48 – WateR goveRnanCe – 04/2015 © Baltzer Science Publishers

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finanCing WateR management:Weak WateR finanCing systems lead to disasteR!Efthymia Fachouridou, Robert van Cleef*

In the light of the OECD report on financing water management,1 the financing of water management re-emerges as a key issue in water management. A financing system in water management refers to the ‘various fundraising tools governments and private organisations rely on to pay for the costs of water management’.2 Recent studies have illustrated the weakness of the current financing systems of water management to ensure adequate quality of the provided services.1,3 Efthymia Fachouridou, a Greek graduate student from Wageningen University, studied the relation between financing systems and water related incidents and the added value of the application of the Financing Assessment Tool (FAT).

In its report on Building blocks for good water governance3 the Dutch Water Governance Centre included financing within the four important building blocks of good governance. Taking the lead, Sterk Consulting B.V. and the Water Governance Center jointly developed the Financing Assessment Tool (FAT) for assessing financing systems in water management. The aim of this tool is dual2: to assess the quality of financing systems for water management and, to define possible improvements within the existing frameworks. The application of the FAT can be broken down into the four steps seen in Figure 1. This article presents the results of its use in an international survey to investigate the relation between water related incidents and the financing system.

Research designThe FAT is designed so as to be applied in various water management areas, where it can highlight a wide range of issues. Due to mainly time limitations, the present search was focused on floodings. The countries that participated, namely, the UK, Serbia, and Colombia demonstrate a wide variety of political, institutional and economic

backgrounds. In the context of the research several in-depth interviews with water management experts and practitioners were conducted, while interviewees were additionally asked to fill in a questionnaire where they provided their personal assessment of their financing structure (step 3 in Figure 1).

* Efthymia Fachouridou is an Environmental Engineer from Greece, currently a Wageningen UR master student in

Environmental Sciences and intern in Sterk Consulting B.V.; Robert van Cleef is a corporate and water economist and co-founder/director of Sterk Consulting B.V.

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Research resultsA clear connection between floods’ destructive impact and the financing system at place was recognised by the respondents. Within this awareness they focus mainly on two important variables of the financing system: sufficiency and stability (Figure 2). In Serbia, the available financial resources are not sufficient neither for covering the maintenance costs nor for new investments, something that has caused damages in infrastructure and severe disruption in project planning. In the UK, the financial resources currently spent are considered sufficient by the government for the time being. However, stability is not ensured as demands are expected to increase in the future due to the adverse consequences of climate change and potential increase of the protection levels demanded by citizens. Similarly, the strong dependence of the Colombian implementing agencies on the government budget, in an environment of fierce competition with other sectors, constitutes sources of finance insufficient and discontinuous. A financing system holding a more decentral way of collecting revenues lacks in most countries and is generally seen as a strong step forwards. Finally, a third arising issue is the application of the cost recovery and beneficiary pays principles. The necessity to apply these principles was widely and strongly recognised by the respondents of all three countries. However, the full implementation of even the existing financing instruments is restricted, not only because of the social reaction expected and users’ limited ability to pay, but also because decentralised authorities lack the capability to further develop them.

Asked for possible improvements in their financing systems, respondents suggested the urgent implementation of the current legal frameworks and water management plans. Furthermore, improving the efficiency of the resources currently spent, as well as increasing their amount through the further contribution of especially the private sector were also recommended.

Prospects of the FAT applicationConsidering the main issues mentioned above and the characteristics of the FAT, it can be concluded that its further development and application can make a significant contribution in the way we study and practice financing water management. To begin with, its application is a way to initiate discussion around the issue, making governments and societies aware of the problems and the potential solutions. This might help to overcome the beneficiaries’ opposition to pay and stimulate governments towards establishing new frameworks or facilitating the implementation of the existing ones. In addition, this is a tool that, despite its limitations in quantitative accuracy, is able to provide an overall picture of the financing system’s condition and weaknesses. Then, researchers can continue with specialised in-depth assessments regarding those variables that are considered the poorest or most crucial for its improvement. For instance, being cost recovery or efficiency an issue, thorough cost recovery assessments or cost-benefit analyses can be recommended. Last but not least, the information collected by its wide application can be used for establishing a paradigm database containing the diverse financing systems, institutional frameworks, and good practices that practitioners of any kind can benefit from. In Europe, the common implementation of the Water Framework Directive4 offered such an opportunity. Consequently, practitioners exchange experiences through common databases5 and have a framework to show them the way forward. Despite any challenges, the Financing Assessment Tool can become an instrument for the Netherlands to lead the way in the international exchange of knowledge and experiences to inspire practitioners, academics and professionals. M

1 Water Governance in OECD Countries: A Multi-level

approach, 2011. 2 Outline of the Financing Assessment Tool: Robert van Cleef,

2014.3 Building blocks for good governance: H. Havekes, M.

Hofstra, A. Van der Kerk & B. Teeuwen, 2013.4 Directive 2000/60/EC of the European Parliament and of

the Council of 23 October 2000 establishing a framework for Community action in the field of water policy.

5 https://circabc.europa.eu/faces/jsp/extension/wai/navigation/container.jsp?FormPrincipal:_idcl=FormPrincipal:left-menu-link-lib-closed&FormPrincipal_SUBMIT=1&javax.faces.

Colombia

Serbia

UK

Figure 2: Summary of scores in the FAT application in the UK, Serbia and Colombia (%).