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Water Resources Development, Vol. 11, No. 3, 1995

Water Resources Management: A New Policy for a

Sustainable Future1

ISMAIL SERAGELDIN

Vice-President for Environmentally Sustainable Development, The World Bank, 1818 H Street,

NW, Washington, DC 20433, USA

ABSTRACT To manage water more effectively, a new approach is necessary, incorporat-

ing a balanced set of policies and institutional reforms. Its core is the adoption of a

comprehensive framework for water management that recognizes the interactions among

the elements of a river basin’s ecosystem and incorporates cross-sectional and environ-

mental considerations in the design of investments and policies. The new approach also

calls for water to be treated as an economic good, for decentralized management and

delivery structures, greater reliance on pricing, and fuller participation by stakeholders.

A New Appreciation for Water

As representatives of governm ent, the academic and research communities, and

international development institutions we share the same objectives: improve-

ment of the lives of people and quality of the environment. There are few issues

that have greater impact on our lives and the life of the planet than the

management of our most important natural resourceÐ water. After decades of

water waste, water pollution and inability to provide basic water services to the

poor, we must fundamentally change the way we think about and manage

water.

Water is our `life blood’, literally . We are made mostly of water. Water is a

requirement for human life. We need water to maintain basic health and

sanitation. We need adequate supplies of fresh water to feed ourselves. Agricul-

ture uses some 70% of the world’ s fresh water, and a third of the world’ s food

crops are produced by irrigated agriculture. We need water to develop and

maintain vibrant economies. Industries use more than a quarter of the world ’s

freshwater supplies, often as a vital part of the production process. The natural

environment is also critically dependent on water.

We also have a new appreciation for how little freshwater there is on earth.

Less than 3% of the world ’s water is freshwater and most of this is in the

ground, ice caps and glaciers. Lakes and rivers account for only 0.014% of all

water.

Water is critically scarce in many places. Generally, a country will experience

periodic water stress when supplies fall below 1700 m3

per person. The global

average annual supply of renew able freshw ater is about 7400 m3

per person.

However, there are 22 countries that have renewable water resources of less than

1000 m3

per person and 18 that have less than 2000 m3

per person (see Table 1).

221

0790± 0627/95/030221± 12 1995 Journals Oxford Ltd

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222 I. Serageldin

Table 1. Availability of water by region

Percentage of population living in

Annual internal renewable countries with scarce annual per

water resources capita resources

Region Total (’000 km3) Per capita (’000 m

3) Less than 1000 m

31000± 2000 m

3

Sub-Saharan Afr ica 3.8 7.1 8.0 16.0

East Asia and the Paci ® c 9.3 5.3 , 1.0 6.0

South Asia 4.9 4.2 0.0 0.0

Eastern Europe and

form er USSR 4.7 11.4 3.0 19.0

Other Europe 2.0 4.6 6.0 15.0

Middle East and

North Africa 0.3 1.0 53.0 18.0

Latin Am erica and

the Caribbean 10.6 23.9 , 1.0 4.0

Canada and the

United States 5.4 19.4 0.0 0.0

World 40.9 7.7 4.0 8.0

By the year 2025, one out of every three peopleÐ almost three and a quarter

billion peopleÐ will live in as many as 52 countries plagued by water stress or

chronic water scarcity.

Issues of scarcity have placed water at the top of the international political

agenda. For example, agreem ent on access to water is an important part of the

peace accords between Israel and its neighbours. But water politics are not

con® ned to the Middle East. Today, nearly 40% of the world’ s people live in the

more than 200 river basins that are shared by more than two countries.

While we have a renewed appreciation for the multifunctional role of water in

our lives, we are also more aware of our failure to manage the resources

properly. The vast majority of poor people are still without safe drinkin g water

and adequate sanitation services. Our economies suffer because of poor water

management and inef® cient investment. We continue to ignore the critical role

of water in maintaining the health of the environment: already half our coastal

wetlands have been drained, and in many places groundwater is seriously at

risk from over-exploitation and contamination by urban and rural pollutants and

salt water intrusion.

