Chapter 6: Political Acceptability, Danish Environmental Protection Agency

Water Prices in CEE and CIS Countries. Volume I: Main Text

Chapter 6
Political Acceptability

The purpose of this chapter is to explain the rationale of political acceptability analysis and to provide guidance on how to carry out an analysis that makes it possible to assess the level and nature of political acceptability in relation to an investment project in the water and wastewater services sector.

6.1.2 Rationale for analysing political acceptability

Often, the analysis of political acceptability is omitted or given very low priority. This is true not only for water services in the CEE and CIS countries, but also for major investment projects in, say, Denmark. The political science analysis tends to be perceived as soft, and the value-added is often neither clearly explained by the political scientist who can do the analysis, nor are there many success stories to refer to.

However, there is an increasing appreciation that apparently simple questions such as:

"Why are large tariff increases politically accepted in one situation/project, but not in another?"

"Why are solutions that are apparently, technically, environmentally and financially sound (like the sinking of Shell's used oil exploration platform "Brent Spar" on the ocean floor) rejected politically?"

need to be addressed neither by technical nor economic analysis, but by analysis of political acceptability.

We present different levels of political acceptability analysis ranging from a simple to more sophisticated models.

By political acceptability, we refer to decision makers' attitudes to a specific water sector investment that entails changes in water tariffs. The decision makers can be formal decision-makers, e.g. a ruling political party in a municipality, or it can be other actors who, de facto, have a saying in the decisionmaking process.

Political acceptability at the level of the local decision makers is a key choice-limiting factor for investment projects in the water sector because such projects are decided upon and implemented in what is typically a very politicised arena.

Actors with potentially conflicting interests populate this arena. The local politicians are there. They are interested not only in a healthy municipal economy and high service levels but also in reelection. The civil servants and the administrative units play a role, too. They may have tight bonds to the water industry, and this may bias their perception and action. The local population will also be in the arena, either directly as voters influencing the direction of the politicians via popular elections or via interest organisations. The arena also gives place to national actors who mark out the legal framework and the overall national political objectives that exercise influence on the local decision makers.

This arena determines the fate of an investment project. Not only whether an investment (or a tariff change, a change in ownership, etc.) will be approved in the first place, but also whether the investment will prove successful, in the long run. Will the water charges, for instance, be collected properly and the agreed upon conditions met even in times of public dissatisfaction?

It is, therefore, fair to take as starting point the assumption that the higher and more stable the political acceptability is, the lower the revenue risk in relation to a given investment. Our task is to detect the level and nature of the political acceptability of a given investment.

More specifically, there are four main reasons for conducting analysis of political acceptability.

They are:

Political acceptance ultimately determines whether a project is feasible. The political actors are responsible for deciding on, implementing and enforcing water tariff increases. The level of risk of any prospective loan is thus directly linked to their ability to carry out these implementation and enforcement functions. Moreover, the decision makers are responsible for many factors which will determine both the effectiveness of any given charging system and the public acceptability. Examples of these factors include: scope of application of tariffs (i.e. if certain customers are exempt to ensure affordability); the operating status of the water supply company; regulation of the water supply company (anti-monopoly controls, etc.) and the methods to enforce collection of tariffs.
There will often be a degree of discrepancy between public acceptability and political acceptability. Measuring public acceptability does not capture whether a given politicaladministrative system will actively seek to minimise an investors' revenue risk by sticking firmly to agreements made, or on the other hand whether it is inclined to please the public opinion if it resists to pay the increased water tariffs.
Political acceptability analysis illuminates the different risks at stake in the case of changes in the water sector. The investor wants to minimise the revenue risks while a votemaximising political party will have to consider the costs of pursuing a policy that minimises revenue risk, but increases the risk of decline in voter support (a political risk). This is a real threat as the most obvious result of unacceptable charges will be the public pressure on the decision 73 makers to reduce charges and/or to be less strict with regard to enforcement. Should this happen, the economic viability of an investment in the water sector could be seriously affected.
Different time perspectives. Investments in the water sector typically have a time perspective of, say, 20-40 years, compared to the typical time horizon of parliamentary democracies which seldom exceeds four years (time period between popular elections). It is, therefore, crucial from the perspective of the investor to have confidence in a high and stable level of political acceptability that goes beyond election periods.

