj and water supply problems

Organized water supply in Ulcinj began before World War II by taking in water from Salc spring. Water Company was founded in 1953. Main capacity upgrade was done in 1987 by forming the underground spring at Lisna Bori. Brajsa and Krute are separate and independent systems. Deficiencies of the water system include: lack of wells so that consumption cannot be regulated. In addition, lack of the water treatment plant for potable water is a problem.

Water losses: Estimated water losses are 40%.

Billing and collection ratio: The last price increase occurred in March 2004 and was not easily accepted neither by the consumers, due to the poor living standards, not by the founders of the Company.

Currently, majority of consumers have water meters incorporated at their connections. Calibration is performed when the collector reports that the water meter is broken. Lump-sum collection is only used for 3% of the consumers. Water meters are replaced, but sometimes late. Currently, 261 water meters are broken. Collectibility at the households is 85% on annual basis.


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Annex 2 – Report on Key Informant Interviews in the Five Project Cities

Kotor –

TariffsThe Municipality of Kotor established current water tariff. The municipality is owner of WC46; depending on the type of consumer, two prices for water are defined: for physical persons 0.60 €/m3 and legal entities 1.50 €/m3. Water price is usually increased for 50% during summer season. All consumers have water meters incorporated at their connections and the consumption is calculated on monthly basis. Water meters are not calibrated regularly. There are about 3,445 (43%) broken water meters. If the water meter is broken, 6 m³/member of the household are calculated and for the legal entities, average water consumption from the previous period is calculated. According to the water company director actual collection ratio is 60% with old debts. It is generally acknowledged that the pensioners pay on a regular basis, despite their limited income.

Last increase of prices was at the beginning of 2004. In the future period, WC is not planning to increase the price of water. Technical director of WC thins that increase of the prices would endanger living standard of the population and that enough will be increase of the level of payment, with which the WC would manage to cover maintenance costs. Other experts think that the percentage of payment would increase with better quality of service, better cooperation with consumers and with disconnecting of non-payers.

Business representatives are approving increase of the price if the supply will be qualitative, without restrictions and salty of water. The question was made, why the price of water is two times higher for businesses. This is not case just with water but also with telephone and electricity.

WC is in process of negotiation with Post office, so the bills could be paid without a provision. The technical director of WC thinks that people would not regularly pay bills if water supply would improve. The only measure that could have effect is disconnecting non-payers from the network. According to him” citizens of Kotor do not have culture of paying the water bills”. Legal acts are representing barriers for WC, because the law did not regulate connecting illegal constructions to water supply network. Experts are proposing solution of this problem through new water supply law.

Current tariff system cannot cover costs of delivering water. Costs of marinating should be covered for the regular payment of bills. From the municipal budget 2% is going to capital investments and that is not enough for investment projects that WC has.

Percentage of payment can be increase just by disconnection of non payers thinks director of WC> They consider that with sanitation of the existing infrastructure and decrease in the number of illegal consumers income can be increased without increasing price of water. Public campaigns project to increase the awareness about the significance of payment would not have positive results.

The head of public services states that consumers would be informed with the system of prepaid payment that exists in world and can be in forced here.

Access to servicesAccording to the technical director of the WC, the amount of the water production is 300 l/sec from “Skudra“ resources. During winter season, Skurda spring is used and by pumping through two main tanks, Kotor is supplied with water. During the summer season, when a water shortage is evident, Orahovac spring is mainly used with direct water pumping into the system so that problems usually occur due to bad electricity supply.

During the summer period spring Orahovac do not have enough capacities, and WC experts state that usually water supply is scheduled at two times a day: four hours in the early morning

46 WC Water Company Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED) 84


and the same duration in the evening. There are areas that have water just once a day and parts of the cities that are lacking water whole day.

In Kotor, losses on network are more than 50%, due to the bad infrastructure, and majority due to the illegal consumption. One-way of losses is irrational consumption with people that have bad water gauge. There is a low percentage of illegal construction in Kotor, so illegal connections are numerous with legal consumers using it to water green areas.

Access to water is also a crucial issue for the businesses. Representative of business that depend on water supply claim that the income in the summer period is lower by 5)% from that what could be gained if the water is better quality. Also, lack of water increases the costs of doing business.

Business sector is suffering large consequences due to the salty water in Kotor. Non satisfaction of guests with services, decrease of the capacities, increase costs for buying bottled water, decrease of life time for appliances that are using water are main problems that are following tourism development and slowing it.

According to the WC experts the quality of the drinking water is good. Other experts are very non satisfied with the water quality in the summer period, so they are forced to have additional costs for purchasing bottled water. Due to the bad quality of water, tourists are offered bottled water in coffee bars “then they think that we want to earn on that bottle of water, so they demonstratively leave”.

Subsidies (lifeline tariff) Kotor has 146 families that receive economic assistance on a monthly basis. That is two percent of the total number of households.

Representatives of the WC consider that subsidies for social cases are not necessary. People would be provided with dual payment of bills if they would agree to pay them. Subsidies should be given to the WC through grants for capital investments. Private entrepreneur that is selling water is sharing the same opinion.

EmploymentPrivate sector thinks that WC is over employed with workers that are not employed enough and during the working hours they have private jobs. Reform should start from the WC by reorganization and decrease of the number of employees. Optimization of the number of employees would bring to decrease of costs for doing business.

Solving the problem of water supply, would improve conditions for tourism development in municipality of Kotor, and the number of employees in municipality would increase.

OtherLand: Migrations did not influence the water supply but urbanization did. Considering the low price of the land that is far from the see, bring to the construction on higher quotas, water supply of these areas is problematic. Area of Sveti Vrač is having problem with water in the long period of time. Areas are spreading and that negatively affects water supply, because of the fact that the existing network cannot satisfy needs of the growing population.

Institutional issues: The WC in Koror is public company and works as municipal company. All experts agree that the private company would be better in doing some things (payment or disconnection of legal consumers). If this job would be given to the private company, it is necessary to impose good control system. Municipality is recommended as a controller. According to the expert opinion, control of the private institutions that would be given some segments of water supply to manage would be crucial.

Considering the fact that the water is treated as a social and not as economic category, representatives of the WC are having the opinion that privatization would not be good thing to do. From the other side, they agree that if there are no changes, further devastation of the company is inevitable. Representatives of the private sector consider that the privatization of the WC is necessary precondition for quality water supply.


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Technical director of the WC thinks that simplification of the court procedure in the case of not paying the bills would increase degree of payment.

Legislation: According to the expert opinion, existing law framework for the water supply is adequate. WC experts consider that the work on the new Law on water was not necessary. The local municipalities should manage this area. Thanks to the established democratic process, every municipal decision is going to debate, so the citizens have opportunity to say their opinion. But, so far practice showed that citizens are not interested too much to take part in these debates.

VodacomAccording to the opinion of WC, Vodacom will bring increase of prices, for legal and physical persons so they were not being able to pay the bills. Representatives of the private sector are afraid that reforms will stay just on paper. They propose to define the monitoring system in advance and regular reports about the taken activities and their effects.

Consumers’ behavior The public is informed about the main decisions related to water provision (interruption hours, repair work, etc) trough the local radio stations. Most of the citizens are forced to buy bottled water from the store, because they don’t have time to listen radio announcements that are talking about constant changes of interruption hours. Respondents said that buying of the bottled water is significantly increasing the costs of living and that everyone cannot afford it.

There is a large number of citizens that are illegally connected to the network during the summer, when due to the empty pipes it is much easy to do it. In Kotor, they are deciding to illegally connect due to the large number of malfunctioning water meters.



Budva -

TariffsThe current billing system in Budva is based mainly on a metered consumption (98% of consumers have a water meter, only 2% pay water based on flat rate). The price of water is not enough even for covering the costs of basic maintenance. According to the opinion of WC director, it should be higher for 0, 10€ for citizens and 0, 20€ for legal persons. Current price of the cubic meter of water in Budva is 0, 60€/m3, for individuals and 1, 2€/m3, for companies. Part of the water bill is related to the wastewater disposal: 15% of the total water bill. Last summer Budva had a summer tariff higher than in the rest of the year. Last increase of prices was in June of 2003.

Municipality as a founder of the WC is deciding on the price of water. Price of water in Budva has to be higher due to the system that demands highest consumption of the Electric energy for delivering the water in the region. Based on suggestion of the WC that was sent to the consideration of the Municipality and it is expected to be adopted, it is certain that the citizens of Budva will soon pay higher price of water. Experts are having the opinion that there won’t be resistance among the citizens, due to the good economic situation of the households in Budva.

Percentage of payment is 60%. Reasons for non-payment are bad habits. Measures for improving the payment are initiated by introducing software to help in monitoring of payment. New software provides more clear water bill so the citizens understands better of what they are paying. Most regular payers are citizens and pensioners. Most problematic are those with lump sum calculation. Large consumers and non-payers are also weekend tourists. Increase the tariff for the lump sum payment would decrease the number of such consumers.

Cost of the maintaining and reparation suppose to be covered primarily from the price of water and bill payment, says technical director of Budva WC. While the director thinks that the tariff should cover first process of the reconstruction of the existing network.

Tariff system is not enough for adequate delivering water to the consumers, according to the WC experts. Every municipality should have winter and summer tariffs. They should be developed based on consumptions. Hotels are large consumers and they should pay more. Part of the costs should be transferred to tourists, “because if there are no tourists Budva would not have problems with water”. Experts from the private sector are proposing imposing of the two-tariff system, summer that would be expensive and winter that would be cheaper.

Business representatives are protesting against high price of water that produce large water bills and they think that it is necessary to make subsidies for companies depending on water.

Access to servicesCity of Budva is supplied from 5 springs with capacity of 350l/s. Needs of the 18000 people living in Budva out of season are satisfied with these needs, during the summer season number of tourists can achieve figure of 100.000 and the existing capacities cannot satisfied needs.

From 2003.existing reservoirs were fixed and new pipelines were put. But, the director of the Regional WC thinks that apart from sanitation of the losses caused by old infrastructure, the lack of water will continue due to the lack of capacities of existing springs that are significantly dropping during the summer period.

Other major problem in Budva is speed urbanization that is not followed with adequate water supply infrastructure. That cause large number of illegal consumers and over usage of existing network.

According to the directors of WC Budva, current losses in network are about 50%. According to director of WC 25% of losses is stealing water. Other causes of losses are bad infrastructure and illegal connections without the permit of the WC. WC started to recover and detect these losses.


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Currently project is undertaken worth 8 million US$ (donation of the US Congress, through USAID and CDM), that is used to build reservoirs, meter stations and reconstruction of the pipeline.

Related to the business development, Budva is the city of tourism and development is requiring enough water capacities. That would provide longer tourist season and satisfaction of guests.

Interviewed business owners are stressing the fact that there are significant capacities of underground water in Budva that they used as technical water.

Regarding water quality: Representatives of the WC has different opinions regarding the conditions and quality of water in Budva. Director of WC thinks that asbestos pipelines are old and they are representing danger from carcinogenic diseases. Its family used bottled water for drink. Water is often mudded, but it is never salted. Technical director said that he is satisfied with quality of water in Budva.

Subsidies (lifeline tariff)Experts of the Regional WC think that the subsidies to the people of Budva are not necessary due to the good economic status. Selective tariffs would have social cases and consumers that are saving water. All interviewed experts are against the subsidies to the entrepreneurs.

Subsidies to the EC would be needed through capital investments that would provide increase of the capacities and building the new ones.

Business representatives are proposing subsidies for business and decrees of the water price, what would enable to decrease the costs and creation of new jobs.

Employment: When asked about the potential impact that the water sector reform might have on employment in the city, none of the interviewed experts could mention any relation between the two factors.

But, tourism development and development of Budva municipality is tighter with development of exclusive tourism that requests existing of the quality water supply system. Solving of this problem would bring to the creation of new jobs in this sector.

Other Health: there was health problems caused by bad quality of water in Budva.

Business opportunities according to the opinion of the respondents would be significantly improved by solving the water supply problems. Budva as a city living from tourism has to have quality water 24 hours a day. If the water supply problems would solve permanently, there would be growth of the foreign investors in this area.

Urban planning: Urbanization and migration of the population in Budva cause increase in the number of illegal build constructions that are illegally connected on the network. WC experts consider that the Municipality and the WC should cooperate in solving of the legalization problem and payment of these connections.

Legislation: Montenegro has a high level decentralization when it is about space management. WC experts consider that the space plan of Montenegro should be adopted on the Government level, and that the area for local management should be decreased, so the ad hoc building should be stopped. In that case municipality cannot adopt different decision about the purpose of the available space. Coastal zone management should exist that from the Central Government was transferred to the local-regional company called Public Coastal Area (“Javno morsko dobro”).

Institutional issues The WC Budve is a public company owned by the municipality. All experts think that there have to be control of the local municipality over the WC. This opinion leads from the attitude that the water is resource that cannot be managed monopolistically.



Director of the WC consider that it is not necessary to exist Agency for regulation of the water supply when “There is a Regional water supply company, that is taking percentage from every investment, and it is not showing results in the field of water supply and waste water disposal.“

Forming of the association of consumers that would gather representatives of the water supply companies and citizens would lead to the solution of some problems. Other thinks that the interest groups could not gain their rights, because there is no law on public information. WC will not give information’s without a clear legal framework.

Private versus public management Director of the WC is not satisfied with the current work of the company as a public service. Legal regulation does not prescribe overtaking of this sector by the private companies. According to him, the negative effect of the privatization in the public sector would be huge growth of tariffs. Privatization of the sectors of public interests is seeking for more strict laws for doing business from the side of private companies. “Montenegro, should not go in that adventure, while all the preconditions are not made. “

WC, according to him should be organized through a partnership between the central government and municipalities. In that case, central government would provide clear legislation and technical standard for work of the WC companies. In accordance with defined standards, municipalities would immediately start with reorganization process. It would provide that infrastructure is following the development and urbanization.

VodacomWC Budva started the reform process, what is showed through works realized in the previous period. One of good examples of the reforms in WC is WC Podgorica. Reforms, according to the WC experts should provide higher degree of the satisfaction of consumers. On that way the percentage of payment will increase and it would enable further maintenance of the system. Most critical moment of the reform could be lack of the financial sources as well as implementation of the law by consumers and suppliers. From the other hand, according to the opinion of WC director, political barriers and represent problem in implementation of the reform processes.

Consumers’ behaviorInforming of the population about the restriction on TV and radio network is slower than the way of living and way of working of population of Budva in the summer period. Faster and better ways for informing are needed. None paying the bills is cultural and moral problem that the population is facing. According to the expert opinion, most efficient method of increase of payment is non-selective cut of non payers.


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Bar -

Tariffs The current billing system is based on predominantly flat rate combined with metered consumption. Existing price for household is 0.60 €/m3, and for the companies 1.20 €/m3. Regular payers are pensioners and households, while the public sector and private businesses are having large owes.

Even low, payment degree is substantially different depending on the type of consumer. So, payment decree is 50% and in the economy lower than 20%. Currently it is invoiced 2,800,000 m3 instead of 7,000,000, what would enable all needs and provide investments.

According to the technical director, payment level can be increase just by engaging the WC to send bills more regularly, buy reparation of the water meters and buy regular checking. It is planned to more often read the water consumption of water and to regular invoice it.

Increase of the price would pressure regular payers, what would lead to lower percentage of payment. “We would not achieve anything since those who did not pay would continue not to do it and the number of regular payers would decrease”, is the opinion of WC experts. Other experts thinks that the citizens would accept higher price if they would have water for 24h a day.

The existing tariff system is not enough for adequate delivering of the water and loan return, according to the development director of WC. The price should be increased by at least 20% so the electricity bill can be covered. Director is suggesting subsidies like lower price of the electricity for Water Company. Increase of the price of water would not influence negative effects because complete service of Water Company would be improved. But, increase of prices is not planned in the next six months.

From the other side, private sector thinks that the increase of prices would be acceptable in the case of 24h supply. According to them the existing system is enough with increase of payment level.

Maintenance and reparation costs can be covered trough more efficient payment of bills, buy disconnecting the illegal consumers and at the end buy increasing of the price of water. The best way to cover maintenance and reparation costs is decrease of the technical losses, reconstruction of the network and increase of the percentage payment. The existing tariff cannot cover reconstruction of the water supply network but it is enough for servicing it “Reconstruction is priority but we don’t have money. We haven’t had help from the local and central government. We solve our problems buy taking loans, but later on we are facing with problems during the pay off”.

Increase of the payment percentage can be done through the public campaign, but it would influence just households. Problems are businesses that are not paying bills and the court process does not have effects.

Quality of water is satisfactory. Chlorine is done regularly. Due to the old infrastructure intensive chlorine is implemented. It is planed to disconnect springs were due to the increased in rain the water becomes muddy. In these cases citizens are informed about the current conditions and quality of water through media.

According to experts, it is necessary to warn citizens on the bad quality of water. Director of the private company thinks that “WC is losing battle against bottled water; people lose their confidence into tap water quality”. Regardless the solid financial situation of the citizens of Bar, that could afford buying of the bottled water; water supply should offer quality water. Access to servicesMunicipality of Bar is supplying 15.000 connections from the spring capacity 540 l/s at the winter period and 358 l/s - during summer season caused by decrease of the capacities due to the lack of rain. Configuration of the terrain requires existence of large number of pump system that is used to deliver water to the consumer. Consequences are large owes of the WC for electric energy.



Second problem is weak supervisory equipment and not enough dimension of the system. According to the WC, there is plenty of water but due to the old water supply network, weak payment, weak pump system, Water Company is having problems.

Connection to the water supply network is having 98% of the citizens of Bar or 33.000 people. Problems that are occurring are different in the summer and winter period. Large inflow of guests during the summer season is presenting huge pressure to the network so restrictions and decrease of the capacities occur. It is not rare to have 12 hours restrictions. Central part of the cities are not staying without water, except for higher floors, due to the watering the pavement and green areas and bad condition of the pump system.

Bad water supplying is having areas without urban license that are connected illegally. Lack of the water is due to the over usage of the network. It is happening that the water is lacking for 24h, because instead of 5 there are 20 connections. During the last ten years, number of citizens of Bar increase substantially and same is for the activities of the private sector, Consequence is additional pressure to the water supply network. Apart from that, problem is between municipal area that does not have sewage or water supply network Experts are suggesting better municipal cooperation.

Water losses in Bar are 50%. Main problems are old water supply network and pump system. There are a large number of illegal connections in the suburban areas. Large private companies solved this problem by digging wells.

SubsidiesSubsidies should be related to economic vulnerable group of citizens. Subsidies for operational costs should be responsibility of the central government in cooperation with the social institutions. WC is according to the words of development director, ready to help vulnerable group of citizens through some benefits during the payment and eventually lower price of water under the condition that those costs are reimbursed by the government.

Interviewed experts from the private sector are proposing subsidies for entrepreneurs whose business is largely depending on water and that are using large amounts of water. Subsidies should be responsibility of Central government. Technical director of the WC thinks that citizens are having enough money for paying any price for water.

Other: Influence on tourism: Experts thinks that unsolved question of water supply has a bad influence on tourism. Bar has potentials: industrial, tourist but non-developed infrastructure is making Bar not interesting place for tourists. According to Technical director of WC hotels in Bar are supplied with water 24h a day.

Health: Interviewed experts that are not representative of the WC are stating cases when the low quality of water caused yellow fewer.

Employment: Privatization of the WC would bring to decrease of the number of employees in WC because the productivity would increase. From the other hand orientation of the Bar industry on tourism is confirming high level of correlation so the expert opinion is that better water supply would increase possibilities for business activities in Bar, and also creation of new jobs.

Group of citizens that are following the work of the WC are existing in Bar. Positive example is group of citizens that collect money for financing the local water supply network and they have water now. Organization and the activities of the interest groups can brought to better understanding of the problem that exists, and by that finding appropriate solution. Legislation: Experts from the private sector are proposing defining legal regulation that would include overtaking of the water supply by the entrepreneurs and prevent frauds in this area. Problem that experts stated are construction permits that are easy to gain even though all precondition for building are not fulfilled. That cause illegal connections


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Spatial planning and urbanizations are not adjusted with spatial tourist development because there is no detailed urban plan. The adjustment of the infrastructure building and future development of the city is needed. WC experts are complaining about the slow court processes in the cases of debt payment by the citizens and large companies.

