67. What is a low cost for solid waste management? At first glance, a low cost for service delivery by the private sector would be one that is lower than the cost for government service. After the cost for government to monitor the performance of the private sector is added, a low cost for service delivery by the private sector would be still lower than the cost of government service.

68. But what are the costs for government service? In most developing countries, accounting systems show cash flows rather than accruals, with no clear delineation between recurrent and capital expenditures. There is no attempt to aggregate municipal solid waste management costs incurred by all the various agencies that participate in the system. Moreover, there is typically no attempt to keep track of depreciation, debt service, personnel benefits, land acquisition, and human resettlement costs within the solid waste management accounting system. The result is that most developing countries estimate their costs for municipal solid waste management service to be less than 50 percent of actual cost (11).

69. While waste generation rates and labor rates in developing countries are significantly lower than those in industrialized countries, the costs of solid waste collection, sweeping, and disposal in developing countries require a much higher percentage of individual income than those in industrialized countries. That is because income levels are much lower, while costs attributable to equipment purchase, debt service, spare parts, fuel, and oil are typically much higher. Total solid waste management costs in a low income country might consume two to three percent of individual income while total costs in a high income industrialized country might consume only one percent of individual income.

70. Because costs are so little understood in developing countries, the annex presents a cost analysis. This discussion will provide a framework to determine which parts of the municipal solid waste management service incur the highest cost. Because most of the municipal solid waste management expenditure is for collection, this should be the first service to examine for private sector participation arrangements that would reduce costs through increasing efficiency. This analyses will also provide a framework to determine which parts of the municipal solid waste service require the greatest capital investment. Because solid waste disposal and transfer systems are more capital-intensive than the collection and sweeping systems, these should be examined for private sector participation arrangements that would provide investment.