2. Water Infrastructure for Sustainable Development Abel Mejia Water Manager The World Bank

3. Outline Water and Poverty: the Big Picture Water and Poverty: the Big Picture Implications for the Infrastructure Sector Implications for the Infrastructure Sector Governance and the Political Economy of Water Governance and the Political Economy of Water The Way Forward The Way Forward

4. Outline Water and Poverty: the Big Picture Water and Poverty: the Big Picture The Millennium Development Goals The Millennium Development Goals Water Security Water Security Urbanization Urbanization Access to Electricity Access to Electricity Environmental Services Environmental Services Climate Change Climate Change Implications for the Infrastructure Sector Implications for the Infrastructure Sector Governance and the Political Economy of Water Governance and the Political Economy of Water The Way Forward The Way Forward

5. Water and Poverty 1 billion lack access to safe water 1 billion lack access to safe water 2.6 billion are without basic sanitation 2.6 billion are without basic sanitation

6. The MDGs On track: Water supply On track: Water supply Off track: Sanitation Off track: Sanitation >500 million people will be missed>500 million people will be missed Beyond the pipes Beyond the pipes Good policies, accountable and capable institutions requiredGood policies, accountable and capable institutions required

7. Urbanization The urban shift and growth of slums has major implications on water infrastructure development The urban shift and growth of slums has major implications on water infrastructure development

8. Projected Population Developing & Transition Countries (DTC) and OECD Rapid urban growth in secondary cities & towns Still many in fragile rural areas Challenges: Urbanization

9. Annual Cost of Environmental Degradation in Colombia ( Percentage of GDP

10. Water Security

11. Access to Electricity 1.6 billion people lack basic electricity service 1.6 billion people lack basic electricity service Access rates:3% in parts of Africa Access rates:3% in parts of Africa Clean Energy Clean Energy Re-emergence of hydropowerRe-emergence of hydropower

12. Environmental Services Recognize the Value of Water Ecosystems Recognize the Value of Water Ecosystems GlaciersGlaciers Coastal systemsCoastal systems Lakes and wetlandsLakes and wetlands AquifersAquifers Tropical forestsTropical forests

13. Adaptation to Climate Change Impact on water cycle, water availability, and water allocation at the global, regional, basin, and even local levels Smaller stocks of existing water infrastructure in developing countries Smaller stocks of existing water infrastructure in developing countries Impact supply and demand of water resources and associated infrastructure Impact supply and demand of water resources and associated infrastructure

14. Relative change in runoff in the twenty-first century mean of relative change (percentage) in runoff for the period 2041–60 compared to 1900-1970. (P. C. D. Milly1 2005)

17. Rainfall & GDP growth: Ethiopia 1982-2000 Rainfall & GDP growth: Zimbabwe 1978-1993 Economy-wide impacts

18. Impact on Infrastructure Damage from coastal flooding, glacier melt, hurricanes Damage from coastal flooding, glacier melt, hurricanes Salt water intrusion into aquifers and lower flows from glaciers reduce drinking water supplies Salt water intrusion into aquifers and lower flows from glaciers reduce drinking water supplies Need for more water storage, wetlands loss Need for more water storage, wetlands loss Overexploitation of aquifers Overexploitation of aquifers

19. Photos of the Qori Kalis Glaciers in the Andes (Colombia, Ecuador, Peru, Bolivia, Chile, Argentina) have lost volume

20. Argentina's Upsala Glacier, once the biggest in South America, is now disappearing at a rate of 200 meters per year

21. A temperature increase of 4 o C is anticipated to lead to a collapse of the Amazon Rainforest Ecosystem (Brazil, Colombia, Bolivia)

22. Most Important Effects in LAC Glacier Melt Glacier Melt Coral Bleaching in the Caribbean Coral Bleaching in the Caribbean Increased Hurricane Frequency and Intensity Increased Hurricane Frequency and Intensity Collapse of Tropical Rainforest Collapse of Tropical Rainforest Coastal Flooding Coastal Flooding

23. Economic impact from climate change in LAC by 2050 Combined impact of sea level rise, loss of fisheries and tourism calculated to equal 5- 30% of GDP in the Caribbean Combined impact of sea level rise, loss of fisheries and tourism calculated to equal 5- 30% of GDP in the Caribbean Water supply to cities will be affected (Quito may see water supply costs increase by 30%, La Paz, Lima, Bogotá also to be affected by diminished supplies caused by climate change) Water supply to cities will be affected (Quito may see water supply costs increase by 30%, La Paz, Lima, Bogotá also to be affected by diminished supplies caused by climate change) Power generation will be more expensive as it shifts from hydro to thermal Power generation will be more expensive as it shifts from hydro to thermal Health costs will be affected by increased exposure to tropical diseases Health costs will be affected by increased exposure to tropical diseases The cost of hurricane impact has increased by two orders of magnitude in the Caribbean basin in the last 20 years and hurricane intensity is expected to continue increasing The cost of hurricane impact has increased by two orders of magnitude in the Caribbean basin in the last 20 years and hurricane intensity is expected to continue increasing Loss of biodiversity and ecosystem integrity: priceless! Loss of biodiversity and ecosystem integrity: priceless!

