|Toward Sustainable Management of Water Resources (World Bank, 1995)|
The cornerstone of the new approach is that water policies and investments should be consistent with a long-term vision for developmentwhether that vision emphasizes food security, health improvement, or environmental protection. This requires the very highest levels of government to articulate a national water strategy.
The strategy should be based on an accurate assessment of a country's water resources. It also should ensure the sustainability of the water environment for multiple uses. Because policies, investments, and regulations in one part of a river basin or in one sector affect activities throughout the basin, the strategy must incorporate a comprehensive framework for water resources management that recognizes the interactions among various elements of a river basin's ecosystem (which is a reasonably self-contained hydrological system) and allows cross sectoral and environmental considerations to be incorporated in the design of policies and investments. World Bank (1993a, p. 41) describes the formulation of the strategy as a process that should: include a realistic forecast of the demand for water, based on projected population growth and economic development, and a consideration of options for managing demand and supply, taking into account existing investments and those likely to occur in the private sector ...; spell out priorities for providing water services; establish policies on water rights, water pricing and cost recovery, public investment, and the role of the private sector in water development; institute measures for environmental protection and restoration ...; Canal facilitate the consideration of relationships between the ecosystem and socioeconomic activities in river basins.
The structures for coordinating effective comprehensive water management will be difficult but necessary to establish. Most countries have a multiplicity of public agencies and commissions with overlapping responsibilities for managing water resources, and decisions are fragmented. Institutional arrangements, such as river basin organizations or coordinating committees, need to be developed that encourage water related agencies to coordinate and establish mutually agreed priorities for investment, regulation, and allocations and to ensure that policy, planning, and regulatory function are separated from operational functions at each level of government. At the national level, these coordinating bodies could be set up in ministries of planning or finance. Wherever they are located, it is important that they have adequate authority to review water activities and enforce consistency with national strategies. Australia's experience with the Murray River shows one way to organize the different arms of government around a river basin (box 4).
The key, however, will be to extend this type of participatory governance to cover an entire region's water resources. This will require representative bodies and devolution of authority, as well as the maintenance of national standards for water quality. This model is inspired by the German experience, which highlighted the importance of several principles: user participation, economic incentives and pricing and decentralization of management (box 5). Outstanding examples of the application of these ideas can also be seen in the French experience (box 6). To resolve international water resource issues, many countries have contributed to the establishment of independent, impartial interstate basin organizations that have the authority to decide on mutually exclusive proposals and conflicting claims for water rights. Other countries have relied on interstate agreements.
Box 4. The Murray-Darling Basin Authority
The Murray River Commission was formed in 1914 With the signing of the Murray River Agreement. The administrative body included commissioners from New South Wales, Mostly South Australia, Victoria, and the Commonwealth. The primary task was to build the structures necessary to ensure adequate supplies and the economical use and development of the water resources of the Murray River.
In 1982, monitoring of water quality was added to the tasks of the commission. It was recognized that the successful management of the basin's river systems was related to land use. Amendments to the agreement in 1984 enhanced the environmental responsibilities of the commission, reflecting rising concerns by the communities about the salinity problems in the basin, the need for a comprehensive approach to river management, and the need for management of the natural resources of the basin to include input from all the governments. This understanding led to the formation of the Murray-Darling Ministerial Council and Commission with a charter to plan and coordinate natural resources management programs throughout the basin.
The Murray-Darling Ministerial Council and Commission, which met for the first time in 1985, comprises state and federal ministers for land, water, and environment. The council sets policy and defines broad directions for managing natural resources in the basin. Its primary task is to promote and coordinate effective planning and management for the equitable, efficient, and sustainable use of the land, water, and environmental resources of the Murray-Darling Basin.
The executive arm of the Murray-Darling Basin Commission is the Ministerial Council, which advises the commission on environmental management issues. The commission includes two commissioners from each of the governments. Its primary task is to manage and distribute equitably and efficiently the water resources of the Murray River. Its technical responsibilities include managing the river; monitoring water quality; maintaining the flow and quality of water for domestic use, stock, and irrigation; and managing land resources, nature conservation, and community relations.
Source: Murray-Darling Basin Commission 1993. Appropriate
Better performance by providers of water services and more efficient use of water by beneficiaries can improve e allocation of water among
Box 5. Germany's Ruhrverband
In Germany, different communities working together in associations play a special role in efficiently managing their water resources. An example of such an association is the Ruhrverband, the Ruhr Basin Water Association. It was established in 1913 to deal with the massive pollution problem of the Ruhr, a tributary of the Rhine River, that resulted from exceedingly heavy industrial and residential development. The Ruhrverband is a self-governing public entity that has managed water in the basin for more than eighty years based on three principles.
