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 1990-2015. Unicef/WHO Aug. 2004

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)

0

25

50

present MDG needs

wastewater treatmentsanitation

water supply

?

?

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 1990-2002, in US$ billion

0

20

40

60

80

100

120

140

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

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

0

50

100

150

200

Energy Telecom Transport Water & Sewerage

East Asia and Pacific

Europe and Central Asia

Latin America and the Caribbean

Middle East and North Africa

South Asia

Sub-Saharan Africa

Total (international) private investment in infrastructure in 1990-2002

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…

Telecom Gas Power Water0%

50%

100%

150%

200%

Financial autonomy

Domestic Public and Private Finance Remains the Dominant Source for Water & Sanitation

Financing flows into water in 2000

0

20

40

60

80

public private

international

domestic

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

Fin

an

ce

Public Private

Pu

blic

Pri

vate

Unbundle Finance And Management - Unbundle Finance And Management - Looking at Sustainable Hybrid SolutionsLooking at Sustainable Hybrid Solutions

Leases/Affermage

Concessions

Divestitures

BOTs

Municipal Department Mgnt. Contracts

CorporatizedMuni. Service

Mixed Company

Operating Company plc

Public & Private sector roles in the WSS sector: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!