These points can be summarised in one general observation. Even if it is difficult to measure political acceptability in exact terms, a systematic description and tentative ranking of acceptability is useful when considering the potential revenues and, thus, the pay back and sustainability of an investment in the water sector.

6.1.3 Target group

The text in this chapter targets policy analysis experts. However, the text also allows other stakeholders involved in municipal water supply and wastewater to obtain an overall grasp of the methods presented and to decide on the level of analysis to be used for a specific case.

6.2 Suggested approach, timing and resources

6.2.1 Approach to analysis of political acceptability

This section describes the recommended approach to undertaking a political acceptability analysis, cf. Text Box 34.

Text Box 34:
The recommended approach to political acceptability analysis

Consider, always, a number of societal factors, independently of how comprehensive the analysis is designed to be (Section 6.3).

Capture not only the level of acceptability, but also the stability of political acceptability (Section 6.4).

Decide, at an early stage of the analysis, if acceptability should be measured at the level of political parties or include a broader range of actors (Section 6.5).

Adapt the analysis, in each case, in order to fit needs and resources available. Therefore, analysis at four levels and a recommendation as to which one to use will be presented (Section 6.6):

Attitudes of political parties (Level 1, See Section 6.7)

Attitudes and assumptions of political parties (Level 2, See Section 6.8)

Analysis of a broad range of actors (Level 3, see Section 6.9)

Policy network analysis (Level 4, see Section 6.9)

The four levels differ with regard to comprehensiveness, ability to predict, and resource requirements. Only the first two are presented in depth.

Report on the findings (Section 6.10).

6.2.2 Resources required

The amount of resources required depends on the level of analysis selected. The figures are indicative. The input depends on the number of actors, and how easy it is to get access to information. If the more profound analysis including a broad range of actors or policy analysis is conducted, the number of person weeks needed may vary between 6 and 14.

Table 6.1:
Resources required for the two simplest levels of analysis of political acceptability

	Person weeks	Calendar weeks
Attitudes of political parties	3-4	6
Attitudes and assumptions of political parties	4-5	8
Total	3-5	6-8

Disclaimer: The resource requirement has been estimated by COWI and is not necessarily endorsed by DEPA or EBRD

The content of each analysis and the specific resource requirements are further detailed in Section 6.6.

6.3 The background factors

Independently of which analytic design is chosen, it is always relevant to consider the societal factors that influence each case. This section describes some of the factors that should be looked at.

The influence of public acceptability The first factor to consider is the level and character of public acceptability. In most political systems, public opinion can be expected to be the major influence on the policy makers, but it should not be taken for granted that a certain degree of public acceptability will gradually spill over in corresponding political decisions. There are several factors that can determine how, and to what extent, the influence of public opinion is exerted, cf. Figure 6.1.

Look here!

Figure 6.1:
The effect of public acceptability on political acceptability

It is, therefore, important to always study these factors in order to understand the extent to which public acceptability (or the lack of it) influences the setting and enforcement of water charges. Factors that should be looked at are the following:

The degree of democracy involved in the policy process - the less democratic the system is, the less influence public acceptability is likely to have²¹;

The current political situation is likely to influence the "vulnerability" of political parties. For example, it is unlikely that any unpopular decisions will be pushed through in the run up to an election;

The relative importance of water charges as a political issue. Even if there is strong opposition to water charges, they will have to be seen as key political issue (i.e. capable of influencing voting behaviour), before they will have a major impact on the policy process. The importance as a political issue is obviously influenced also by the rate of change in tariff and may be influenced by related issues such as the prospect of concurrent staff reductions etc.;

The level of organisation of consumers and other groups representing the public interest.Consumer groups are traditionally among the weakest forms of lobby groups. It is important to assess the effectiveness of the channels through which (potential) dissatisfaction with water charges will be expressed in order to estimate its likely impact.

Institutional factors

The institutional framework for decision making in relation to water tariff setting should always be considered as a background factor.

One of the decisive factors is the procedure for water tariff setting. The more institutionalised it is, the less likely it is that political turmoil will influence the case. The rules concerning water tariff setting are traditionally set in national legislation, which is an institution that is difficult to alter. Local political interference will find it hard to change these rules. However, the national rules on price setting may leave small or large discretionary powers with local authorities, such as the city councils, to determine the actual price levels. The larger the discretionary powers given to the local price determining authority, the more sensitive to political interests the issue is likely to be.