Institutional questions: Water Supply Company is public company owned by municipality of Bar. Existence of the regulatory Agency according to the experts of the WC is necessary, in the part of existence of regional cooperation that would improve water supply of the among municipal areas that are not having water or sewage network. Technical director of the WC is stating the example of the Agency for development and building Podgorica as a good example of development. Director of the development sector thinks that it is necessary to have some regulatory body, made of hydro experts, at the republic level they would consider the question of water supply in Montenegro including seaside.

Private versus pubic managementInterviewed experts are not supporting idea on privatization of WC. WC is having large problems that private company cannot solve, and privatization will lead to increase of the prices and the quality of service would decrease. According to the stated attitude, management of the WC should stay under control of the Municipality as a regulatory body. Sector of payment should be privatized so the percentage of payment would increase.

Technical director of the WC thinks that the WC should have to be private companies, based on the examples from surrounding countries. That would solve large financing problems. WC in Bar is not receiving money from the communalities that could be used to finance investments. Money stays in Municipality of Bar. Representatives of business are sharing the opinion, and they think that the state owned companies are not functioning well.

ReformsReforms are important and necessary segment of the future development. Most important is to ensure lower prices for the vulnerable group of citizens.

Board of Directors of the WCBoard is representing party members and representatives of the WC> According to the WC experts- board should be consisted of experts for water supply and hydrology and not people from parties.

Consumer’s behavior: Problem of the city of Bar is a large number of illegal connections and stealing the water. Large percentage of citizens in the area without construction license is having illegal connections. In the huge percentage, water is used to water arable land and green areas.



Ulcinj –

TariffsThe current water tariff established by the Municipality Ulcinj is 0.45 €/m3 for physical persons and 1.30 €/m3 for legal entities. The last increase of water price was in March of 2004. Payment is done based on metered consumption; just 3% of the citizens are having lump sum payment, Even though the percentage in Ulcinj is low (3%), according to the WC experts, lump sum consumption is representing large problems with people that are renting room for tourists because the consumption stays the same and the number of people increase. There is no measure to pay that.

Apart from that stealing of the water is large problem especially during the summer months. “Agriculture people are stealing the water to decrease high bills. They need water-to-water gardens with fruits and vegetables that they are selling to obtain money for living. “

Payment percentage is 85%. Even though this percentage is lot higher related to the other cities from the region, experts think that it is not enough to cover all the costs that WC has: so the existing infrastructure network cannot be renovated. The enforcement is needed for debts that large companies are having.

Most regular payers are pensioners, that have lowest income, and non-regular are entrepreneurs. Increase of the payment percentage can be achieved just through improving the supply conditions.

The existing tariff system is not enough for adequate work of WC consider the WC expert. Water should be more expensive at least for 20 cents so they could cover high electricity bills. The increase of the prices is not planed but it will occur if the services of the WC are improved.

Tariff increase would negatively effect population since the purchasing power of the population is low. From the other side, if the quality of the water supply would improve, negative effect and resistance would be significantly lower.

Maintenance and reparation costs can be covered with increase of payment and decrease of the price of electric energy for WC.

Increase of the payment percentage is possible if the water supply improve; quality of water improves and provides water during all 24h. Respondents are proposing public campaigns about the water savings, as well as stimulation of the citizens by free installation of the water meters and reparation. Director of the WC is proposing more strict measures and disconnection of non-payers, as well as more regular invoicing of bills what h is accepting as a WC mistake. “If we disconnect them, they would connect by themselves. It happened that in the area of Pinješ we disconnect water seven times in twenty-day period. After we leave, he turns on the valves and has water again. ”

Access to servicesUlcinj is supplied with water from six springs: Lisna bora, Gac, Salc, Mide, Klezna, and Brajsa. Capacities are covering the needs of 16500 inhabitants, which this municipality has of the season. During the season, number of tourist is 80.000 and due to the daily consumption and low capacities city stays without water.

Spring Lisna Bori is spring without the usage license, with bad quality of water that is pumped in the system during the summer season due to the lack of other capacities. Citizens think that this spring should be used as a source of technical water.

Minimal measures that need to e immediately taken are building the reservoir of 5000 m3 as well as decrease of the price of the electric energy, that WC is paying a lot. With this measures current water supply situation would be improved.

Losses in water supply network are 60%. Structure of losses by WC experts is: Fix losses of WC- up to 15%,


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Losses due to the old network, especially secondary line that is covering city center, - up to 20%,

Losses due to the misusage, illegal connections that almost all agriculture people have - 30% of the total consumption.

Special problem are the losses due to the lump sum payment. During the tourist season almost all houses in Ulcinj is renting space for tourists. The increase in the consumption is three times, and the bill is the same like during the winter. Apart from them, experts said that one of the causes is the non-regular invoicing of the water bills.

Special problem in Ulcinj are agriculture people that by watering the gardens and green areas are over using the network significantly. They are often illegal consumers. Aged network, weak pump system that is often not working, leaking pipes and broken pipes due to the illegal connections, with weak pressure lead to bad supplying of the people living on higher quotas.

WC experts are stressing that the priority measures that need to be undertaken are: reconstruction of the water supply network. Building the reservoir for saving the water that would be used during the summer season and saved during the winter. According to the expert opinion, Central Government should help improvement of the water supply by investing in Regional WC what would solve problem of water supply in Montenegrin seaside.

Quality of water: all participants of the FG agreed that the quality of water in the summer period is bad, due to the involvement of water from the Lisna Bori spring. The bacteriological not fit water characterizes this source. Representatives of the WC claims that the water is good quality, while the other experts are saying that the WC is not providing timely information’s about the changes of the water quality.

Experts said that the “people lost trust into the quality of tap water and that rarely people drink that water in Ulcinj except the people that cannot afford it”.

Subsidies are not necessary to introduce, thinks experts of the WC, because the water bill is not large item for the family budget if paid regularly. If it would be introduced, subsidies would involve materially endangered families. The local authorities should manage it. It is needed to introduce special protection system from frauds by imposing the certain amount of money that endangered families can spend without payment. According to the 2003. Census the number of families that are receiving social help in Ulcinj is 249 (4%).

Private companies depending on water should be subsidies by lower prices, so the payment of the bills from that sector should be more regular, consider people from the private sector.

Other Tourism: Ulcinj suffers large consequences due to the problem with water. According to the director of WC, hotels in Ulcinj have their own pools and pumps but they are aged. By the realization of the Master plan for tourism development it would lead to the solving of the problem of bad infrastructure, forgotten hotels, dirty beaches. According to the business representatives, Ulcinj is living from tourism. All investors have already come and they will attract more new ones but facing with the water supply problem is negative experience that can discourage them from the start, and it could influence them to choose some other country or city that does not have water problems

Management and spatial planning: Non-existence of the urban plan leads to illegal construction. In the period from the earthquake in 1979. The number of citizens and illegal areas increased. The result is illegal connection to the water supply network. Development of the water supply network has to follow the spatial plan of city development.

Employment: It is presumed that the existing reforms will lead to decrease of the number of employees in the WC, because even now it is over employed. From the other side, reforms will bring more quality water supply to the city and more successful tourist season and new jobs.

Institutional issues



The WC in Ulcinj is Public ownership. This is the only Public Utilities Company in the municipality.

Directors of the WC are not for the privatization of the company and they consider that the mail usage will occur. The business owner thinks that privatization of the payment department would be the best solution to solve low payment percentage. The cooperation between consumers and suppliers would improve. Consequence of the privatization according to the all experts would e rising tariffs. The Government in this case should define the price of water.

Agency for regulation of the water supply does not exist but its founding would be good solution. Experts are having opinion that it should be private institutions and with it it would solve problems better. Association of WC exists but it cannot act as an Agency because the individual that have the interest to solve the problem would run it. According to the experts cooperation between the group of citizens and WC would not function because the citizens do not know the real conditions of the WC and its problems

LegislationLegal framework does not include court payment of bills and protection of the WC. The new law is not necessary, the old law is good but is has to be obeyed.

Managing the water supply sectorBoard of directors has to consist of experts and functioning separately, independent from the municipality, so we would avoid that the board members are coming from the political parties that are not experts and they are not fond of the problems that the WC is facing.

According to the opinion of the director of communal sector, creation of the association of consumers would not have wanted effects because the citizens do not understand real nature of WC problems and they are asking for impossible often.

Consumer’s behaviorLack of water is caused by consumption of the huge amount of water by the peasants for watering large areas under crops. According to all experts, the education of the citizens is needed about the right usage of water. Apart from that non-payment is caused by the revolt of citizens that are not satisfied with supplying. The lack is also qualitative informing of the citizens about the conditions and water quality, which cause lacks of believe and buying bottled water for drink.


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Annex 3 – Report on Focus Groups Discussions Held in Podgorica on non-water thematic topics

Focus group (FG) discussion, topic: TourismMay 18, 2005

Key problems of tourism development in Montenegro

According to participant opinion, there are several problems and limitations for the development of tourism in Montenegro, such as: Bad water supply. One of the most important problems facing tourism is that of the water supply, which is especially expressed in summer, during the tourist season on the Montenegrin seaside. Problems with sewage system. This is a very serious problem and has a negative consequence on the presence of foreign tourists. “Non-treated waste water has a tremendous negative effect on foreign tourists. The western tourists are very sensitive to the issue of waste water.” Bad road infrastructure. The unfavorable road conditions in Montenegro represent a huge limitation for the development of tourism. “Key problems that must be given attention are the problems of the infrastructure (poor road conditions, bad water supply, electricity problems, etc.)

The main reason for such a situation to exist in Montenegro is the lack of investment in the infrastructure network.

Expectation from Government, i.e. from local government, in solving these problems to aid the development of the tourism industry:“Local government, by definition, is closer to the source of the problems and thus, the local government should gain more capital and more responsibilities.” “There is a problem with comprehension as well as the presence of many conflicts; these issues make the whole process slower on the local and central level. It is necessary to improve cooperation on all levels in order to better solve common problems.”“The lack of problem solving initiative that we have had for so long is now showing the consequences. You cannot solve accumulated problems in one step. It is necessary to solve the problems in a continuous and systematic way. All political parties can benefit from this.”

The Action plan of the Ministry of Tourism includes projects that are involved in the water supply, electricity problems, problems of parking, and decreasing the VAT rate. The plan also mentions improving the water supply in Montenegro. The Action plan anticipates 33 projects and tries to create better cooperation on the local and republic level.

Define and separate the construction season from the tourist season. It should insist that all construction on roads be completed before the tourist season begins. “In this moment there is construction on all local and regional roads, thus creating a problem in the beginning of tourist season and making a bad impression on the tourists who have come to Montenegro.”

Recommendations for development and improvement to agricultural business with the purpose of improving tourism:

It is necessary to initiate cooperation between service-oriented establishments, such as restaurants in Montenegro, and domestic agricultural producers. “The Ministry of Tourism initiates meetings with agricultural producers and representatives of hotels. The idea was to build cooperation and support for promotion that would stimulate the purchase of domestic products. Special attention is paid to domestic products promoting medias.”In Montenegro, there is no direct connection between agricultural producers and service providers, or restaurants. Hotels supply themselves on the market, i.e. there is an indirect connection reflected in the buying price. On the other side, agricultural producers have problems selling because they have to sell their products to a re-seller at lower prices.



The main problems of tourists on our seaside related to water supply:The lack of water and the low water pressure in some parts of town or on higher floors of buildings, Chemical and bacteriological correctness of water.

Readiness of tourists to pay a higher price for better accommodations and for a higher quality water supply.

The experiences of new hotels show that tourists are ready to pay a higher price for better accommodations and a higher quality water supply. However, we should bear in mind that the problems facing Montenegro (electricity, water supply) are elements of the tourist supply, and in other tourist locations, there is no problem with these resources. “The market exists and competition is great on an international level. If you are missing or are inadequate in your supply of any one of these segments -- water, road, and beaches -- you are out of the game. The market dictates this. Even if you offer tourists all of the conditions or attractions, if the service in hotels is unsatisfactory, you are again out.”

The way to solve tourist problems related to water: By investing in the existing infrastructure, network loses will be lower and the water supply will be improved during summer. It is necessary to start promoting the mandatory payment for water. Develop in citizens the sense for saving water and develop a mechanism for punishing non-payers.

How much lower was the number of tourists during the last season due to water supply problems?

In the Ministry of Tourism, this data is not available. They consider it to be impossible to measure the influence that the poor water supply has on the number of tourists visiting Montenegro. However, the sense that this situation needs improvement in order to keep tourists does exist. “There are many tourists that come to Montenegro even though there is no water during 7 of 10 days of their stay. The reason they come anyway is because they do not have enough money for any other destination. We must think of a way to return our old guests, especially foreign.” Conducting surveys is the mechanism used to learn the tourist opinion of the situation. Other than some temporary research realized by non-government organizations and an open telephone line at the Ministry of Tourism for receiving tourist comments, there is no systematic access to research public opinion and impression of tourists.

Intervention of World Bank in solving these problems

Improving the water supply system by investing in the infrastructure – and by doing this, the higher price of water will be justified. Establishing a rate on water that will repay the investment. “The issue of a higher water price and moving waste water is a domestic issue. The higher price of water means a higher price of staying for tourists. That is the question for our expecting tourists. They have to be our target. In Croatia, there are special tourist rates for financing projects like this.”

System for waste water treatment. “The system for waste water treatment is bad and there is a direct issue of waste water at the sea, even though the system for cleaning and waste water treatment exists. This is a huge problem and it has to be solved. When you lost your guest you should make triple force to take him back.”

Education of citizens in the purpose of rational use of water. “We have a lot of jobs to do because of the irrational use of water and the huge loss on the water network. In my neighborhood, everyone waters his or her gardens. In Denmark, people could not believe that. That is our problem; we must find a solution.”

Help in regulation of local places for hard waste. “The problem of waste water, moving this water, water supply system, safe transfer of hard waste into land, road infrastructure, electricity – these are the conditions for attracting investors and international tourists in Montenegro.”


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Construction of golf terrain for better tourist supply The participants are in agreement that the golf terrain is attractive for guests with a lot of money. These guests want several kinds of golf terrain and there is space for this on the Montenegrin seaside. A great investment movement is golf terrain, although it is said to have a bad influence on the environment. The experts for the environment consider that a greater share of our water will be used to water the golf terrain and states that we must think about priorities. Other participants consider that watering can be realized with technical water, and there is no elite tourism without developing golf. “Rich guest want golf. But first, we have to solve the problems mentioned above and after that, we can construct a golf terrain.”

Focus group discussion, topic: Agro BusinessMay 24, 2005

The main problems and obstacles for agricultural development in Montenegro in the context of tourism development in Montenegro

Agriculture producers and those within the tourism business community do not have a good understanding of the market needs. The tourism and agriculture industries are very closely connected in Montenegro. Since domestic products are not certified, it is very difficult to launch them on the international market. On the other side, offering domestic products to foreign tourists is the best way to indirectly export them. “If Montenegro has something special and distinctive from the other countries in the Region to offer to the tourist market, this should be done with agriculture products as well as other products. When visiting Žabljak, Kolašin, tourists do not want to taste the same food they have in their home countries, but products that are typical for that area.”

Poor infrastructure. Most agriculture production is concentrated in the central part of the Republic. Distribution of these products to the southern and northern part is often difficult. Additionally, the Montenegrin households that deal with agriculture are quite small and dispersed. The procedure to purchase dairy products from remote villages is very difficult due to the poor road infrastructure, especially during winter. “The interest for visiting those villages simply does not exist. Expenses are very high in comparison with what could be achieved.” The small local producers are not well connected with the market or with other producers in the region and their products cannot be sold so easy in the market.

Lack of processing centers, which could enable better marketability and sale of domestic products at local and international markets.

Promotion, marketing. The campaign “Buy ours” is currently popular in Montenegro. One of the FG participants stated: “The goal of Montenegro should not be “buy,” but “sell our products.” Tourism in the northern part of Montenegro is at a very low level as well. Its recovery would also help to recover agriculture production in terms of offering domestic healthy food and all of the things that are demanded by tourists.

Regional connections. Montenegro possesses significant land potential and large water potential, which should be directed to locations that need water. “On one side, the Sozina tunnel that connects us with the coastal area of Montenegro is to be completed, and on the other side, our food producers are located in the Skadar Lake area as well. A project of common interest for tourism and agro business could be realized through healthy food exchange and directing toward the southern and northern parts of Montenegro.”

Water pollution. One of the most significant problems facing the Zeta area, which is the largest productive land area located near the Aluminum Plant Podgorica, is that all of the polluted rivers coming from Nikšić, Danilovgrad, Podgorica, Cetinje, etc. “meet” here. Additionally compounding this problem is that most factories do not have adequate equipment for cleaning their waste and communal water. The goal is to improve the quality of water and to provide water that is the cleanest and of the highest quality used in industry. “In this way, water and land would be protected and conditions for agro business would be much better.”



Unplanned building. “During the last couple of years, caused by the illegal building and uncontrolled forest cuttings, degradation of the land has appeared. Unfortunately, adequate control in this field still does not exist.”

“Gaining” of productive land around Skadar Lake. Montenegro and Albania are conducting negotiations on a project that should provide Montenegro with an additional 14,800 hectare of productive land in the coastal area of Skadar Lake. The realization of this project is very important because, as the experts claimed: “one hectare of land in the coastal area on Skadar Lake is more valuable than one in Vojvodina47.”

Bee products marketability. “Bee keeping in Montenegro is a low accumulative industry.” It is necessary to organize a Center for collecting and packaging produced honey. “Montenegro has a lot of medical herbs and our honey is at an adequate quality level, but it should be offered and sold at the market and to customers in an appropriate way.”

Aid is needed for better connections between agro business and tourism.

If Montenegro wants to further develop as a tourism and agricultural country, much more should be done. First, those people who deal with agriculture and tourism should realize the purpose and benefits of connecting the two industries. The International market and the market of the European Union are both saturated with standardized products. “It is necessary to find a way for the Montenegrin agricultural industry to become connected with tourism in order to offer specific, oriental domestic products.”The Government and the related ministries, such as the Ministry of tourism and the Ministry of agriculture, should invest in processing capacities, laboratories, and infrastructure instead of increasing customs, subsidies, etc. For agricultural development, many projects were realized in terms of credit lines for agricultural businesses: live stock was increased and many cows were given, mechanization was given by Slovenia, green houses by Israel, etc. The Ministry of agriculture is significantly included and for several years has organized exhibits of agricultural products and live stock fund and Days of bleak fish in cooperation with some American organizations. Considering his field of work, stressed that “part of the premiums should be given to the products’ realization in order to stimulate producers of those products.”

Promoting and establishing connections between healthy food producers and hotels and restaurants in order to launch domestic products on the tourism market.

With respect to the current and future market (local, national, international) potential for agro business regarding tourism, the FG participants found as follows:Montenegro has potential for food production and could make a strategic step forward if it is used in the right way. The special opportunity for Montenegro presents its direction as an “ecological state.” However, Montenegro never completely valorized this attribute. Raising the ecological awareness is one of the consequences for postindustrial societies. If ecological awareness exists, the willingness to purchase food that is 2-3 times more expensive due to its “healthy” production rather than the usual “industrial agriculture” would also exist. With very few exceptions, land, air and water in Montenegro are not industrially polluted. The basis for Montenegro becoming an “oasis for healthy food production” does exist. If Montenegro is strongly determined in this strategic direction, the entire country might be an area for biologically acceptable food production, while a recognizable trade mark could be established. Although production of food without chemical additives is 30-50% less than “traditional” production (which includes the use of chemicals), the fact is that the European market demand is a few times higher than the supply for such food. The lower offer and supply is adjusted by higher prices that can be obtained at the market (“lower production is compensated by higher prices”). Biological food production does not require any subsidies. The EU market would absorb all products produced in this way for a long time to come. Biological food produced in this way could be marketed through Montenegrin tourism capacities as well, which would automatically cause a step forward in terms of quality, habits, and customers’ purchasing power.

47 Agricultural land in the north SerbiaSecond Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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In this way, Montenegrin agriculture could join the integration processes and could be more competitive. In the first place, there would be no need for protection and subsidies (as is now the case), but the quality, competitiveness and position at the international markets would be the focus.

Potential that agro business has for improving tourism in Montenegro

Product quality improvement and adequate packaging as priorities. Tourism requirements need to be understood. “I think that people dealing with agriculture do not understand the needs of tourism very well. Their connection with hotels is very poor. For example, honey served in hotels is usually imported. This means that honey, butter, cheese, etc. should be offered in small packaging. Without understanding market needs, no industry can survive in the long run.”

