Launch of the OECD Report “Managing Water for All: an OECD Perspective on Pricing and Financing”

 

Opening Remarks by Angel Gurría, OECD Secretary-General, delivered at the 5th World Water Forum.


Istanbul, 17 March 2009


Dear friends and colleagues,

I am delighted to be here in Istanbul to present the OECD contribution to the 5th World Water Forum


News headlines are dominated by the financial and economic crisis. Governments are moving as quickly as possible to meet today’s unprecedented challenges. But as we address the emergency of the crisis, we must not forget about longstanding challenges. In particular, the water issue.

Some like to point to the 4Fs: finance, fuel, food and freshwater. They say these are key challenges. But the fourth F – which happens to be water - is described as “the silent challenge”.

Yet, it is an issue that will not go away with the crisis. One billion people cannot get clean drinking water and 2.5 billion lack access to basic sanitation. We know that polluted water and poor sanitation cause 1.5 million preventable child deaths per year. It is the biggest child killer along with malaria and malnutrition. Investing 1 dollar in water and sanitation saves 4 to 12 dollars in avoided health care costs alone, according to the World Health Organisation.

Water is the most essential good we have and we must raise its political profile. We must find new and innovative approaches to allow everyone access to water and sanitation.

The outlook is not good. By 2030 nearly half the world’s population, some 3.9 billion people, or 1 billion people more than today, will be living in areas of water stress. This will increase competition and even conflict for ever scarcer water resources.

Yes, we need more political discussion about water, particularly at the highest level. We need to build public awareness to encourage politicians to reform and improve water management. If there is an item in the agenda that could qualify for inclusion in today’s fiscal stimulus packages, clearly that is water. Water represents the best example of “double dividend” spending that packages offer the opportunity to invest in. OECD has a Strategic Response to help governments counter the financial and economic crisis. It emphasises the critical role that infrastructure can play in creating the conditions for sustainable long term growth. 

I would like to commend our Turkish hosts for organising a Heads of State session in this Forum. This coincides with the interest of many countries. Japan and Italy are putting water back on the G8 agenda. Such initiatives are essential to generate the high-level political support needed to ensure that all levels of government take action – including at the local level.

OECD is engaged very forcefully in the water domain. Managing Water for All: An OECD Perspective on Pricing and Financing and a shorter summary for policy makers are based on six more detailed analytical reports, which will be presented in other sessions during this Forum. Together, they:

  • Emphasise the economic and financial aspects of water;
  • Address the challenges from a cross-sectoral perspective; and,
  • Establish a firm evidence base on how to deal with these problems.


Our analysis suggests solutions and policy tools to help countries with approaches that can be implemented in practice.

Several areas require immediate attention.


Agriculture and water

Agriculture is one critical sector because it accounts for 70% of water use globally, and about 40% in OECD countries. It is also an area where reforms need to go deeper. Governments continue to subsidise agricultural uses of water, and this is a major factor contributing to increasing water stress. Greater use of market-based allocation mechanisms are needed to encourage more efficient water uses. We have examined the instruments that OECD countries apply most successfully.


Financing gap in water supply and sanitation

Agriculture is one costly waste. Ageing water infrastructure is another. Estimates are that the US will have to invest USD 23 billion annually for the next 20 years to maintain water infrastructure at current service levels, while meeting health and environmental standards. To expand water services and achieve the water and sanitation Millennium Development Goals, Developing countries will need to double spending - to about USD 18 billion per year. In addition, they will have to maintain the existing water infrastructure, which will add another USD 54 billion spending per year.


Improving governance and private sector participation

Improving water governance is also of vital importance. It can help save huge amounts of money. The organisation of the water sector - its incentive structure - influences the efficiency of water uses, thus increasing the attractiveness to investment.

One aspect of governance concerns private sector participation. In developing countries there is now a diverse set of private actors and the debate has moved beyond “public vs. private”. It is now about the conditions under which water services can be provided effectively and efficiently, whether by public, private or a combination of players. To help governments optimise the result of these partnerships we have produced Private Sector Participation in Water Infrastructure: OECD Checklist for Public Action.

 

Implementing strategic financing plans

We also need to think more strategically about financial planning for water and sanitation. Our goal should be sustainable cost recovery based on what we call the “3Ts”: tariffs, taxes and transfers. In developing countries, transfers are mainly Official Development Assistance. Some sources of finance, such as loans or bonds, have to be paid back. But funding generated by the 3Ts goes into, and stays in, the water sector. We have a model called FEASIBLE, which several countries have used to develop realistic financial strategies for water and sanitation. We are now working with the World Bank, the EU Water Initiative and others to promote wider use of this approach.


Role of tariffs in sustainable cost-recovery

Of the 3Ts, tariffs are the key to sustainable cost recovery and are justified when combined with subsidies to those who cannot afford to pay. They are an incentive to use less water and in most countries they are the lion’s share of financing for water and sanitation. “Full cost recovery” based on tariffs should be the long-term goal. But “sustainable cost recovery” based on the 3Ts recognises that publicly financing water and sanitation is justified when it delivers socioeconomic benefits such as public health and access by the poor to water services. In most countries today, “sustainable”, rather than “full”, cost recovery is a more practical and realistic policy approach.


ODA flows to water and sanitation

New data on Official Development Assistance to the water sector shows that aid has risen in recent years, reaching USD 6.2 billion, or 8% of the total in 2006-07. This good news, however, is obscured by the skewed distribution of water aid. Most goes to countries that already enjoy good access to water services and/or a close relationship with donors. Official aid flows to the water sector in sub-Saharan Africa has actually decreased as a proportion of total aid flows. Overall, ODA plays a relatively minor role in financing water infrastructure. We demonstrate that better ODA uses could go a long way in leveraging much needed finance from private sources.


