Types of Interventions for Responding to the Water Supply and Sanitation and Intergrated Water Resources Management targets in the Mediterranean

1. Introduction

The European Union Water Initiative (EUWI) was established as a key contribution to the implementation of the WSSD commitments and Plan of Implementation, aiming to help achieve water-related MDGs and WSSD targets, providing a platform for strategic partnerships.

The Mediterranean Component of the EU Water Initiative (MED EUWI) shares all its objectives and it seeks to make significant progress in poverty eradication and health, in the enhancement of livelihoods, and in sustainable economic development in the Mediterranean and Southeastern Europe. Given the critical importance of water in the bilateral and multilateral relationships in the region, it also seeks to serve as a catalyst for peace and security in the region.

Documents developed during the Preparatory Phase of MED EUWI, like the 'Concept and Vision Note', 'Organisational Framework and Modalities, 'Three-Year Activity Plan' and 'Work Programme 2005', describe the principles, framework, structure, as well as, the first concrete activities planned within MED EUWI.

Some of the key challenges in the water sector in the Mediterranean could be identified under the following broad categories:

• water scarcity and uneven distribution of water resources
• lack of accessibility to water supply and sanitation
• water pollution and environmental degradation
• management of shared waters
• food availability, stability, accessibility and affordability
• awareness of decision makers and the public
• decline of financial resources allocation
• lack of skilled and motivated water professionals
• institutional aspects and fragmentation of water management
• non-sustainable management of the non-renewable groundwater resources
• collapse and decay of traditional water practices

2. Purpose of the Note

At different levels and with varying effectiveness, concrete action responding to challenges mentioned above is already taking place in all countries of the region. Interventions, supported financially by domestic sources and / or external aid, are prioritized according to countries needs.

The purpose of this brief Note is to suggest generic types of interventions, at the regional level, for meeting the MDGs and the WSSD targets on Water Supply and Sanitation and Integrated Water Resources Management in the Mediterranean. It also aims to contribute in defining priority areas, for Mediterranean countries, for the water sector, in order to assist orientation of future financial aid and resource allocation to the region, for domestic, EU and international sources.

It is recognised that there is a wide range of possible sources, or mixes of sources, of finance for the water sector. However, poor governance, lack of capacity at country and local level and sometimes political instability seem to be the most important constraints that impede the flow of finance into water sector investments. Lack of good or 'bankable' projects also hinder the flow of finance. Commercial risks, involving limited guarantee and uncertain liquidity support mechanisms, often prevent private sector investment.

In this respect, this Note encompasses a brief assessment of ODA flows in the region and builds on available data compiled by OECD during MED EUWI's Preparatory Phase (2004), as a basis for a more in depth gap assessment, at a next stage. It is in line with internationally agreed principles and practices, attempting a general prioritization according to needs in the countries of the region. Evidently, there is a diversity of specificities per sub-region and country, including natural resources, demographic trends, economic development, etc.

Currently, there are no in-depth assessments on expenditure requirements to meet the MDGs and WSSD targets in the region, while the majority of countries lack related financial strategies linking to needs. Therefore, strategic coordination, based on assessment and tailored-country and donor priorities, is considered necessary in order to be able to propose concrete interventions, to effectively respond to the challenges and to, eventually, meet the set targets in the coming years. MED EUWI should effectively assist in making that happen.

Among on-going key regional processes, the latter is expected to contribute to the European Neighborhood Policy (ENP) as well as to the new European Neighborhood and Partnership Instrument (ENPI) that will start in 2007, replacing the MEDA fund in the Mediterranean. The ENP aims to offer the countries an increasingly close relationship with the EU, involving a significant degree of economic integration and a deepening of political cooperation in an approach founded on partnership, joint ownership and differentiation, according to each country's interests and capacities.

3. WSS and IWRM: two priority themes of the MED EUWI

In the present Note emphasis is given on two priority Themes of the MED EUWI that respond to related MGDs and WSSD targets. More specifically:
? Water Supply and Sanitation (WSS) and the target to halve by 2015 the proportion of people who do not have access to safe drinking water and basic sanitation.
? Integrated Water Resources Management (IWRM) and the target to develop IWRM and water efficiency plans in all countries.

