Reform in the Public Utility Services Management: Another Step towards Utility Services Market

The Decree of the Uzbekistan’s President Islam Karimov dated 19 December 2000 "On Furthering Reform in the Public Utility Services Management" ("Narodnoye Slovo", December 21, 2000) marked the completion of an entire phase of reforms in the country’s public utility sector, which began as early as summer 1993. Then, in the early days of independent Uzbekistan, the Ministry of Public Utilities and Housing was transformed into the Ministry of Public Utility Services. The Decree of 14 July 1993 ordered to establish regional maintenance associations ("Narodnoye Slovo", July 16, 1993) based on provincial [oblast] operational associations of utilities and housing, and provincial units of the republican operational associations "UzVodoKanal" [water supply and sewerage], "UzTeploKommunEnergo" [heating and power supply], "UzRemStroi" [construction and maintenance] and "UzbekGaz" [gas supply].

The core idea of the Decree of 14 July 1993 was to eliminate functional segregation caused by the existence of the multiple agencies responsible for securing proper housing and utility conditions for the population. Lack of coordination between different organizations involved in housing maintenance had been causing a lot of trouble for the residents: instead of turning to one centralized unit with all their problems related to housing, people had to run around between various agencies that reported to different authorities and often functioned without any accord with one another. Such situation affected residents in the first place, and the aforementioned Decree appeared as one step on the way to overcome the problem.

Simultaneously with the reform in public utility management, starting January 1, 1994 Uzbekistan introduced the system of negotiable rates for housing maintenance ("Narodnoye Slovo", July 20, 1993). Presumably, apartment/house owners and tenants would sign a contract with the newly established regional maintenance associations. At the same time the government gradually began to rid itself of the responsibility for housing maintenance, having anticipated 10 percent reduction of budget subsidies for these purposes annually. As in 1993 70% of the actual costs was covered from the budget, it should have been the year 2000 when the government was supposed to be completely free from costs related to housing maintenance, with the largest portion of the housing fund no longer being public property.

Having removed the burden of care for the housing, the government still retained all levers to control water and power supply to the houses. For instance, in 1997 the experts from the republican anti-monopoly committee noted that the Ministry of Public Utility Services had full control over the supply and distribution of natural and liquefied gas, as well as 90% of heating and 83% of water supply and discharge ("Business-Vestnik Vostoka", July 30, 1997). There are many an evidence that monopolistic and pyramid-like management system in the sector did not at all helped improve living conditions of the majority of people. Many houses that had been in use for 25-30 years were never renovated, water supply and heating systems decayed so much that water and heating had often to be disconnected ("Narodnoye Slovo", November 3, 2000). One of the most critical problems in Tashkent has become solid waste removal, regardless of the fact that tariffs for this service were increased several times ("Pravda Vostoka", June 15, 2000).

It has to be mentioned that the cause of quick degradation of the housing quality in old apartment blocks is not only the former housing and utility management system, but also a rapidly increasing debt for utility services, as well as multiple cases of stealing sources of energy. Part of the population who have become unable to pay for public utilities at a rate that has vastly increased after the mass privatization, simply stopped doing it. For instance, by the end of 2000 the amount of debt to the Tashkent city public utility maintenance association reached 1.5 billion soums - 1.8 million US dollars ("Vecherniy Tashkent", November 22, 2000). And as the design of most of the buildings does not allow to disconnect individual defaulters, other methods of enforcing debt are employed. Staff of the regional maintenance units go from house to house themselves, trying to shame or threaten defaulters. Lack of personnel to do the job is compensated by engaging people from other sectors; in Tashkent, for example, yielding to the pressure of local authorities, even school-teachers had to perform this function ("Pravda Vostoka", June 16, 2000). The sweep of utility "poaching" sometimes reaches an incredulous scale. According to an executive from the Chilanzarskaya heating plant, the total damage incurred by the heating sector in Tashkent city constitutes 120-140 million dollars over one heating season. "To make their houses warm many people tap water pipelines, arrange for massive water discharge in the heating systems, burn gas, steal electric power" ("Pravda Vostoka", December 15, 1998).

All the aforesaid proves that the former system of housing and utility services management fails to sustain even the current condition of apartment houses, not to mention any progress in the sector. It needs to be said that already in 1998 the government passed a document called "The Concept of Furthering Economic Reform in the System of Public Utility Services in the Republic of Uzbekistan", thus the Decree of December 19, 2000 mentioned early in the text fits well into the implementation plan of this Concept. For instance, the abolishing of the Ministry of Public Utility Services anticipated in the Decree imports separating management from operations proposed in the Concept. The functions of management, coordination and control is given to the newly established agency "UzKommunKhizmat", and the service function – to the local executive authority and the regional maintenance associations.

With regard to the above, the "UzKommunKhizmat" agency shall: (1) ensure sustainable supply of gas and water; (2) pursue consistent technological policy in the sector; (3) coordinate the implementation of reforms; (4) make sure that the legislation is complied with by all other participants of the process; and (5) facilitate bringing in foreign investments and technologies.

Bodies of executive authority represented by the Council of Ministers of Karakalpakstan and khokimiyats of the provinces and the city of Tashkent shall take care of: (1) creating competitive environment in the utility services market; (2) implementation of the target government programs for the development of water and gas supply networks; (3) tariff policy design; and (4) the introduction of gauges.

The duties of the regional public utility maintenance associations include: (1) the provision of the entire range of public utility services; (2) organizing for overhaul and renovation; (3) introducing societies of the dwelling owners and Single Customer Services, as well as alternative organizations which can be contracted for the housing maintenance services.

It should be noted that before the reform in the public utility and housing sector began, all the above listed functions had been the responsibility of the Ministry of Public Utilities and Housing. The experience of the past years has proved the former management structure absolutely inadequate in the new circumstances, therefore, recently undertaken actions should be viewed as an effort to adjust to a different socioeconomic reality. Whether this effort brings any actual improvements and what the main problems on this path are going to be will become clear in 3-4 years’ time.