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United Nations
Development Programme
(New York)
November 8, 2006
 Longstanding
public-versus-private debate hinders real progress, says
2006
Human Development Report
Across
the world, the poor are forced to pay much more for clean water than their
affluent neighbours, says the 2006 Human Development Report, released
today.
The
Report, entitled Beyond scarcity: Power, politics and the global water
crisis, notes that in the slums of Nairobi the poor
pay five
to 10 times more per litre of water than wealthy people living in the same
city. The poorest households of El Salvador, Nicaragua and Jamaica spend
on average over 10 percent of their income on water; in the United
Kingdom, by contrast, spending more than three percent of family income on
water is considered an economic hardship.
And the
longstanding public-versus-private debate on water will not bring prices
down, stresses the 2006 HDR. In recent years, public debate on
water-delivery policy in developing countries has been dominated by a
polarizing discussion on privatization versus public ownership. But the
authors argue that this is a false choice, diverting attention from the
ultimate goal of finding viable ways of getting potable water to those who
can least afford to pay.
"The
debate over the relative merits of public and private-sector performance
has been a distraction from the inadequate performance of both public and
private water providers in overcoming the global water deficit," says the
Report. A new, more strategic approach that puts the poor at the centre of
the solution is essential to reach the Millennium Development Goals by
2015, stress the authors.
As a
starting point, the Report advocates for all governments to go beyond
vague constitutional principles in enabling legislation to ensure the
human right to a secure, accessible and affordable supply of water. At a
minimum, this implies a target of at least 20 litres of clean water a day
for every citizen—and at no cost for those too poor to pay, the authors
emphasize.
The way forward
The 2006
HDR lays out a number of recommendations on how to make this a reality:
• Put
water at the centre of poverty-reduction strategies and budget
planning: A bold, coherent national water plan grounded in
strategies for reducing poverty and extreme inequality is a first step,
stress the authors, but this needs to be backed with predictable
finance.
•
Extend 'lifeline tariffs': The 2006 HDR notes that lifeline tariffs would
allow poor households to access a minimum amount of water for a
very low price or no charge, with usage fees rising thereafter. South
Africa has already legislated that every person should have a
minimum of 25 litres of clean water each day. However, tariffs alone
will not help where informal settlements are not connected to the
utility or where households do not have meters installed, says the
Report.
•
Expand 'pro-poor' investment: Water is underfinanced, says the
Report. The biggest financing gaps are in rural areas and in informal
urban settlements. Closing these gaps requires increased financing
and a reorientation of public spending to rural communities, through
the provision of wells and boreholes, and to urban slum areas,
through the provision of standpipes.
• Set
clear goals—and hold providers to account: The authors stress
that contract arrangements under public-private management
agreements should set clear goals for expanding access for poor
households living in slums. Non-performance should result in
financial penalties. The same rules should apply to public providers,
with nonperformance penalized through incentive systems, says the
Report.
•
Develop and expand the regulatory framework: The public-versus
- private debate has diverted attention from the pressing issue of
public utility reform, stress the authors. "The water sector has many
of the characteristics of a natural monopoly and in the absence of a
strong regulatory capacity to protect the public interest through the
rules on pricing and investment, there are dangers of monopolistic
abuse," says the Report. It stresses that creating an independent
regulator to oversee water providers—including the intermediaries
that serve the poor—is vital for ensuring that water provision reflects
the public interest.
•
Rethink and redesign water tariffs and subsidies: Subsidies can
play a critical role in delivering affordable water to the poor, says the
Report, but too often, they instead deliver windfalls to the non-poor,
while impoverished households using public taps face the highest
prices. Targeted subsidies depend on the capacity of the
government to identify poor households. Where done properly, as in
Chile, this can be a route to efficient water delivery by private
utilities
and high levels of equity in water access. Using cross-subsidies—a
combination of pricing and access policies, including targeted
subsidies—to support standpipe users where coverage rates are
low would be a step towards improved equality.