Failure of Current Policies

Our water policies and management practices are not sustainable from any

perspectiveÐ social, economic or environmental. There are a multitude of prob-

lems, but they are all part of four principal failures.

First, most countries refuse to treat water as an economic good. Low-value

users are allowed to consume large quantities of water, forcing high-value users

to incur steep costs in securing water from long distances. The result is waste

and depletion and less than fully productive investments (see Figure 1).

Underpricing of water has also yielded a vicious cycle of unreliable service,

low willingness to pay and further decline in capacity to provide services. The

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WaterPowerGasTelecom0

20

40

60

80

100

120

140

160

180

Per

cent

age

of c

ost r

ecov

ery

Water Resources Management 223

Figure 1. Degree of cost recovery in infrastructure sectors.

result is that the vast majority of poor people are denied adequate water and

sewage services: 1 billion people lack adequate supply and 1.7 billion have no

adequate sanitation. Indeed, poor people must often get their water from water

sellers, and sometimes end up paying far more for water than do the rich.

Second, we rely too much on governm ent to collect, treat, distribute and

dispose of water. Governm ent involvement re¯ ects the understandable concern

that relying exclusively on unregulated markets would not work. However, the

delivery of water services is overly centralized, with little stakeholder or private

sector involvement. Users are rarely consulted or otherwise involved in planning

and managing water resources. As a result, government agencies are over-ex-

tended, and, lacking the proper incentive structure, are unable to provide quality

services.

Third , management of water is fragmented between sectors and institutions,

with little regard for con¯ icts or complementarities between social, economic

and environmental objectives. There are multiple agencies for different users,

and inter-sectoral interactions, including externalities and pollution, are ignored.

In many countries, indiv idual states may develop the same water source without

considering the impact on other states. Similarly, domestic, industrial, and

commercial supplies are often provided by local governm ents that are not

coordinated with provincial or national water departments. The result is fre-

quently excessive and unproductive investments with different agencies devel-

oping the same water source for different uses within an interdependent system .

The numbers of employees working in water-related departments in developing

countries re¯ ects the tremendous inef® ciencies in the water sector: most devel-

oping countries have 10± 20 employees per thousand water connections. This

compares with 2± 3 employees per thousand in Western Europe.

Fourth, health and environm ental concerns are badly neglected. Water is still

a life-and-death issue for millions of people. Some two billion episodes of illness

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224 I. Serageldin

Table 2. Effects of improved water and sanitation on sickness

Episodes of illness per Median reduction attributable

Disease year (in millions) improvem ent (%)

Diarrhoea 900 22

Roundworm 900 28

Guinea worm 4 76

Schistosom iasis 200 73

are caused by water-related diseases and nearly two million children die from

diarrhoea because they do not have access to clean drinking water (see Table 2).

National economies suffer when citizens are in poor health. But they also

suffer directly from water pollution. In Poland, for example, three-quarters of

the river water is too contaminated even for industrial use. In Peru, the ® rst 10

weeks of a cholera epidem ic caused US $1 billion in losses from agricultural

exports and tourism Ð more than three times the amount the nation invested in

water supply and sanitation during the 1980s.

Agricultural output and productivity are also declining because of environ-

mental degradation resulting from poor drainage and irrigation practices. In

India, a country which depends on irrigation for most of its food, waterlogging

and salinization have caused more than 7 million hectares of once productive

land to be abandoned. Today, 10± 15% of the world’ s irrigated land is degraded

by waterlogging.

New Stresses Require a New Approach

These are stark and terrible failures. But they are only an indication of what may

lie ahead. Current trends in population, income growth and urbanization will

not allow us to continue current practices without crippling our health and our

economies, and causing irrevocable damage to the environment.