Agricultural producers should not pay the Value Added Tax (VAT). Agricultural producers in Montenegro usually sell their products at the green market. In most cases, the sale is not regular and the prices do not include VAT. On the other side, agricultural producers do pay VAT when purchasing raw material.

Establishing a Distributive Center in Podgorica. In this way, the VAT could be paid, the resources for purchasing raw material could be reimbursed, and the final product prices would be lower by 1/3, which would be helpful for both the local population and for the tourists. This situation would be much easier for agricultural producers as well.

Credit lines with favorable interest rates. “I need €3,000 for setting 1,000 m2 of green house. The annual interest rate for this amount is 19%. If the interest rate would be lower (say, 6%), I would decide to modernize my production. In time, the final product price would be lower as well.”

The Bojana River regulation. This regulation is about the international project based on the principles of sustainable development. The project goal is to avoid land soaking (as is the case with the 14,000 hectare border of Montenegro with Albania) that is caused by the high water level in the Lake. In this way, the land would be protected and could be used for ecological food production.

Education. It is necessary to educate agricultural producers on how to produce ecologically quality food so they can become more competitive on the market and generate more income. Mr. Jeremija Radojević from the bee keepers association stressed: “Here, bottled labeled honey costs €7 to €10, while in Europe it costs €4 to €5. The price of the unloaded honey is even lower by €2. Product quality and price are very important for customers. However, the price is a decisive factor for customers when choosing imported honey from Serbia and Croatia instead of domestically produced honey.”

More exploitation of herbals. The Northern part of Montenegro is extremely enriched with the herb called buckwheat (Fagopyrum aesculentum), also well-known as honey flower and is known to have diet characteristics. “Based on this, Montenegro can become an exporter of buckwheat, buckwheat flour and specialties of buckwheat.”

Better exploitation and directing of water as an obstacle for agro business. Water presents an important resource. Mr. Nikola Spahić from the Ministry of agriculture, forestry, and water states that the plan is to realize a “project for the waterless area of Kuči, which has agricultural land but is without water and melioration. In this way, agro business would have a chance because households dealing with agriculture would irrigate fruits and vegetables with clean water and would be more qualitative and the dairy products would be healthier in comparison to those at the green market.”Activities of Agro business associations

There are some problems in this area. Existing associations that connect various producers of the same agro business should solve the problems their members face and represent their interests in front of the governmental institutions. Very few associations work on market improvements through quality improvements, tax reductions, education of their members and



similar activities. They are mostly requiring various subsidies and governmental protection, and in this way, the problems of agro businesses are only temporarily solved. A special problem of note is the lack of qualified staff within those associations. “Associations are not organized well and members do not pay membership fees. There is not enough capacity for engaging experts to help members promote and sell their products.”

Recommendations for development and improvement of agro business in the context of a better tourist offerIt is recommended that Montenegro intensify the promotion of its agricultural products, especially in industries where Montenegro has a competitive advantage to neighboring countries. This can be done through the preparation of brochures highlighting given products and promoting the geographic origin of those products as well. “For example, while presenting cheese or ham from Njeguši at food fairs, it should also be presented where the cheese and ham come from and all of the advantages of that place for vacation; it should be connected with Lovćen and other well known places that could attract tourists. It should be mentioned that this mountain village is only 20 minutes from the coast (Kotor) and should list other similar advantages.” Product packaging needs to be improved and adjusted to hotel and restaurant requirements.

Importance of agriculture for Montenegro “If something has potential and if it can generate income for the entire economy, than it is extremely important. Montenegro has potential for agricultural development and it is doubtful that this potential will be used properly.”

Participants agreed that open borders are a precondition for the connection and development of Montenegro. Agriculture is an important industry, although households dealing with agriculture are quite dispersed. Special potential is recognized in selling domestic agricultural products to tourists. “This is the best way to connect agriculture and tourism and is a very important element of the tourist offer for foreign tourists. Uniquely Montenegro is not only the landscape, but also the specific tastes and aromas of domestic food and drinks.”

Marketability of agricultural products When asked why sales decreased this year in comparison to last year and what problems could arise even when producers obtain adequate product quality, the focus group participants responded with:

The living standard decreased in the last couple of years. That is one of the main reasons for the decreased sales in comparison to last year. Additionally, the population is more oriented towards the green markets since the living standard decreased. In this market, sales and income could not be measured. Obstacles for sale outside of Podgorica are very significant. The association of plant producers in protected areas does not have a vehicle for distribution of products in the northern and southern parts of Montenegro. Lack of adequate warehousing of final products, such as refrigerated warehouses, is one of the main problems.

Sale obstacles on the domestic and foreign marketsVery few Montenegrin agricultural products are sold outside of Montenegro. In fact, we can say that the foreign market does not exist at the moment. It is necessary to initiate an organized export. Individual producers cannot sell on the foreign market alone.

Sales at the local market are being realized, though are accompanied with problems. Some of the identified problems are the following: The factory for producing packaging does not exist;The premises and areas for sale are in very bad and unhygienic conditions. They are usually track markets next to green markets with an unarranged area for the sale of products that require specific conditions for warehousing. Additionally, the payment system is very poor there. The sale is indirectly implemented. “Our product is not directly sold to customers. If we could avoid the intermediary salesmen, the price would be lower as well. Our prices are higher than


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those in Israel. This problem would be avoided by opening a Distributive Center. To rent a stall at this truck market for the sale of agricultural products, it costs €600 per day. These funds could better be used to equip and maintain a Distributive Center.”Unfair competition. Fruits and vegetables are imported in Montenegro by trucks, and due to mistakes at the border, no customs are paid for them. This situation burdens domestic production.Poor control of the agricultural inspections. The import control should be stronger and the number of agricultural inspectors should be higher in order to prevent the possibility of illegal import of products that require fixed payments in addition to custom rates.

Information on sowing and harvestingAdequate information on sowing and harvesting does not exist. It is necessary to establish an agency or institution that would provide information on sowing, harvesting, credit lines available, weather conditions, etc. Namely, such an agency would provide data for agricultural producers and would help them to become better connected and more functional.

Education in agro businessProduction of ecological food requires modern technology. Education on the existence and use of such technology is necessary. It is also necessary to organize fair visits to introduce new technologies and seminar attendance to exchange information and experiences with foreigners. It is necessary to organize courses for agricultural producers in order to learn how to “produce in a less expensive way.”

Very often, courses on modern technology use are not organized in the country, but abroad. It was much easier to obtain a visa before and business people were more likely to attend seminars, fairs, exhibitions, etc. Today “I cannot leave the country even in the former Yugoslavia area.”

Agricultural products sale: Agricultural producers from the Zeta flatland near Podgorica sell their fruits and vegetables at green markets in Podgorica and in the Montenegrin coastal cities. This is the typical method of product sales. Connections between hotels and agro businesses are indirect and realized at green markets. Some hotels have their own suppliers for dairy and meat products. There are strong obstacles for a new producer to enter an already established supplier chain. A participant from the association of beekeepers reports that they usually sell honey at exhibition in Podgorica, in some stores, or at the places where it is produced. He stated that there is a lack of resources for equipping laboratories for quality control and customer safety.

Recommendations that the World Bank could support:To enable tourism development likewise with agro business.Every project should be economically feasible (within the Government and certain institutions). The Government should provide help free of charge for those with ideas related to agro business to help them realize and practice those ideas.”To organize local product promotionsTo help connect local producers and hotel ownersTo establish a Distributive Center in Podgorica.



Focus group discussion, topic: Land Management and urban planningMay 23, 2005

What are the main problems regarding access to the land or ensuring land rental for building tourist facilities? Which of these problems depend on the Government, which on the local authorities, and which problems are dependent on donor organizations?Main problems are:The inexistence of a Spatial plan of Montenegro with which the development of some areas would adjust. In 2001, the Parliament of Montenegro adopted the Decree on building the spatial plan of Montenegro for a period through 2020. The campaign for the building represents the chance to finish the transition process in this area (reform of the system and adoption of the new law), to criticize and gather sector strategies and programs, to establish a network of expert organizations, to create a base for building the GIS (Geographic Information Portal), and to ensure a qualitative basis for the development policy and spatial planning.

The inexistence of general and detailed urban plans for every municipality in Montenegro. There are no basic studies within the existing plans that regulate for example the green areas that border National parks, the areas of special assignment and the construction within its borders or in protected areas. “Especially, we have a problem with flora and fauna, with endemic species… Let’s take the example of the river Cijevna. Who is allowed to build in the middle of the Cijevna Canyon that is under the world heritage protection?”

The inexistence of institutions that would coordinate building the basic studies. Based on the various studies, the needs would be defined in tourist development and they will adjust to capacities of space so the negative effects of an unplanned building would be avoided.

The inexistence of strategic planning that would polarize development in the previous ten years and harmonize it with urban plans. War effects and migrations stipulate accelerated construction and unplanned areas so that accommodations could be provided to the coming population. The strategic plan should calculate the tendency of development of a certain region related to tourism, agriculture, and economic development, and according to that, detailed urban plans would be adjusted. “Space is like a person. It is born in a geological sense and you constantly usurp it. We work following the logic: first we build the building and only after it is built we include it in the plan”.

Certain areas of municipalities in the coastal area do not have a Detailed Urban Plan (DUP), thus persons who are planning to build tourist capacities are building them without a construction permit. “It is only a matter of time until the new authorities will come and ask to devastate all the buildings without a construction license. Investors are feeling insecure.”

The Law on planning and aligning space does not have the permeability and quickness in getting the plans. The law hasn’t predicted some possibilities that could meet the demands of getting a license, even though it hasn’t been a registered parcel in DUP.

The responsibility for these problems lies with the Government; it must decide on areas of development of the whole country and declare strategic plans for development. With it, we should modulate detailed urban plans of development and demands from the local municipalities. “In the case of the economy and demands by the local authorities about their needs for a certain territory, those changes are going faster than the development of the plans; this is the reason for such a vast amount of illegal construction.Are all private accommodations registered and licensed? If they are not, why not – what are the obstacles?

The primary obstacle for licensing and registration of accommodations is the non-simulative policy of the Montenegrin Government. People are simply not well informed about what they gain through the licensing process, and on top of that, they do not want to take part of their income for paying taxes to the Government. “In the last twelve months, a lot has been done to improve controls. We are approaching a new tourist season and we do not want to leave it. In


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Montenegro, people are used to finding a way to cheat the government. Controls have to be regular and punishments must be rigorous and dissimulative.”

Are spatial planning and urbanization modulated with the existing tourist development and modernization of tourist capacities? If so, at what level?

Participants agreed that adjustment is at a very low level. “Spatial planning practically does not exist in Montenegro, or at least in an effective shape. It canters with every flow of development and tourism as well. Uncontrolled, everything is turning into tourist capacities. Later it is legalized through inclusion into the plans. This will be a disaster for the space in Montenegro.”

Every municipality should have a tourist development plan, and in accordance with it, each municipality should correctly develop the spatial area. As a consequence of the illegal construction at the Montenegrin seaside, “The land is devastated, and what is the most beautiful in Montenegro, sandy beaches and nature, are lost in the invasion of concrete and uncontrolled construction.”

What kind of threats does the illegal construction pose to the tourism development master plan? Are there any problems regarding enforcement demolish or prevent illegal construction? Mijušković: Illegal construction grew to its largest scale when the wars began. Political power in one moment loosens the criteria and it quickly grew out of control. There are around 20,000 illegal buildings in Podgorica. Those people haven’t paid a cent to the municipality, and haven’t contributed a cent to the infrastructure development...”

If the building does not fit its intention and its caliber to the detailed plan of the Municipality, the law anticipates destruction. According to one focus group participant, the master plan for tourism does not have legal weight. “A large problem with destruction of the illegally built buildings is the selective approach of the executive bodies, corruption within them, and the inefficiency of these bodies.”

Large problems exist in cases where illegally built areas house many people; these people are often socially jeopardized by living in them and they are connected to the water supply and electrical network. Afterwards, these dwellings are often written to the urban plans by the local municipalities to avoid the destruction of social peace.

How does the existing Law influence restitution on tourism development?The existing Law on restitution prescribes a moral obligation of the state toward former landowners to pay the difference between the paid price and the real price of the property when it was nationalized.

Existing owners of the tourist facilities are protected by this law and there is no legal continuity between them and the previous landowners.

Suggestions to increase the positive and highlight the negative elements of the tourism/spatial planning relationship:

Develop an efficient, responsible system of planning that would prevent destructive effects of building tourist facilities in the area. Garner political will and support to this process and stronger capacities.Predict the desired tourist capacities and adjust with existing capacities of the natural resources (water, land).

Expected support by the World Bank and other donorsHelp in monitoring the planning processHelp in building the infrastructure Help in renewing the tourist spots at significant places like Skadar LakeHelp in conducting a campaign to create the mindset of the importance of preserving our living space.




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Focus group discussion, topic: Small and Medium Sized EnterprisesMay 25, 2005

According to the observations of the FG participants, the main problems and barriers for development of the SME sector in Montenegro are: Administrative barriers. These are problems concerning administrative barriers for business development; they are centered on the bureaucracy and procedures required to obtain certain licenses. A special problem of note is the cost of obtaining these licenses (both in terms of the money and time that is spent to collect the various forms of required documentation). Administrative barriers are part of every step, starting from municipal administration, and going all the way to the republic one.

Illegal competition is one of the problems that tourist agencies are facing. For example, a significant number of NGOs (for example, student organizations) are organizing different types of excursions, and as NGOs, they are not obliged to pay certain taxes even though, according to the Law on tourism, penalty provisions are in place in situations where an uncertified organization (in this case the student NGO) is dealing with typical tourist agency business.

High taxes. This problem applies especially to taxes and contributions on wages, and value added tax. The VAT tax rate is 17% flat and according to the opinions of the business representatives, it should be lower. This is most important for the tourism sector, as a lower VAT would allow their prices to be more competitive. Currently, just export activities are excused from paying the VAT. Among the private sector, there is an initiative to cut the VAT for services in tourism and to treat tourism as an export activity. According to the opinion of the representatives of the Chamber of Commerce, small and medium companies would feel positive effects with the introduction of different tax rates. Even though the tourist season has begun and it is unlikely, due to obligations to the IMF, that the Government of Montenegro would possibly change the tax rates, the Chamber of Commerce does expect improvement in this situation toward the end of this year.

Insufficient credit support is provided, especially for small hotels and motels. Interest rates are pretty high and companies are financed under bad terms. Small firms have problems obtaining loans and the terms of credit are not good. With the adoption of the Law on financial leasing, an improved climate for accessing the sources of finance is expected.

Grey economy continues to be a barrier; its participation in GDP is estimated at 30%.

Lack of knowledge and skills among managers, as well as employers. The Director of Alliance tours said that: “In Kola, during the last 3-4 years, around 240 catering workers were educated. The skills that they possess are weak because of the fact that during their schooling, they don’t have much connection with practice. It is needed that schooling is combined with practice. A special problem of note is the lack of managerial skills. As a representative of the business association indicated, in small and medium sized companies, one person/owner is often times doing different jobs and is also acting as the general manager. “Private entrepreneurs will rarely confess that they don’t know how to do something and they typically have a wish to control everything. Training of the managers and their employees is needed.”

Marketing strategy of small companies "How to make better, more qualitative and cheaper advertising? FG participants agreed that for the foreign markets better advertising is needed.

It is necessary to found an association of tourist agencies. There are various problems that unite tourist agencies, from illegal competition to the levies that they are paying to the state and that increase the prices of their services. “A Joint approach of the tourist agencies through an association would strengthen their negotiating position in talks with Government.”Bad infrastructure. “In the south we don’t have water and in the north we don’t have electricity. Aggregates are too expensive for us. If we put hard work into the preparation of the season and then we don’t have electricity for seven days, it ruins everything.



Non existence of the certification system in tourist facilities ISO 9001, HASAP, ISO 14000. A representative of the business association stressed the fact that in Montenegro, small and medium sized companies are still not aware of the “standards” that foreign buyers/tourists expect. “It is necessary to strengthen the minds of managers with regards to the importance of certification and international standards.”

When discussing the existing regulation concerning the SME sector and whether there is a strategy for its development, participants of the focus group said that:

A Strategy for development and preservation of the SME sector does not exist.“That which concerns the SME sector concerns all others. There is nothing special that is tied just to the SME sector while not affecting other companies in Montenegro. Companies are founded and registered under the same conditions, regardless of whether they are SME’s or large companies. The basic is that in Montenegro, 97% of all companies are small and medium enterprises and they represent the major employers. Development of the Montenegrin economy is based on the SME sector. Small and medium sized companies are the major employers and the only ones that have the potential to create new jobs.” Bearing in mind the importance of tourism for the development of the Montenegrin economy, there is a need for additional regulation of the companies that are working in the tourism sector. Companies whose main scope of work is catering must be registered according to the basic laws, but also according to the Law on tourism. That regulation should respect the criteria regarding quality of accommodations, payment of fees, services in catering, and the proper sharing of income from tourism between the local and central governments.

Suggested methods of how the SME sector can help to better contribute to the development of tourism in Montenegro? Promotion of Montenegrin tourism and small and medium sized companies working in the area of tourism. There is a boom of small and medium sized companies, starting from private accommodation, small catering facilities, rentals of private beaches, etc. Large scale, state-owned companies are no longer characteristic of Montenegro; however, there are quite a few small accommodations, small restaurants, coffee shops, etc. and they need to receive more promotion through fairs, exhibitions, etc. Decrease the taxes and contributions on wages for employers; doing this will ultimately create the preconditions for development of the SME sector in the area of tourism. “In some countries, the work of the Ministry of tourism is done by a private agency that is in charge of promotion and you pay it to promote you.” In Montenegro, this work is done by the Tourist Organization of Montenegro. It is partially financed by the private company’s fees, and even so, this company has the right to ask for better promotion and for the foreign tourists to be better informed of the capacities that they are offering.

Organizing exhibitions. Apart from the promotion through catalogues and brochures, the Association of hotels organized promotion of Montenegro and its seaside in Berlin.

Organizing Information centers at country borders and within every city in Montenegro. Its assignment would be to create the picture for tourists that in Montenegro everything can be accomplished within one day; tourists should be able to receive information regarding pricing for all hotels and private accommodations, camps, national parks, lakes, and anything else that might be interesting for tourists. Training of the tourism providers/employees: “there is no institution in Montenegro that organizes adequate training for people working in the tourism industry and provides certificates for participation in training. We do not have educated and person certified for rafting, licensed by the state. If we are going to operate in tourism, we have to concentrate to do business as it is done everywhere else in the world.”

Current possibilities of the local, national and international market of the SME sector in relation to tourismThe potential of Montenegro is incredible. But, we have to create a product that could be sold on the international market.


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Focus of the SME sector in tourism is more towards the international market. There are more foreign tourists coming in Montenegro, especially from the European Union (in this case, we don’t consider tourists from Serbia as foreign). On the other hand, people from Montenegro are tending to choose other locations for tourism. Considering the possibilities, we should focus on the idea that Montenegro is an exclusive tourist destination for high income tourists. Some FG participants are of the opinion that the main guests are local people.

When discussing whether or not private associations have a role in the development of the SME sector, and which questions and problems they cover, participants of the FG agreed that:

There are private associations, like The Montenegro Business Alliance, that have a role in the development of the private sector through their advocacy for the interests of the private sector. In its agenda, they question the regulation and changes of the legal framework with the purpose of creating a better business environment in Montenegro: “From the other side there is a need for advocacy in the area of promotion of the SMEs since you cannot rely on the state to promote you.”There are associations that represent the interests of the SMEs (like the association of hotels that represents the interests of hotels) and there are umbrella organizations, such as the MBA, that represent the interests of different sectors on a national level. It is necessary to create an association of tourist organizations. When someone is organized, it is easier.It is suggested that a concrete solution would use the money collected from taxes for promotion, thereby indirectly giving the money back to the guests through the campaign. This is one interest that the tourist association should advocate for.

Podgorica’s need for green areas, other services, tourist attractions (souvenirs, bus stations, etc.):

We have to take care of the bus stations, railway stations, airport, etc. That is the first sight that tourists have when entering a country. The bus stations in Montenegro are in very bad condition. In most cities, there is no information bureau at the bus station, and in some cities, especially to the north of Montenegro, there is no bus station building.

There is stressed construction in Podgorica, especially in the central part of Podgorica, and the green area is disappearing. Experts claim that the diminishing green area in Podgorica does pose a problem. Everything is being done to provide parking places; that is a problem. New settlements are rising and they are taking away green areas, taking away our natural beauty. Due to the high temperatures during the summer and the large number of cars, “Park is worthiest in Podgorica.”