•
Prioritize the rural sector: Rural water supply poses special
challenges. Building on successful demand-responsive approaches,
governments need to make service providers more responsive and
accountable to the communities that they serve. Decentralization of
water governance can play an important role, provided that
decentralized bodies have the technical and financial capacity to
deliver services, says the Report.
What does water cost?
No one
can live without water. But for 1.1 billion people around the world, water
sources can be unreliable, unsafe or beyond their purchasing power. The
Report notes: " 'Not having access to clean water' is a euphemism for
profound deprivation. It means that people walk more than one kilometre to
the nearest source of clean water for drinking, that they collect water
from drains, ditches or streams that might be infected with pathogens and
bacteria that can cause severe illness and death."
And the
poorer you are, the more you pay for clean water, says the Report. For
those who must get water from tankers, access to water costs far more per
litre than it does for their richer compatriots, or for people in the
cities of the developed world.
Why do the poor pay more—and get less water?
While
the rich usually get water from a single supplier, the poor have to reckon
with a bewildering array of service providers, such as public standpipes,
vendors, truckers, and water carriers. Some of the water vendors access
water from the municipal source and then re-sell it at a premium to poor
slum dwellers who do not have access to piped water. As a result, water
delivered through a vendor is often 10 to 20 times more costly than water
provided by the public utility.
Inequality is one driver of the crisis: 'Water lords' now dominate the
water market in the Indian state of Gujarat, for example, where falling
water tables are compromising the lives of hundreds of thousands of
vulnerable people. Large landowners have constructed deep wells, depriving
neighbouring villages of water, only to sell it back at a high price to
those whose wells they have emptied.
Elsewhere, tariff structures can be a disincentive to conserve water and
can, in fact, make it cheaper for the affluent or rich to consume even
more water. In places like Dhaka, Bangladesh, where a flat tariff is
charged for water usage, those with private water connections are in
effect subsidized to the detriment of the poor: A tariff rate that
increased with the level of water consumed would generate resources that
could then increase coverage of the water network and improve the
infrastructure of the water utility.
One of
the deepest disparities in water and sanitation is between urban and rural
areas, partially because incomes tend to be lower in rural areas, but also
because delivering services is more difficult and often more costly per
capita for dispersed rural populations than for urban populations, says
the 2006 HDR. Political factors also come into play, with people in rural
areas—especially marginal areas—typically having a far weaker voice than
their urban counterparts.
The public-versus-private debate
In
countries with high levels of poverty among un-served populations, public
finance is necessary to extend access, regardless of whether the provider
is public or private, stress the authors.
Experiences in Argentina, Bolivia, the Philippines and the United States
show that the private sector does not offer a 'magic bullet' solution to
providing equitable water for all. Their experiences in fact indicate that
greater caution, regulation and commitment to equity in public-private
partnerships are necessary.
Public
providers dominate water service, accounting for more than
90
percent of the water delivered through networks in developing countries.
Many publicly owned utilities are failing the poor, but some, like Porto
Alegre in Brazil, have succeeded in making water affordable and accessible
to all.
What is currently spent on water?
Water
and sanitation suffer from chronic under-funding. Public spending is
typically less than 0.5 percent of GDP. 2006 HDR research shows that this
figure is dwarfed by military spending: In Ethiopia, for example, the
military budget is 10 times the water and sanitation budget—in Pakistan,
47 times.
The
Reports' authors urge all governments to prepare national plans for
accelerating progress in water and sanitation with ambitious target backed
with financing to the tune of at least one percent of GDP and clear
strategies for overcoming inequalities.
Water
and sanitation is not a donor-country priority, either, says the Report,
with only five percent of Overseas Development Assistance spent on this
sector. The authors say a doubling of aid flows—an extra US$3.4 billion to
$4 billion annually—is necessary to have any chance of reaching the MDG on
water and sanitation.
Progress
in water and sanitation requires large upfront investments with a very
long payback period, says the
2006 HDR, so innovative
strategies like the International Finance Facility are essential. This
would be money well spent, according to the authors, who estimate the
economic return in saved time, increased productivity and reduced health
costs at $8 for each $1 invested in achieving the water and sanitation
target. 
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