May 17, 2002—Access to water is clearly the most basic of human needs. Improving water supply and sanitation service delivery is crucial in the quest to reduce poverty. Yet for many in the developing world, access to water is far from the given it is in developed countries. Roughly 1.1 billion people lack access to improved water. At the same time, 2.4 billion people live without improved sanitation and 4 billion without sound wastewater disposal. Deaths from water scarcity number 12 million each year. Of this total, 3 million are children who tragically die from waterborne diseases every year.

These daunting statistics and the conditions from which they arise were very much on the minds of World Bank staff last week as members of the Water family gathered in Washington for Water Forum 2002. This year's Water Forum was organized jointly between the Water Resources Management Group and the Water and Sanitation Sector Board. Nearly 500 participants attended, including Bank staff from all water related sectors, and also including field staff from the Water and Sanitation Program. A number of external participants were also invited, including representatives of Thames Water, the world's third largest water company.

Addressing a capacity crowd, Private Sector Development & Infrastructure Vice President Nemat Shafik underscored the centrality of water access and water resources management to poverty reduction. "Water is without a doubt man's most fundamental need and is essential for everything else. We cannot think of making a meaningful impact on poverty reduction without addressing access to and management of water."

The relevance of water access to development was further stressed by Africa Vice President Callisto Madavo, who described water as the "essence of life." Madavo reminded staff not to forget the "human story behind the economics." He pointed out that alleviation of the suffering of individual families and communities with poor access to water resources must be uppermost in people's minds, an apt reminder before three full days of discourse on subjects including water resources economics, pricing policies in the water supply and sanitation sector, and challenges of sector regulation, among others.

This human story was very much in evidence as keynote speaker M. Venkaiah Naidu, India's Minister for Rural Development, spoke about the water scenario in his country, as well as India's reform initiatives in the water sector. Naidu spoke about what he called a "learning by doing" approach. He noted that the Indian Government, committed to reducing the suffering of poor communities beset by limited access to water, had placed a high premium on the water access and water resources management. He spoke of India's strong partnership with the World Bank over the past decade, and the impressive progress that had been made in developing and implementing innovative strategies to improve the rural water supply and sanitation sector. The Indian Government envisages provision of safe drinking water to all its rural habitations by 2004.

John Briscoe, Senior Water Adviser in the Bank's Rural Development Department, drew on examples from India as he presented participants with the latest draft of the Bank's new Water Resources Sector Strategy, the third in a trilogy of Bank reports on water management. (See www.worldbank.org/water). The draft strategy focuses not on services but on water resources management, covering water supply and sanitation, irrigation and drainage, energy, environmental services and other uses including industry and navigation. It notes among its main themes that the effective development and management of water resources is essential for growth and poverty reduction, thus highlighting the important role the Bank must play in water resources. It also underscores the main management challenge, which is not vision but effective implementation. It makes it clear that to be an effective partner, the Bank must be more attentive to the political economy of change, the prioritization of actions, and the time taken for change. And the strategy's third main theme is that the main development challenge is for countries to develop appropriate stocks of well-performing hydraulic infrastructure, mobilizing public and private financing.

Much has been said and much more will be heard about the Millennium Development Goals or "MDGs" as the international development community intensifies its efforts to reduce poverty. The challenge for the Bank, as the institution joins other partners in pursuing these goals, is to ensure that the rhetoric translates into real benefits on the ground for poor people. Clearly, progress in the development and management of water will have a major impact on these goals. Two of these which especially stand out are: (a) ensuring environmental sustainability …and halving the proportion of people without sustainable access to safe drinking water; and (b) reducing child mortality. Jamal Saghir, Energy & Water Director and Chair of the Water & Sanitation Sector Board, emphatically underscored the importance of meeting the Millennium Development Goals in his opening address to the forum.

"The international development community is now focusing on water and sanitation services as a priority for reducing poverty," Saghir said, "Attaining MDG targets requires significant increase in extension of service to poor households." He pointed out that "sustained access" did not mean simply hitting momentary coverage targets, but rather increasing the focus on service quality and corporate, contractual and legal infrastructure needed to foster financial and operational sustainability. Saghir noted that urban areas will require the most effort, given the accelerating pace of urbanization. The Asia region will require the largest access increase, being the region of the world with the largest absolute number of people unserved, followed closely by Africa. "Reasonable access" to water is broadly defined [by the World Health Organisation] as the availability of at least 20 liters per person per day from a source within one kilometer of the user's dwelling—a far cry from water access in the developed world.