24. Outline Water and Poverty: the Big Picture Water and Poverty: the Big Picture Implications for the Infrastructure Sector Implications for the Infrastructure Sector Global Context Global Context A Minimum Platform A Minimum Platform S-Curve S-Curve Adapting to Climate Change Adapting to Climate Change The World Bank The World Bank Governance and the Political Economy of Water Governance and the Political Economy of Water The Way Forward The Way Forward

25. Source: Easterly, Calderón and Serven

26. Investments in Water Water investments provide multiple co-benefits and are drivers of growth and poverty alleviation. Health Health Environment Environment Building government track record Building government track record Education Education Gender equality Gender equality Economic growth Economic growth

27. Water Infrastructure & Institutions A minimum platform for infrastructure and institutions is needed to move along the path of sustainable development. small-scale OR large scale water infrastructure water management OR infrastructure public OR private investments AND Key is to blend options reflecting needs & specific country context ( no universal recipe)

28. Investments in Water The S-Curve

31. Considerations of Climate Change Challenges for developing countries Challenges for developing countries Needs for additional water infrastructure and nonstructural investmentsNeeds for additional water infrastructure and nonstructural investments Adaptive management to address uncertainty about implications of climate variability and long term impacts on the water balanceAdaptive management to address uncertainty about implications of climate variability and long term impacts on the water balance

32. Adapting to Climate Change Augment Supply: Augment Supply: Expand alternatives of water supply and storageExpand alternatives of water supply and storage Increase efficiency of water supply servicesIncrease efficiency of water supply services Control water balance at basin levelControl water balance at basin level Sustainable aquifer management (recharge)Sustainable aquifer management (recharge) DesalinationDesalination Pollution Management: Pollution Management: Foster water quality management at basin levelFoster water quality management at basin level Phased approach to investments and standardsPhased approach to investments and standards Support priority investments in wastewater treatmentSupport priority investments in wastewater treatment Support reuseSupport reuse Water Consumption Water Consumption Economic incentives to reduce consumption and wasteEconomic incentives to reduce consumption and waste Support R&D on cutting edge water technologies and reuseSupport R&D on cutting edge water technologies and reuse Increase productivity of water in irrigation systemsIncrease productivity of water in irrigation systems

33. Priorities for World Bank Assistance Water Supply, Sanitation, Hygiene Water Supply, Sanitation, Hygiene Integrated Water Resources Management Integrated Water Resources Management Agriculture Water Management Agriculture Water Management Floods and Droughts Floods and Droughts Hydropower Hydropower Ecosystem Management Ecosystem Management Groundwater Groundwater Adaptation to Climate Change in Water Adaptation to Climate Change in Water

34. Global Context of Water *Source: Global Water Partnership ** Average annual investments FY04-FY07

35. The World Banks Water Portfolio Note: As of October, 2007

36. Support efficiency and sustainability of water investments Charge the well-to-do, subsidize the poor Charge the well-to-do, subsidize the poor From (regressive) consumption subsidies to connection subsidies for the poorFrom (regressive) consumption subsidies to connection subsidies for the poor Public Expenditure Reviews to inform public financing policyPublic Expenditure Reviews to inform public financing policy Apply smart technology Apply smart technology Focus on system improvement before expanding capacityFocus on system improvement before expanding capacity Flexible standards decrease costFlexible standards decrease cost New irrigation and drainage techniques, reuse, desalinationNew irrigation and drainage techniques, reuse, desalination Better designs of damsBetter designs of dams Secure O&M Secure O&M Revenues from consumers, as a minimum, should cover O&M to underpin sustainabilityRevenues from consumers, as a minimum, should cover O&M to underpin sustainability Climate proof new investment Climate proof new investment The infrastructure that is built now, will be subject to increasing variability and climatic uncertaintyThe infrastructure that is built now, will be subject to increasing variability and climatic uncertainty