World population is projected to increase by 50% over the next 30 years. Per

capita water supplies worldwide are already a third lower now than 25 years

ago because of the 1.8 billion people added to the planet since then. Based on

current trends, the demand for water can be expected to grow by over 650% in

the next three decades. There are already 26 countries with a population of

almost 250 million that can be considered water scarce. Many of these countries

have high population growth rates (see Figure 2). In Africa, there are 11

water-scarce countries, and it is estimated that by the end of the decade, four

more countries will be included in the list. By the year 2000 it is estimated that

300 million Africans will live in water-scarce countries, about one-third of the

projected population. In the Middle East, nine out of 14 countries are already

facing water-scarce situations and populations in many countries of the region

are expected to double in less than 30 years.

Between 1950 and 1990, the number of cities with populations of more than 1

million nearly quadrupled from 78 to 290, adding some 650 million people (see

Figure 3). Between 1980 and 1990, the number of people in urban areas without

sanitation rose by about 70 million (see Figure 4).

In the next few years, fully half the world’ s population will live in cities. By

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PeruIsraelIndiaEgyptCyprusChina0

1000

2000

3000

4000

5000

6000

Key: 1955; 1990; 2025

202520102000199019801970196019500

100

200

300

400

500

600

700

Year

Water Resources Management 225

Figure 2. Growing demand and resulting water scarcity: estimated water

availability, selected countries.

2025, 90% of population growth will have taken place in urban areas, increasing

the demand for water of suitable quality for domestic, municipal and industrial

use and for treatment of waste. Urbanization and industrialization will also

increase demand for energy and hydropower, and income growth will put

pressure on household water use, as those who are well off use more water than

those who are not (see Table 3).

At the same time, the ® nancial and environmental costs of tapping new water

supplies are increasing dramatically (see Figure 5), and they will rise even

further when adequate facilities are included as essential parts of investments.

Figure 3. Growth in number of cities with more than one million inhabitants.

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Rural sanitation

Rural water

Urbansanitation

Urbanwater

0

0.2

0.4

0.6

0.8

1.2

1

1.4

1.6

1.8

2

Bill

ions

ser

ved

Key: 1980 1990

226 I. Serageldin

Figure 4. Access to safe water and adequate sanitation in developing countries in

1980 and 1990.

Beijing must already consider drawing water from a source that is more than

1000 km away, while Mexico City may be forced to build schemes to pump

water over a height of 2000 m. These kinds of pressures explain why the average

costs of most new projects are already two to three times the costs of current

investments.

Population pressure will increase the demand for food, putting further press-

ure on water supplies. Some 40% of the world’s food already comes from

irrigated land but half of the growth in food supply in the past 30 years is due

to the expansion of irrigated agriculture. It is estimated that half to two-thirds

of the increment in food production in the future will have to come from

irrigated land.

The problem is that it is becoming increasingly dif® cult to sustain irrigation

expansion. Like other water-supply projects, the economic costs of new irri-

gation can be expected to double and triple existing costs. Water use in

agriculture can generally be characterized as high volume and low value. The

Food and Agricultural Organization of the United Nations (FAO) estimates that,

on average, only 45% of water diverted or extracted for irrigation actually

reaches the crop. (see Figure 6)

Table 3. Sectoral water withdrawals, by country income group

W ithdrawals, by sector (%)

Annual withdrawals per

Income group capital (m3) Dom estic Industry Agriculture

Low 386 4 5 91

M iddle 453 13 18 69

High 1167 14 47 39

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1.401.201.000.800.600.400.200.000.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

A

M

HL

AG

DB

S

1988 cost in US$/m3

Water effectivelyused by crop

45%

Farm distributionlosses15%

Field applicationlosses25%Irrigation system

losses15%

Water Resources Management 227

Figure 5. How the cost of supplying water is increasing .

The performance of irrigated system s has also generally been below expecta-

tions, producing low economic and ® nancial returns and discouraging invest-

ment. There are also growing environmental concerns about large projects, the

over-exploitation of groundwater and salinization. Finally, given the large

allocation of water to agriculture, many countries are under pressure to reallo-

cate water used for irrigation to other uses. All these factors suggest that the

Figure 6. Average irrigation water losses. Source: Water for Life (FAO, 1994).

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228 I. Serageldin

demand for food will have to be met by increased cropping intensi ties and

higher yields using less water.