Bridging the gap

Bridging the huge water access gap will take considerable effort. From an investment perspective, the Bank's emerging Water & Sanitation Business Strategy estimates that roughly $380 billion dollars in investment will be needed for the 2000-2015 period in order to meet Millennium Development Goal targets. This translates into roughly $25 billion annually. While significant funding is being directed at water and sanitation services in many countries, what tends to stand in the way of improved services has had less to do with lack of financial resources and more to do with ineffective policies and institutions at the sector and local levels. It was noted that countries which had good policies and effective institutions were usually able to make better use of public funds.

Private sector participation…

Private participation remains a powerful instrument to achieve sector and MDG goals. Experience has shown that projects with a private sector component are generally better than earlier public sector experience, though there is still room for improvement. However, private entry into the water sector has been limited. During the 1990s, a significant number of countries succeeded in attracting private investors into other sectors like telecommunications and power but less than 5 percent of private infrastructure investment in developing countries went to water and sanitation. Even so, much of this was concentrated primarily in East Asia and Latin America.

The water industry still faces considerable challenges in continuing to attract private sector participation. For one, there are relatively few qualified international operators in the industry. Second, for most of these investors, the water sector in developing countries is still a low-yield industry, often marked by considerable development and return risk. There is thus very low appetite for investment in developing countries. Jan G. Janssens of Water & Sanitation suggests a number of ways in which water private sector participation in developing countries can be improved. He emphasizes the need for better structuring of private sector participation in the water sector, with emphasis on access and affordability of consumption as a way of really serving the poor. He highlights various incentives for private sector operators. One is to discourage opportunistic bidding and to expand competition to more players in the selection of the operator. Another is improving what he calls the bankability of concessions by setting realistic performance targets for expected revenue flow and using new multilateral financial instruments.

… and output-based aid

There is broad consensus that the introduction of public subsidies into private sector participation can produce specific incentives for serving the poor, while at the same time facilitating financial closure with concessions. The implementation of output-based aid (OBA) schemes whereby subsidies are disbursed upon actual service delivery to users, and on the improvement of quality, has been gaining ground. This is in contrast to traditional "input-based" public co-financing where subsidies were targeted at the capital cost of specific civil works.

There are various applications of output-based aid subsidies. For instance, in cases where coverage of water service is expanded into rural areas, lump payments can be made for each new connection in these poor areas. A subsidy can also be provided for tariff transition. In other words, the subsidy supports a gradual tariff increase until the operator attains a cost-recovering level. And third, OBA subsidies can also be provided for wastewater treatment, whereby the subsidy is based on the amount of pollution removed.

At the closing session, Water and Sanitation Program Manager Walter Stottman invited heads of the various thematic groups to share their thoughts on some of the key elements discussed during the forum. The representatives of the Water Resources Management, Urban Water, and Rural Water and Sanitation thematic groups all welcomed the opportunity that the forum presented for all three thematic groups to come together, share information and get to know one another better. Participants agreed that each of the thematic groups represented an integral part of a greater whole. Karin Kemper, leader of the Water Resources Management thematic group, noted that water resource issues had been identified as "very important" in 53 percent of the Bank's portfolio of projects for the FY03 to FY05 period.

Sudipto Sarkar, Chair of the Urban WSS thematic group, welcomed the more integrated approach among the three thematic groups. In terms of a path to follow, he described the Millennium Development Goals as a welcome "beacon of light," pointing out that such guiding principles had not existed in the past. Sarkar said it was important to understand the political economy of water, noting the obvious links between water access and health and environmental issues. He described water as a "political, social and economic good." He spoke of the "pendulum of the private/public sector partnership," underscoring the need to think through risk allocation between both sectors. He talked about the need to draw from lessons learned from problems with private sector contracts in the past and to make improvements in the next or second generation of contracts. At the same time, he drew attention to the large role of the public sector in creating the right enabling environment for the private sector to come in.

Speaking for Rural Water and Sanitation, Jennifer Sara also welcomed the commitment to increased coordination among the three thematic groups. She recapped highlights of the management of water and sanitation in small towns and in a multisectoral, programmatic context, especially in the context of poverty reduction strategies, decentralization and community driven development. Going forward, Sara laid emphasis on the importance of restructuring the rural water and sanitation learning agenda, particularly with Bank partners. As priority topics for FY03, she noted the need for greater attention to gender and empowerment, sustaining rural water and sanitation, hygiene and sanitation, and small towns management. Also deemed important was financing and scaling up of sustainable models.

In her wrap-up remarks to participants at the closing session of the forum, Nemat Shafik told staff that no intervention in development that mattered more in improving the welfare of people than water. She stressed the importance of integrated management and development of water resources, pointing out that such integration was crucial. Shafik noted that there had been considerable neglect of sanitation and hygiene and welcomed the commitment that had been made to scale up activity in this area. She also noted the high risks of the sector, especially the high risks associated with large projects like dams, and she reminded staff of the need to continue contributing to helping countries manage these risks. Shafik also enjoined staff to embrace the programmatic approach and to improve work on partnerships, especially among internal sectors and also with the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). She also encouraged the nurturing of strong and sustained partnerships with civil society and the private sector.