In some coastal areas, like Budva, the green area disappeared as construction (legal or illegal) “ate” it. We have to work to preserve the existing green areas and build detailed urban plans in which green areas must be a part of.

We need national recognition; the originality of Montenegro exists just “in pieces.” We do not have a high quality and complete offering of souvenirs and there is no cultural, historical, and national program. We have to work to develop the mindset of people in all areas: from the significance of the environment to the quality of the services that we are providing to tourists. If tourism is basic for economic development, we have to play the role of tourist worker. The essence is within us. Our mindset is on the low level.

Suggestions for development and improvement of the tourism and SME sector:Experts said that it is necessary to introduce standards.Suggestions were sent to decision makers to further work on creating a better business environment in Montenegro by further opening Montenegro and attracting foreign investors and beneficiaries that can be given to the investors. Further decrease bureaucracy.Decrease the grey economy.Decrease taxes and contributions paid by the private sector. With this, as they said, the best push for the private sector will be provided, and especially for the SMEs.



Help by the World Bank:The World Bank could help to influence decision makers to provide development to the private sector. World Bank is an important factor in every country, especially in the area of policy creation. As this situation exists in Montenegro, the World Bank could help with its suggestions. Decreasing the administrative barriers should be in focus. Providing credit for infrastructure objects.Participating in the reform of the health and pension systems. With its suggestions, World Bank should insist on a market economy, its principles and implementation, “Because you haven’t done anything if you insist on adoption but not on implementation of some law.”

Help by the local municipalities and Government: Education as a continued process is recognized as a priority from the side of foreign experts. Education is necessary at all levels, and in all areas that are directly or indirectly tied with tourism, from policemen to receptionists. Foreign language courses must be organized. Our culture doesn’t have the right attitude toward tourists: everyone earns from tourists but I am afraid that we don’t appreciate it enough.”The Government has to eliminate existing barriers and not create new ones. Through the creation of fair and appropriate rules, the Government is doing its best to support the development of SMEs.Municipalities also have to compete with each other. With better conditions for doing business and simpler procedures, municipalities have to attract founding a larger number of companies in their area. That would ensure the creation of new jobs and they will have income coming through taxes. The task of the local authority is to create a favorable ambient for doing business and to create beneficiaries for tourism. Water supply reform is the first step towards a more qualitative infrastructure.

Golf terrains and courses in Montenegro: Development of this elite sport will attract elite clientele. People that use terrains will use some other service. Experts consider that Montenegro has an unused area in the backyard of the coastal region that can be used for building golf courses. Experts didn’t have doubts that this terrain would be functional.Investors in this business take care of their clientele and return of investments. It’s his concern.Specialization is necessary. For example, education of the employees and maintenance of the terrain is needed.

Focus group discussion, topic: Environmental and Ecological ProtectionMay 25, 2005

Ecological problems caused by tourism and suggestions for protecting the environment:

According to participant opinion, the most important ecological problems caused by tourism are:

Conversion of nature lairs into semi–natural and artificial areas as a consequence of the unplanned building, fast expansion of new settlements and the development of mass tourism. Bušković: “Occupation of everything that is free in order to create some tourist object, hotel, or beach, in order to gain more space for tourists. Tourism is one big industry and a significant factor in the development of Montenegro, but we have to be conscious of its price.” Urbanization and illegal construction is especially expressed in the coastal area where we have experienced a retreat of biodiversity and some select species have even disappeared.

Absence of trash dumps and the citizens’ lack of consciousness about that problem. The problems surrounding the inadequate trash dump system are being solved. Very often, a misunderstanding of the local authority, as well as citizens, decelerates the realization of projects that are related to reclaiming trash dumps. “Citizens are negligent. They are looking


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for others to respect something that they do not respect themselves.” Sekulić: “When our people visit another city where there is no garbage or cigarette butts on the ground, they will respect that and will not litter either.”

Bad infrastructure, roads, water supply network and waste water system. “The roads in Montenegro are very bad, with potholes, slowdowns, and construction that are managed without any planning and even occur during the peak of the season,” observed Mr. Danilo Sekulić from Secretary.

Absence of laws to support protection of the environment and the development of tourism. Bušković: “Nature is incapable of accepting tourism as a pressure. Now, limits of acceptable changes are being calculated; that is, how much change and pressure can a certain environment endure without destruction and undesirable devastation appearing.”

Existing regulations and legislation surrounding the environment and tourismThe common estimation of focus group participants is that certain legal decisions exist, such as those that regulate the managing of nature, the protection of the environment and tourism. However, Mr. Vaso Bušković said: “... the question is, how much do those regulations correspond to reality and how have they been put into effect and in which mutual relation are they.”

Sekulić: “If somebody comes to the National park, are there any clues to indicate that he is in a National park? Hardly.” Katnić: “Therefore, he certainly wouldn’t be able to conclude that Montenegro is an ecological state.”

There are mechanisms and procedures that regulate protection of the environment and they establish the influence of some specific activities on the condition of the environment. Some of these mechanisms are:

Environmental Impact Assessment, which has been conveyed from 1996 “it is strongly formalized, it makes a lot of sense but does not have participation of the public. It is positive that it still exists formally, at least on paper.”

Law about National parks is old. Protection of the environment of national parks and protected areas of nature are not defined; however, the law still has some good solutions. However, Vaso Bušković is of the opinion that “there are no appropriate solutions for what happens as society changes because those changes and those solutions are not brought to the end, neither privatization nor the transition process of social and economic life, which has to be brought to the European level.” Ana Katnić: “There is certain regulation that the Ministry for Urban Planing oversees regarding the illegal building in National Parks, and we are here just to report it. National park cannot punish.”Bušković: “At the level of strategic documents, physical plans, and Strategy of tourism development, we do not have the mechanism called Strategic Environmental Impact Assessment, but it is in the Parliament procedure. Additionally, there is a draft of the Law on Environmental Impact Assessment and a draft of the Law on Integrated Environmental Pollution, Prevention and Control.

Procedures for control of traffic of endangered species of flora and fauna

Bušković: “As a unique regulation, there is no completely defined relation between tourism and the environment at the country’s level.”

Focus group participants cited basic recommendations that would help the harmonization of environmental protection and tourism development. Therefore, there are recommendations and expert documentation that are part of either convention or principles for which competent international organizations stand for.

There are documents that regulate, at the level of so–called directions, the relation between tourism and the environment in the Convention about biodiversity.



Bušković: “The International Union for Conservation of Nature, IUCN, creates directions for protected areas of nature and identifies how tourism should be regulated there. They have directions and recommendations that could be used for all of those who work in the sector of tourism and for the environment in order to adapt their jobs to what has been recommended. But that is not defined by Law, it is not obligatory.”

Development of a specific sort of tourism. “It is not all the same if you, in a small country with limited resources such as Montenegro, develop mass tourism, or so – called eco – tourism; this would not only provide higher incomes but would also demand minimal intervention in nature.” Education of citizens and raising consciousness about the significance of the environment and its preservation. “Everything is in us. If we do not respect what we have, others will not respect us. And what will be left to coming generations?”The Ministry for Environmental Protection and Urban Planing, in cooperation with UNEP (United Nations Environment Program), prepared a National Strategy of sustainable development (NSOR- NSSD) that will unite economic development, the challenge of poverty reduction, and all of the pressures by which economic development influences the environment in accordance with sustainable development principles.

Private associations occupied with questions and problems of environment

According to focus group participants there are many organizations and associations occupied with problems of environmental protection and their solutions, but the motive behind their existence is in question, as are the strength of their actions and their influence. However, there is a tendency of networking, resulting in the creation of “Green circle” by five or six NGOs.

Organizations that are occupied with the questions and problems of the environment should have influence on:

An increasing sense of responsibility and the development of a consciousness and culture among citizens so that they could adequately react and take over the initiative. “People are indifferent and unwilling to occupy themselves with the environment because they are in a bad economic situation. Who can care for someone else, some Ministry, Municipality, institution, who can be occupied with that, not we,” Bušković noticed.The Government and state institutions in the way that the “green” component is a part of every activity. Realization of projects from the area of environmental protection, such as the “Project for green trash dump,” Nikolić.Marketing activities.

Suggestions for solving ecological problems

According to participants, things that can be done to improve ecological protection are: Decentralization and deregulation of authorities that exist on the Republic level towards Municipal and local organizations. Mr. Bušković thinks that “Even if Montenegro is ‘small’, we can not, on the central level, know all of the problems within each municipality. We have to give the local people the chance to be engaged in questions of their municipality.”

Better cooperation of state institutions with the NGO sector, especially with respect to project realization.

Competence and authority for solving problems. Sekulić: “Everyone wants to know everything. Doctors want to be architects, economists want to be lawyers.”

Initiation of projects from the area of environmental protection and regulation of the mechanism by which every intervention on the environment is sanctioned. Šćekić: “For every cut tree, we should plant three.”

Determination of priorities. Sekulić: “The question must be asked, what do we want?”

Help from World Bank concerning the environment


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The general conclusion among focus group participants is that the World Bank can help in solving the ecological problems, first of all, through:Financing advanced trainings for domestic specialists abroad to apply their knowledge towards solving concrete problems in Montenegro. Help preparing projects in financial and cadre form, especially for projects through which problems of tourism, the environment, water supply and waste waters are treated. Clear formulation of needs and problems together with the Government and local authorities.Adjust the activities of international organizations to meet the real needs of Montenegro. Bušković: “There is a barrier between the expression of local needs and their acceptance at international organizations.”To anticipate the consequences of development, projects and plans and to find a model with the Government for a mechanism to control that development in order to protect that area. To insist at Government, on the application of laws and acceptance of its obligations. “As it is the case with protected areas: Buljarica, Tivatska solila. The Law is applied and there is no building.” Assessment of influence on Skadar Lake and ecosystems of withdrawal of water from Skadar Lake. Social estimation of the influence the protection of Skadar Lake as a National park will have on the life and work of citizens from this region. Estimation of the influence that the rapid development of tourism in the coastal area will have and how many natural lairs will disappear. Planning of future building.

Receiving Governmental or local authority help in solving ecological problems participants take with dose of doubt. “I think that there is a general disrespect of laws. This is a small country and we are all related.”

Regional needs of Montenegro considering environmental protectionInvolvement of Montenegro in regional organizations for solving the questions of environmental protection is supported by participants. Sekulić: That is a good thing, but it is not its turn yet. We must, first of all, organize an internal situation and then go further in the neighborhood.”

There are opposite opinions also: Skadar Lake, as a natural object, which is of international importance, must be the object of international community interest. The same can be applied on massif Prokletija. On the other hand, there are projects in which Montenegro should not take large participation due to its size and experience. In such associations, programs, and projects, its participation in regional initiatives would be minor. Such a project, according to expert Mr. Bušković is the Adriatic Ion Initiative.

However, according to experts, before all of that the following must be done:

Estimation of what is urgent, and what is feasible in the near future in Montenegro. It is necessary to make a list of priorities, and direct donations in that direction.

Creation of a document that would clearly define the priorities and needs in the sector of environmental protection.

“We must have projects for investments that will have some kind of application letter. If Budva needs a new water supply system, a new water supply system with new capacities must be planted and we have to know how many tourists we can receive. We cannot receive tourists at any cost, and afterwards think about the lack of water or trash dump. We cannot think in such a backwards way that we need tourists since we need money, and then afterwards think about the problems.” Katnić.

World Bank has to anticipate the consequences of development and, together with the Government, must define a mechanism for development control in order to protect the area in which operations are conducted. There are positive examples in Montenegro from which we have to learn. For example, managing protected areas: Buljarica, Tivatska solila. Laws are applied and there is no building.



Golf terrains

Opening of a golf terrain in the coastal area has different consequences on the environment. Participants think that it is a good way to develop tourism, but as we have learned from past actions, in Montenegro there exists euphoria to build objects or conduct projects that have proven popular in other countries without first estimating the economic and ecological impact of such actions. They are sure that this elite sport would bring high paying guests to Montenegro.


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Annex 4 – Report on Focus Groups Discussions Held on Water Thematic Topics

First Focus Group Podgorica, May 17, 2005

TariffsAll focus group participants agree that water bills payment based on flat rate is unsatisfactory. That calculation of bills cause high water bills delivered at the end of second or third month. Causers of that situation are non-existence of water meters and high price for their installing.Focus group participants think that most Podgorica citizens pay their water bills. The average water bill for a four-member family is €10. They emphasize that retired people and poorer citizens pay their bills regularly, while those who are the worst payers come from the private sector. “The best payers are retired people. With a pension of €80 I have to pay electricity, trash, water... and still, I have to live!”

The majority of participants think that those who don’t pay their bill do so out of indignation: “We were paying water bills regularly until the moment we started to receive very large bills. It was consumption of 750 m3 for our four-member family. I have called the water supply Company to come and check because there were business offices on the ground floor and I assumed a mistake had been made. They didn’t want to come, and I became obstinate and didn’t want to pay anymore, at my own damage. Until that moment I was a regular payer, then I received a written warning that they can sue me and I was afraid. After that I didn’t want to pay and I asked them to build in water meters; they responded that this could not be done and that it is forbidden.”

Most participants will accept higher prices if the quality of service in the supply of water is also increased, not in order to pay water losses in the network system. Participants suggest a gradual increase, progressive at 2% every two months, but not all at once. “If the water supply company decides to increase the price, we have to swallow that price of water in the same way we have swallowed the price of electricity, telephone, etc. But, if I have the chance to advise the water supply company, I would tell them to introduce a higher price gradually, not all at once. In that graduation, will be some space for consumers to feel improvement of water supply, so they will easily accept higher price and pay their obligations normally.”

AccessRegarding the quality of water, focus group participants are very satisfied and they use it for drinking as well as for cooking. “The water is so good that it was suggested to refine and bottle it.” They deem that the quality of water in Podgorica does not require any improvement.The main problem is that the municipality pollutes the environment of the springs with wastewater and feces. Considering the infrastructure and supply network, leaking water from the coal-pit and the low level of sanitation are the critical points.

Suburbs with bad approach and quality of waterThere are places like the Roms settlement in Vrela Ribnicka that is in close proximity to the city trash dump, and they do experience the problem of having an inadequate water supply. During the summer months, the municipality delivers water in cisterns to them, but the risk of infections and diseases is increased. “We have filled plastic containers, cans, etc....”

Endangered groups are also citizens of the area around the aluminum combine. “The number of those who have cancer in these settlements has grown in the past several years.

There are places, such as the settlement Konik, that didn’t have a good quality of water supply and they tried to resolve the problem by bringing water from Mareza, “but the quality of water that we received two years ago from Mareza decreased after unlicensed connections at that system appeared, and now problems have already begun at the end of May.”

Main priority needs in the town/community in regard to water services and tourism:

Sanitation of the damaged points on the water supply network – invest in the improvement and sanitation of the temporary water supply network.



Selective stimulation of consumers – define a minimum price of m3 (cubic meter water) up to a certain quantity that is consumed by one household. All quantities that are consumed over the optimal limit should be paid for dearly. “Let’s say that for consumption of 10m3, which is optimal for a three member family, one price should be paid, and all consumption above that should be paid at a much higher price, so if someone wants to use water in the garden, he/she should pay for it!”

Stimulations by the Water Supply Company - build a special water meter for each household. “For this investment, the Water Supply Company needs a huge amount of capital, and if it is possible, there should be some discounts for households when bying the water meter.”

Subsidies (lifeline tariffs)

Focus group participants think that if the Government organized subsidies, they should be directed to social cases, people with small incomes, and handicapped persons. The Government, i.e. a competent social institution that has evidence of the number of social cases, should do compensation for social cases.The mechanism should “be very sensitive since people don’t like to be marked as poor in the public eye. Nobody likes it.” They have record of such cases and they should receive 30% to 50% of relief.

Other

Mechanism to increase paymentsFocus group participants suggest:

Bills should be delivered at the beginning of the month, after monthly wages are received.

The Water Supply Company should form a group that would control the number of citizens connected to the water supply system.

A list of non-payers should be posted at public places twice a month. The water supply company should react to citizens’ comments about bills and problems.

“Disregard for their concerns will only increase the problems.”

Institutional issues - Private versus public management

Working groupsIn this case, citizens think that the Water Supply Company has a monopoly and think that nothing could be done at the local level. The larger citizen’s initiative group should be made only at the republic level, without political impacts. “The local community is occupied by political issues and by organization of elections.”

Local communities should be organized, in suburban areas within the municipality. Representatives of the working group should be presidents of the home council and they should demand reports from the water supply company about the level of payment, dates, etc.

Focus group participants think that in the case of making the water supply company a private service, the situation would be significantly improved. A private company would invest resources, establish a plan, establish ways to solve problems and establish repressive measures if bills are not paid on time, such as turning water off to a particular apartment or house if bills are not paid regularly.

Water management serviceThe water Supply Company should function as an independent service and that is the best way of functioning. Although it has a monopoly, it should function independently.Ongoing action of the Water Supply Company in Podgorica, wherein an information about the damage is sent by SMS and a worker comes to repair the problem with no charge, was positively received by participants, with the comment: “we don’t have anything against it, just the water supply Company has to buy us a mobile phone!”


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The water supply company should have the responsibility for turning off illegal consumers, but also, to disconnect those consumers who are not right: “Those illegal connections should be legalized somehow.”

Measuring – Water metersIn Podgorica, there are a small number of individual water meters; water meters are common and bills are calculated based on the number of family members. “We have asked about building water meters but were told that it would only be possible after the debts are paid. We would also agree to buy and build the water meters ourselves if it could be later deducted from our bills.”Water meters are under the ownership of the consumer; the price is €50, which is not suitable for most interrogated people.

Participants think that they get high quality water, and also they agree that current water price is not enough for covering of the costs of Water Supply Company and maintenance.

Migrations and urbanizationDue to the ongoing migration, in Podgorica, illegal buildings have increased, and there are a lot of illegal connections. The consequence of these illegal connections is lower water pressure. “Preventive measures should exist that would stop them from doing this.”

Consumer’s behaviorFocus group participants think that citizens in Podgorica haven’t expanded their consciousness to saving water. “We have to start education from the kindergarten generations.”Profuse consumption of water during the summer time when people use water for cooling sidewalks and gardens leaves those people in higher elevated flats without water.

Second Focus group discussion - Kotor, 05/19/05

TariffsBill Payment in Kotor is charged based on the registered water consumption at the water meter. A small number of citizens pay for water based on a flat rate and thereby receive lower water bills. These households do not report the exact number of household members and in summer months they water their gardens and yards, thereby making it impossible for citizens who live on higher elevations to have water. The Average monthly water bill is 10 euros. Water meters are placed in common parts of buildings and bill collectors may come to them. The living space of individual apartments is also written on the bills and participants tend to think that this also influences the amount of bill, though they are unsure as to what influence it has since they pay for water according to consumption that is read from the water meter.

A large number of users do not pay for water. The opinion of focus group participants is that young people, in particular, are revolting because they are dissatisfied with the quality of water and lack of water and the problems surrounding water force them to adjust their lives around the times when water is available.

Participants believe that the most regular payers are retired people and poor people.

Focus group participants think that the existing price of 0.90 Euros is the highest price of water in the Republic. With a further increase in the price of water, the percentage of water bills that are actually paid would be reduced. Some participants noted that they may accept a higher price if they had access to water during the entire day so that “water is no longer a category in peoples’ heads that burdens them” and if water were of good quality, so extra money must not be spent for bottled water.

They think that the price should not be increased during the summer months and even suggest that it should be cheaper during that period since there is such a lack of water. “The price is higher and service is not obtained.” According to participants, the Water Supply Company may want to increase the price of water in order to pay all of its workers, and there are too many of them.



AccessKotor provides water from two springs, and one of them dries up during the summer; those springs are Orahovac and Gurdic, and partly from the Tunnel. According to focus group participants, all of these methods are ad hoc. Citizens are of the opinion that Kotor does not have an adequate water supply. The existing method of supplying water to the city cannot be the solution.

The most important problems of the city concerning water cited by focus group participants are:Salty water and the lack of water during the summer months.Shortages or periodic lacks of water due to breaks in the water pipes of the water supply system.Muddy water at the spring occurs frequently and water from the system cannot be used in households. The consequence of using salty water is an increase in household expenses since the lifespan of appliances that use water is reduced (boilers, washing machines, dishwashers, etc.). When the quality of water is considered, participants are not satisfied. Some of them do report to use that water for drinking and in their households, while others drink only bottled water. Also, participants mention having a problem paying for water, especially in times when they have to buy drinking water, and they suggested that during those periods, water bills should be reduced.During the times when water restrictions are in place, expenses of a household increase since people cannot use cheaper electricity tariffs. During that period, citizens have to adjust themselves to situations when there is water.

