Water

Results of ADB Water Week 2004 Water for the Poor: Setting the Rules and Finding the Money Change Agenda Changing water financing partners from national to subsovereign Lend to those who can help achieve more

Results of ADB Water Week 2004 Change Agenda Changing selection criteria Changing incentives and advocacy Changing regulation Changing the rules to reward efficiency Changing the focus of lending Changing the nature of water project Changing water financing partners

It is not simply a matter of finding more money. It is equally important to get more value for money, to direct the money to those areas in most need, and to those who have proven that they have the capacity to make the right decisions and be accountable for its effective use. Put another way, the issues are:

• Increasing the supply by harnessing community funds, private sector, provider self-financing and more aid funds
• Shifting the focus of lending to the rural sector which is most in need of support
• Decentralizing the funds and making them available to local governments, NGOs and community groups which are best placed to make use of them
• Reducing the risks and transaction costs of borrowing
• Simplifying the procedures to make it easier for subsovereign entities like local governments to borrow
• Replicating good experiences and ensuring there is wide dissemination of information about successful projects and programs
• Using some funds to build the capacity of communities and NGOs to manage finance and water projects and others to enable government and providers to improve their own competencies and management systems.

ADB has to work more closely with municipal governments (sub-sovereigns) who are responsible for providing/facilitating water services in many DMCs. Commentators on the one hand applaud this devolved authority but on the other lament a lack of local capacity to provide the services. Sub-sovereigns particularly lack development finance. And whilst the MDBs led the push for devolution, they rarely exercise their discretion to lend to sub-sovereigns. Sub-sovereigns find it difficult to access private capital markets, obtain private project finance, or attract private equity finance. Financing sub-sovereign water investments is a hot topic, including in the Camdessus report. There is a large and growing body of research and experience on innovative municipal financing for developing countries. Still, in most Asian DMCs municipal financing for water is moribund.

• ADB must decide to increase public lending to sub-sovereigns.

• Central governments must decide to promulgate sub-sovereign water financing legislation, regulations and programs.

• Sub-sovereigns must decide to access public and private water financing and to position themselves to qualify for financing.