Anne Lyche Solheim, Senior researcher, Norwegian Institute for Water Research (NIVA) World Bank Group and the Private Sector, CMI seminar 14th June 2005 Water and sanitation - Comments

Challenging the hypothesis of sequencing water investments

Water resources cannot wait for sustainable management Persistent blooms of toxic bluegreen algae in Lake Victoria

Example of pollution problem, Uganda Toxic bluegreen algae dominate the ecosystem of Murchison Bay, Lake Victoria This water is raw water for Kampala (1 mill.) This water receives sewage from Kampala The pollution accelerated after wetland destruction and enlargement of Nakivubo channel Lack of holistic management

Strategy – priorities should be: Water quality must be improved now! Combined and parallel efforts of investment in infrastructure and management necessary Capacity building at University level necessary Reliable and continuous monitoring of water resources necessary (also stressed by UNEP as one of the major challenges for sustainable management)

Integrated water resource management

MGD/WSSD –Mid-term Assessment of Progress Unicef/WHO Aug The world is on track to meet the drinking water target, but sub-Saharan Africa lags behind Without a sharp acceleration in the rate of progress, the world will miss the sanitation target by half a billion people From now until 2015, greater effort must be made to reach the poor and those in rural areas, whose deprivation is hidden behind national averages

The Millennium Development Goals - MDGs – A Startling Reminder of the Financing Challenge Ahead Halve by 2015 the proportion of people without sustainable access to safe drinking water; Halve by 2015 the proportion of people without access to basic sanitation; Translates into a doubling of investment needs from $15 billion to $30 billion per year for water supply & sanitation alone (as part of $180B a year for all water). Investment needs per annum (B USD) ? ?

Financing Challenge Investment needs are enormous Public funding stable or even decreasing in most countries; International aid is (and probably will remain) small percentage of water and sanitation financing;  Thus how to fill the gap?  The private sector?  Taxpayers?  User tariff?  A combination?

Collapse of Private Flows to Infrastructure Annual Private Investment in Infrastructure in , in US$ billion Private sector financed about 22 % of infrastructure investments in the 90s; about 8 % from ODA; 70% domestic financing.

Private Investments in Water Supply and Sanitation Have Been Low Total (international) private investment in infrastructure in by sector and region, US$ billion US$ 0.8 billion of the total flows (less than 2% of total) in 2003 to water and sanitation; about half to China

Degree of cost recovery Reasons NOT to Invest in the Water Business… TelecomGasPowerWater 0% 50% 100% 150% 200% Financial autonomy

Domestic Public and Private Finance Remains the Dominant Source for Water & Sanitation Financing flows into water in 2000 Billion USD Estimates from “GWP Framework for Action” Domestic is dominant ~ 85% Domestic dominant 85%

Going Forward: Long-Term Sustainability: A Must!! Improve Sector Performance – Closing the Revenue Gap is Key; Make Use of All Sources of Financing; Targeted Subsidies; and Unbundle Finance and Management.

Targeted Subsidies Stop subsidizing the rich, they can pay for themselves; Target subsidies better (subsidize connections rather than consumption) cost recovery in water; subsidies required for sanitation and waste water (public good component);

Management Finance PublicPrivate Public Private Unbundle Finance And Management - Looking at Sustainable Hybrid Solutions Leases/Affermage Concessions Divestitures BOTs Municipal Department Mgnt. Contracts Corporatized Muni. Service Mixed Company Operating Company plc Public & Private sector roles in the WSS sector:

Concluding Remarks Huge investment needs; Water infrastructure key to economic growth and development; Long-term sustainability a must; Improve sector performance – Closing the revenue gap is key; Make use of all sources of financing – Public or private and create framework where risks are properly allocated and bound by enforceable contracts And need to move beyond public-private debate: It is about delivering efficient quality services at lowest cost; Water as an opportunity – not only as cost!