There are other institutional factors that should be kept in mind, in particular:

The historical patterns of water charges;

The ownership of the water utility; and

The legal status of utility. This will govern many aspects of the way in which a utility is able to function in practice and its degree of susceptibility to public and political acceptability.

The influence of other factors

At the initiation of the study on political acceptability, the analyst should consider a number of other factors that may influence the case. A checklist with such background factors is given in Table 6.2.

Table 6.2:
Other factors which may influence political acceptability

Factor	Possible impact
Rent seeking	Particularly if foreign investors are involved, it is possible that political support of price increases may be conditional on payments by the investor concerned.
Expectation of subsidies	If there is a belief that investment and operational subsidies may be available for carrying out the project there is a potential for local policy makers to wait and see if such subsidies materialise instead of pressing ahead with less popular price rises.
Media	In the absence of precise measurements of public opinion, a media campaign against (or even for) price increases can determine political decisions.
Awareness of environment and public health issues	If policy makers themselves accord a low priority to environment and public health issues, then other political objectives will be accorded a higher priority.
International guidelines	Influential donor organisations using various rules of thumb (e.g. the 4 per cent rule for household affordability) can influence politicians as to what they consider acceptable, regardless of any underlying rationale for the rule of thumb.
Administrative implementation costs	In the case of an administration with low levels of administrative capacity and/or resources (particularly likely at the local level), the administrative costs of implementing the structural reforms (e.g. mechanisms for compensating the socially vulnerable for a significant increase in water charges) may surpass administrative capacity. In this case, it may not be feasible to implement structural reforms. Alternatively, administrators may use such a situation as leverage to gain extra resources.

6.4 Assessing the level and stability of political acceptance

We define political acceptability as being composed of two elements:

The level of political acceptability. This can be captured by analysing the actual attitudes positive or negative - among decision makers to a certain initiative or proposal in the water sector, typically to increase water tariffs in return for higher service levels. It can be measured in quantitative terms (x per cent in favour of a proposal - x per cent in opposition), but should be supplemented with qualitative refinements.

The stability of political acceptability. To capture the stability of attitudes implies an identification and investigation of the assumptions on which the decision makers base their attitudes (implicitly or explicitly). The assumptions should be described qualitatively.

Combining the two dimensions, we get four different scenarios, cf. Figure 6.2. Each of these scenarios differs with regard to the way in which an investor should approach the situation.

Figure 6.2:
Four scenarios of political acceptability (level and stability)

The first scenario is characterised by an apparently high level of political acceptability as the project in question is given a positive evaluation. However, the attitude rests on assumptions that are not stable implying that it is not necessarily well grounded. This is the case if, for example, the political actors favour the investments believing that it will lead to improved drinking water quality whereas, in reality, the investment is necessary to avoid deterioration. The investment will thus "just" lead to maintenance of status quo.

From the perspective of an investor: The investor runs the risk of overlooking the fact that the political acceptance is fragile. It is, therefore, necessary to investigate, in detail, the assumptions on which the positive attitudes are founded in order to determine the likeliness of changes in these.

The second scenario is the one characterised by a genuine, high acceptance, as the positive stance is not based on assumptions that are likely to change.

From the perspective of an investor: This is the optimal situation with minimum revenue risk as there will be a high degree of commitment and stability vis-à-vis the project.

The third scenario is an interesting scenario, which is maybe more promising than it looks at first. There is a dominance of negative attitudes to the investment, but the attitudes rest on assumptions that are not stable and, therefore, it may be possible to change them. One example could be that increased water tariffs are opposed due to social reasons. If the social imbalances of higher water tariffs could be corrected, the attitude may change rapidly.

From the perspective of an investor: Explore the opportunities to counter the objections thereby undermining the assumptions that create the negative perception of the project.

The fourth scenario is the one with a low acceptance. Few actors appreciate the investment, and this perception is well grounded.

From the perspective of an investor: There are major barriers to the investment/project, and these barriers are not easily overcome.

We recommend that the distinction between level and stability be applied when assessing political acceptability.