Improved access to water supply and basic sanitation can make a major contribution to poverty eradication, health improvements, quality of life and protection of the environment. This contribution is often underestimated. Globally, progress toward targets on WSS has been slow, particularly with regard to sanitation, and a higher priority for these in poverty reduction strategies and sustainable development strategies is required.

At the same time, water resource management needs to be addressed at all levels and should be based on the natural river or lake basin or aquifer. IWRM with strong stakeholder participation, a pro-poor emphasis, and gender sensitivity is a key instrument to ensure the integration of water services within an overall water management framework. IWRM also provides a framework to promote peace and security in transboundary water courses.
Implementation must ensure a balance between human water needs and those of the environment. Freshwater ecosystems provide a range of vital services related to biodiversity, the hydrological cycle, and self-purification capacity. The health of ecosystems is therefore key to human health, to sustainable development and to poverty reduction and vice-versa. Improvements in efficiency and sustainability of water use and river basin management, should contribute to the goals to halt or reverse by 2015 the current trend of loss of natural resources and biodiversity.

To meet the challenges, the policy profile of water needs to be higher in all agendas: local, national, regional and global. This political commitment needs to be translated into concrete and co-ordinated action. The primary responsibility for ensuring equitable and sustainable water resources management integrated into development strategies rests with national and local governments, and their sustained ownership of both policies and projects is essential to achieve results. Applying a consistent to IWRM approach for all development sectors to support countries in need can also ensure better coherence, co-ordination and complementarity.

Effective governance as well as policy and sectoral reforms are necessary to secure proper management. Moreover, partnerships between public, private and civil society actors have to be promoted, ensuring that those partnerships are essential and active and that they remain equitable and transparent, able to safeguard users' (even the most poor) and investors' interests while maintaining high standards of environmental protection. Institutional strengthening, capacity building and expanding the knowledge base are all essential to rationalize use, support sound planning as well as decision-making processes.

The targets cannot be achieved without addressing a number of other horizontal issues: gender inequality, for instance, hinders growth, poverty reduction and progress in health and education, thus, mainstreaming gender equity is essential in meeting the targets. These issues as well as other cross-cutting aspects can also benefit from research to develop the critical knowledge needed for policy formulation and in order to implement policies and principles.

In June 2005 and based on 100 MDG Country Reports from all around the globe, UNDP listed the challenges and priorities for action for achieving environmental sustainability. Water, mainly through MDG Target No. 10 on sustainable access to safe drinking water and basic sanitation, was only one of the natural resources tackled in the analysis. Nonetheless, the vast majority of the findings which are presented in Table 1 also reflect water related realities in the Mediterranean.

Closing the financing gap is a major challenge. Financial estimates to meet the MDGs for water and sanitation, as reported by the UN High Level Panel on Financing for Development (2001), suggested that between US$10-29 billion per year is required on top of the roughly US$30 billion already being spent. These figures reflect the needs for water supply and sanitation only and significant other resources will also be required for all other aspects of water management. The Camdessus Report (2003) presented in Kyoto, estimates the current investment on water related issues to 80 billion USD and suggests that in order to address our needs 180 billion USD are needed annually by 2015. These figures correspond to secondary treatment plants and are considered by many as the 'upper' estimate.

On the other hand, apart from increasing the level of aid, improving efficiency of existing financial resources as well as the identification of mechanisms to activate innovative sources of finance will also be important factors. Globally, the EU Commission and EU member states spend close to ?1,5 billion on water resource development and management projects per year and improving the effectiveness of these investments can make a difference. Using these funds to leverage other forms of finance including from users and from the private sector is an aspect that should be further explored.
 

Table 1: Environmental Sustainability Challenges and Priorities Reported (UNDP, 2005)

4. Water ODA in the Mediterranean, with an emphasis on WSS

The water sector can be funded by a variety of sources including:

• User charges
• Taxes - local or national (otherwise referred to as domestic public financing)
• Household and community investments
• Private sector investment from either international or local operators
• Official development assistance (ODA) loans and grants
• Donations from the local and international non-profit sector.

According to the first results of the Working Group of the Finance Component of the EU Water Initiative (2002-2003), the water sector worldwide does not currently attract the levels of finance needed to meet the challenges set by the MDGs and the WSSD targets, to which also the EU Water Initiative is aimed to respond. The latter seems to reflect also the situation in the Mediterranean, though WSS conditions are much better than in Sub-Saharan Africa.

