Financing Water: Can We Find Capital to Invest?

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One of the first sessions on the opening day of the sixth World Water Forum was an introductory panel discussion about the financial needs for water management entitled Mobilizing Finance for Water: Needs and Challenges. It was no surprise that finance was the first topic on the table.  According to an OECD report, water is the “hungriest” sector in terms of investment needs.  By 2020, 600 billion USD will be needed for water management.  In comparison, electricity will only require 80 billion USD and roads will only need 160 billion USD.  This figure may not fully capture the staggering investments needed: according to Sophie Tremolet, a consultant for the European Investment Bank, we do not need to only invest in access to water, access to sanitation, and hygiene promotion, but also in protecting water resources, treating wastewater, and creating safe disposal practices.

Sophie Tremolet acted as panel moderator.  Some of the dignitaries who spoke were: Angel Gurría – Secretary General of the Organisation for Economic Co-operation and Development (OECD), Benjamin Arthur – Executive Secretary of the Coalition of NGOs in Water and Sanitation (CONIWAS), Chanthanom Phithasone – Director General of the Ministry of Finance for Laos, and José Frade – Senior Advisor for Water & Project Development of the European Investment Bank (EIB).

The panelists discussed a 3-T approach when determining finance sources:  Tariffs, Taxes and Transfers.  The panelists discussed the need to maintain government control of water sources but also allow the private sector to help bridge the funding gap.  They believe the private sector can make investments that can be re-paid.   Specifically, according to Ms. Tremolet, “grant funding should be targeted to those activities that can help leverage additional funding to the sector through the use of innovative financial management.”

In a mirror to the 3-T concept, Ms. Tremolet discussed a 3-tiered approach for obtaining water management goals.  She believes the greatest effort needs to be made in: (1) clarifying and disseminating concepts and developing tools to help with that dissemination.  The next level of effort will go to: (2) “scaling-up initiatives to channel financing to local actors.”   Finally, the least amount of effort will be needed for: (3) inventing new solutions.  This is, she argues, because we have already made great advances in creating solutions. We now need to improve them.

Mr. Gurría of the OECD argued that the increase in the world population (to an expected 9 billion people by 2050) will necessitate a new approach to thinking about water.  We will need to exponentially increase the funding of the water sector.  We will also need to finance the water sector appropriately by imposing tariffs, taxes, and transfers at the correct level so that the poorest individuals do not experience the largest burden.  Even though water is a global resource that affects the entire planet, he exclaimed the need to remember that “Water is Local, Local, Local.”  In other words, we need to follow the dollar all the way to the end user.

Although the panelists did not get into specific financing schemes, this session was an introduction for the many of the finance sessions that are to follow at the World Water Forum. Check back to see follow up posts.

Immediately following this session, the student reporters – Aishwarya Nair and Eva Papadimas – had the opportunity to interview Mr. Gurría.  Please read that post here.

3 thoughts on “Financing Water: Can We Find Capital to Invest?

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