The PSI Vice President further highlighted the centrality of water at such future landmark events like the World Summit on Sustainable Development in Johannesburg in August/September, and the 3^rd World Water Forum in Kyoto, Japan next March. "Ultimately, the work we do as water professionals is very important in the context of these initiatives … and going forward, the commitment of the institution to water resources management and development remains strong."

Staying true to the Millennium Development Goals

Both Shafik and Environmentally and Socially Sustainable Development Network (ESSD) Vice President Ian Johnson, drew attention to the recurring theme of the Millennium Development Goals. The importance of the MDGs had also been the subject of a lunch address on the second day of the forum by Mr. Michel Camdessus, former Managing Director of the International Monetary Fund and current Chairman of the Panel on Financing Water Infrastructure. In his closing session remarks, the ESSD Vice President enjoined staff to think of water not as an end in itself but as a key vehicle for arriving at some of these goals. He noted the relevance of water to agriculture, health, energy, education and environmental concerns and said he hoped the Millennium Development Goals would propel the issue of water forward. In an apt play on words, he described the new age of water management as an important "watershed" in the sector. He described the desired environment going forward as one that called for enlightened public policy and a responsive private sector. He welcomed the focus on performance based approaches and accountability. He added, "it is all about demand management," highlighting the pressure that increasing demand for water had put on sound water management. He said that water management must be seen as a public good. Johnson also spoke of the importance of investing in science and technology, noting that there had been huge swings in the agricultural sector from investments in science and research.

The ESSD Vice President also pointed to the risky business that water had become. He was emphatic in pointing out that it was wrong for the Bank to think that getting out of the water business was the right answer, echoing his PSI counterpart's call to help the Bank's clients deal with the high risks of water resources management. Like others, Johnson also welcomed the attention that was being given to sanitation, which he said could only result in an all around win-win. Concluding, he enjoined staff to be strategic in the water sector. He noted that partnerships had really "changed the way we work and that we must still do a better job on partnerships. … We have an array of interdisciplinary skills that are second to none, and we can make a significant impact."

Staff welcomed the participation of external participants at the forum. One external participant was Fatima Jibrell, a Somali environmentalist who recently won the 2002 Goldman Environmental Prize, the world's largest award for grassroots environmentalists. Ms. Jibrell found the forum useful and was particularly interested in the safety regulatory framework around the planning and management of dams. Just like Africa Vice President Callisto Madavo had done at the beginning of the forum, she also likened water to life itself. "Water is life. Without it there is no life at all." Jibrell noted that in many places like her dry and arid homeland of Somalia, access to water is considered as the ultimate blessing. "Whoever manages water has the most power because they have the means to keep life going" she said. Jibrell said she would encourage the Bank to look not just at projects within individual countries but increasingly at those that spilled across country borders and which had a regional perspective like the Nile Basin Initiative. Smiling, she mused over the concept of "a rainy day" as a day one does not look forward to, as in the western adage of saving or putting things away for a rainy day. "In my part of the world," she explained, that so-called "rainy day" would be a perfect day.

Useful links: Click here for the WSP's website and here for the Watsan's website.

Sunset on the River Nile near
Lake Victoria

M. Venkaiah Naidu, Indian Minister for Rural Development

Nemat Shafik, Vice President, Private Sector Development & Infrastructure

Jamal Saghir, Director, Energy & Water, and Chair, Water & Sanitation Sector Board

Cross Section of Water Forum 2002 Participants await Closing Session

Mukami Kariuki, Snr Water & Sanitation Specialist (Nairobi Office) Njeri Gicheru, Program Assistant
(Nairobi Office)

Walter Stottman, Manager, Water & Sanitation Program

Cross section of  Water Forum 2002 Participants at lunch speech by Michel Camdessus

Left to right: David Grey, Senior Water Resources Adviser, Solomon Alemu, Senior Sanitary Engineer, Salman Salman, Lead Counsel

Fatima Jibrell, Managing Director, Horn of Africa Relief & Development Organization and Winner of 2002 Goldman Environmental Prize

Peter Woicke, IFC Executive Vice President & MD and Michel Camdessus, Chairman, Panel on Financing Water Infrastructure

Nemat Shafik, Jamal Saghir, Michel Camdessus

Left to right: Sudipto Sarkar, Chair, Urban Water Supply & Sanitation Thematic Group Jennifer Sara, Chair, Rural Water & Sanitation Thematic Group Karin Kemper, Water Resources Management Thematic Group Nemat Shafik, Vice President, Private Sector Development & Infrastructure