Water Infrastructure for Water Infrastructure for Sustainable DevelopmentSustainable Development

Abel MejiaAbel Mejia

Water ManagerWater Manager

The World BankThe World Bank

OutlineOutline

Water and Poverty: the Big Water and Poverty: the Big PicturePicture

Implications for the Implications for the Infrastructure Sector Infrastructure Sector

Governance and the Political Governance and the Political Economy of WaterEconomy of Water

The Way ForwardThe Way Forward

OutlineOutline

Water and Poverty: the Big PictureWater and Poverty: the Big Picture The Millennium Development GoalsThe Millennium Development Goals Water SecurityWater Security UrbanizationUrbanization Access to ElectricityAccess to Electricity Environmental ServicesEnvironmental Services Climate ChangeClimate Change

Implications for the Infrastructure SectorImplications for the Infrastructure Sector Governance and the Political Economy of Governance and the Political Economy of

WaterWater The Way ForwardThe Way Forward

Water and PovertyWater and Poverty

1 billion lack access 1 billion lack access to safe waterto safe water

2.6 billion are without 2.6 billion are without basic sanitationbasic sanitation

The MDGsThe MDGs On track: Water supplyOn track: Water supply Off track: SanitationOff track: Sanitation

• >500 million people will be missed>500 million people will be missed Beyond the pipesBeyond the pipes

• Good policies, accountable Good policies, accountable and capable institutions requiredand capable institutions required

UrbanizationUrbanization

The urban shift and growth of slums The urban shift and growth of slums has major implications on water has major implications on water infrastructure developmentinfrastructure development

0

1

2

3

4

5

6

7

8

9

DTC OECD DTC OECD DTC OECD DTC OECD DTC OECD

Popu

latio

n (b

illion

s)

MegacitiesCitiesTownsOther ruralFragile lands

1950 1970 2000 2030 2050

Projected Population Developing & Transition Countries (DTC) and

OECD

Rapid urban growth in secondary cities & towns

Still many in fragile rural areas

Challenges: UrbanizationChallenges: Urbanization

Annual Cost of Environmental Annual Cost of Environmental Degradation in Colombia Degradation in Colombia

((Percentage of GDPPercentage of GDP

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

Water,Sanitation &

Hygiene

Urban & IndoorAir Pollution

NaturalDisasters

LandDegradation

Water SecurityWater Security

Access to ElectricityAccess to Electricity

1.6 billion people lack basic electricity 1.6 billion people lack basic electricity serviceservice

Access rates:3% in parts of AfricaAccess rates:3% in parts of Africa Clean EnergyClean Energy

• Re-emergence of hydropowerRe-emergence of hydropower

Environmental ServicesEnvironmental Services

Recognize the Value Recognize the Value of Water Ecosystemsof Water Ecosystems• GlaciersGlaciers• Coastal systemsCoastal systems• Lakes and wetlandsLakes and wetlands• AquifersAquifers• Tropical forestsTropical forests

Adaptation to Climate ChangeAdaptation to Climate Change

Impact on water cycle, Impact on water cycle, water availability, and water availability, and water allocation at the water allocation at the global, regional, basin, global, regional, basin, and even local levelsand even local levels

Smaller stocks of Smaller stocks of existing water existing water infrastructure in infrastructure in developing countriesdeveloping countries

Impact supply and Impact supply and demand of water demand of water resources and resources and associated associated infrastructure infrastructure

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)

Average Annual Precipitation and Variability in LAC and SSA

Polar LAC

Brazil-Arid LAC

Northern Warm Temperate LAC

Southern Equatorial LAC

Northern Equatorial LAC

Southern Arid SSA

Northern Equatorial SSA

Arid LAC

Southern Warm Temperate LAC

Northern Arid SSA

Northern Warm Temperate SSA

Southern Warm Temperate SSA

Southern Equatorial SSA

-500

0

500

1000

1500

2000

2500

mm

/yr

Average Annual Runoff and Variability in LAC and SSA

Polar LAC

Brazil-Arid LAC

Northern Warm Temperate LAC

Southern Equatorial LAC

Northern Equatorial LAC

Southern Arid SSA

Arid LAC

Southern Warm Temperate LAC

Northern Arid SSA

Southern Warm Temperate SSA

Northern Warm Temperate SSASouthern Equatorial SSA

Northern Equatorial SSA

-500

0

500

1000

1500

2000

2500

mm

/yr

-80

-60

-40

-20

0

20

40

60

80

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

year

pe

rce

nta

ge

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

rainfall variation around the mean

GDP growth

-80

-60

-40

-20

0

20

40

60

80

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

year

pe

rce

nta

ge

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

rainfall variation around the mean

GDP growth

Rainfall & GDP growth: Ethiopia 1982-2000

-10.0

-5.0

0.0

5.0

10.0

15.0

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

Years

Real

GD

P g

row

th (

%)