Water supply improvementTo reduce water losses in the water supply system, it is suggested that the existing system be renewed and maintained to avoid frequent damage. It was also suggested that filters and water cleaners be used to eliminate stones and dust that come with water to improve the overall quality of water.

Subsidies (lifeline tariffs)Participants of the focus group agreed that if the Government introduces subsides that private businesses should receive them since they have found a solution for water supply in their facilities and invested in their businesses in order to provide water to their guests. Private businesses own whole systems for water supply. Subsidy priority should be given to businesses since they will be bringing money to the municipality, and in that way, endangered groups would not be endangered anymore.

Local authorities have to be interested in their local businesses so they would compensate 70% of the subsidies, while the Government would subsidize a smaller portion, 30%, since it is in its best interest that the city lives.

Other

Sensitive areas and groups of citizens: In the city, there is an area of Dobrota that is at a higher elevation, Sv. Vraca, which, during the summer, has poor water pressure and sometimes people go without water for several days. When this occurs, they are provided with water by cisterns that are provided by the Water Supply Company.

Family business in tourism: The water shortage problem is solved by using technical water for washing and bathing, while people buy water for drinking and cooking. Other solutions to the problem include having water tanks with pumps, plastic containers holding 50 liters of water, and installation of boilers holding technical water that is heated by the sun for bathing. Complaints to the Water Supply Company are not effective since the whole town has problems.

Institutional questions - Private versus public management


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Working groups – Some participants said that private businesses would best represent the citizens in communication with the Water Supply Company since they benefit the most and consume much more water than households. It was suggested that that group should work voluntarily and have a representative that completely understands the problems of the water supply.Focus group participants think that private enterprise would find a better solution for the water supply problem. “That enterprise would act as a good host toward this problem.” The Water Supply Company should be an independent service that works independently from municipal authority.

Employment: Without any doubt, a reduction in the number of employees in the Water Supply Company would occur, and that would have a negative effect on the whole economy of the city. However, privatization would increase the efficiency of those workers who would remain. A higher price as a consequence of privatization would be accepted by focus group participants only if the quality of water is better and if water would be available 24 hours per day.Reform: Participants positively estimated the reforms that are planned in the water supply system and they have a positive attitude toward this project. Reforms in the water supply system are not only significant to the ordinary life of citizens, but for the whole economy of one coastal city.

Reform would bring long-term solutions and improvements. The number of citizens has risen and investments in reconstruction and extension of the existing system are needed. By that, conditions of supplying water and the overall hygiene of the city would be improved. “Technical, refined sea water, which has been used to clean pavements, is not efficient. The city is dirty.”

The most critical problem of the reform could be the efficiency of the reform, to which attention should be paid so that citizens do not bear this situation for too long a period. Participants agreed that they would accept a higher price in a certain period, if after that, permanent improvements in the water supply would be made.

Mechanism to increase payments for water: Payments may be increased if service is improved, thereby increasing consumer satisfaction. Service could be improved if employees were to provide exact information about water restrictions and were more efficient towards consumers and their needs.

Focus group participants think that the water supply company should invest its money in the existing infrastructure since the consequences of a bad infrastructure are great: from breaks in the water pipes to flooding of the whole town. “People would most probably accept a tariff and some water restrictions for a certain period, but only if it would result in a better quality of water supply.”

Water management serviceWork of the Water Supply Company – There is certain dissatisfaction with the work of the Water Supply Company at the moment because work is done just to be done. Very often, some pipes are left at the surface or damage is not being repaired completely. “It is much easier to repair certain damage if you call a worker from the Water Supply Company to come as a private entrepreneur rather than calling the Water Supply Company to send an employee.”

Migrations: The greatest increase of citizens occurs during the summer period and in the period of traditional manifestations and fiestas, such as New Year’s, February, and March. Participants deem that the quality of tourists is changed according to the water. “Foreigner’s wouldn’t come, even if he/she only had to pay 5 euros for a bed if he/she does not have basic life conditions. After all, he/she has those conditions at home. Such a situation with the water supply definitely is not a precondition for elite tourism development.” Increased number of tourists positively influences the economy of the city, but it has a negative influence on the water supply. One focus group participant said: “I am ashamed in front of those tourists. I am a native and the city has never been dirtier, there is no drinking water, there is trash wherever you look, your foot sticks to the pavements...”



Consumer’s behavior: All participants agreed that citizens have not developed a conscience about the necessity to save water. As an argument, it is cited: “Why do we have to save water at home when much more water is lost due to breaks in the pipes and no one repairs that for days or months.” In Kotor, most of the apartments have water meters, so people tend to have the opinion that, “I pay for it and I can use as much as I need.”

Third Focus group discussion - Bar 05/20/05

TariffsAll focus group participations state that they pay based on metered consumption, or flate rate aif they don’t have water meter. Usualy they pay their water bills to a bill collector who comes to the home of consumers. The average water bill is €20. In their opinion, the pension group, people with low salaries, are the most typical to pay bills. “Those in the greatest debt, who owe thousands of euros, will never pay a bill, but those who have bills of 10-20 euros pay their obligation immediately.” The main reason for late bill payment is that the other utility bills (electric energy, telephone, etc.) are too high and consumers’ salaries are irregular.

Mechanism of increasing the price of water: The current price of water is already high, according to the opinion of focus group participants. A further increase in price will have negative effects. “Whatever the Water Supply Company does, everything tends to take money from the citizens’ pocket.” Mechanism of increased charges: The higher quality of water and the punishment of illegal consumers will have an effect on the charge associated with water, it will increase. One of the suggested mechanisms is to switch from the network. Participants think that those holding the largest debts should be pushed by jurisdiction to pay their bill. Additionally, it was suggested to make it possible for consumers to pay their bills in installments.

AccessMain water problems facing the town are lack of water and lack of cleanliness. When discussing the bacteriological wellness of drinking water, a great share of citizens lack confidence. There should be a system in place that checks the water in laboratories from time to time. “People are afraid to use the drinking water because of several cases that have hospitalized whole families due to water incorrectness. You should appeal to citizens not to use the water for drinking if there is the possibility of waste water or reduced water quality.”

Quality of water which is at an unsatisfactory level. There is no water filtering and the water pressure is low. “Last year, there were epidemics in the living areas of Popovići, Rena, and Bjelise. One man became sick with hepatitis B.”Focus group participants think that illegal network connections are “huge problem”, and there are a lot of illegal connections to the water network in Bar’s environment. “The number of houses with an illegal network connection increases, but the network of water pipes remain the same, so there is low capacity and we don’t have enough water”.

Improvement of tourism: The areas near the beach have the most problems with water because these areas host the greatest number of tourists. “People, during the whole year, collect bottles in order to fill them with water that they will be able to use later when there won’t be water. At times, citizens may wait three full days to be able to get water, and then, it is available only for a couple of hours before it disappears again. How can families of four take a bath? How can you wash your laundry? What can you expect from tourists then?” For every tourist location, and Bar as well, a top priority should be the quality of the water supply; the pipes should be fixed and maintained and the citizens should be allowed to have a normal life, even during the season. “The lack of water influences tourists to leave Bar and to visit other places instead.”

Focus group participants are not satisfied with the quality of water, but also express dissatisfaction with the supply of water. “In places where I have built house there is a lack of water during the whole year. It sometimes occurs that there is no water for two months straight causing me to move into my old house that is in another part of town.” Citizens are forced to buy water from private businessmen that deliver water in cisterns costing “nearly a whole month’s salary, but you just have to find a way.”


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Supplying in periods when there is no water: From indoor taps you can use water for cooking, while for drinking you should use water directly from sources or buy bottled water. It often happens that you need to wait for water until late into the night, and then you fill balloons so that you have enough water for cooking and washing during the day. You cannot use this water for drinking because it’s incorrect. “During the most beautiful part of the year (summer) we spend our time waiting for water until late in the night. When the water comes, we are ‘begging’ neighbors to turn off taps for at least one half hour so that we can fill bottles or wash laundry. The problem is that when one tap is turned on, the rest have no water.” Some buildings don’t have huge problems with the water supply and quality of water, and other buildings have “hydrophones” so they don’t have problems like this during the year.

Water savings: Everything indicates that citizens of Bar don’t save water. “How can we save water when we don’t have enough water? When we get water, we are trying to wash more laundry and fill more bottles. In places around Bar, people actually use water to water their garden!”

Subsidies (lifeline tariffs)The focus group participants believe that subvention should be for pensioners, unemployment, and social cases. These expenses should be refunded by the community of Bar, and should be careful not to misuse. “Social institution should identify those who will be free from paying bills.”

Institutional issue - Private versus public managementParticipants believe that, even with privatization of the Water Supply Company, the reforms would be slow because of a lack of money and trained staff. The price would be even higher with privatization, and problems with illegal consumers and losses in water exist as well – and these problems are not easy to solve. “Who would pay the higher price? The current price is already high, not to mention a higher one.” Participants believe that a mechanism to monitor the privatized Water Supply Company should be developed.

Reforms: If the water supply system were improved, participants believe that this would have a positive effect on the development of tourism and investment in Bar. “I have not heard that hotels have any problems with water, so there is no fear of this problem for foreign investors.”

Water management service

Work of Water Supply Company: The participants feel that the Water Supply Company should function as an independent service and should be independent from the community. The current tariff on water covers the company’s expenses, but the problem comes in when bills are not paid and when illegal connections are made, both of which reduce Company’s income. If the Water Supply Company is successful in charging whole receivables, priority will be given to investing in the infrastructure. Focus group participants believe that everything should be done to improve cooperation between the Water Supply Company and citizens - Employees in the Water Supply Company services should be more pleasant, should provide more information about the quality of water, and should organize free repairs of water meters, pipes, etc. “Several times I tried to get information about the plan for reconstruction of the water supply network from the Water Supply Company and I would get feedback that our part of the network is not in the plan for reconstruction.”Even though water meters exist in most households in Bar, problems appear due to the lack of existing services and the infrequent calibration of the water meters.

Land, which is far away from the coast is cheaper and because there is no detailed urbanization plan for the town, illegal building cause a big number of illegal connections. “There is no detailed urbanization plan for the town of Bar and that may be the cause of problems for the citizens’ supply of water.”

Fourth Focus group discussion - Ulcinj May 21, 2005



TariffsParticipant opinion is that the poorest population and pensioners pay water bills most frequently, while the larger consumers are less likely to pay. “It can hardly be managed to pay electricity, water, and telephone with a small pension, but the most regular payers are pensioners, while the hotels, Salt Company, and municipality are not paying their bills regularly.” Consumption is calculated based on the water gauge or a lump sum calculation based on the number of people living in the household. The average water bill ranges from 12 to 20 Euro per month. The price of water is 0.35 Euro per m3. The bill can be paid directly to the delivery person, at the Water Supply Company, or at the special identified place for such purpose. The participants consider that the price of water is too high and that the high price has a negative influence, especially on the pensioner population.

An increase in the price of water would be justified if the Water Company could provide enough quality water. There is also a second opinion that: “Everything is calculated in this price of water. There is no need to increase.”

Increase in charging can be made through a court process against the large consumers that are not paying.

AccessThe city is supplied with water from several springs: Lisna Bora, Rec, Salč, Gač, and Klezna.

A main water problem facing the town is lack of water during the tourist season. “The pumps are not working and water is missing in the areas of Meterizi and Pinješ since they are at higher altitudes. Additionally, peasants from the villages are stealing water to water fruits and vegetables, which leaves not enough water in the city.” “My opinion is that the citizens are used to living with a water shortage.”

Due to the overwhelming demand of the water supply network and the lack of pumps, and also a large number of guests (up to 100,000 during the summer months), it is typical to involve the water supply from Lisna Bora. Often, the water tastes like mud and is yellow in color, or sometimes, it tastes like gas. Water is not being filtered enough. “Kids here have problems with their teeth and kidneys due to the bad quality of water, it is defective due to bacteria, and nobody is warning the population about it.”As a huge problem, focus group participants recognized the non-payment of water bills by the large consumers (municipality, court, etc.)Purchasing drinking water or delivering it from springs in canisters, while tap water is used for cooking does water supply during the restricted months. “Drinking water is brought from the springs since people don’t have enough money to buy it regularly; it is not cheap.”

Vulnerable groups: “I am forced to collect water at the spring since my area (Kodre) is almost always without it.” Parts of the city like Stari grad, Meterizi, and Pinješ that are at higher altitudes have the most problems with water, especially during the tourist season. The Kodre area has a lack of water constantly and they are forced to collect both drinking and cooking water from the spring.

Influence on tourism: The poor water supply is recognized as a major problem during the tourist season. The problem with the quality and quantity of water negatively reflects on tourism.” All of that is leaving a bad impression on our guests, and due to the problem with the water supply, they may not visit Montenegro next year.” So, everyone agreed that because of tourism, Ulcinj and all of the other coastal cities need to solve the problems with their water supply. One of the participants said that the best way to solve the problem is to build water towers, like in Belgrade, so the planned hotel in the area of Grand Beach, as well as the rest of the city, will have enough water. “I think that separators are a good solution since we have enough water but the pumps are not working properly. They are not expensive, and we can use them.” Tourist workers said that “guests can be without electricity for a couple of days, but not without water. That is deadly for tourism. We live in the 21st Century!”


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Subsidy (life line tariffs) Groups should include, pensioners, social cases, Roma’s, and invalids. The Government should take subsidies for operational costs. “The Government should help the poorer part of the population cover those expenses through taxes collected from the citizens.”

Other:

The increased number of tourists during the season influences water consumption. The water supply of Ulcinj depends exclusively on pumps that are not working properly, so there is not enough water for citizens and tourists. That leaves a negative impression on tourists. “Who would consider coming again to a tourist destination that has water problems during the season when it is most needed? The kids become sick. I wouldn’t go back there.”

Improving the water supply system:Reconstruction of the existing infrastructure and pump stations is suggested so that higher parts of the city would have water. “The city of Ulcinj obtained pumps on two occasions, but no pump was installed and no one knows what the story is with them. We should bring foreigners to finance the purchase and monitor the installment of the pumps to avoid the same thing happening again, where pumps are not installed and they disappear while somebody puts the money into their own pockets and Ulcinj remains with a lack of water.” “Some substation pumps should exist that would provide water to Meterize and Pinješ.” Distinguish between technical and drinking water.

Exclude the spring Lisna Bora from the network for drinking water, and use that water as a technical source only.

Improve the warning system to citizens about the changes in the water supply system and the quality of water. “It is easy to solve the problem with pumps, but we should work on the quality of water and the regular controls of it.”

Private versus public managementWorking groups Participants of the focus groups think that a city council should be formed from participants that could be trusted (most significant people form Ulcinj) and that could help in solving the water problem. They would be in contact with people from the Water company and demand regular reports regarding the quality of water.

With privatization of the Water Company, the situation would improve, as well as the quality of water, but the amount of water would not significantly increase. The local or central government should control the whole process.

Reforms: Participants of the focus groups consider that reform will not be successful since the planning process started during the seventies of the last century, and so far nothing has been done. “I don’t believe that anything can be changed because everything is going slowly, so why would the Water Company be different?”

Employment: Reforms would cut the number of employees because they think that the “Water Company is over employed, the employees are not doing anything, and they receive salaries more regularly than the other state companies.”

Water gauges in Ulcinj are correct in large percent. Almost every house owns them but they are not calibrated regularly.

Water supply: The existing price of water is enough for investments in the existing infrastructure. We should work towards more effective charging of the water bills. The largest problem that the Water Supply Company is facing is the illegal consumers and the non-payers. The Water supply Company Ulcinj is an independent subject, “The Municipality of Ulcinj is one of the most problematic payers. I think that they do not pay for water at all.” Participants think that it should remain as an independent subject since the company will be easier to privatize. “If the company is part of the municipality, it would just cause more problems.”



The complete range of service offered by the Water Supply Company is satisfactory, but the process should be lower. Complete service should be free of charge. “Whenever something breaks, we are forced to call private companies to fix it, and that costs money.”

Consumer’s behavior: Water is not saved in Ulcinj. We need to educate the citizens and appeal to them to save water. “Water is not saved because when it becomes available, everyone starts using it enormously, and the pressure is weak.” We should start with the education in elementary school.

Fifth Focus group discussion, Budva May 24, 2005

TariffsMost flats in Budva have water meters; some have two. Bills are in correlation with consumption.Citizens of Budva pay bills in the offices of the Water Supply Company or in the post office. One participant mentioned an expeence in Croatia with electricity bills, and later with water bills: “In Croatia, bills for electricity and water are calculated after getting data (once a year) about consumption per hour – on an annual level. Consumers get bills for two months in order to escape the oscilation between the summer and winter seasons. After this innovation, the number of employees in the Water Supply Company in Croatia decreased.”

Focus group participants think that most Budva citizens pay their water bills. They emphasize that retired people and poorer citizens pay bills regularly, while those who own weekend cottages are the worst at paying their bills.

Participants think that the price of water isn't enough to cover the expenditures of the Water Supply Company. Increasing the price of water “will generate a revolution!” Water is a source of life like air, and the Company wouldn't try to stipulate people. It is similar to the phrase “you need air for breathing, you must pay for it!” The Water Supply Company must present a concrete calculation, and show the reason for charging a higher price for water in Budva than is done in the Northern part of the Republic.Participants also agree that everybody must pay their bills in order to decrease the price and to increase the quantity of water.

AccessThe problem for Budva is lack of water, especially during the summer season. This problem is less significant now than it was a few years before. Last year this problem was less significant and we face restriction in water supply not earlier then August.

Overload of water supply network during the summer season causes lack of water. The water supply system in Budva was built in 1979 after an earthquake. In that period, in the Old part of Budva, there were only about 1,300 citizens, and this system 4 cannot any more meet the needs of our city. Participants think that the infrastructure is old and a demand for changing the water pipe lines. One of the focus group participants used Germany as an example where companies don't replace water pipe lines. “One company in Germany uses special machines and equipment to clean and maintain the water pipe lines without changing them.”

Citizens and private companies in tourism use water from balloons and polyester tanks. They buy bottled water or use water from springs. Many private houses have tanks, and recently, many owners of flats also use this water source.

Focus group participants are not satisfied with the water quality. During the summer season, they buy drinking water and use the water from pipe lines only as tehnical. “You can easily see backlog in dishes with water, and it is probably very dangerous for health, especially for children.” Participants agree that the quality of water is low, and not for drinking, in Budva.


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Water saving. Participants think that consumer consciousness for saving water is very low because people don't understand the importance of water. “Citizens usually fill their baths with water during periods of restriction, but only use a few dishes worth of water for the toilet.”

Sensitive groups. Participants agree that there are no settlements in Budva without a water supply; however, higher flats often have low pressure.

Subsidies (lifeline tariffs)Focus group participants think that subvention is not conducive to positive effects. In case that there is a need for subsidies, they suggest introduction of the “package” targeting really poor people, which would assist them not only with their water bills. “Subvention as a permanent solution cannot be conducive to positive effects, especially in the long term.”

Other

Mechanism for improving water supply:Participants agree that the territory of the Budva municipality is morass, and probably has many springs of drinking water. Participants also mentioned a problem with the water meter toll, which is very expensive. Participants suggested that the Water Supply Company, or another organization, should begin to research springs, and the capacity of the springs so that this water can be used. Also, it is very important to research the quality of the water from unknown springs.

Losses in the water supply network are very big. It is very important to improve and maintain the current water supply network.

Sometimes, people try to find new water springs; this is especially true of business people. Participants agree that the municipality must stop that - “everybody dig everywhere!” The lack of water is a problem at the municipality level, not a problem for individuals. “We always need water, and we don’t want to depend on rainfall.”

The municipality must try to use alternative water sources, such as rainwater, in order to accumulate water that can later be used for consumption during periods of restriction. Institutional questions - Private versus public managementWorking groups. There are groups in settlements in Budva that have been formed to communicate with the Water Supply Company. One of these groups is in the settlement of Lazine. Focus group participants think that having groups in the local community is a good idea. Consumers, citizens, and representatives of the SME sector should be involved in these groups.

Focus group participants do not think that the situation would be improved if the Water Supply Company were made into a private service. “Only if a private company could offer a high quality of water and an adequate price would it be OK. A private company will be more effective, people just need quality water -- it isn't important to them whether it comes from a public or private company -- maybe competition would be the best solution.”

