Posted by: mattnespoli | April 1, 2010

Market Failure in Waslala

By Matt Nespoli, President & Founder of Water for Waslala

One of the first concepts taught in Economics class is that markets function most effectively when there is a high level of competition, which puts downward pressure on prices and fosters quality and innovation. Conversely, markets fail when an individual or firm monopolizes the production of a certain good or service, and can therefore raise prices and reduce quality without losing customers.

Yesterday Nora and I learned of a great example of market failure in Waslala that is negatively affecting our bottom line on the ground.  If you want to design or build something in Waslala – a building, a bridge, a water system, etc – there are only two qualified engineers living in the area that know how to produce the requisite engineering design drawings. Therefore, these engineers can charge increasingly exorbitant consulting fees with impunity. And because there are many international development projects occurring in Waslala, these two engineers are free to select only the most lucrative projects to work on.

The same is true of general contractors, who actually construct the buildings, bridges, water systems, etc. Because there is so much demand for this specialized labor among international aid agencies, the few contractors working in Waslala can bid up their prices, to the chagrin of small organizations like WfW.

The lack of qualified engineering specialists in Waslala, coupled with the growing number of internationally-funded projects in Waslala, is creating a difficult situation for us. If we continue to use local labor in designing and building our systems, the costs of our projects will skyrocket – think $50 to $100 to supply one Waslalan with clean water, instead of $25. However, if we decide to rely more on US volunteers, such as the Villanova Engineering Department, to design and help construct the systems, we would forgo the local, on-the-ground presence that is critical to ensuring that projects are designed to best meet the community’s needs.

What is our solution? In the interim, we’ll likely continue to use our local resources to construct the projects in our 2010 pipeline. But as we look to the future, we’ll need to think of another solution to overcome the failures in the high-skilled labor market in Waslala.


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