37. Outline Water and Poverty: the Big Picture Water and Poverty: the Big Picture Implications for the Infrastructure Sector Implications for the Infrastructure Sector Governance and the Political Economy of Water Governance and the Political Economy of Water Governance of Utilities Governance of Utilities Corruption Risks Corruption Risks Regional Examples Regional Examples Drivers of Corruption Drivers of Corruption Reducing Corruption Reducing Corruption The Way Forward The Way Forward

38. Corruption Water institutions are vulnerable to corruption. Water institutions are vulnerable to corruption. Where to look? Where to look? Corruptible financial flows Corruptible financial flows Discretionary decisions affecting value Discretionary decisions affecting value

39. Traditional clientelist model Source: Foster 2001

40. Reformed model Source: Foster 2001

41. Utility performance Policy environment 70s political turmoil mid 80s new government end 80s & 90s Major rehab 95 new statute 97 new Board 98 new MD 98-00 service & revenue enhancement programs 00 ext & int performance contracts 02 automatic tariff indexation 03 staff performance contracts 97 corporate plan The Path for Reforms Uganda

42. Public Policy: Macro-Micro links Policy Environment Utility Performance low high Good Bad Realistic Unrealistic Impossible

43. Public Policy: Macro-Micro links Macro Inflation Inflation Exchange Rate Exchange Rate Fiscal Deficit Fiscal Deficit Subsidy Policy Subsidy Policy Law: labor, environment, water, procurement, … Law: labor, environment, water, procurement, … SOE reform SOE reformMicro Appointment of key managers Appointment of key managers Budget and Investment priorities Budget and Investment priorities O&M policy O&M policy Staffing level Staffing level Client orientation Client orientation Commercial policy Commercial policy

44. Understanding where corruption risk occurs Petty Corruption Grand Corruption

45. Regional Examples of Corruption In South Asia In Africa 80 percent of urban water utilities in80 percent of urban water utilities in Africa are considered financially unviable In 21 water companies in Africa, nearly two- thirds of operating costs were due to corruption In 21 water companies in Africa, nearly two- thirds of operating costs were due to corruption False readings: 41% of False readings: 41% of customers had paid a bribe in last 6 months Illegal connections: 20% Illegal connections: 20% of households admitted paying a bribe to utility staff Contractors: 15% Contractors: 15% excess cost because of collusion Kickbacks: 6-11% of Kickbacks: 6-11% of contracts value Cross, Piers. WSP. 2007. Estache & Kouassi. 2002 Cross, Piers. WSP. 2007.

46. Drivers of Corruption in Public Works Unclear procurement and tendering Unclear procurement and tendering Lack of compliance monitoring and enforcement sanctions Lack of compliance monitoring and enforcement sanctions Low salaries of utility staff Low salaries of utility staff

47. Understanding how to help reduce corruption Central Government Providers Public / Consumers Local Government WDR 2004 Framework: Paths of Accountability Long route Short route Medium route

48. Possible intervention points Central Government Providers Public / Consumers Local Government Political competitors Management Information on performance Demand for service + probity Public / Consumers Support country-level probity: Public expenditure management & accountability Public procurement Ombudsman, anti-graft commission Build clear accountability paths: Sector structure Regulation Performance contracts OBA Provider governance Strengthen consumer demand: Consumer groups Report cards Complaints mechanisms Capacity building Procedural integrity Support provider-level probity : Financial integrity Technical audits Procedural audits

49. The new model: balancing multiple accountabilities Regulator Clients National Gov Utility Local Gov. Financiers Union Donors Credit Rating Min. Finance Sector Min. Min. Environment Rich Poor MDGs

50. Extent of reform in Latin America At the regional level, regulation has gone much further than PSP At the regional level, regulation has gone much further than PSP It is estimated that of urban water consumers It is estimated that of urban water consumers 41% enjoy regulatory protection 15% are supplied by a private operator (rising to 25% and 34% in certain segments) Source: Foster 2001

51. Outline Water and Poverty: the Big Picture Water and Poverty: the Big Picture Implications for the Infrastructure Sector Implications for the Infrastructure Sector Governance and the Political Economy of Water Governance and the Political Economy of Water The Way Forward The Way Forward

52. The Way Forward Holistic approach to water resources management and climate change Holistic approach to water resources management and climate change Address governance and political economy issues Address governance and political economy issues Scaling-up support to reach the MDGs Scaling-up support to reach the MDGs Enhance coordination of donors Enhance coordination of donors Improve quality of fiscal spending Improve quality of fiscal spending Develop technical capacity to absorb incremental resources Develop technical capacity to absorb incremental resources

53. Thank you