Reforms. Participants think that reforms can respond as a long term solution. A big problem could be the lack of water. Using water from Skadar Lake is a positive for participants, but they aren't sure about the price and quality of that water. They hear on TV that the quality of water in Skadar Lake isn't good.

Water management service. The focus group participants think that the Water Supply Companies should act independently, not under the authority of the community. “Workers of the Water Supply Company would be faster in doing business if it were privately owned. “The participants notice bad organization of service in the Water Supply Company, especially when discussing smaller repairs needed in private homes.

Participants are satisfied, to some degree, with the Water Supply Company Budva because they see progress, so they hope that losses to the network will be lower. They also mention that the Water Supply Company is well informed about the current state of restriction and fixing.



Mechanism to increase payingIt is necessary to prolong the working days of the Water Supply Company to include Saturday because many citizens cannot pay bills during the workweek. This would likely increase the percentage of paying customers, especially among those who are weekend visitors.

Water meters. In every apartment in Budva there is a water meter, sometimes even two. During the restriction of water, water meters still work, so consumers get bills for water that they didn't use.

Urbanization problem. In Budva, there is an illegal building that suggests a huge number of illegal connections. Additionally, there is a construction problem in some places where water sources exist. As a consequence of such constructions, there is a risk of landfall, which can put in danger existing settlements.


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Report on Focus Groups Discussions Held on Water Thematic TopicsCity Datum Number of

participantsTotal

Podgorica 05/17/05 8

36Kotor 05/19/05 6Bar 05/20/05 8Ulcinj 05/21/05 8Budva 05/24/05 6

Conditions: 8-10 people, gender (4 male, 4 female ili 5 male, 5 female) Ethnic Structure:

Albanian

Montenegrin

Croatian SerbianUrban

Rural

Ulcinj 6 2 4 4Kotor 4 2 5 1Bar 6 2 1 5 3Budva 5 1 5 1Podgorca 6 2 4 4 Selection conditions:

Urban center and periphery of city High and lower leveling Legal and illegal connections Poverty line (poor and non poor) Ethnics structure Vulnerability and non vulnerable group (big family, retired, unemployed, IDP) Have and don’t have water meter

Focus group Podgorica - 17.05.2005.8 participants; 2 participants from urban periphery; flat rate metering, non payment consumersFocus group Kotor - 19.05.2005.6 participants, all have problems with water supply, 2participants from periphery, metering consumption Focus group Bar – 20.05.2005.8 participants, problems with water supply in summer,2 participants from peripheryFocus group Ulcinj – 21.05.2005.8 participants, 3 urban periphery, illegal connections Focus group Budva – 24.05.2005.6 participants, 2 urban periphery



Annex 5. Socio - economic Household Questionnaire

CONFIDENTIAL

Center for Entrepreneurship and Economic DevelopmentOmladinskih brigada 1, 81000 Podgorica, Montenegro

Phone/Fax: (00 381 81) 633 855, 633 623e-mail: [email protected]

Web site: www.ceed-visit.org

HOUSEHOLD 48 QUESTIONNAIRE

Poverty and Social Impact Analysis (PSIA) and SAfor theWater Supply System Reform in Montenegro, and the Montenegro Tourist Development Project.

Household ID Code:

Interviewer Code:

Date: ________________________________

1. Municipality

2. Settlement

3. Address

4. Phone number5. Head of the Household

Name of Data entry person and date of data entry ___________________

The purpose of this questionnaire is to assess the consumer perceptions of, and satisfaction with, the water supply as part of the Poverty and Social Impact Analysis of water sector reforms in Montenegro. This information will be used for purpose to provide a broader understanding of household conditions and problems they have with water supply and to set a baseline for water supply against which consumer satisfaction can be measured in the future. The survey is being conducted in four municipalities: Kotor, Budva, Ulcinj and Bar. All respondents will be anonymous. Survey results will be analyzed and used in a processed form only. The full confidentiality of this discussion is guaranteed.

48 Households are defined as all individuals living in the same dwelling and are part of the same economic unit.Second Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

127

http://www.ceed-visit.org/

mailto:[email protected]


(TO BE COPMLETED BY THE MOST KNOWLEDGABLE RESPONDENT)

Number of household members:____________ Respondent ID code ________Id. 1. 2. 3. 4. 5. 6. 7. 8. 9.

Name What is the relationship between you and the head of the household?

Sex Ethnic affiliation How old is [...] Level of education

1. None 2. Preschool/kindergarten3. No complete primary school4. Primary school5. Incomplete secondary6. Complete secondary7. Associate (2 – years) College8. University and higher9. Special school

How would you rate your own health status?

1. Very good2. Good3. Average4. Poor5. Very poor

What is [...] current social status?

1. Live unmarried with someone2. Married3. Widow4. Divorced5. Single6. Separated 7. Under 15 years old

What was […]’s primary activity during the past week?

1. Head2. Husband/wife3. Son/Daughter4. Son/Daughter in Law5. Parents/Parents in Law6. Grandchild7. Other relatives8. Servants9. Tenant10. Other non-relatives

1. M

2. F

1. Montenegrin2. Serb3. Moslem4. Bosnjak5. Croatian6. Yugoslavian7. Roma8. Egyptian 9. Albanian10. No answer11. Other

0 if <1 year

Enter if <1 year

1. Working/helping to earn income. 2. Seeking employment3. Attending school4. At home, not working5. Retired6. Under 6 years old 7. Sick/disabled8. Other, specify

Name Code Code Code Years Months

Code Code Code Area

1.

2.

3.

4.

5.

6.

7.

8.

1. Agriculture, hunting, forestry 6. Construction 11. Real estate and renting activities 16. Humanitarian organizations, NGO etc.2. Fishing 7. Wholesale and retail trade, repair 12. Public administration Army or Police 17. Communal services3. Mining and stone quarrying 8. Hotels and restaurant 13. Education 18. Other, specify4. Manufacturing 9. Transport, storage and communication 14. Health or social work5. Water, electric and gas supply 10. Financial intermediation 15. Crafts and services



Does your house/apartment have the following?Yes No

1 Connection to the electricity grid2 Coverage by the water supply system/network 3 Connection to water supply system/network4 Shower/bath inside house5 Shower/bath outside house6 Toilet inside house7 Toilet outside house8 Toilet "eastern-style" (squat plate)9 Toilet "western-style"10

Indoor tap

11

Outdoor tap

Which of the following do you have in your household, and do you use regularly?Availability Use Regularly If not used

regularly, why not?

1. Yes / 2. No 1. Yes / 2. NoWashing machineDish Washer

Do you have a garden plot where you grow some products for household consumption? 1. Yes 2. No If yes, do you use water from the piped water network, and when do you use it (season, off-season)? Does it help promote tourism? Please explain: _______________________________________________________________________

MAIN NEEDS AND PROBLEMS

What are the most important problems, which you are facing in every day life?(Please rank five of them in the following table, on the scale 1-5, where 1 is the least important problem and 5 - the most important problem)

Ranking 1 Shortage of money for buying principle food products2 Shortage of money in satisfying non-food needs3 Poor housing conditions4 No connection to the water supply network5 Potable water is unsafe / unclean6 Insufficient drinking water supply through the piped network (shortage

of water)7 Insufficient quantity and pressure of water8 Lack of sewerage9 Worn out sewage network10

Poor response of water company in case of water, sanitation problems

11

Problems with power supply

12

Poor public health services

13

Health

14

Poor public transportation

15

Unemployment

1 Lack of business opportunities



617

Shortage of agricultural land

18

Water price (tariff) is too high

19

Lack of meters per apartment/ house

20

Difficulty in getting a building permit

21

Difficulty in purchasing land for tourism development

22

Don't know/hard to say

23

Other (specify)

What in your opinion are the most serious problems confronting your city? (Please rank five of them in order in the following table on the scale 1-5, where 1 is the least important problem and 5 - the most important problem)

Ranking

1 Bad roads/inadequate access2 Inadequate health care3 Inadequate schools4 Inadequate child health care services5 Poor drinking water supply through the piped network (shortage of water)6 Insufficient coverage of the water supply network7 Insufficient coverage of the sewerage network8 Worn out sewage network9 Unsafe sanitation10

Poor drainage (flooding)

11

Problems with power supply

12

Poor telecommunications

13

Poor housing conditions

14

Crime

15

Bribing needed for provision of goods and services

16

Poor response of local government in case of water, sanitation problems

17

Weak local government capacity to provide public services (specify which services)

18

Lack of coordination in the water supply sector

19

Problems with public order & security

20

Land conflicts

21

Conflicts between political parties

22

Water price (tariff) is too high

23

Lack of meters per apartment/ house



24

Difficulty in getting a building permit

25

Difficulty in purchasing land for tourism development

26

Other (specify)____________________________________

HOUSEHOLD INCOME and EXPENDITURES, AND EMPLOYMENT

15. How much does your household spend, on average, per month on:€/month (fill each cell)

Which of the listed items do you pay regularly?

Please rank your five priority bills

1 Food2 Transport3 Rent4 Education5 Health and medical services6 Clothing and shoes7 Heating (other than electricity)8 Electricity (summer)9 Electricity (winter)10

Piped water (summer)

11

Piped water (winter)

13

Telephone

14

Entertainment, vacations, celebrations

15

Toursim-related business (e.g.: accommodation, restaurant, vendor, please specify: ______________)

16

Total expenditures


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16a. What is the total household monthly income from: €/month

1 Wages2 Pensions3 Unemployment benefits4 Social assistance5 Money received from relatives working in Montenegro6 Money received from relatives working abroad7 Other gifts/donations8 Income from business operated by the household9 Income from the property10

Income earned from other sources (specify)

11

Total income

16b. Is there any change in your family income during the last three years?1. Increase in family income 2. Decrease in family income3. No change (Go to Q17)

16c. What do you think are the main factors causing this change? (multiple answers are allowed)1. Age2. Changes in employment and salary3. Changes in schooling4. Changes in position (promotion, demotion) 5. General economic situation in the country6. Chances for employment out of country (migration, remittances) 7. Other (specify)______________________________________________________

Does your HH have income from tourism? 1. Yes 2. No (if NO go to Q22)

18. Which economic activities of your household are related to tourism? (Please tick where appropriate)

1 Restaurant2 Hotel3 Small Business4 Renting-out private rooms5 Renting-out private beds6 Service (please specify what kind of

services)___________________________

19. Do you have a license for the activities mentioned in Q18. Please specify:______________________

20a. How many percent of your total household income is generated from tourism during the season? __________%

20b. Has income generated from tourism during the season increased during the last 3 seasons/ years?1. Yes 2. No, it decreased 3 No, no change (if NO, go to Q21a.)

20c. How much on average (in percentage): ________________%

21a. Is there a change in income connected to the situation of piped water supply ? (Please explain the reasons):1. Yes,____________________________________________________________________2. No, _________________________ __________________________________________



21b. How do you define the season:Start Month: ___________End Month: ___________

21c. How do you define peak of the season:Date in frame: ___________

22. Which one from the statements is the most appropriate in accordance with the financial situation of your household?

Tick one answer only

1 We do not have enough money to buy food.2 We have enough money to buy food, but it is difficult for us to buy clothes

or shoes.3 We have enough money for food and clothes, and we are able to save

some money, but we can't afford expensive goods such as a refrigerator or television.

4 We can buy expensive goods, but not everything we want.5 We can afford anything we want.

23. How would you evaluate the financial situation of your family in comparison with the average financial situation of the residents of your city?

Tick one answer only1 Much below average2 Below average3 Average4 Above average5 Much above average WATER USAGE & PROBLEMS

24. What percentage of the water you receive is used for the following purposes?Percentage of Total Water Used

Drinking, cooking, washing, sanitationGardeningCar washingStreet cleaningOther (specify)

25a. What is the main water resource you use for drinking and cooking? (water supply, yard well, vendor, cistern)_________________________________________________________________________________

25b. Are you satisfied with this source of drinking water?Using Satisfactio

nWater source Use for drinking

(a)Use for cooking (b)

1. Yes/ 2. No

1. Indoor tap (piped water)2. Yard well3. Outdoor tap4. Neighbor's indoor tap5. Neighbor's outdoor tap6. Public taps/natural resourcesSecond Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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7. Vendor8. Cistern

25c. If no, explain why (for each source) _____________________________________________________________________________________________________________________________26. Do you have problems with the water supply during the tourist season? (Please tick where appropriate)

1 Supply/volume2 Unreliable3 Salt4 Safety5 All of the above6 Something else, specify7 None

27. What are your priorities regarding piped water supply during the season?Please rank (1 high, 3 low)

1 Hours of supply per day2 Pressure3 Schedule of supply4 Something else, specify

28. When your main source of drinking water is not available, how do you obtain water? (multiple responses allowed)

Tick1 Water stored in or outside the house in a tank2 Piped water from the neighbors3 Hand pump in the backyard (well)4 Dig out a well5 Public taps 6 Natural resources /springs7 Buy water from vendors8 Fill buckets when water is available9 Other (specify)_____________________

29. If you obtain water from “public taps/natural resources” or you buy it from “vendors”: Quantity in liters/day Time spent to

receive waterPrice (day)

Public tapsNatural resources (springs)VendorNote: Average quantities/prices during the season when there is no enough water supply.

IF THE PERSON IS NOT CONNECTED, GO DIRECTLY TO QUESTION 35a.

30. Since when you are connected to the water supply network/system and who connected you?

We are connected to the water supply network/system since __________ (specify year of connection)

Tick1 Yourself2 A friend3 The water company 4 A private technician5 Other (specify)



31. How many water connections do you have in your household?Legal connections __________________ (number) Illegal connections __________________ (number)


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32. Has your household been warned to become disconnected or has your household actually been disconnected last year? (multiple responses allowed)

1. Warned, explain the reason _____________________________________________________ 2. Disconnected, explain the reason_________________________________________________3. Neither, explain the reason______________________________________________________

33. For each category, please choose the most important problem in your water system according to their perceived importance?

Tick one for each category

Technical1 Leaking pipes2 Lack of access to piped water supply network3 Low pressure4 Limited hours of supply (hours)5 Other (specify)

Qualitative6 Perception that water is unsafe (lack of trust, taste, color,

smell)7 The water is unsafe (health reasons)8 Other (specify)

Service9 Unreliable water supply (unavailable for hours/day, or

days/week)10 Water Company technician take bribes (are corrupted)11 Delays in repair and maintenance by the Water Company12 Non responsive customer relations 13 Other (specify)

Operational14 The price per cubic meter is too high15 Dissatisfaction with the not metered billing16 Dissatisfaction with the block metering apartment

building 17 Too much water is used or misused18 Other (specify)

34a. Do you have piped water every day of the month? 1. Yes (if YES, go to Q35a.) 2. No

34b. If NO, how many days a month isn’t it available?Season Number of DaysSummerWinter

34c. How many hours per day do you receive water from the water system/network? ( on average per day)(hours per day, every day)

Season Number of HoursSummerWinter

34d. How does the piped water shortage affect your household/business?1. Household Answers

a) Work at night



b) Purchase more expensive water from vendorsc) Lose guests during tourism seasond) Other

2. Business

Answersa) lose businessb) lose customers/guestsc) work longer at nightd) other, specify

35a. Do you have a tank?1) Yes (if YES (a) individual or (b) collective) 2) NO (if NO why not______) →Q36a

35b. What is the capacity C of the tank?

Tick1 C<100L2 100L<C<500L3 C>500L

35c. Does the tank satisfy the needs of your household / family (drinking, cooking, and washing)? 1. Yes 2. No

36a. Does your household have a water pump? 1) Yes (if YES (a) individual or (b) collective) 2) NO (if NO why not______) →Q37

36b. Does the water pump add to your electricity bill?1) Yes (if YES how much in %____) 2) Don’t know 3) No

37. If you could choose, which important improvements would you like in your piped water supply?

First most important:_________________________________________________________Second most important:_______________________________________________________Third most important: _________________________________________________________

38. Do you have your own water meter (household)? 1. Yes 2. No, (If NO, would you like to have your own water meter?_________________ )

3. Non metered billing4. We don’t obtain bills and don’t pay water (go to Q51)

39. How much do you pay for your piped water supply:1) Season: ____________€/per month2) Off-Season: ________€/per month

WILLINGNESS AND AFFORDABILITY TO PAY

How much is your household supposed to pay for water? _____ Euro per month (or indicate annually, quarterly) [INDICATE DK IF THE RESPONDENT DOES NOT KNOW]

TickGo to water supply company and personally pay billwater supply company’s collectorPost office – water supply company’s drawing accountOther (specify)

40b. How do you pay for sewage?


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___________________________________________________________________________

40c. How do you pay for garbage disposal?___________________________________________________________________________

41a. Do you know how much is the price per cubic meter of water from the water supply network? ____ €/per month

41b. Do you know the unit cost for water in sewage sistem? ____ €/per month

41c. Do you know the unit cost for garbage disposal? ____ €/per month

42. Do you know your household’s average consumption of water in cubic meters per month? ____ cubic meters per month

43a. How much does your household pay on average for piped water per season /month /year?Time Period Euro

1 Month2 Season3 Year

43b. How much does your household pay on average for non-piped water per season /month /year?

Time Period Euro1 Month2 Season3 Year

44. Do you think the price is justified for your current water services? 1. Yes 2. No. If NO, please specify why not: ______________________

45a. Do you know your household’s “generation” of waste water in cubic meters? 1. Yes ____ monthly/ quarterly/annually 2. No

45b. Do you know your household’s “generation” of garbage in square meters? 1. Yes ____ monthly/ quarterly/annually 2. No

46a. Has there been any increase in the price per cubic meter from the water company during the last year? 1. Yes 2. No (go to Q48a) 3. Don’t know (go to Q48a) 46b. How much has the price per cubic meter for water increased during the last year? Price before increase _______€/ m3

Price after increase: _______€/ m3

Specify month of increase________________

46c. What was the impact of this increase on your household income? 1. No significant impact2. Unable to afford the bill3. Restrict other expenses to be able to pay the increased bill4. Reduce water consumption to afford the bill5. Switch to other means to access water6. We became irregular payers



47. After the tariff increase how has your water supply changed? (multiple answers are allowed)1. Longer hours of supply2. Higher water pressure3. Better water quality4. Improved responsiveness of the company in case of technical complaints5. Improved company-customer relations6. No change7. Other (specify)_____________________________________

48a. In the last year, was there a time when you did not pay your water bill? 1. Yes 2. No (go to Q49)

48b. If YES, what are the reasons why you do not pay this bill regularly?

TickWater should be freeWere not able to? (lack of money)Are not satisfied with the service?Did not receive any water bill?Have to wait too long in line to pay (long cues)Opening hours of water office are not convenient?No enforcement for non-payment Other

49. How much has the water bill increased in the last 2 years?Yes________Euro (or estimated bill doubled, tripled, ect.) 2. Don’t know

50a. Would you be willing to pay higher price per month for a 24-hour supply of water of good quality and pressure?

1. Yes, how much______% per month (go to Q51) 2. No

50b. If no, why not?

1. cannot afford2. water should be free3. other (specify) _________________________

51. What are the priorities in your household’s wastewater disposal services?1. Connection to central sewerage system 2. Regular septic tank cleaning 3. Other (specify) _________________________________

52. If you are not connected to central sewerage system, how much and would you be willing to pay for a connection to the central sewerage system?1. Yes _____Euro 2. No

53. Would you be willing to pay monthly for waste water disposal?1. Yes,________€/month 2. No54. Which improvements of waste water disposal would you like to have?_________________________________________________________________

55. How much would you be willing to pay for regular septic tank cleaning (if you have any)?________€/month


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PUBLIC AWARENESS

56. What do you know about the central/local government measures to improve the water supply? 1. Nothing (go to Q58a)2. Somewhat informed 3. Adequately informed

57. Where do you get the information about the government measures to improve the water services?

Tick1 National TV2 Local TV3 Radio4 Newspapers5 Magazines6 Posters/ affiche/ billboards7 Direct marketing (someone came home to explain you or you got a leaflet

at home)8 Other (specify) _____________________

58a. In your opinion, what should the local government do to improve the piped water supply? Please specify: ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

58b. In your opinion, what should the central government do to support the municipalities to improve the piped water supply? Please specify: ________________________________________________________________________________________________________________________________________________________________________________________________________________________________

59a. In your opinion, who is responsible for water supply in your town?Central governmentMunicipalityother, specify__________

59b. In your opinion, who should be responsible for water supply in your town?Central governmentMunicipalityother, specify__________

60a. Is there an office within the Water Company where you can direct your concerns?1. Yes 2. No 3. Don’t know

60b. If you have any problems (such as blockages, leakages, contamination etc.), how quick does the water company fix them?