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

Vari

ab

ilit

y i

n R

ain

fall

(M

ete

r)

Real GDP grow th (%)

Variability in Rainfall (Meter)

Rainfall & GDP growth: Zimbabwe 1978-1993

Economy-wide impacts

Impact on InfrastructureImpact on Infrastructure Damage from coastal flooding, Damage from coastal flooding,

glacier melt, hurricanesglacier melt, hurricanes

Salt water intrusion into aquifers and Salt water intrusion into aquifers and lower flows from glaciers reduce lower flows from glaciers reduce drinking water suppliesdrinking water supplies

Need for more water storage, Need for more water storage, wetlands losswetlands loss

Overexploitation of aquifersOverexploitation of aquifers

Photos of the Qori KalisPhotos of the Qori Kalis

Glaciers in the Andes (Colombia, Ecuador, Peru, Bolivia, Chile, Argentina) have lost volume

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

per yearper year

A temperature increase of 4A temperature increase of 4oo C is anticipated to C is anticipated to lead to a collapse of the Amazon Rainforest lead to a collapse of the Amazon Rainforest

Ecosystem (Brazil, Colombia, Bolivia)Ecosystem (Brazil, Colombia, Bolivia)

Most Important Effects in LACMost Important Effects in LAC Glacier Melt Glacier Melt Coral Bleaching in the Caribbean Coral Bleaching in the Caribbean Increased Hurricane Frequency Increased Hurricane Frequency

and Intensity and Intensity Collapse of Tropical Rainforest Collapse of Tropical Rainforest Coastal Flooding Coastal Flooding

Economic impact from climate change in Economic impact from climate change in LAC by 2050LAC by 2050

Combined impact of sea level rise, loss of fisheries and Combined impact of sea level rise, loss of fisheries and tourism calculated to equal 5-30% of GDP in the tourism calculated to equal 5-30% of GDP in the CaribbeanCaribbean

Water supply to cities will be affected (Quito may see Water supply to cities will be affected (Quito may see water supply costs increase by 30%, La Paz, Lima, water supply costs increase by 30%, La Paz, Lima, Bogotá also to be affected by diminished supplies Bogotá also to be affected by diminished supplies caused by climate change)caused by climate change)

Power generation will be more expensive as it shifts Power generation will be more expensive as it shifts from hydro to thermalfrom hydro to thermal

Health costs will be affected by increased exposure to Health costs will be affected by increased exposure to tropical diseasestropical diseases

The cost of hurricane impact has increased by two The cost of hurricane impact has increased by two orders of magnitude in the Caribbean basin in the last orders of magnitude in the Caribbean basin in the last 20 years and hurricane intensity is expected to 20 years and hurricane intensity is expected to continue increasingcontinue increasing

Loss of biodiversity and ecosystem integrity: priceless!Loss of biodiversity and ecosystem integrity: priceless!

OutlineOutline

Water and Poverty: the Big PictureWater and Poverty: the Big Picture Implications for the Infrastructure SectorImplications for the Infrastructure Sector

Global ContextGlobal Context A Minimum PlatformA Minimum Platform S-CurveS-Curve Adapting to Climate ChangeAdapting to Climate Change The World BankThe World Bank

Governance and the Political Economy of Governance and the Political Economy of WaterWater

The Way ForwardThe Way Forward

Infrastructure accumulation and growth (1960-97 country averages, percent)

y = 0.4224x + 0.0007

R2 = 0.3487

-4%

-2%

0%

2%

4%

6%

-2% 0% 2% 4% 6% 8% 10% 12%

Growth in infrastructure stocks per worker

Gro

wth

in

GD

P p

er

wo

rke

r

Others

lac

eap7

Source: Easterly, Calderón and Serven

Investments in WaterInvestments in WaterWater investments provide multiple Water investments provide multiple co-benefits and are drivers of growth and co-benefits and are drivers of growth and poverty alleviation. poverty alleviation.

• Health Health • EnvironmentEnvironment • Building government Building government track recordtrack record

• Education Education • Gender equality Gender equality • Economic growthEconomic growth

Water Infrastructure & InstitutionsWater Infrastructure & InstitutionsA minimum platform for infrastructure and A minimum platform for infrastructure and institutions is needed to move along the institutions is needed to move along the path of sustainable development.path of sustainable development.

small-scale OR large scale water infrastructure

water management OR infrastructure

public OR private investmentsAND

AND

AND

Key is to blend options reflecting needs & specific country context ( no universal recipe)

Investments in WaterInvestments in Water

The S-CurveThe S-Curve

Considerations of Climate ChangeConsiderations of Climate Change

Challenges for developing countriesChallenges for developing countries• Needs for additional water infrastructure Needs for additional water infrastructure

and nonstructural investmentsand nonstructural investments• Adaptive management to address Adaptive management to address

uncertainty about implications of uncertainty about implications of climate variability and long term climate variability and long term impacts on the water balance impacts on the water balance

