Catalog

	Table of Contents
p. 11 of 19 BACK | NEXT Emerging Global Water Issues Water Quality, Pollution, and the Environment A Double-Edged Sword: Flood and Droughts Geographical Variability in Water Resources Shared Waters Heightened Awareness of Water Issues Elements of a Water Strategy Basic Human Rights and Environmental Renewal Water for Poverty Reduction Water for Food Production Water as a Finite and Economic Good Imperatives for Wise Water Management ADB's Evolving Role in the Changing Context

Water in the 21st Century : Elements of a Water Strategy

---

Water as a Finite and Economic Good

The limits of the world's freshwater resources have become all too apparent, even though in many of the world's regions, detailed data on the hydrologic cycle are not available. Inefficient use, often initiated and then reinforced by government subsidies, has become ingrained; and the attendant water rights, whether formal or informal, are jealously defended by the privileged users. Agriculture and manufacturing use the greatest share of the world's water. Irrigation is particularly voracious, accounting for up to 80 percent of water demand in hot, dry regions.

The river basin constitutes the natural hydrologic unit within which users compete for the same resource and water quality is modified in ways that affect its value to other users. Management of water resources must therefore be approached on a comprehensive basis within this hydrologic unit. Beyond the basic needs for human well-being and environmental renewal, scarcity of water is largely an economic issue. This idea, that water has an economic value in all its competing uses and should be recognized as an economic good, must underlie all efforts for rational water resource management.

Part of the value of water is reflected in the costs of extraction and delivery to the users. As a minimum, users should pay these costs to ensure accountability and financial sustainability. In addition, the opportunity cost, representing the value of the resource to some other user, must be considered. And finally, there are also the external costs related to the impacts on the environment and the health effects of polluted water.

Treating water as a tradable commodity would help ensure greater efficiency and productivity in its use. However, important cultural concerns and complex issues exist regarding resource sustainability and natural habitat, which means that government intervention is needed in resource allocation and investment decisions. Governments should therefore establish the policy, legislative, and regulatory frameworks for managing water supply and demand. Governments should also provide financing for large water projects-dams, large-scale irrigation, flood control-for which private financing may not be readily available. They should also intervene, directly or indirectly, to ensure that water resources are used in the most beneficial way for the greater society.

Allocations frequently become locked, however, into what are clearly low-return uses (e.g., irrigation), when new projects are required to meet priority high-return needs (e.g., cities and industries). As the readily accessible water resources become committed, the costs of new projects can rise rapidly, resulting in high economic costs relative to the alternative of reallocating existing supplies. Even if countries are willing to incur the subsidies inherent in such solutions-for instance, to meet social, political, or environmental objectives-the full burden of these subsidies is seldom transparent; large costs may inadvertently be incurred as a result of inefficient resource allocations resulting from such decisions.

Back Water for Food Production	Next Imperatives for Wise Water Management