Text Box 35:
Poznan: The high level of acceptability rested on a fragile assumption

Interviewing a number of leading politicians in Poznan (city councillors) first gave the impression of a high level of acceptability of significantly higher water tariffs. However, during the interviews when it was made clear to the politicians that according to technical assessments, higher water prices were needed just to be able to maintain current water quality standard, the acceptance, not surprisingly, somehow vanished. The local politicians obviously preferred to "sell" the deal to the voters: higher water prices in return for better service, - and this was one (implicit) assumption underlying their attitude.

This, in terms of political acceptability, is an example of Scenario 1 described above.

6.5 Political parties or a broader range of actors?

Political acceptance can be measured at two levels:

At the level of formal policy makers; that means political parties and the elected deputies: what are the viewpoints of the political parties on water pricing.

At the level of a wider group of political actors: parties, prominent interest organisations, the water industry, the relevant scientific community and public authorities. This makes it more demanding to get a grip of the actual level of political acceptability, but the results will be more solid.

The two possibilities are contrasted in Table 6.3.

Table 6.3
Arguments for focussing on either political parties or a broader range of actors

Focusing on political parties		Focusing on a broader range of political actors
It is more tangible and less demanding in terms of time and resources to analyse at this level as few actors need to be studied in-depth	but	the analysis may miss a lot of factors which, eventually, shape the priorities of the elected deputies, e.g. interests, groups, and authorities
Political parties are, in the end, the entities who make the decisions	but	the decision-making processes are often initiated, driven forward and steered by other actors than political parties, hence, political parties may only be mediators of interests
In principle, political parties cover all policy areas, hence, they can be expected to either have articulated a stance on water pricing or be willing to do so	but	many political parties will be reluctant to express a stance, for instance, if the case has not, a priori, been discussed internally in the party

We recommend that it should be considered, at an early stage of the analysis, whether the study can be limited to the political parties. If this is possible, there are major advantages to be gained in terms of simplicity of analysis and time savings.

Obtaining a convincing result requires that the water tariff issue has matured into a well-defined and well-known issue so that the political parties have taken a standpoint. Otherwise, the consultant runs the risk of asking questions to "ignorant" politicians.

6.6 Four levels of analysis

Analysis of political acceptability can be carried out in many different ways, regarding content and process of analysis, and four levels of analysis are outlined in Table 6.4. The levels should not be interpreted rigidly. There is room for combining elements from one option into another. For instance, elements of a policy network analysis can be integrated into less ambitious analysis. Each specific case requires its own design. It is the task of the consultant to tailor the analytic design of each case.

The levels are defined to be successively more ambitious and demanding to carry out but also giving still more accurate assessment of political acceptability. To analyse the attitudes of a limited number of political parties is relatively cheap and quick to do, but it requires that these parties do have a stance on the issue, and the predictability level of such an analysis will normally be low to moderate. To perform a policy network analysis, on the contrary, is resource and time demanding, but rewarding in the form of solid conclusions.

In general, level 1 or 2 is recommended because these levels allow the consultant to obtain an understanding of the political situation in a cost efficient way. Therefore, Section 6.7 and Section 6.8 spell out the suggested analysis for these two levels, while the additional analysis included in levels three and four is only indicated in Table 6.4 and Figure 6.3.

As a rule of thumb, political acceptability should always be addressed (at least by undertaking a simple version of the analysis) unless:

The investor already has a great deal of knowledge on the political situation and the situation is deemed stable, and

The procedures for setting water tariffs are firmly institutionalised via an institution that is difficult to alter, e.g. a piece of legislation.

It would not be wise to exclude the analysis simply on the grounds that the decision-making authority rests with, say, a national board that seemingly is "sheltered" from local interests. In such cases, it should be documented that the board enjoys a great deal of autonomy and is likely to maintain its position.

More specifically, the importance of the political acceptability analysis differs depending on whether the project is a private-public partnership, such as a concession agreement, or a traditional investment project in a public utility.

For a traditional investment project in a public utility, the political acceptability analysis may be "nice to have" or "needed to have". This depends on how autonomous the water utility is, and thus the degree to which the consequences of the political decisions have to be borne by the political system itself or by an independent water utility.