In addition to domestic resources, investment on water infrastructure in the Mediterranean countries is being made through bilateral and multilateral agreements. The EU Member States and the European Commission are among the major donors in the region, including support to water sector, constituting a major force towards economic growth and transition.

In the present Note, a brief assessment of ODA trends in the region is attempted, in order to draw some general conclusions that could serve as a basis for a more in depth identification of gaps, at a later stage. The statistical overview of ODA provided to the water sector in the region from 1990-2002 was elaborated by OECD Non Member State Division of the Environment Directorate for the MED EUWI.

The general global trend in the volume of ODA relative to economic growth in industrialized countries and population growth in developing countries is one of decline. As it is presented in Figure 1, the case in the Mediterranean does not differ much, though we can observe fluctuations with high and low peaks every 4-5 years which might reflect funding 'circles'.

Figure 2 presents the aid provided by sub-sector. It should be noted that the DAC Database encompasses the following categories under ODA to the water sector:

• Water resources policy and administrative management
• Water resources protection
• Water supply and sanitation - large systems
• Water supply and sanitation - small systems
• River development
• Waste management and disposal
• Education and training in water supply and sanitation

The above categorization does not specifically include activities related to IWRM or to the management of water ecosystems. On the other hand, some activities are included (such as waste management) which are indirectly linked to water sector. Moreover, dams and reservoirs which serve primarily for irrigation and hydropower and activities related to transport in rivers are excluded and are classified under aid to agriculture, energy and transport, respectively.

With these limitations, the analysis presented in Figure 2 shows that ODA in the region is mainly directed to projects dealing with large and small systems of water supply and sanitation as well as to projects relating to policy and administrative management, while sub-sectors such as education and training, river development and water resources protection receive only a very small percentage of the allocated funds.

An analysis of the aid to the water sector by recipient from 1990 to 2002, presented in Figure 3, shows that Turkey and Egypt, the two most populated developing countries in the Mediterranean, were major beneficiaries, reaching 2 billion USD each over a period of 12 years. Moreover, ODA was directed mainly to countries of North Africa and Middle East while support to Balkan countries was considerably lower.

Figure 4 presents the support provided by donor in the region in the period 1990-2002. Two non EU countries, USA (1,787 billion USD) and Japan (1,517 billion USD), are in the top of the list together with Germany (1,539 billion USD). Nevertheless, the sum of EU Member States and EC support reaches 3,5 billion USD proving that the EU is the major donor in the region.

It is evident that although more financial resources, if effectively used, could bring concrete results in the water sector in the region the major immediate challenge would be to optimize and use more effectively the already available resources, e.g. by targeting it toward alleviating the constraints which stop other sources of finance becoming available for investment in the water sector.

4. Types of possible interventions for WSS and IWRM

Taking into account the overall assessment of global and regional challenges as well as that of ODA trends in the region (thematically and geographically), important types of possible intervention that may be applied at the country and transboundary level in the Mediterranean are herewith presented. The suggested types aim to respond to MDGs and WSSD targets on WSS and IWRM, as well as, to related constraints encountered by competent stakeholder groups.

4.1. Water Supply and Sanitation

For the improvement of the management of municipal water supply and sanitation infrastructure in order to ensure that good quality water and adequate sanitation services are delivered to the population in a reliable, sustainable manner and at a cost that does not hinder poor people's access to these services, suggested activity area may comprise:

• Investment and technical assistance to improve water supply and sanitation infrastructure. Such improvements could respond to:
  • Maintenance, rehabilitation or upgrade of existing infrastructure, including leakage control, renovation of water mains, etc.
  • Development of new infrastructure, including transmission pipelines with household connections, water meters, pumps, wells, boreholes, public standpipes, rainwater collection schemes, sewerage systems, connections to public sewers, connection to septic systems, latrines, wastewater treatment plants, etc
     
• Improvement of the institutional and regulatory framework for the urban water sector. Interventions could include:
  • Establishment of an effective national framework to regulate water utilities. Improvement of the conditions influencing the involvement of the domestic and foreign private sector in the water services, according to needs for investment.
  • Development of a utility performance monitoring system in order to introduce benchmarking and stimulate efficiency.
  • Development of a model performance contract between utilities and municipalities.
  • Reviewing and reforming standards concerning drinking water and effluent water quality,
  • Reviewing and reforming standards concerning construction and consumption norms.
  • Promoting public awareness in sector reforms through information dissemination and public debate of reform options.
  • Training programmes to build national and local capacity.
     