Tick one1 Within one (1) day2 In two (2) days3 In three (3) to five (5) days4 In one week5 More than one week6 No response from the water

company 7 No problems experienced8 Usually I call a private plumber



61. When you want to report water/waste water problems, ask for repairs, or complain regarding water/waste water services, who do you contact, and what contact is it?:

Who do you contact?(write name of organization /agency)

State whether this contact is:1. Water company2. Local government 3. Private technician4. Other

1. Report water/waste water problems (e.g. blockages, leakages, contamination, etc.)2. Ask for repairs3. Complain regarding water/ waste water services

OTHER QUESTIONS

62a. Do you think that the water supply company should improve enforcement to:

Tick1 Collect the bills?2 Cut-off illegal connections? 3 Prevent constructions that affect water and sewage networks5 Other (specify)

62b. What do you think would be the three best ways to improve enforcement in your neighborhood/community? (please rank,1-low, 3-high)

Ranking (1-3)

1 Public awareness campaign2 Send mailed reminder to non-paying customers3 Apply financial penalties for late payers4 Send water company representative together with municipal

police5 Cut off non paying customers, monitor these customers and

charge for the re-opening of the water connection6 Take legal action for unlawful behavior by consumer in

regard to water7 Cut off illegal connections at customers’ expenses

63. In your opinion, which goal group should be included in campaign?Tick

HouseholdsBusinessesInstitutions

64. On what basis do you think each household should pay for water?Tick one

1 According to consumption2 According to household income3 According to number of people in the household4 According to house/flat size (including garden)5 Water should be free6 Other (specify)

65a Do you get subsidies for your piped water services? (coupon, cash, lower tariffs, etc.)1. Yes 2. No 3. Don’t know


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65b. Would you support that very poor households would receive subsidized tariffs?1. Yes 2. No

65c. Do you think, that the government measures to improve the piped water services should include a subsidy for households who can not afford to pay their piped water services? 1. Yes 2. No

66. Do you think that the current water shortages restrict your employment opportunities, especially in regard to tourism?1. Yes 2. No 3. Don’t know

67. Do you think that the government measures to improve the piped water services will increase opportunities for employment, especially in regard to tourisms?1. Yes 2. No 3. Don’t know

68. Do you think that the current water shortages reduce your business opportunities or investments and the value of your property? 1. Yes 2. No 3. Don’t know

69. Do you think, that the government measures to improve the piped water services will increase your business opportunities or investments, and the value of your property?1. Yes 2. No 3. Don’t know

70a. Do you have a bank account?1. Yes 2. No

70b. If yes, would you be interested to pay your water bills directly through your bank account? 1. Yes 2. No



Annex 6. Terms of Reference for Local Consultant

Poverty and Social Impact Analysis (PSIA) for the Water Sector Reform in Montenegro, and Social Assessment (SA) for the Montenegro Tourist Development Project.

I. Background

The Poverty Reduction Strategy for Montenegro includes preparation of a water sector reform in Montenegro. Important steps toward this reform include a mid- and long-term sustainable water supply in the coastal area that will improve the tourist industry. The Government has requested the Bank’s assistance for the development of a new regional water supply scheme. The Bank together with other donors will start operational work in the water sector. KFW, for example will provide technical assistance for management improvements of water utilities, while with the help of USAID, the Government has drafted a new Water Supply Law that has been passed in the Parliament of Montenegro and is expected to be discussed during spring 2005. The draft law proposes that the tariffs should cover the costs of utility operation and maintenance. In addition, USAID will assist the Government in preparing a tariff setting regulation and methodology framework.

The intended countrywide water sector reform is interconnected with the Tourism Development Strategy which is one of the most important future income-generating sectors in Montenegro. The most urgent areas in regard to water supply and tourism are the six coastal cities Herceg Novi, Tivat, Kotor, Budva, Bar and Ulcinj, thus the WB project will focus on these sites. These coastal cities provide 95.6% of all beds available for tourism in Montenegro.

With the water sector reform still in its initial stage, the Government has agreed to conduct an upstream Poverty and Social Impact Analysis (PSIA) and Social Assessment (SA). The study will inform the water sector reform, and will lend operational assistance to the World Bank’s Montenegro Tourisms Development Project. Additionally, the findings of the PSIA will benefit the PRSP while at the same time; the study will contribute to the Country Assistance Strategy with recommendations for programmatic lending as well as operational work.

II. Objectives

PSIA/SA analyzes distributional impacts of policy reforms on the well-being or welfare of different stakeholder groups, with particular focus on the poor and vulnerable. PSIA promotes evidence-based policy choices and fosters debate on policy reform options. It assists to better understand the intended and unintended consequences of operational interventions that aim to implement the borrowers poverty reduction strategies.

More concretely, this upstream study will analyze the distributional impacts of the proposed water sector reform priorities that the Government is addressing in the following areas: (1) rehabilitation of the existing water and wastewater networks to improve the operation and service quality to meet the increased demand from the tourism industry and completion of the regional water supply scheme to cover current and future water demands of the coastal tourism industry; (2) improvement of the management of the public water utilities to enhance the effectiveness of their operation, and to assign key management positions on the principles of technical expertise and merit; (3) institutional and organizational changes in the sector; (4) improvement of the legal and regulatory framework that would provide for tariffs at cost recovery levels and adequate mechanisms for tariff settings; and (5) establishment of a benchmarking system to monitor and evaluate the sector performance and better allocate resources.

III. Focus of the work

The study will assess the poverty and social impacts of the Governments’ proposed reform measures in the water sector and its implications for the local economy, dominated by the tourism sector. These include but are not limited to the proposed regional scheme, planning to


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provide bulk water from Lake Skadar for Coastal municipalities, and the water supply law covering the entire country. The guiding principles are:

What are the key issues and current constraints in the water and tourism sectors? How could those constraints be overcome through different reform options in the water sector? (illustration of various reform options)?What are the expected poverty and social impacts of each of the different reform options, i.e. who are the winners and losers of each reform option?

During the analysis of the water sector reform priorities, special attention will be given to (a) institutional reform aspects within the decentralized context of Montenegro, (b) financial viability of water utilities through tariff increases to reach cost recovery and establishment of commercially oriented business practices, and (c) any other key reform aspects that accompany the ongoing reform dialogue and/or emerge during the data collection and analysis.

IV. Methodology

Due to the lack of reliable and up-to-date data in the sector, the study will draw heavily on primary collected data, while using existing secondary material as far as possible. The methodology comprises quantitative and qualitative methods and tools, set out in the PSIA User’s Guide, PSIA Website and E-Learning, i.e. (a) a combined Stakeholder and Institutional Analyses, (b) Social Impact Analysis, (c) Demand Analysis – Consumer Assessment (incl. willingness to pay and price sensitivity analysis), and (d) Social Risk Assessment including a Scenario Analysis. Data collection tools include a desk review of relevant material; expert/ key-informant interviews; focus groups discussion; and community profiles. Sampling is purposefully with attention to a gender-balanced approach towards respondents. Specifically, the PSIA will assess the expected reform actions impacts on different social groups in terms of:

tariff increases to cover the financial operating costs of the utilities; changes in access to water and water services; measures to support the poor (lifeline, bulk tariff, etc. ); changes in any asset ownerships, e.g. tourism hotels and facilities; changes in employment for the local economy and in particular for tourism industry.

V. Rational for Site Selection

Four cites have been selected in the Coastal Region - three cities that participate in the water sector reform through the proposed regional scheme (under the proposed Bank’s Montenegro Tourism Development Project), and one city outside of the project area, but lies in the vicinity of the regional scheme. The study will benefit the implementation of the PRSP, stakeholders of water sector reform, and beneficiaries/existing customers, particularly the poor.

The study will focus on the four cities of Bar, Budva, Kotor, and Ulcinj:

City Selection Criteria Bar Coast: WB project city with actual reform measures, local economy has both

tourisms and industry (port), biggest city on CoastBudva Coast: WB project city with actual reform measures, biggest tourist city with huge

water shortage during tourist seasonKotor Coast: WB project city with actual reform measures, UNESCO heritage site with

large number of tourists, no natural sources (except rainfall), low quality water (salination, brackwater pollution of network = health issue)

Ulcinj Coast: high tourism development and economic growth potential; environmental sustainability (wetlands); outside of WB project area as comparative PSIA site

VI. Scope of Work and Responsibility of Local Consultant

The PSIA work entails: (1) preliminary work in preparation of the study (including site profiles), (2) preparation of the fieldwork, (3) data collection and fieldwork, and (4) data analysis and report writing. In each of these components, the main tasks to be carried out by the consultant include, but are not limited to the following:



(1) Preliminary work:

The consultant should carry out a desk review of existing documents related to the water and tourism sector and PSIA methodology to get a sense of the context and four study sites, e.g.:

Montenegro Poverty Reduction Strategy Pape Living Standards and Poverty in Montenegro, ISSP (2002) Diagnostic Assessment of Montenegrin Water and Sewerage Works, Urban Institute

(2004) Water Supply Law, and Law on Self-Governance PSIA User’s Guide, PSIA Good Practice Note, PSIA Website, PSIA E-Learning Material describing the water and tourism situation in the four study sites UNDP Roma, Egyptian, Refugee, and IDPs Study USAID water study Albania Water PSIA “Decentralization and Water Sector Privatization in Albania” Other relevant reports or studies

(2) Preparation of the fieldwork

The fieldwork comprises socio-economic household survey, focus group discussions and expert/key informant interviews in each of the four cities, plus community profiles of each site. The consultant should review and eventually propose revisions of existing fieldwork material and specifically elaborate the household questionnaire, focus group discussions and key informant interviews questionnaires. Stratification criteria will include, but are not limited to the following criteria and indicators:

Purposive selection criteria IndicatorsUrban center Urban periphery GeographyLower elevation Higher elevation “ ”Legal settlement Illegal settlement Property StatusVery Poor – poor Noon-poor – well-off Income levelsEthnic groups (Roma, etc) Non-ethnic groups EthnicityVulnerable Groups (Large families, retirees, unemployed, IDP, Roma, etc

Non-vulnerable Groups Vulnerability

Metered Households Un-metered Households Billing methodConnected HH Un-connected Households Network ConnectionAffected by tourism Not affected by tourism Local economy

…any additional, useful criteria and indicator that emerge from the literature/ desktop review...

In each of the four cities, the consultant should prepare the sample for the socio-economic household survey in accordance with the criteria agreed upon during the PSIA/SA training. In particular, while preparing the sample, the consultant should focus on (i) the distribution of the households within the network, in relation with service area maps, taking urban center/ periphery and higher/lower elevations into consideration, (ii), property status of the settlement, (iii) metered-based billing (individual/ block meter), and (iv) the inclusion of households located outside of each service area.

While preparing the focus-group discussions, the consultant should select the participants according to gender, ethnic and socio-economic diversity in each of the cities, size and type of business (large, medium, small / tourism and non-tourism related), and public and private civil society organizations (public institutions, tourism agencies, NGOs, etc). Concerning the in-depth expert/key-informant interviews, the consultant will identify and list the stakeholders to be considered in the water sector and tourism industry, in the public and private sector, both at the central and local levels, and in the civil society.

(3) Field workSecond Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

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The field work will be carried out in the four specified sites of Kotor, Budvar, Bar, and Ulcinji will comprise but not be limited to the following:

100 socio-economic household questionnaires = 25 per sity 10 focus groups = 1 per site, plus 6 in Podgorica About 30 expert/key-informant interviews = minimum of 6 per site, a minimum of 5 at

central government, and with key international partners. This is a mere indication, and the actual number of interviews to be determined by the context and the necessity to gather sufficiently satisfactory information

4 community profiles = 1 per city + Podgorica

(a) Socio-economic Household SurveyThe household survey will cover four municipalities: Kotor, Budvar, Bar, and Ulcinij. The survey will be carried out on a purposive representative sample of about 25 households in each of the four cities. It will provide statistics regarding population, education, employment, income, and health status. It will then focus on people’s perceptions regarding their water supply conditions, priority problems with their water supply service.

(b) Expert/ Key-informant InterviewsTen expert interviews will be carried out in each of the four cities with representatives of public and private sector and civil society related to water supply, and the local economy (tourism, industry, etc) to understand the issues and dynamics of the expected distributional reform impacts on tariffs, access, transfer and taxes, and employment. This will help to evaluate and understand stakeholder perceptions, views, and institutional positions of water supply and local economy conditions, policies, roles and bottlenecks of institutions in each city.

(c) Focus Group DiscussionsFour focus group discussions (about 8-10 people with attention to gender-balance) will be conducted in each city to get qualitative feedback from the population on the expected distributional impact of the planned water sector reform, regarding, but not limited to tariffs, quality, employment, access, transfers of taxes. More specifically, discussions will provide feedback on the nature of water supply services, people’s willingness and ability to pay for water supply improvements - including quality of water-, feedback on health issues associated with existing conditions, perceptions of links between current and future water supply conditions and the local economy, especially tourism, perceptions regarding the tourism development potential per se, and its implications for environmental protection and sustainability, and people’s perspectives on institutional bottlenecks and necessary organizational changes. One extra focus group will be conducted in Podgorica with experts on agricultural businesses, small and medium-size enterprises, and environmental protection. See focus group discussions for further guidance.

(d) Community profilesFor each city, the consultant should prepare a community profile describing the situation of (a) water supply, (b) the local socioeconomic conditions (tourism, industry, etc.) and (c) impacts of the water situation on the local economy and vice versa, (d) the socio-economic situation per se (including income, (un)employment, ethnic groups), and (e) in regard to water issues - including issues of access to, and assets of water goods and services, tariffs, and the institutional and organizational setup of the water sector within the highly decentralized context of Montenegro. Each community profile should be 3-4 pages in length.

VII. Data analysis and report writing

The consultant will be responsible for the data processing, data analysis as well as the writing of a report in excellent English. Data analysis should include, but not be limited to areas such as statistics regarding population, education, employment, income, and health status. It will then focus on people’s perceptions regarding their water supply and local economy conditions, priority problems with their water supply service and institutions, and willingness and ability to pay for improvements in their water supply conditions. The final report will presents (a) the main findings, (b) concrete recommendations and different options for policy reform, and (c) the expected positive and negative poverty and social impacts of each of the proposed reform options, which will guide the government and the Bank project on choosing an appropriate



structure and process for the planned water sector reform in Montenegro. The consultant will prepare a policy matrix similar to the one in the Albanian water PSIA.

In 2003, UNDP has supported the Household Survey on Roma, Askaelia, Egyptians, IDPs and Refugees, and has showed interests in data collection for vulnerable groups such as Roma, IDPs and Refugees. During the last rapid appraisal mission, UNDP expressed interest to join the WB PSIA and agreed to conduct the fieldwork for the study for these vulnerable groups. After completion of the fieldwork, the local consultant will incorporate into the PSIA report the UNDP data/report on vulnerable groups. UNDP agreed to conduct and to pay for both, the fieldwork on vulnerable groups and the PSIA dissemination workshops.

VII. Time-table

It is expected that the assignment will commence in April 2005. The duration of the assignment is expected to be about 5 months:April 20, 2005 – April 15, 2005: preliminary work and preparation of the fieldwork (all survey and interview material and logistics)April 25 – May 20: fieldwork May 20 – June 15, 2005: data processing and analyzing, submission of draft outline of reportJune 15 – June 28, 2005: report writing (first draft)June 20, 2005: Deliver the draft report to the World Bank.July 2005: Revision and incorporation of commentsAugust 1, 20, 2005: Deliver the revised draft report to the BankAugust 25: final report submitted to the BankSeptember: Dissemination through a workshop in country

VIII. Outputs and reporting requirements:

The consultant should report to the PSIA team: Hermine de Soto, Sabine Beddies (Social Scientists), Andreas Rohde, and Arben Bakllamaja (Water Sector Experts). All documents shall be submitted in English. Electronic version of each document should be available in MS WORD format and as pdf files.

Once ready, and before the launching of the fieldwork, the commented/revised socio-economic households questionnaires, key informants interviews and focus group discussions questionnaires shall be sent to the World Bank for comments, and no objection.

During the fieldwork, the consultant will submit three progress reports of no more than two pages. The first one will be submitted two weeks after the starting of the fieldwork, the second one in the middle of the fieldwork and the third one at the end of the fieldwork. These progress reports should state the number, type and location of fieldwork carried out, any problems identified and the solution developed to deal with them, as well as a very brief summary of preliminary key findings that the fieldwork has identified. After completing fieldwork and quantitative data entry into a database, an extract of this database containing the answers to the aforementioned questions should be provided to the Bank electronically.

After the data analysis, and no later than two weeks after the end of the fieldwork, the consultant will submit a draft outline of the report for comments. Upon agreement on the outline, the consultant will submit draft chapters for review and comments, in accordance with the agreed timeline. Two weeks before the deadline for the submission of the final report, the consultant submits a full draft report, including all comments received for each of the draft chapters. The final report will be submitted to the World Bank for approval. The final report will be submitted electronically, alongside all data collected and material generated during the study.


147


Annex 7 – Guidance on the focus and scope for data collection

a. Socioeconomic Household Survey

Stratification will cover residents in urban center and periphery, lower and higher elevations, legal and illegal settlements, different poverty levels (poor and non-poor), different ethnic groups, vulnerable and non-vulnerable groups (e.g. large families, retirees, unemployed, IDP, Roma), metered and un-metered households, and connected and unconnected households, particularly an issue for population groups located South of the city Bar and Ulcinj).

b. Expert/key Informant Interviews

Expert interviews will help to understand legal and institutional bottlenecks related to inadequate water supply and tourism growth, in the areas of: (1) institutional responsibilities and accountability of stakeholders at central and local government levels; (2) tariffs increases to cover the costs and self financing of the utilities; (3) operation and management of the water utilities as commercial oriented utilities; (4) willingness to pay for service provision; (5) enforcement of payment from delinquent customers; (6) access to land and land tenure security for construction of tourism facilities; (7) registration and licenses of the small private accommodations for tourism taxes; (8) harmonization between urban planning and regulation with spatial tourism development and modernization of existing ones plans; (9) the threats that the illegal construction are posing to the tourism development master plan and level of enforcement; (10) the implications of the current Law on restitution of the private property to the former owners for tourism development. Impacts of the water supply conditions on the tourism industry, Identify expert perceptions on which organizational changes need to take place to improve the efficiency of legal system regarding enforcement of standards, management and efficiency of the water utilities, the current water shortage and implications on and from the local economy. For each site, a minimum of six interviews will be conducted with a technical water expert in the municipality, the director and employees of the water utilities, and representatives of the local business sector, such as tourism and non-tourism related businesses (large and small), chambers of commerce (if applicable), and water supply-related businesses, as well as one interview with a representative of Vodacom. Additionally a minimum of five interviews will be conducted with experts from the Central Government, i.e. the Ministry of Environmental Protection and Urban Planning (MoEPUP), Ministry of Tourism, Ministry of Agriculture, Forestry and Water Management (MoAFWM), PEW and the Water Agency, as well as with representatives of Parliament’s Committee on Finance, Environment, protection, and the Committee on Tourism (or equivalent titles). Additionally, several interviews will be held with key international partners including the Urban Institute/ USAID, KfW, EAR, IDR, and UNDP.

c. Focus Group Discussions

Focus group discussions will help to understand both individual and collective perceptions on the proposed improvements. It will also contribute to our understanding of the social organization of communities, their ability and readiness to participate in project implementation and monitoring and evaluation. Focus groups will be organized with representatives of the business sector, consumers, and community representatives. Specifically, focus groups with (a) businesses will comprise large and small tourism-related business (hotels, B&Bs, private accommodations, restaurants, etc), large and small non-tourism-related business, chambers of commerce, and water supply-related businesses; (b) consumers will include residents in urban center and periphery, lower and higher elevations, legal and illegal settlements, different poverty levels (poor and non-poor), different ethnic groups, vulnerable and non-vulnerable groups (e.g. large families, retirees, unemployed, IDP, Roma), and metered and un-metered households, (c) community representatives will include tourist agencies, NGOs/CBOs, local public institutions such as hospitals, schools, kindergartens, and (d) tourists. One additional focus group with experts is conducted to get insights into the links between tourism and agricultural businesses, small and medium-size enterprises, and environmental protection.