For public-private partnership with an autonomous private sector partner, the political acceptability analysis will be "needed to have". For a concession agreement, BOT or similar, the optimal timing is likely to be at the pre-feasibility stage. An early analysis leaved more time to address the critical issues identified at an early stage. Since it is an expensive process to bring a PPP arrangement to closure, early identification of critical political acceptability issues is cost-effective. As a minimum, the analysis should be completed and reported simultaneously with the announcement of the selected short list of firms invited to submit a bid for the concession, BOT etc. The short-listed firms will find it highly useful to have an indication of the political acceptability of alternative solutions in order to assess, inter alia, their revenue risk.

Look here!

Figure 6.3:
Four methods of analysing political acceptability

Table 6.4:
Comparison of the four levels

	Level 1 Attitudes of political parties	Level 2 Attitudes and assumptions of political parties	Level 3 A broader range of actors	Level 4 Policy network analysis
	Background factors	Background factors	Background factors	Background factors
Content of analysis	Attitudes of political parties	Attitudes and assumptions of political parties	Attitudes, assumptions, and resources of a range of actors	Attitudes, assumptions and resources of a range of actors & analysis of the policy network related to water tariff policy making
Output of analysis	The level of acceptability	The level and stability of acceptability	The level and stability of acceptability based on analysis of each actors' ability to influence the policy process: whose attitudes are likely to prevail	In-depth understanding of acceptability via identification of the policy network (history, actors, rules, interests, influence) and policy development in the water sector.
Level of predictability	Low (in most cases)	Low-moderate	Moderate	Moderatehigh
Accessibility of information	Good	Good	Mostly good, sometimes difficult²²	Mostly good, sometimes difficult²²
Data sources	Interviews with political parties, party programmes and statements	Interviews with political parties, party programmes and statements, a range of information to assess the assumptions (technical, statistical, economic, political surveys)	Interviews with political parties and other actors, interviews with local social scientists, programmes, annual reports, list of members.	Interviews with political parties and other actors, interviews with local social scientists, interviews with case workers (civil servants) programmes, annual reports, administrative files

In the remaining part of this chapter levels 1 and 2 are described in detail, whereas only the principles of levels 3 and 4 are outlined. This approach is chosen because often levels 1 and 2 will suffice, possibly with elements of levels 3 or 4 included. The figure gives an overview of the content and flow of each level.

6.7 Attitudes of political parties

This section describes the tasks required for an assessment of political acceptability via an analysis of the attitudes of political parties. The merits of this design are:

It is easy and relatively cheap to conduct the analysis;

Approaching the political parties can give a very decent understanding provided that the issue of water tariffs has emerged as a salient issue meaning that the parties either already have or are prepared to express an attitude.

The structure of the analysis is presented in Text Box 36.

Text Box 36:
Assessing political acceptability via analysis of the attitudes of political parties

Consider whether it is sufficient to delimit the analysis to political parties (Section 6.5)

Involve local expertise (Section 6.7.1)

Identify the relevant political parties. Arrange and conduct interviews with prominent representatives of each party (Section 6.7.2)

	prepare semi-structure interview guide, taking the list of background factors into consideration
	provide interpreters
	Prepare minutes of interviews

Compile complementary information (in writing) that expresses the view points of the parties (Section 6.7.3)

Assess the political acceptability (Section 6.7.4)

	Consider relevant background factors
	Make distinctions between ruling parties and parties in opposition
	Make distinctions between the degree of acceptability expressed

If the parties do not have clear-cut opinions, it is not sufficient to only consult the parties. In this case, it may be necessary to screen the policy field and to identify the key actors and analyse their attitudes²³. Compared to level three, the analysis suggested here not only covers less actors, but it also does not seek to capture the resources on which the actors can draw on when water tariff setting becomes an issue. An investigation of resources could enable the consultant to indicate the outcome of the water tariff issue as it will be possible to distinguish between, say, stronger and weaker actors. Then, the overall picture may change.

Text Box 37:
Kaliningrad: Difficult to assess acceptability via interviews with the politicians because the water tariff issue was not well defined

This was the case in Kaliningrad, autumn 1999. It turned out that water pricing had not become a well-defined political issue, meaning that it did not make sense to assess acceptability only by consulting the political parties, as they could merely articulate a general statement. Other actors would, therefore, have to be consulted to get a decent understanding of acceptability.