Adapting to Climate ChangeAdapting 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 ConsumptionWater Consumption• Economic incentives to reduce consumption and wasteEconomic incentives to reduce consumption and waste• Support R&D on cutting edge water technologies and Support R&D on cutting edge water technologies and

reusereuse• Increase productivity of water in irrigation systemsIncrease productivity of water in irrigation systems

Priorities for World Bank Priorities for World Bank AssistanceAssistance

Water Supply, Sanitation, HygieneWater Supply, Sanitation, Hygiene Integrated Water Resources ManagementIntegrated Water Resources Management Agriculture Water ManagementAgriculture Water Management Floods and DroughtsFloods and Droughts Hydropower Hydropower Ecosystem ManagementEcosystem Management GroundwaterGroundwater Adaptation to Climate Change in WaterAdaptation to Climate Change in Water

Global Context of WaterGlobal Context of Water

180

75

3.60

20406080

100120140160180

$US

(B

illi

on

s)

Needed forWater

Security*

Investmentsin Water

Resources*

WorldBank**

Annual Investments in Water Resources

*Source: Global Water Partnership

** Average annual investments FY04-FY07

The World Bank’s Water The World Bank’s Water PortfolioPortfolio

0

500

1000

1500

2000

2500

FY04 FY05 FY06 FY07

$U

S (

mil

lio

ns

)

WSS I&DWRMHydro

Note: As of October, 2007

Support efficiency and sustainability Support efficiency and sustainability of water investmentsof water investments

Charge the well-to-do, subsidize the poorCharge the well-to-do, subsidize the poor• From (regressive) consumption subsidies to connection From (regressive) consumption subsidies to connection

subsidies for the poorsubsidies for the poor• Public Expenditure Reviews to inform public financing Public Expenditure Reviews to inform public financing

policypolicy Apply smart technologyApply smart technology

• Focus on system improvement before expanding Focus on system improvement before expanding capacitycapacity

• Flexible standards decrease cost Flexible standards decrease cost • New irrigation and drainage techniques, reuse, New irrigation and drainage techniques, reuse,

desalinationdesalination• Better designs of damsBetter designs of dams

Secure O&MSecure O&M• Revenues from consumers, as a minimum, should cover Revenues from consumers, as a minimum, should cover

O&M to underpin sustainabilityO&M to underpin sustainability ‘‘Climate proof’ new investmentClimate proof’ new investment

• The infrastructure that is built now, will be subject to The infrastructure that is built now, will be subject to increasing variability and climatic uncertaintyincreasing variability and climatic uncertainty

OutlineOutline

Water and Poverty: the Big PictureWater and Poverty: the Big Picture Implications for the Infrastructure Implications for the Infrastructure

SectorSector Governance and the Political Economy Governance and the Political Economy

of Waterof Water Governance of UtilitiesGovernance of Utilities Corruption RisksCorruption Risks Regional ExamplesRegional Examples Drivers of CorruptionDrivers of Corruption Reducing CorruptionReducing Corruption

The Way ForwardThe Way Forward

CorruptionCorruption

Water institutions are vulnerable to Water institutions are vulnerable to corruption.corruption.

Where to look?Where to look? Corruptible financial Corruptible financial

flowsflows Discretionary Discretionary

decisions affectingdecisions affecting valuevalue

Traditional ‘clientelist’ modelTraditional ‘clientelist’ model

POLITICIANS

EMPLOYEESUTILITY

COMPANY

CONNECTEDPOPULATION

Operational subsidiesAppointment of directors

Political favours

Artificiallydepressed

tariffs

Poorquality of

service

Over-staffing

UNCONNECTEDPOPULATION

High prices

CONTRACTORS

Untendered contracts

Source: Foster 2001

Reformed modelReformed model Strategic

guidance

REGULATORYAGENCY

Price and qualityregulation

UTILITY COMPANY

Efficient service

EMPLOYEES

Good quality ofservice

Cost-recoverytariffs

CONNECTEDPOPULATION Connections

UNCONNECTEDPOPULATION

POLICY–MAKERS

CONTRACTORS

Competitive tendering

Source: Foster 2001

Utility performance

Pol

icy

env

ironm

ent

70s political turmoilmid 80s new government

end 80s & 90s Major rehab95 new statute

97 new Board98 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 UgandaThe Path for Reforms Uganda