· User/participation There are 985 users and polluters of the basin's water resources, including communities, districts, and industrial firms that are associates of the Ruhrverband. The Assembly of Associates (or Water Parliament) is the highest decisionmaking body in the Ruhrverband and is responsible for establishing the budget, which is about $400 million annually, and standards.
· Economic incentives and pricing The Ruhrverband finances many investments through economic mechanisms such as water use fees and charges for pollution or wastewater discharges.
· Decentralization of management activities The Ruhrverband is also responsible for the "trunk infrastructure," encompassing the design, construction, and operation of reservoirs and wastewater treatment facilities, while the communities are responsible for the "feeder infrastructure," encompassing the distribution of water and collection of wastewater.
This model has been duplicated in twelve industrial regions of the state of North Rhine-Westphalia and served as the model on which the French River Basin agency was based in 1964.
Source: Briscoe 1995.
Box 6. France's "Model" System
The French system of water resources management, adopted after many years of study and debate, includes many excellent features that could serve as models to help industrial and developing countries as they look for the best way to put a comprehensive approach into action.
There are several key elements.
· Well-defined laws and regulation The water Acts of 1964 and 1992 are the foundation of the French system. The earlier law establishes specific duality objectives and regulations for pollution control, while the later act is designed in part to meet stricter European directives on water management.
· Hydrografic basin management The system is organized around six major hydrographic basins, with appropriate national policy oversight. These correspond to the country's four main catchment areas and to two areas of dense population and intense industrial activity.
· Comprehensive management descentralization and participation Each of the six basins has a basin committee and a corresponding executing agency, a water board. The basin committee, also known as a "water parliament" because of its representation and powers, reflects regionalrather than central governmentcontrol and is designed to promote the role and responsibility of different interest groups in the basin. The water boards, while executing the committee's directives, are also responsible to the central government for certain technical matters (such as upholding national standards). Water and sewerage services are provided by either public or private firms (increasingly through competitive bidding) and are chosen by communities.
· Cost recovery and incentives The companies and entities operating water services deliver a portion of the charges they collect to the basin agencies. In addition, a "pollution free" (a penalty) is collected by the basin agency. Most of these revenues are reinjected into the system to provide technical assistance and to help the public or private sector ensure that water] is safe and purified.
Source: World Bank Bank 1993a.
Different users and achieve greater conservation. Performance and efficiency can be enhanced through proper incentives, the most important of which are based on price. Ideally, water should be priced at its opportunity cost: its value in the best alternative use. Adjustments to achieve compatible prices among urban and agricultural uses, reflecting the opportunity cost of water, should guide allocations within a comprehensive framework that considers national objectives and the preferences of water users.
Many countries are shifting from regarding water as a free resource to understanding its economic value and its growing scarcity, and they arc changing policies to emphasize proper pricing. For example, after the city of Bogor in Indonesia increased fees for water by 30 percent, the consumption of water declined by a similar rate, and expensive investments in new supplies were postponed (see p. 23). Similarly, some eighteen months after Guinea turtled over responsibility for supplying urban areas with water to a private supplier, the fee collection rate had increased from 15 to 70 percent, and services had improved significantly. Market principles also work on the farm. Even farmers wile are very poor are often willing to pay for good-quality services that raise and stabilize their income. In Bangladesh, it is not uncommon for farmers to agree to pay 25 percent of their dry-season, irrigated rice crop to the owners of nearby tubewells who supply their water and studies of farmer-owned and -managed irrigation systems in Nepal show that farmers contribute large amounts of cash and labor to pay the annual costs of operation and maintenance.
Although there are many successful examples of the introduction of some level of increased pricing, the extent of underpricing in both agricultural and urban useusually makes it politically infeasible to immediately adopt water charges that are equal to the opportunity cost of tile resource. Indeed most countries are just starting to charge to cover tile cost of services. This, at least, is allowing countries to ensure the financial autonomy of their water service agencies and tile sustainability of their operations and is reducing, but not eliminating. the misuse of water resources. The problems of pricing are most pronounced in agriculture, because it is difficult in very large systems to measure tile volume of water each farmer receives. I Here alternative mechanisms can be tried such as cost recovery through user groups (based on water delivered to an entire village or water user association) and approaches that rely on indirect measurement of water use, such as estimating the amount of water deliveries based on the number of hectares irrigated and varying the per hectare water charges by the crop grows the number of irrigation periods in a season. or the length of irrigation time. Another problem with opportunity cost pricing in agriculture is political farmers lose an economic rent they perceive to be an acquired right. In this situation. farmers might be encouraged to trade their water in water markets. Thus far, water trading is common within a sector but has keen prevalent between sectors only in the western United States and Chile.