This was an example of circumstances dictating the choice of analytical design as some options appeared to be insufficient.

If the more ambitious approach is chosen, the actors should be described and mapped in terms of resources, i.e. political, economic and legal resources as well as cognitive, strategic and argumentative resources. Using the resource mapping it is possible to distinguish between strong and weak actors as well as the types of actors.

6.7.1 Involvement of local expertise

Local expertise should be involved from the very beginning of the analysis.

When preparing the interviews, it is relevant to have a local assistant compiling various background materials. This includes party programmes and statements, election programmes, etc. in which the parties may have forwarded principal standpoints on e.g. environmental matters (water quality), the application of the cost-recovery principle in the provision of environmental services, social concerns, etc.

The project assistant must also be asked:

To detect and compile other background material;

To assist in tracing the historical milestones on the development of the local water policy;

To compile relevant theoretical and empirical descriptions of the local public administration and political context;

To assist in the reporting and interpretation of interviews.

6.7.2 Arrange and conduct interviews

Preparing, conducting, and reporting on interviews should follow general standards for qualitative research. The following points should, as a minimum, be remembered:

A prominent representative of the political party should be approached; one who is able and willing to describe the party's policy in detail;

Make sure that this person represents the official stance of the party, for example, by crosschecking with another party representative;

Get a clear understanding of whether or not the issue has been thoroughly debated within party circles. Does the party e.g. have a written declaration covering the water tariff issue?

Get a clear understanding of whether the water tariff issue is a crucial or marginal issue to the party (and why);

Be able to detect and describe the principal line of reasoning. On what general principles does the party base its standpoint on water pricing (e.g. purely pragmatic, a trust in market mechanism, social concern, perception of borderlines between public and private obligations in the provision of municipal services, etc.).

At the completion of each interview, ask the person to think of useful sources of information (other persons to interview, written materials, etc.).

The interviews can be partly standardised. It is, therefore, recommended to prepare and apply a semistructured interview guide.

6.7.3 Compile additional information

After a round of interviews with the political parties and before drawing conclusion, it may be necessary to include a number of additional interviews with the political parties to clarify potential misunderstandings, etc. It will also be relevant to confront local social scientists with the results so as to get a better contextual understanding of the information collected.

6.7.4 Assessing political acceptability

The assessment must be based on i) the background factors and ii) interview-based information. The consultant should, obviously, seek to interpret the findings in the light of the background factors.

When assessing acceptability based on a relatively "quick" screening of attitudes, it is recommended:

To be careful not to draw too far-reaching conclusions.

To make clear to the reader that the dynamics of water tariff policy making have not been captured; instead, the analysis only gives a static snapshot presentation of the situation.

To distinguish between ruling parties and parties in opposition and to comment on how a change in municipal government may influence the acceptability.

6.8 Attitudes and assumptions of political parties

This section describes the analysis required for an assessment of political acceptability via an analysis of the assumptions underlying the attitudes of political parties. The key questions are whether the assumptions are fragile or solid? What happens to the level of acceptability if assumptions prove inadequate?

This study is relatively easy to undertake but it adds a lot to the attitude analysis by clarifying the nature of the acceptability level; foremost, whether the given level of acceptability is stable or nonstable.

The structure of the analysis is presented in Text Box 38.

Text Box 38:
Assessing political acceptability via analysis of the attitudes and assumption of political parties

Consider whether it is sufficient to delimit the analysis to political parties (see above Section 6.5)

Involve local expertise (Section 6.7.1)

Identify the relevant political parties and arrange interviews with prominent representatives of each party (6.7.2)

	prepare a semi-structure interview guide, taking the list of background factors into consideration
	provide interpreters

Conduct interviews and prepare minutes of interviews (Section 6.8.1)

Compile complementary information (in writing) that expresses the view points of the parties, etc. (Section 6.7.3)

Describe and analyse key assumptions (Section 6.8.2)

Assess level and stability of the political acceptability (Section 6.8.3)

	Consider relevant background factors
	Make distinctions between ruling parties and parties in opposition
	Make distinction between the level of acceptability and the stability of acceptability

6.8.1 Conduct interviews

In addition to the comments given in Section 6.7.2, it should be stressed that the interviews should be prepared and conducted bearing in mind that they must be able to reveal the "hidden" assumptions. This makes it particularly important that the consultant keeps asking about the assumptions on which the attitude is based.

