Supply Chain Analysis for Rural Sanitation Products and Services in Lao pdr

Government and Development Partners are part of the chain

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Government and Development Partners are part of the chain

As illustrated in the diagrams in Section 8, Government and NGO programs form part of the sanitation supply chain. Government and NGOs may account for 12% or more of the sales of some construction material suppliers (though these programs may not all be sanitation-related). They act as an intermediary between private suppliers of products and services and the end consumer.
    1. Actors working with Government and Development Partners

Nearly 30% of construction material suppliers said that they had been involved in a Government or Development Partner (DP) sanitation or water program in the last two years (Figure 20). They cited Plan International, ADB, GTZ, Care, Norwegian Church Aid, World Vision, SNV and district health offices amongst the organisations they had worked for. They reported that they supplied a variety of materials to these projects. Some said they supplied everything required for a latrine, others only supplied a combination of pans, cement zinc sheeting, and PVC piping. Some supplied pans only (one supplied 30 pans, another 50 pans). These suppliers are in five of the seven provinces studied: Luangnamtha, Bokeo, Sekong, Borikhamxay, and Savannakhet.

Similarly, nearly a third of concrete producers have supplied rings and/or slabs and other products to Government or DP programs. They have supplied Plan International (Bokeo), Red Cross (Borikhamxay and Sekong), SNV (Savannakhet), World Vision (Savannakhet), and Care (Sekong).

Around 27% of masons reported working for Government or DP projects41. For these masons, such projects usually accounted for 10% to 30% of their work. These masons are in Luangnamtha, Bokeo, Salavan, Sekong, Attapeu, Borikhamxay and Savannakhet.42 Typically though, masons do most of their work for households. Half of masons reported that all of their work is for households, and a further 14% reported that at least 80% of their work is for households. However, some of those that do work for programs obtain a significant proportion of their workload from them. One mason reported that 80% of his work is for Government and 20% for NGOs. Another reported that 10% of his work is for UNICEF, 70% for Lao Red Cross and the rest for households.43

Figure 20: Percent that have worked for Government or Development Partner project

In addition to the above data, research teams often had difficulty obtaining interviews with suppliers — some suppliers reported being regularly bothered with questions from NGOs. At least two material suppliers refused outright to be interviewed on these grounds.

When interviewing wholesalers and retailers, the team was often told that “if the project requires other materials, we can import them”. It is though they think the research team is interviewing them as prospective suppliers to a NGO program.44 Some were very eager to assure the team of the quality of their products, noting that none of it was made in China or if it was that it was good quality.

Similarly, when asking local government officials about the cost of a latrine, they answer in terms of cost “to the project” or the amount of subsidy offered by the program. It is almost as though Nam Saat officers see themselves as suppliers of sanitation products and services. Discussions with some officials give the impression that no one in rural areas obtains a latrine outside of a program.45

Some NGO staff has detailed data on latrine costs and contact and other information on potential suppliers. This is because the programs they work for are a part of the supply chain. They are not the end user of the product, but sit between the private sector and the end consumer (potentially blunting or restricting demand signals from consumers to suppliers if they buy materials directly themselves).

It is not clear the extent to which the supply chain has already been affected by such programs. For example, would there be fewer supply chain actors in the absence of programs (unlikely, since for most sanitation is a small part of their overall business), or less knowledge of latrine components and their construction.

    1. Subsidized provision of latrines

Despite the prevalence of these projects, in Lao PDR “Only 18 percent of household latrine construction in 2008/09 was subsidized, with the vast majority funded from house­holds’ own resources” (WSP 2012a). Similarly, the WSP - Sanitation Consumer Behavior Study found that 24% of latrine owners received their latrine for free.

Table 28: Household expenditure on latrine construction, 2008-09

Source: WSP 2012a.

All latrine subsidies are funded by donors. Government spending on sanitation accounts for 12.5% of the total (Figure 21), but is “spent entirely on salaries and administration” (WSP 2012a).

Figure 21: Estimated sanitation and hygiene financing, 2008-09

Notes: “Software” includes personnel, administration, communications, logistics etc.

Private sector (value unknown est. at 1.7%). Total value = 49.7 billion LAK (US$5.9 million).

Source: WSP 2012a.

Subsidies create distortions, for both consumers and also private sector suppliers. For the demand side, “the incubation of village dependency on outside organizations to assist them with a task that most villagers can do themselves.” (Plan International 2011). WSP (2013) found that the “main reason for households having a toilet was that they were provided or supported by projects”46 and that “Respondents in all sites cited ‘never offered a toilet’ as a reason for not having one.” So despite some consumer recognition of the benefits of sanitation, many Lao PDR households decide to wait for an NGO or the government to provide a toilet rather than invest in one themselves.47

“Subsidized latrine programs in social marketing target areas may undermine willingness to pay for latrines, as beneficiaries wait for a subsidy based intervention. Also the limited technology promoted may undermine attempts to alter the consumer perception of latrines, if the technology promoted is expensive. On the other hand, a large latrine supply program may offer the opportunity to innovate in technology and delivery mechanisms." IDE August 2007

In terms of the supply side, subsidies can provide a good source of revenue for businesses, and may make them more familiar with sanitation products than they otherwise would be. However, businesses are also less likely to think of the end user as the consumer of the product because many programs sit between them and the end user. Businesses in the sanitation supply chain hence may be insulated from private demand. They might also be less likely to engage in marketing (although most do very little marketing of any of their products anyway — see Section 7).

A Plan International (2011) survey of 11 villages in Bokeo found that seven of the villages had “received toilet subsidies at some point in their recent past” (that is, at some time over the previous 5-6 years).48 WSP noted that a program with a subsidy:

  • is expensive to scale up;

  • creates community expectations of external support, re­ducing the motivation of householders to build latrines at their own expense; and

  • makes it very difficult for private masons and suppliers to generate business since their products are not subsidized. (WSP 2012a)

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