• Ensuring the financial viability of the water sector:
  • Assessment of the financial sustainability of existing level of water services, taking into account the often low ability of householders to pay as well as cultural perceptions on water valuing.
  • Evaluation of eventual debts or deficits of the public water sector and development of a plan to address effectively the issue.
  • Identification by the relevant public authorities of adequate level of services examining also alternative and less costly options.
  • Development of in-country pilot projects aiming to test reforms in tariff-setting systems.
  • Facilitating investment into the water sector from local, national and foreign sources.
     
• Ensuring social welfare so that poor and vulnerable groups of the population have access to water services
  • Analysis by competent national and local authorities in consultation with water users of the affordability of water prices at local and national level, aiming at establishing a national and/or local affordability target or benchmark of water expenses
  • Implementation of measures to support access to water for the poor, including targeted income subsidies.
  • Promotion of public participation on water issues, particularly on aspects of municipal development plans, level of services, health standards, tariff reform and private sector involvement.
  • Promotion of education and public awareness on water, sanitation and health related issues.
  • Safeguard public health by strengthening the linkages between water management and health, including better surveillance, warning and response systems.
     
• Protecting the environment and natural resources through, among other things, increased wastewater collection and treatment and through increased water use efficiency.
  • Establishment of a framework for managing competing uses of water at national and regional levels eg. through integrating municipal systems for water treatment and reuse into coherent programmes for water resources management.
  • Increase progressively the wastewater collection and high quality treatment and reuse, allowing the necessary quantities for environmental purposes.
  • Promotion of measures for water demand management aiming to increase the efficiency of water use and reduction of wasteful consumption and water losses.

4.2. Integrated Water Resources Management

For the improvement of the management of water resources, including transboundary river basins and aquifers, in order to ensure the best possible balance between economic efficiency, environmental sustainability and social equity and the reduction of conflicts associated with the distribution and use of water at different levels, suggested activity area may comprise:

• Implementation at national level of the relevant international conventions.
• Preparation of national integrated water resources management strategies and efficiency plans, including decision-support systems and integration of land and water management and freshwater and coastal zone management.
• Supporting the implementation of integrated transboundary water resources management based on a river basin (including lakes) / watershed (including ground waters) approach.
• Promotion and preparation of water-related legislation (including strengthening of water licenses / discharge permit systems etc) based on the best available scientific evidence, considering also principles and practices of the EU Water Framework Directive.
• Supporting the institutional capacity building and review of the organisational framework for water resources management, including basin management bodies.
• Supporting the countries and competent authorities in developing whenever necessary adequate administrative and operational mechanisms for management of transboundary water bodies.
• Improvement of water resources monitoring and assessments (such as hydrometric/water quality monitoring system, upgrading of environmental laboratories, etc) as well as improve reporting capacities to effectively meet international, regional and national reporting requirements/obligations.
• Improvement of public access to information, education and awareness on water resources problems and involvement of stakeholders and users in decision-making.

4.3. Interventions to assist main stakeholder group

The EUWI Working Group on Finances (2004) lead by the UK elaborated scenaria from the perspective of the three main water sector stakeholders who require more finance, ie.:

• Water users (community based organisations etc.);
• Water service providers (from a national public sector perspective); and
• Public authorities (local and national government)

These scenaria describe key constraints by stakeholder group and types of interventions where ODA can effectively assist, in order to alleviate constrains which stop sources of finance of becoming available for investment or of being used more effectively.

a. Water Users

Water users face the following key constraints (broadly governance, capacity and project preparation related):

• Lack of cash and credit
• Lack of demand focused projects
• Lack of local capacity
• Lack of decentralised governance

To ease these constraints the following approaches could be used:

• Providing more appropriate tariff and targeted subsidy regimes
• Promoting output-based aid projects for communities
• Providing community financing and credit schemes
• Seeking to design better -demand focused, financially sustainable projects and programmes
• Improving capacity in civil society to form water user groups, CBOs etc and to better advocate for policy change

In this way, ODA could be used to better help water users to secure and provide their own finance, through paying for the provision of targeted subsidies (especially for connections); starting up community-financing and credit schemes; helping to design more demand-focused projects that people actually want and will pay for; promoting output based tariff changes; and developing capacity to form water user groups.
 