6.8.2 Describe and analyse assumptions

An attitude always rests on assumptions and perceptions, but these are seldom made explicit. The purpose of this analysis is, exactly, to make the assumptions explicit and to assess their relevance for the stated level of acceptability.

Examples of underlying assumptions could be that acceptance is high, provided an alteration of water tariffs will facilitate EU approximation, or provided that these changes are a prerequisite for further donor assistance.

We propose the following process:

Conduct interviews;

Discuss the assumptions with the persons interviewed;

Describe the assumptions;

Assess whether the assumptions are stable and assess the implications for acceptance in case they are not met in the future.

Table 6.5 gives an example of how to structure the assessment.

Table 6.5:
Example of a structured presentation of assumptions

	Attitude to increased water tariffs	Assumption	The stability of the level of acceptability expressed
Political party A	Positive	Additional revenue will finance renewal of e.g. wastewater treatment facilities	Depends on whether revenue is linked to investments in wastewater treatment facilities
Political party B	Negative	Undesirable distribution effects of increased tariffs	Depends on analysis that can reveal distribution effects

6.8.3 Assessing the level and stability of political acceptability

Scrutinising the assumptions will give a better understanding of acceptability as the consultant comes to know not only the level of political acceptability, but also the stability of political acceptability.

As already mentioned, stability refers to whether the attitudes rest on key and probably fragile assumptions. The consultant should evaluate the assumptions including their significance vis-à-vis the attitude expressed, and estimate the likelihood of relaxing those assumptions that are not absolutely fixed.

By explaining which of the four scenarios the particular case resembles, the consultant can reflect on how a potential investor should approach the situation.

When assessing the stability, the consultant should also keep in mind whether the water tariff issue is crucial or marginal to the party. If marginal, the party will be more willing to change its position.

It could thus, a priori, be assumed that the more crucial the issue is to the party, the more stable its position will be. This dimension should be incorporated in the assessment.

Text Box 39:
Brno: EU membership stands out as the dominant assumption

The case study in Brno revealed that, for the political parties, the long-term objective of EU membership is one of the main motivations for carrying out investments in the water supply and wastewater sectors. This is a key assumption and a stable one, too.

Public opposition would have to be very substantial before it became a more important issue for policy makers than meeting the requirements of EU membership.

6.9 Analysing a broader range of actors and/or policy network analysis

If the analysis illustrates that the assumptions are fragile, and if there is reason to believe that the success of the project will critically depend on an adequate assessment of political acceptability, there is an argument for conducting a more broad and in-depth analysis. It is recommended that such a decision be made on a case-by-case basis.

Figure 6.3 and Table 6.4 indicate the key issues which are raised as part of a so-called policy network analysis. This type of analysis has not been described in detail in the toolkit as we have assumed that a decision on whether to conduct such an analysis will be taken on a case-by-case basis. The policy network analysis combines analysis of the attitudes and resources of the key actors with a presentation of the rules - formal as well as informal - that steer the relevant water policy network, thereby increasing the predictability level.

The policy network approach can help us focus attention on a description of those actors who have, now and historically, determined the water policy, as well as an assessment of whether the network resembles a policy community or a loose issue network. In order to do this, the historical development is analysed as background material, and the interests of the network members are analysed.

6.10 Reporting

It is recommended that the political acceptability analysis be reported in a separate working document or a separate chapter in the report on acceptability of water prices.

As a minimum, the chapter should include the following subsections:

Background factors

the link from public acceptability to political decisions on investments and enforcement of tariffs;

the procedure for water tariff setting;

other factors identified as important (consider all those in table 6.2, as a minimum).

Level of political acceptability

based on an assessment of the attitudes of the political parties

Stability of political acceptability

based on assessment of the assumptions of the political parties

Conclusion

highlighting any issue that may be critical to acceptance of the proposed investment tariff level or institutional change (e.g. introduction of a concession).

²¹	In well-functioning political systems the political parties will adapt to the preferences of the population; hence there will be a tendency towards the same level of public and political acceptability of a given issue.
²²	As these analyses, by nature, cover delicate matters, some actors may be reluctant to participate.
²³	A guide to screening of key actors has been provided in Appendix 10.