The financial and economic crisis and water

The current financial and economic crisis presents challenges and opportunities for the water sector. In the face of decreasing revenues, governments might be tempted to reduce public financing of investment in water and sanitation infrastructure. However, the significant economic benefits from investing in the sector suggest that governments have to go further and include them in their fiscal stimulus packages. Both the US and China have already taken this approach. Governments in the OECD Development Assistance Committee and the recent Doha Conference on Financing for Development have pledged to maintain aid flows in line with earlier commitments. These developments give some ground for optimism.


In conclusion, we have to use the opportunity to better manage the future of water, a vital resource on which human development depends. The OECD is fully committed to support the international effort to provide access to water and sanitation for the billions that do not yet have it, and to better manage the increasingly scarce water resources. The OECD stands ready to help you in this effort.


Thank you for your attention.

 

 

 

Countries list

  • Afghanistan
  • Albania
  • Algeria
  • Andorra
  • Angola
  • Anguilla
  • Antigua and Barbuda
  • Argentina
  • Armenia
  • Aruba
  • Australia
  • Austria
  • Azerbaijan
  • Bahamas
  • Bahrain
  • Bangladesh
  • Barbados
  • Belarus
  • Belgium
  • Belize
  • Benin
  • Bermuda
  • Bhutan
  • Bolivia
  • Bosnia and Herzegovina
  • Botswana
  • Brazil
  • Brunei Darussalam
  • Bulgaria
  • Burkina Faso
  • Burundi
  • Cambodia
  • Cameroon
  • Canada
  • Cape Verde
  • Cayman Islands
  • Central African Republic
  • Chad
  • Chile
  • China (People’s Republic of)
  • Chinese Taipei
  • Colombia
  • Comoros
  • Congo
  • Cook Islands
  • Costa Rica
  • Croatia
  • Cuba
  • Cyprus
  • Czech Republic
  • Côte d'Ivoire
  • Democratic People's Republic of Korea
  • Democratic Republic of the Congo
  • Denmark
  • Djibouti
  • Dominica
  • Dominican Republic
  • Ecuador
  • Egypt
  • El Salvador
  • Equatorial Guinea
  • Eritrea
  • Estonia
  • Ethiopia
  • European Union
  • Faeroe Islands
  • Fiji
  • Finland
  • Former Yugoslav Republic of Macedonia (FYROM)
  • France
  • French Guiana
  • Gabon
  • Gambia
  • Georgia
  • Germany
  • Ghana
  • Gibraltar
  • Greece
  • Greenland
  • Grenada
  • Guatemala
  • Guernsey
  • Guinea
  • Guinea-Bissau
  • Guyana
  • Haiti
  • Honduras
  • Hong Kong, China
  • Hungary
  • Iceland
  • India
  • Indonesia
  • Iraq
  • Ireland
  • Islamic Republic of Iran
  • Isle of Man
  • Israel
  • Italy
  • Jamaica
  • Japan
  • Jersey
  • Jordan
  • Kazakhstan
  • Kenya
  • Kiribati
  • Korea
  • Kuwait
  • Kyrgyzstan
  • Lao People's Democratic Republic
  • Latvia
  • Lebanon
  • Lesotho
  • Liberia
  • Libya
  • Liechtenstein
  • Lithuania
  • Luxembourg
  • Macao (China)
  • Madagascar
  • Malawi
  • Malaysia
  • Maldives
  • Mali
  • Malta
  • Marshall Islands
  • Mauritania
  • Mauritius
  • Mayotte
  • Mexico
  • Micronesia (Federated States of)
  • Moldova
  • Monaco
  • Mongolia
  • Montenegro
  • Montserrat
  • Morocco
  • Mozambique
  • Myanmar
  • Namibia
  • Nauru
  • Nepal
  • Netherlands
  • Netherlands Antilles
  • New Zealand
  • Nicaragua
  • Niger
  • Nigeria
  • Niue
  • Norway
  • Oman
  • Pakistan
  • Palau
  • Palestinian Administered Areas
  • Panama
  • Papua New Guinea
  • Paraguay
  • Peru
  • Philippines
  • Poland
  • Portugal
  • Puerto Rico
  • Qatar
  • Romania
  • Russian Federation
  • Rwanda
  • Saint Helena
  • Saint Kitts and Nevis
  • Saint Lucia
  • Saint Vincent and the Grenadines
  • Samoa
  • San Marino
  • Sao Tome and Principe
  • Saudi Arabia
  • Senegal
  • Serbia
  • Serbia and Montenegro (pre-June 2006)
  • Seychelles
  • Sierra Leone
  • Singapore
  • Slovak Republic
  • Slovenia
  • Solomon Islands
  • Somalia
  • South Africa
  • South Sudan
  • Spain
  • Sri Lanka
  • Sudan
  • Suriname
  • Swaziland
  • Sweden
  • Switzerland
  • Syrian Arab Republic
  • Tajikistan
  • Tanzania
  • Thailand
  • Timor-Leste
  • Togo
  • Tokelau
  • Tonga
  • Trinidad and Tobago
  • Tunisia
  • Turkey
  • Turkmenistan
  • Turks and Caicos Islands
  • Tuvalu
  • Uganda
  • Ukraine
  • United Arab Emirates
  • United Kingdom
  • United States
  • United States Virgin Islands
  • Uruguay
  • Uzbekistan
  • Vanuatu
  • Venezuela
  • Vietnam
  • Virgin Islands (UK)
  • Wallis and Futuna Islands
  • Western Sahara
  • Yemen
  • Zambia
  • Zimbabwe