Water

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Presentation of Gurria Water Financing Task Force Report, 4th World Water Forum
A Comprehensive Strategy for Local Actions: Bridging the Supply-Demand Gap

Remarks By:

Arjun Thapan
Deputy Director General
Asian Development Bank

16 March 2006
Mexico City

Introduction

Ladies and gentlemen, distinguished guests, I am pleased to discuss with you today certain findings of the Gurria Task Force Report and what they mean for the Asia and Pacific region.

Asia is home to the majority of the world's poor. In the People's Republic of China alone, the number of people without access to clean water supply is almost as large as all of the underserved in Africa, according to the "Asia Water Watch 2015" report, a new joint-agency study commissioned by ADB. The water supply situation is so critical that-despite progress that has been made-one in five Asians still lack access to improved water supplies. Even more disheartening, one in two Asians still lack access to improved sanitation. To meet the water MDG target region-wide, a minimum of $8 billion in annual investments is needed in water supply and sanitation. Further financing is needed to protect and manage freshwater resources in integrated ways.

Key Findings of the Gurria Task Force

The Gurria Task Force findings on worldwide trends in water financing confirm what ADB has recognized in Asia and is already taking action on. For Asia, three messages resonate in the Gurria report:

• The first is that the demand for increased financing is lower than what is needed to achieve the water MDG target.
• The second is that financing for the water sector is available, but not in the forms that are attractive to governments.
• And the third is that the poor are not really benefiting from current investments.

Rethinking Demand-Looking at It from the Government's Perspective

To the disappointment of the Gurria Task Force and a great many others, the calls for government to step up their investments into the water sector have essentially gone unanswered. ADB has identified 3 main reasons behind the low demand:

• The first is that there is a lack of understanding about the importance of water sector investments as a necessary first step in achieving ambitious overall development and poverty reduction objectives.
• The second is that governments have not been aggressive enough in actioning policy reform, and until they do, they lack the enabling environment needed to ensure investor confidence. Official development assistance groups need to know that their investments will result in sustainable poverty reduction, while the private sector needs to know its investments are protected from political risks. The only means to these ends are through reforms, such as strengthening the regulatory framework and setting realistic tariffs. Until these steps are taken, existing water consumers will continue to suffer from poor service delivery and unserved communities will continue to be denied access.
• The third reason for the low demand is that financing modalities have not been attractive options for governments, particularly in countries undergoing decentralization. ADB Water Week 2004 resounded with the message for financing institutions and government to decentralize the money, not just the responsibility of providing water services and resource management.

The Supply Side Holds Solutions

To address these demand side issues, the supply side-financing institutions like ADB and the private sector-must understand the governments' position and offer it comprehensive solutions. Our comprehensive approach embraces three strategies. Firstly, raising awareness of the importance of water and investment sequencing; secondly, assisting in implementing reform and building capacity; and thirdly, developing relevant financing products for their changing circumstances.

To raise awareness levels of government and the general public, we have-for some time-conducted campaigns that reinforce the importance of water and its links to poverty reduction and economic development. Through a whole range of knowledge products and services, we have sought to help governments address their water policy reform and strengthen their agencies that manage water resources and operate water services. On financing, we have developed-and continue to develop-a range of products better suited to decentralized water management.

In anticipation of greater commitment by governments to meet the water MDG, we will be announcing this week, from the 4th World Water Forum, a new Water Financing Program. The program will significantly increase investments in the water sector over the next five years and offer governments additional support in their reform efforts and developing capacity. The program will utilize innovating financing modalities that we have been developing since the 3rd World Water Forum in 2003. These modalities include subsovereign and nonsovereign public sector lending, multitranche financing, local currency financing for the public sector, refinancing, financing syndications, risk-sharing arrangements and flexibility in commitment charges.

Before closing, let me spend just a few moments giving you examples of how our comprehensive strategies have translated into actions on the ground.

• In Indonesia, we are providing technical assistance grants to local governments to increase their capacity to implement decentralization plans and new water policies. Through the knowledge gained from these technical assistance projects, we are preparing long-term investment proposals for urban water services and integrated resource management that will utilize the multitranche facility. A loan project for rural water services and health is already being implemented and heavily depends on local participation in all stages of the project cycle, including partial financing, construction of infrastructure and maintenance. Technical assistance grants have also been utilized in response to tsunami-affected areas. The communities face increasing risk of waterborne and water-related diseases.
• In India, we are supporting the Government's National Urban Renewal Mission, specifically its work in improving water supply, sanitation and waste management. We are providing $2 million in technical grant assistance and additional financing from our Cooperation Fund for the Water Sector to build the capacity of the Ministry of Urban Development for this nationwide urban development scheme. Our water fund is helping pilot-cities develop detailed project reports, ensuring that reform measures accompany infrastructure development.
• In Nanjing, the People's Republic of China, which is home to more than 6.5 million people, we are helping a new integrated water utility to reform its business processes and increase its capacity as a means for acquiring financial viability that will open the door to private, long-term capital finance markets. Major restructuring and capacity development are needed to bring the utility in line with international best practices required for raising long-term bond finance.
• In Viet Nam, we are providing long-term capacity building for national, river basin, and provincial implementation of integrated water resource management plans. Six provinces in central Viet Nam will be included in a project currently being designed. These provinces suffer disproportionately from high rural poverty and natural disasters that cause loss of life and damage to houses and crops. Their inclusion in an upcoming project loan provides them opportunities to increase agricultural production by reforming service providers and building capacity of client water users as partners. The subprojects will also improve irrigation and drainage infrastructure and strengthen natural disaster risk reduction measures.

Conclusion

In conclusion, the water sector has enormous potential to dramatically reduce poverty. But time is of the essence. The world is approaching the halfway mark for achieving the MDGs by 2015. What is it going to take to make sure no country is left behind? Knowledge, like what the Gurria Task Force Report offers, is obviously important, but action must accompany the work of generating and sharing new knowledge. We believe that governments should use the recommendations of the Gurria Task Force Report to formulate action plans at national and subnational levels. These plans should set specific targets for service delivery and integrated water resource management. ADB is already supporting targeting activities, such as performance benchmarking and peer review services for utilities, river basin organizations, and government water sector reform bodies. And we stand ready to assist governments in designing action plans, setting targets, and mobilizing the financing.

The Gurria Task Force is part of a vital continuum to secure equitable access to water. ADB, as a member of the Task Force, looks forward to collaborating further with the wider global water community. Together, we can learn from each other and determine new, better, faster courses to pursue in achieving our common goal-water for all.

Thank you.