The formal buying and selling of water USC right in Chile require legal sanction and registration. Although the law defines water use rights as a volume of flow per unit of time (for example 24 liters per second), in practice rights are a share of stream flows, since variability renders the volumetric/time specification impractical. Use rights are required for groundwater exploitation; these rights prohibit the user from making other withdrawals within the area specified in the right. A system is in place for challenging the granting of water rights and for resolving disputes related to them (box 7).
Fees and fiscal incentives can also significantly influence water conservation and encourage firms and individual users to adopt water saving technologies, including reuse systems.
Box 7. Water Markets in Chile
Chile's National Water Code of 1981 established a system of water rights that are transferable and independent of land use and owner Water rights are defined as permanent (from unexhausted sources) or contingent (from surplus water) and as consumptive or nonconsumptive. Rights can be obtained by petitioning the government, or they can be established by right based on historical use; they can also, of course, be purchased from the owner. In practice, the second of these methods is the most common, because the government's 1966 expropriation of all water rights necessitated the establishment or reestablishment of those rights since the National Water Code was passed.
The most frequent transaction in Chile's water markets is the "renting" of water between neighboring farmers with different water requirements (Gazmuri 1992). This can also be tended a "spot market," in which the owners sell a portion of their water usually over a brief period (perhaps even hours) sometimes without fulfilling formal, legal requirements. Although the volume of sales may not he metered, the buyer and seller have good information on the amount exchanged. Compensation may be in kind or in some other form of nonmonetary benefit.
Prices for water rights are left to the buyers and sellers. In a draft study covering more than 700 shares of water in four river valleys in Chile, Hearne and Easter (1995) found that, for both intra- and inter-sectoral transactions, "market transfer of water use rights does produce substantial economic gains-from-trade'' in the two valleys where transactions were numerous In the Limari Valley for instance, shares traded at an average of about $4,0(10 (which is roughly equivalent to $0 20 per cubic meter). The net value of the exchange (that is, the value of water in the new use minus the value of water in the previous use) is estimated to he about $6,000 per share (or about $013 per cubic meter).
Source: Le Moigne
· In the United States, industrial water use in 1980 stood at 45 billion gallons per day. By 1990, it had declined 33 percent to 30 billion gallons per day, largely as a result of the tightening of controls on effluents and the imposition of effluent charges over this period.
· In a study of industrial plants in Sao Paulo, Brazil, water use in manufacturing dropped between 42 and 62 percent, depending on the industry, from 1980 to 1982, after effluent charges were introduced.
· Consumption of water in the former German Democratic Republic dropped from 400 to 120 liters per capita per day, or 70 percent, between 1989 and 1994, primarily as a result of cost-based pricing.
· Such incentives also make it easier for farmers to switch to less water-intensive crops and to reduce practices that cause groundwater pollution (some 20 to 30 percent of irrigation water in the world and some 50 percent of new water sources now come from groundwater, most of it from shallow aquifers). Although municipal water supply accounts for far less water shall irrigation, it is a highly concentrated demand and is growing rapidly. In their efforts to limit the need for increased water supplies, many municipalities have employed demand management programs.
· The city of Bogor, Indonesia, was faced with high investment costs of developing additional water supplies. The municipal authorities decided to cut substantially the water consumption of domestic and commercial consumers. Water fees were increased initially by approximately 30 percent, resulting in an average decrease in consumption of 29 percent This action was followed by a campaign to reduce water use further, particularly among consumers with monthly consumption of more than 100 cubic meters. Consumers were given advice, as well as the necessary devices, to reduce consumption. Three months after the campaign started, average monthly water use had decreased another 29 percent.
· In an effort to cut water use per capita by one-sixth, Mexico City replaced 350,000 toilets with smaller 6-liter models. This has saved enough water to meet the household needs of 250,000 residents.
· A new pricing system in Beijing links charges to the amount of water used. New administrative regulations set quotas on consumption and authorize fines for excessive use.
· The use of water-saving devices, leak detection and repair, and more efficient irrigation in its parks helped Jerusalem to reduce its use of water per capita by 14 percent from 1989 to 1991.
· A water conservation program in Waterloo, Canada, included higher prices, education, and the distribution of water-saving devices. Volunteers distributed water conservation kits to nearly 50,000 homes.