Annex 8. CDM - Potential financial gain for utility by recovering lost water based on the winter tariff in Budva of 0.6 €/m3

Leakage,

l/s

Water Price,€/m3

Daily,m3

Daily,€ Monthly

,m3

Monthly,€

Annually,

m3

Annually,€

1 0.60 86 52 2,592 1,555 31,104 18,6625 0.60 432 259 12,960 7,776 155,520 93,31210 0.60 864 518 25,552 15,552 311,040 186,62420 0.60 1,728 1,037 15,840 31,104 622,080 373,248

Losses of 20 l/s in one year equal lost revenue of €373,000


149


Municipality

Detected number of

the damages

Number of the

damages

Changed and

installed

New pipelines

>Φ 80 mm(m)

Changed and

installed

New pumps(Repair)

Installed

Throughput meters

Installed new

Frequency regulators

Installed new

Water meter

Savings caused by

rebuild damages

Q (l/s)

New quantum of

water injected in

water system

Q (l/s)

Total of new

quantum of water

Q (l/s)

1 2 3 4 5 6 7 8 9 10Herceg Novi

80 1,566.24 0 20 0 0 7.00 0.00 7.00

Kotor 12 190.00 4 (3) 0 0 798 11.50 0.00 11.50Tivat >30 174.00 8 11 1 293 10.00 9.00 19.00Budva 6 730.00 5 + 4 6 14 (5) 0 0.50 25.00 25.50Cetinje 118 225.30 0 0 0 1,765 47.00 0.00 47.00Bar 10 4,948.00 2 0 0 0 1.00 40.00 41.00Ulcinj 0 2,438.00 3 4 0 0 0.00 15.00 15.00TOTAL >255 10,271.54 26 (3) 41 15 (5) 2,856 77.00 89.00 166.00

Annex 9. – VODACOM – OVERVIEW OF COMPLETED ACTIVITIES WITHIN THE “INTERVENING MEASURES 1”



Annex 10. Tables and Descriptive Statistics Obtained from HHQs

Municipality Frequenc

yPercent

Budva 25 25Bar 25 25Kotor 25 25Ulcinj 25 25Total 100 100

Poverty line by municipalityPoverty line by municipalityOpstina Poverty line Frequency Percent

Budva

Poor 3 11.5Economically vulnerable 2 7.7Non poor 21 80.8Total 26 100

Bar


Kotor


Ulcinj


Q2 Number of household members Frequenc

yPercent

1 15 15 2 9 93 20 204 33 335 18 186 5 5

Total

100 100

Gender

Q4 Ethnic affiliation by municipalityOpstina Poverty line Frequency Percent

Budva

Montenegrin 80 72.07Serb 22 19.82Non answer 9 8.11Total 111 100.00

Bar

Montenegrin 51 66.23Serb 10 12.99Croatian 9 11.69Albanian 7 9.09Total 77 100.00

Kotor Montenegrin 51 62.96

Draft Report, prepared by Center for Entrepreneurship and Economic Development (CEED)

Frequency PercentMale 184 54.28Female 155 45.72Total 339 100

153


Serb 10 12.35Croatian 20 24.69Total 81 100.00

Ulcinj

Montenegrin 15 21.43Serb 37 52.86Moslem 2 2.86Roma 1 1.43Albanian 15 21.43Total 70 100

Ethnic affiliation Frequenc

yPercent

Montenegrin 197 58.11Serb 79 23.30Moslem 2 0.59Croatian 29 8.55Roma 1 0.29Albanian 22 6.49Non answer 9 2.65Total 339 100

Q5 AQ5 AGEGE OFOF INTERVIEWSINTERVIEWS Frequenc

yPercent

17 age 68 20.0618 - 30 98 28.9131 - 40 30 8.8541 - 50 54 15.9351 - 60 53 15.63> 60 35 10.32Total 338 99.71

System 1 0.29339 100

Q6 Level of education Frequenc

yPercent

None 8 2.36Preschool/kindergarten 12 3.54No complete primary school 13 3.83Primary school 41 12.09Incomplete secondary 11 3.24Complete secondary 170 50.15Associate (2 – years) College 36 10.62University and higher 47 13.86Total 338 100

Q9 What was […]’s primary activity during the past week? Frequenc

yPercent

Working/helping to earn income 69 69Seeking employment 3 3Retired 24 24Sick/disabled 3 3

Area of work Frequency PercentAgriculture, hunting, forestry 5 2.99Fishing 1 0.60Mining and stone quarrying 1 0.60Manufacturing 3 1.80Water, electric and gas supply 8 4.79Construction 4 2.40Wholesale and retail trade, repair 23 13.77



Hotels and restaurants 14 8.38Transport, storage and communication 5 2.99Financial intermediation 5 2.99Real estate and renting activities 1 0.60Public administration Army or Police 17 10.18Education 7 4.19Health or social work 4 2.40Crafts and services 4 2.40Humanitarian organizations, NGO etc 1 0.60Communal services 4 2.40Other 2 1.20Total 109 65.27

Q10 Does your house/partment have the following? Frequenc

yPercent Budva Bar Ulcin

jKotor

Connection to the electricity grid

Yes 100 100 25 25 25 25No 0 0 0 0 0 0

Coverage by the water supply system/network

Yes 90 90 24 25 16 25No 10 10 1 0 9 0

Connection to water supply system/network

Yes 95 95 25 25 20 25No 5 5 0 0 5 0

Shower/bath inside house

Yes 95 95 24 25 21 25

No 5 5 1 0 4 0Shower/bath outside house

Yes 12 12 7 0 3 2

No 88 88 18 25 22 23Toilet inside house

Yes 75 75 20 25 24 19No 25 25 5 0 1 6

Toilet outside house

Yes 11 11 4 0 5 2No 89 89 21 25 20 23

Toilet eastern-style" (squat plate)

Yes 12 12 3 2 5 2No 88 88 22 23 20 23

Toilet "western-style" Yes 46 46 8 21 12 5No 54 54 17 4 13 20

Indoor tap Yes 96 96 23 24 25 24No 4 4 2 1 0 1

Outdoor tap Yes 48 48 15 14 15 4No 52 52 10 11 10 21

Q11 Washing machine have in household Use Regularly

If not used regularly, why not?Frequency Percent

Yes 36 92.31No 3 7.69Total 39 100


155

Frequency PercentYes 92 92No 8 8Total 100 100

Frequency PercentNo water 1 8.33Water is sally 11 91.67Total 12 100


Dish Washer have in household Use Regularly

If not used regularly, why not?Frequency Percent

Water is sally 4 80It old 1 20Total 5 100

Q12 Do you have a garden plot where you grow some products for household Consumption?Frequency Percent

Yes 26 26No 74 74Total 100 100

Q 16b Is there any change in your family income During three years?Frequency Percent

Increase in family income 18 18Decrease in family income 19 19No change 63 63Total 100 100

Q16 c What do you think are the main factors causing this change?Frequency Percent

Age 3 8.11Changes in employment and salary 7 18.92Changes in schooling 2 5.41Changes in position (promotion, demotion)

5 13.51

General economic situation in the country 10 27.03Other 8 21.62Total 35 94.59

Q17 Does your HH have income from tourism?Frequency Percent

Yes 17 17No 83 83Total 100 100.00

Q 18 Which economic activities of your household are related to tourism?Frequenc

yPercent

Restaurant 1 5.88Smile business 2 11.76Renting-out private rooms 13 76.47Renting-out private beds 1 5.88Total 17 100.00


Frequency PercentYes 40 40No 60 60Total 100 100

Frequency PercentYes 35 87.5No 5 12.5Total 40 100


Q 20a How many percent of your total household income is generated from tourism during the season?

Frequency

Percent

20 1 5.8830 4 23.5350 5 29.4160 3 17.6580 4 23.53

Total 17 100.00

Q 20 b Has income generated from tourism during the season increased during the last3 seasons/ years?

Frequency

Percent

Yes 1 5.88No, it decreased 11 64.71No, no change 5 29.41Total 17 100.00

20 c How much on average (in percentage)Frequenc

yPercent

10 3 25.0020 4 33.3330 3 25.0050 2 16.67

Total 12 100.00

Q21b How do you define the season?Frequenc

yPercent

June 2 11.76July 4 23.53The end of June 4 23.53May 1 5.88

End Month


Frequency

Percent

1 August 2 11.7610 September 1 5.8815 august 2 11.7625 august 1 5.88August 2 11.76The finish of august 3 17.65Start September 2 11.76September 4 23.53Total 17 100

157


Q 21 c How do you define peak of the season?Frequency Percent

2 11.761.07-15.08 1 5.8810 august 1 5.8810. august 1 5.8815 July - 15 august 1 5.881august 1 5.8820 July - 15 august 1 5.8820 July - 20 august 1 5.8820. July 1 5.8825. July - 10 august 1 5.8825 July-15august 1 5.88August 4 23.531 August 1 5.88

Q23 How would you evaluate the financial situation of your family in comparison with the average financial situation of the residents of your city?

Frequency

Percent

Much below average 15 15Below average 23 23Average 47 47Above average 13 13Much above average 2 2

Q 22 Which one from the statements is the most appropriate in accordance with the financial situation of your household?

Frequency

Percent

We do not have enough money to buy food 13 13We have enough money to buy food, but it is difficult for us to buy clothes or shoes 26 26We have enough money for food and clothes, and we are able to save some money, but we can't afford expensive goods such as a refrigerator or television 39 39We can buy expensive goods, but not everything we want 16 16We can afford anything we want 4 4Total 98 98

WATER USAGE & PROBLEMSWATER USAGE & PROBLEMS

Q 24 What percentage of the water you receive is used for the following purposes?Percentage of

Total Water UsedDrinking, cooking, washing, sanitation

88.8

Gardening 17.5Car washing 6.2Street cleaning 10.2Other (specify) 10.4

Q 25b Are you satisfied with this source of drinking water?



UsingUsing SatisfactionWater source Use for drinking

(a)Use for cooking

(b)Yes

1. Indoor tap (piped water) 84.0 89.0 53.02. Yard well 8.0 15.0 16.03. Outdoor tap 12.0 14.0 13.04. Neighbor's indoor tap 1.0 1.0 1.05. Neighbor's outdoor tap - - -6. Public taps/natural resources

9.0 8.0 11.0

7. Vendor 77.0 46.0 70.08. Cistern 4.0 2.0 5.0

Q 26 Do you have problems with the water supply during the tourist season? Percent

1. Supply/volume 68.02. Unreliable 58.03. Salt 23.04. Safety 37.05. All of the above 9.06. Something else, specify 1.07. None 9.0

Q 27 What are your priorities regarding piped water supply during the season?Rank

Hours of supply per day

Low – 33.0%

Pressure Medium – 42.0%

Schedule of supply High – 26.0%Something else, specify

-

Q 28 When your main source of drinking water is not available, how do you obtain water? (Multiple responses allowed)

Percent1. Water stored in or outside the house in a tank

19.0

2. Piped water from the neighbors 5.03. Hand pump in the backyard (well) 3.04. Dig out a well 7.05. Public taps 16.06. Natural resources /springs 10.07. Buy water from vendors 58.08. Fill buckets when water is available 64.09. Other (specify)_____________________ 2.0

Q 29 If you obtain water from “public taps/natural resources” or you buy it from “vendors”: Quantity in liters/day

Time spent to receive

water

Price (day)

Public taps 20.8 46.1 xxxNatural resources (springs)

18.9 20.3 xxx

Vendor 4.4 xxx 1.6


159


Q 30 Since when you are connected to the water supply network/system and who connected you?

Percent1. Yourself 6.52. A friend 1.13. The water company 85.94. A private technician 6.55. Other (specify) -

Q 32 Has your household been warned to become disconnected or has your household actually been disconnected last year?

Percent1. Warned 5.02. Disconnected 3.03. Neither 87.0

Q 33 For each category, please choose the most important problem in your water system according to their perceived importance?

Q 34 a Do you have piped

water every day of the month?Percent

1.Yes 35.42. No 64.6

Q 34 d How does the piped water shortage affect your household?Percent

1. Work at night 47.4


Tick one for each category

TechnicalTechnical1 Leaking pipes 11.52 Lack of access to piped water supply network 38.53 Low pressure 20.84 Limited hours of supply (hours) 27.15 Other (specify) 2.1

QualitativeQualitative6 Perception that water is unsafe (lack of trust, taste,

color, smell)57.0

7 The water is unsafe (health reasons) 36.68 Other (specify) 6.4

ServiceService9 Unreliable water supply (unavailable for hours/day,

or days/week)55.9

10 Water Company technician take bribes (are corrupted)

10.8

11 Delays in repair and maintenance by the Water Company

20.4

12 Non responsive customer relations 9.713 Other (specify) 3.2

OperationalOperational14 The price per cubic meter is too high 53.315 Dissatisfaction with the not metered billing 5.416 Dissatisfaction with the block metering apartment

building5.4

17 Too much water is used or misused 33.718 Other (specify) 2.2

160


2. Purchase more expensive water from vendors

45.6

3. Lose guests during tourism season 7.04. Other -

Q 34 d How does the piped water shortage affect your business?Percent

1. Work at night 4.32. Purchase more expensive water from vendors

43.5

3. Lose guests during tourism season 52.24. Other -

35 a Do you have a tank?Percent

1.Yes 22.02. No 78.0

If YES: (a) individual or (b) collectivePercent

1. Individual 85.72. Collective 14.3

35 b What is the capacity C of the tank?Percent

1. C<100L1. C<100L 10.02.100L<C<502.100L<C<500L0L

45.0

3. C>500L3. C>500L 45.0

35 c Does the tank satisfy the needs of your household/family (drinking, cooking, and washing)?

Percent1.Yes 70.02. No 30.0

36 a Does your household have a water pump?Percent

1.Yes 27.62. No 72.4

If YES: (a) individual or (b) collectivePercent

1. Individual 72.72. Collective 27.3

36 b Does the water pump add to your electricity bill?Percent

1.Yes 47.42. Don’t know 47.43. No 5.3

37 If you could choose, which important improvements would you like in your piped water supply?

Percent First most important


161


1. Better quality 19.02. Without restriction 13.03. Building water network 8.0 Second most important1. Bother quality 28.02. Cutting illegal consumers 9.03. Better pressure 6.0 Third most important1. Lower price 9.02. Better quality 7.03. Without restriction 6.0

WILLINGNESS AND AFFORDABILITY TO PAY

40 a How much is your household supposed to pay for water?Percent

1. Go to water supply company and personally pay bill

36.9

2. Water supply company’s collector 51.23. Post office – water supply company’s drawing account

8.3

4. Other (specify) 3.6

How much does your household pay on average for piped water?Time period Percent1. Month 17.332. Season 42.313. Year 152.06

How much does your household pay on average for non-piped water?Time period Percent1. Month 16.132. Season 46.353. Year 130.85

Do you know how much is:

Q 45a Do you know your household’s “generation”:

Q 44 Do you think the price is justified for your current water services?Percent

1.Yes 44.92. No 55.1

Q 46 a Has there been any increase in the price per cubic meter from the water company during the last year?

Percent1.Yes 5.62. Don’t know 76.4


MeanThe price per cubic meter of water from the water supply network?

0.58 €/per month

Household’s average consumption of water in cubic meters per month?

19.64 m3/per month

MeanWaste water in cubic meters?

14.57

162


3. No 18.0

46 b How much has the price per cubic meter for water increased during the last year? Mean

1. Price before increase 0.31 €/m3

2. Price after increase 0.60 €/m3

How much would you be willing to pay for:Mean

1. Connection in the waste water network

88.30 €/per month

2. Pay monthly for waste water disposal

9.67 €/per month

3. Regular septic tank cleaning 4.98 €/per month

46 c What was the impact of this increase on your household income? Percent

1. No significant impact 50.02. Unable to afford the bill -3. Restrict other expenses to be able to pay the increased

25.0

4. Reduce water consumption to afford the bill 25.05. Switch to other means to access water -6. We became irregular payers -

47 After the tariff increase how has your water supply changed? Percent

1. Longer hours of supply 25.02. Higher water pressure -3. Better water quality -4. Improved responsiveness of the company in case of technical complaints

-

5. Improved company-customer relations -6. No change 75.07. Other (specify) -

Q 48a In the last year, was there a time when you did not pay your water bill? Percent

1.Yes 28.12. No 71.9

Q 48 b If YES, what are the reasons why you do not pay this bill regularly?Percent

1. Water should be free -2. Were not able to? (lack of money) 45.53. Are not satisfied with the service? 13.64. Did not receive any water bill? 4.55. Have to wait too long in line to pay (long cues)

-

6. Opening hours of water office are not convenient?

-

7. No enforcement for non-payment -8. Other 36.4

PUBLIC AWARENESS


163


Q 56 What do you know about the central/local government measures to improve the water supply?

Percent1. Nothing 45.52. Somewhat informed 35.43. Adequately informed 19.2

Q 57 Where do you get the information about the government measures to improve the water services?

Percent(non weighted

values)1. National TV 92.02. Local TV 56.43. Newspapers 52.6

Q 59 a In your opinion, who is responsible for water supply in your town?Percent

1. Central government 18.22. Municipality 79.83. Other 2.0

Q 59 b In your opinion, who should be responsible for water supply in your town?Percent

1. Central government 21.92. Municipality 72.93. Other 5.2

Q 60 a Is there an office within the Water Company where you can direct your concerns?Percent

1. Yes 30.32. No 19.23. Don’t know 50.5

Q 60 b If you have any problems (such as blockages, leakages, contamination etc.), how quick does the water company fix them?

Percent1. Within one (1) day 2.02. In two (2) days 5.13. In three (3) to five (5) days 8.14. In one week 2.05. More than one week 3.06. No response from the water company

1.0

7. No problems experienced 38.48. Usually I call a private plumber 40.4

Q 61 When you want to report water/waste water problems, ask for repairs, or complain regarding water/waste water services, who do you contact, and what contact is it?:

Who do you contact?

(non weighted values)

State whether this contact:

(non weighted values)

1.Report water/waste water problems Water company Water company



(e.g. blockages, leakages, contamination)

(79,1%) (72,0%)

2. Ask for repairs Water company (57,6%)

Water company(50.0%)

3. Complain regarding water/waste services

Water company (84,7%)

Water company(78.3%)

OTHER QUESTIONS

Q 62 a Do you think that the water supply company should improve enforcement to: Percent

1. Collect the bills? 37.42. Cut-off illegal connections? 36.43. Prevent constructions that affect water and sewage networks

23.2

4. Other (specify) 3.0

Q 62 b What do you think would be the three best ways to improve enforcement in your neighborhood/community? (please rank: 1-low, 3-high)

Percent(non weighted

values)1. Public awareness campaign High – 56.92. Send mailed reminder to non-paying customers

Medium – 42.2

3. Apply financial penalties for late payers Medium – 55.34. Send water company representative together with municipal police

Low – 40.0

5. Cut off non paying customers, monitor these customers and charge for the re-opening of the water connection

Medium – 44.9

6. Take legal action for unlawful behavior by consumer in regard to water

High – 53.3

7. Cut off illegal connections at customers’ expenses

High – 43.8

Q 63 In your opinion, which goal group should be included in campaign?Percent

1. Households 45.92. Businesses 26.53. Institutions 27.6

Q 64 On what basis do you think each household should pay for water?Percent

1. According to consumption 62.62. According to household income 17.23. According to number of people in the household

8.1

4. According to house/flat size (including garden)

6.1

5. Water should be free 6.16. Other (specify) -


165


Q 65 a Do you get subsidies for your piped water services? (coupon, cash, lower tariffs, etc.)

Percent1. Yes 5.02. No 55.03. Don’t know 41.0Q 65 b Would you support that very poor households would receive subsidized

tariffs?Percent

1. Yes 99.02. No 1.0

Q 65 c Do you think, that the government measures to improve the piped water services should include a subsidy for households who can not afford to pay their piped water services?

Percent1. Yes 96.02. No 4.0

Q 66 Do you think that the current water shortages restrict your employment opportunities, especially in regard to tourism?

Percent1. Yes 66.02. No 16.03. Don’t know 18.0

Q 67 Do you think that the government measures to improve the piped water services will increase opportunities for employment, especially in regard to tourisms?


Q 68 Do you think that the current water shortages reduce your business opportunities or investments and the value of your property?


Q 69 Do you think, that the government measures to improve the piped water services will increase your business opportunities or investments, and the value of your property?


Q 70 a Do you have a bank account?Percent

1. Yes 43.02. No 57.0



Q 70 b If yes, would you be interested to pay your water bills directly through your bank account?

Percent1. Yes 67.42. No 32.6


167