Public Policy: Macro-Micro Public Policy: Macro-Micro linkslinks

Pol

icy

Env

iron

men

t

Utility Performancelow high

Good

Bad

Realistic

Unrealistic

Impossible

Public Policy: Macro-Micro Public Policy: Macro-Micro linkslinks

MacroMacro InflationInflation Exchange RateExchange Rate Fiscal DeficitFiscal Deficit Subsidy PolicySubsidy Policy Law: labor, Law: labor,

environment, environment, water, water, procurement, …procurement, …

SOE reformSOE reform

MicroMicro Appointment of Appointment of

key managerskey managers Budget and Budget and

Investment Investment prioritiespriorities

O&M policyO&M policy Staffing levelStaffing level Client orientationClient orientation Commercial policyCommercial policy

Understanding where corruption Understanding where corruption risk occursrisk occurs

PUBLIC UTILITY

GOVERNMENT

CUSTOMERS

REGULATOR

DONORS

PRIVATECONTRACTORS

Donor finacing

- Human Resources- Stores- Accounting

- Commercial operations- Service and repairs

- Planning and budgeting- Tendering and procurement- Project selection- Project planning and design- Construction- Supervision

Gov’t Officers

Utility Managers

Utility Employees

CAPITAL PROJECTS

Suppliers and

Contractors

UTILITY MANAGEMENT

UTILITY OPERATIONS

Petty Corruption

Grand Corruption

Regional Examples of CorruptionRegional Examples of Corruption

In South AsiaIn South AsiaIn AfricaIn Africa•80 percent of urban 80 percent of urban water utilities inwater utilities inAfrica are considered Africa are considered financially unviablefinancially unviable

In 21 water companies in In 21 water companies in Africa, nearly two-thirds Africa, nearly two-thirds of operating costs were of operating costs were due to corruptiondue to corruption

• • False readings: False readings: 41% of41% ofcustomers had paid a bribecustomers had paid a bribein last 6 monthsin last 6 months• • Illegal connections: Illegal connections: 20%20%of households admittedof households admittedpaying a bribe to utilitypaying a bribe to utilitystaffstaff• • Contractors: Contractors: 15%15%excess cost because ofexcess cost because ofcollusioncollusion• • Kickbacks: Kickbacks: 6-11% of6-11% ofcontracts valuecontracts value

Cross, Piers. WSP. 2007.Estache & Kouassi. 2002Cross, Piers. WSP. 2007.

Drivers of Corruption Drivers of Corruption in Public Worksin Public Works

Unclear procurement Unclear procurement and tenderingand tendering

Lack of compliance Lack of compliance monitoring and monitoring and enforcement enforcement sanctionssanctions

Low salaries of utility Low salaries of utility staffstaff

Understanding how to help reduce Understanding how to help reduce corruptioncorruption

Central Government

ProvidersPublic /

Consumers

Local Government

WDR 2004 Framework: “Paths of Accountability”

Long route

Short route

Medium route

Possible intervention pointsPossible intervention points

Central Government

Providers

Public / Consumers

Local Government

Political competitors

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 integritySupport provider-level

probity :

•Financial integrity

•Technical audits

•Procedural audits

The new model: balancing The new model: balancing multiple accountabilitiesmultiple accountabilities

Regulator

Clients

National Gov

Utility

Local Gov.Financiers

Union

Donors

Credit Rating

Min. Finance

Sector Min.

Min. Environment

Rich

Poor

MDGs

Extent of reform in Latin AmericaExtent of reform in Latin America

At the regional level, At the regional level, regulation has gone regulation has gone much further than PSPmuch further than PSP

It is estimated that of It is estimated that of urban water urban water consumersconsumers• 41% enjoy regulatory 41% enjoy regulatory

protectionprotection• 15% are supplied by a 15% are supplied by a

private operator (rising private operator (rising to 25% and 34% in to 25% and 34% in certain segments)certain segments)

Regulation PSP Chile 100% 86% Argentina 88% 62% Bolivia 100% 28% Colombia 100% 13% Perú 100% 0% Brasil 24% 1% Uruguay 100% 17% México 19% 19% Venezuela 3% 3% Nicaragua 100% 0% Panamá 100% 0% Paraguay 100% 0% Ecuador 0% 0% El Salvador 0% 0% Honduras 0% 0% Costa Rica 0% 0% Guatemala 0% 0%

Source: Foster 2001

OutlineOutline

Water and Poverty: the Big Water and Poverty: the Big PicturePicture

Implications for the Implications for the Infrastructure SectorInfrastructure Sector

Governance and the Political Governance and the Political Economy of WaterEconomy of Water

The Way ForwardThe Way Forward

The Way ForwardThe Way Forward

Holistic approach to water resources Holistic approach to water resources management and climate changemanagement and climate change

Address governance and political Address governance and political economy issueseconomy issues

Scaling-up support to reach the MDGsScaling-up support to reach the MDGs Enhance coordination of donorsEnhance coordination of donors Improve quality of fiscal spendingImprove quality of fiscal spending Develop technical capacity to absorb Develop technical capacity to absorb

incremental resourcesincremental resources

Thank you