Clearly, we cannot continue along our current path. There is an old Chinese

proverb that says `If we do not act now, we will surely end up where we are

headed’ .

A Framework for Improving Water Resources Management

The challenges are daunting. However, our successes and failures during the last

decades have taught us enough to be con® dent about the direction we should

take. We can identify four over-arching lessons.

(1) Water must ® t squarely into a long-term vision for national develop-

ment. Incorporation of water strategies within broader policy objectivesÐ food

security, health improvement, environmental protectionÐ is the sine qua non of

better water management. This will require an articulation of national water

policy from the very highest levels of governm ent.

(2) Water must be managed comprehensively. We must stop managing water

sectorallyÐ by its separate usesÐ and begin to treat water system ically; that is,

inter-sectorally. We have learned about the bene® ts of developing a comprehen-

sive framework for water resources management that recognizes the interactions

between various elements of a river basin’ s ecosystem and allows for the

incorporation of cross-sectoral and environmental considera tions in the design

of investments and policies. Here, the French and German system s of river-

basin-based management could serve as models. Under these system s, river

basin committees decide on long-term plans for developing water resources.

Regulation and enforcement are conducted by various national ministries, while

operation and maintenance of different components of the system s are left

primarily to regulated private entities and public utilities (see Figure 7).

The French and German system s owe their success to an adheren ce to four

fundamental principles of sound water management. First, the Institutional

Principle: stakeholders should help decide on balance between costs and bene® ts

and assignment of costs. Second, the Subsidiary Principle: never do at a higher

level what can be done effectively at a lower level. Third, the Technical Principle:

questions of trade-offs about costs and bene® ts and how best to expend

resources should bene® t from technical advice. And fourth, the Instrument

Principle: make the maximum use of market-based instrumentsÐ `user pays,

polluter pays’ .

(3) Decentralization and greater stakeholder participation are essential for proper water

management. Countries have achieved better quality service at lower cost by

decentralizing water- service delivery responsibilities to local governments and

transferring some functions to the private sector, ® nancially autonomous entities

and community organizations such as water-user associations. Greater stake-

holder participation has also served to improve design (by incorporating local

knowledge and circumstances), generate ownership , encourage cost sharing and

better maintenance, promote equity, build local capacity, and enhance transpar-

ency, accountability and institutional performance.

The Orangi Pilot Sanitation Project in Karachi is a good example of success in

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Water Resources Management 229

The French system of water resources management, adopted after many years

of study and debate could well serve as a model for developed and

developing countries as they look for the best way to put a comprehensive

approach into action. Key elements are:

Well-de® ned laws and regulations. The Water Acts of 1964 and 1992 are the

foundation of the French system. The earlier law established speci® c quality

objectives and regulations for pollution control, while the later act is designed

in part to meet stricter European directives on water management.

Hydrographic 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, decentralization 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, re¯ ects regionalÐ rather than centralÐ

governm ent control 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 governm ent for

certain technical matters (e.g., upholding national standards). Water and

sewerage services are provided by either public or private ® rms (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 fee’ (i.e. a penalty) is collected by the basin agency. Most

of these revenues are reinjected to provide technical assistance and help the

public or private sector ensure safe, puri® ed water.

Supporting research. About 14% of the water board’s expenditures in 1992± 96

are budgeted for research and development.

Figure 7. France’s `model’ system .

providing services through stakeholder empowerment and ® nancial autonomy

and, in the words of its architect, liberating people from the demobilizing myths

of government promises. There, the task was to provide services which the

government had not been able to provide by reducing costs so that sanitation

systems could be developed and operated by the community. With an elim in-

ation of corruption and the provision of labour and management by community

members, the project is providing in-house latrines and street sewers for some

600 000 people at a cost of less than US$100 per household.

There are two key lessons from the Orangi experience. First, trust the people

and put them in command. Second, give the residents the support they need.