b. Water service providers

Water service providers face usually the following key constraints (broadly commercial, governance and capacity related):

• Unclear and unstable legal framework within which they operate
• Operating deficits
• Lack of cash for reinvestment or expansion
• Inability to raise cost effective finance
• Lack of capacity in finance and management capabilities
• Lack of autonomy

To ease these constraints the following approaches could be used:

• Providing technical assistance
• Price reform
• Capacity building
• Support for raising finance

In this way, ODA could be used to better help water service providers in developing countries :

• to leverage more finance for investment and expansion of their operations through tariff and subsidy reform (and improved billing and collection procedures)
• to succeed accountancy improvements
• to stimulate a mixture of finance sources including loans, raising bonds and encouraging equity stakes and direct private investment in their organisations.

ODA can help to do this by providing various forms of technical assistance in areas of strategic corporate development and capacity building by :

• helping to provide, identify and negotiate affordable loans
• underwriting elements of risk attached to these loans;
• encouraging equity investors through the use of ODA to offset ill-liquidity premiums or low returns.

c. Public authorities

Public authorities face the following key constraints (broadly governance and capacity related):

• Political reluctance to reform
• Budgetary constraints due to competing demands
• Lack of a long term strategy for the sector
• Lack of understanding and inertia in adjusting policies to better access forms of finance other than public
• Lack of capacity to undertake new roles and differentiated responsibilities

To lift these constraints the following approaches may be used:

• Provide guidance on possible reform pathways engendering political will for change
• Develop sectoral strategies and financing plans
• Support good project preparation
• Build capacity
• Improve tariff and subsidy regimes
• Provide specific technical assistance
• Leverage of cheaper loans
• Underwrite risk
• Develop local capital markets
• Enhance interest from equity investors

In this way, ODA could be used to better help the introduction of wider financial reforms and financing possibilities into the wider water sector, both in terms of strategy and capacity development and in terms of stimulating local markets, underwriting risk and promoting access to wider forms of international financing options.

5. Strategic coordination at the country level: A recommendation for MED EUWI

To meet challenges, generic targets will have to be embedded in workable programs at national and local level. Identifying gaps, agreeing on priorities and setting achievable targets linked with rational operational steps, are critical for turning commitments into reality.

Moreover, it is vitally important that strategic planning of concrete interventions/actions is based on a good understanding of the costs of achieving the targets and is supported by feasible financing strategies.

Though in some countries of the region there is advancement in preparing assessments of needs and financial strategies, in the majority of cases progress is very slow.

Therefore, there is a need for a coordinated and comprehensive effort:

• to identify gaps and emerging deficiencies in current national priorities and implementation processes to achieve MDGs/WSSD targets,
• to identify insufficiencies and bottlenecks in key prerequisites posed by donors for national investments in the water sector,
• to identify and describe in detail types of interventions and concrete national framework programmes to meet targets,
• to provide an estimate of the costs of achieving targets,
• to identify sources of finance and develop financing strategies and
• to elaborate, discuss and agree on a roadmap for achieving the targets at country level.

Such findings, estimates, strategies and agreements have to be robust, policy relevant and well documented and should be approved by partner countries' and donors as the basis for partnerships and joint action.

MED EUWI shall play a key role in making these happen, by facilitating coordinated action and effective synergies between competent partners at country and international level, assisting in effectively mobilizing ODA, in order to meet WSS and IWRM targets in the Mediterranean in the coming years.

References

• EUWI Background Document at the WSSD. European Commission, August 2002.
• EU Water Initiative - Financial Issues. DFID and European Commission, August 2002
• Water for the 21st Century: Framework for Action for North Africa. GWP-Med, CEDARE and MWN, 2003.
• EECCA Component, Background Document at the 5th Ministerial Conference 'Environment for Europe' in Kiev. EECCA EUWI Working Group, 2003.
• OECD Aid Activity Database, Mediterranean countries. Non Member Countries Division, Environment Directorate, OECD, 2004.
• EUWI Finance Component, Final Outputs of Phase I. EUWI Finance Working Group, 2004.
• MED EUWI Activity Plan. MED EUWI Working Group, March 2004.
• MED EUWI Vision and Concept Note. MED EUWI Working Group, March 2005.
• Environmental Sustainability in 100 MDG Country Reports, UNDP, June 2005.