The challenges of regulating the drinking water sector: lessons from Mozambique

Private sector participation and liberalisation call for a greater and more efficient role for sector‐specific regulation. This necessitates a balanced and stable institutional regulatory framework to accommodate both public intervention and market dynamics. Here we consider this assertion with detailed reference to the case of drinking water in Mozambique. We focus on the framework for delegated management and the influence of international lending agencies. Three major lessons can be learned: (1) Regulatory functions need to be defined and attributed to the various entities at the different levels; (2) Regulatory objectives must be defined prior to designing and implementing a regulatory regime; and (3) External models and decisions can lead to hybrid regulatory and institutional framework that become sources of complexity and inefficiencies. We propose that regulation define broad objectives and minimum standards, while contracts set specific objectives. Competent regulation may open the door to simpler, and hence less costly, contracts.