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230 I. Serageldin

In the United States industrial water use in 1980 stood at 45 billion gallons

per day. By 1990 it declined 33% to 30 billion gallons per day, largely as

a result of tightening controls on ef¯ uents and ef¯ uent charges imposed

over this period.

In a study of industrial plants in SaÄ o Paolo water use in manufacturing

dropped between 42 and 62%, depending on the industry , between 1980

and 1982, after ef¯ uent charges were introduced.

Consumption of water in the former East Germany dropped from 400 to

120 litres per capita per day, or 70%, between 1989 and 1994, primarily as

a result of cost-based pricing.

Figure 8. What can the market achieve?

Markets and prices improve the allocation of water among competing users. Many

countries have shifted from regarding water as a free and renew able resource to

understanding its economic value and its growing scarcity, and they are chang-

ing policies to emphasize proper incentives, pricing and regulation (see Figure

8). For example, the city of Bogar in Indonesia increased fees for water by 30%.

As a result, the consumption of water declined by a similar rate and expensive

investments in new supplies were postponed. Similarly, some 18 months after

Guinea turned over responsibility for supplying urban areas with water to a

private supplier, the fee collection rate had increased from 15% to 70%, and

services had improved signi® cantly. The market also works on the farm. Even

farmers who 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% of their dry season irrigated rice crop to the owners of

nearby tubewells who supply their water. Studies of farmer-owned and man-

aged irrigation systems in Nepal show that farmers contribute large amounts of

cash and labour to pay the annual costs of operations and maintenance.

The World Bank, with assistance from organizations in the United Nations

and intensive consultation with international and developing country NGOs, has

taken the lead to de® ne the elements of a comprehensive approach to water

resources management that emphasizes economic behaviour, overcoming mar-

ket and government failures, more ef® cient water use, and greater protection of

the environment. The Bank is working actively with its developing country

partners to encourage implementation of these objectives. With support from the

Bank, Brazil is ® nancing water-quality and pollution-control projects that create

basin authorities and institutional, legal and regulatory frameworks which

facilitate cross-sectoral and cross-governm ental coordination while delegating

many responsibilities to municipalities. In Bangladesh, the Bank has encouraged

the creation of an enabling environment that allows the private sector to take

responsibility for selling and maintaining low-lift pumps and shallow tubewells.

The number of tubewells has grown substantially, with a subsequent increase in

market activity for water. With the Bank’s assistance, Pakistan is developing a

delivery mechanism whereby rural communities would provide, operate and

maintain the service themselves. And in Mexico, the Bank is supporting the

transfer of almost 2.5 million hectares of irrigated agriculture to water-user

associations that will be responsible for operating and maintaining canals and

water distribution.

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Water Resources Management 231

As these examples demonstrate, efforts towards implementing a new ap-

proach are feasible. The ® nancial requirements, however, will be substantial. For

water supply and sanitation and irrigation and power, these are estimated to be

US$600± 800 billion over the next decade. The World Bank will continue its

extensive support for water resources. The Bank has lent about $40 billion for

water-related investments in the last 30 years. Over the next 10 years, it will lend

an additional $35± 40 billion. This will represent about half of all external agency

funding for water. Governm ents must ® nance the balance. However, they will

not be able to do so from central budgets alone. Part of the capital will have to

come from water users themselves. Therefore, as recommended in the new

approach to water management articulated here, emphasis on cost recovery and

private sector involvement will be crucial.

Conclusion

The lessons of collective experience compel us to make a decisive break from

past policies to embrace a new approach that is comprehensive, market-orien-

tated, participatory and environmentally sustainable. This approach is consistent

with the consensus that has emerged in Agenda 21. Its applicability to all

countries was reaf® rmed at the International Conference on Water and the

Environment in Dublin in 1992. Implementation of the new approach will

require dif® cult decisions on the part of all of us. But one fundamental point is

clear: we have no choice. At stake are our health, our economies, our ecosystem s,

our children . Water gives life to all these things.

Note

1. The source for all graphs, charts, tables and ® gures is the World Bank, unless otherwise noted.

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ibra

ry]

at 0

8:00

10

Nov

embe

r 20

14