77839 THE ECONOMIC IMPACTS OF INADEQUATE SANITATION IN PAKISTAN Inadequate Sanitation Costs Pakistan 343.7 Billion PKR (US$5.7 Billion) An Overview of the Economic Impacts of Inadequate Sanitation in Pakistan Who Should Overview Read the Study In Pakistan, the deterioration of the environment continues to harm livelihoods and health, increasing the vulnerability of the nation’s poor. It has long been The study is intended to serve clear that lack of access to clean water and sanitation facilities has a wide the needs of those who make variety of impacts; however, the data and evidence needed to verify the size decisions about resource of the burden imposed on the people of Pakistan are limited. As a result, allocations, technical expertise, investment in the water and sanitation sector remains well below what is as well as advocacy: required to ensure for the population a basic minimum of services. Indeed, Pakistan’s population is projected to grow by more than 2.9 percent a year, a national and sub-national which means an additional 4.0 million people each year who will require policy makers, additional clean water and sanitation facilities. a national, sub-national, The Water and Sanitation Program undertook this study to conduct evidence- and international based research to help advocacy in the sanitation sector. The study aims donor agencies, to empirically estimate the economic impacts of current poor sanitation1 conditions in Pakistan as well as the economic benefits of options for a multilateral improved conditions. The study’s ultimate goal is to provide policy makers organizations, and at both national and local levels with evidence to justify larger investments in improving the sanitation conditions in the country. It also provides a technical partners recommendations, again based on empirical evidence, for effectively planning and stakeholders in and implementing sustainable sanitation and hygiene programs. development assistance. How this study was conducted The study conducted both quantitative and qualitative assessments of the impacts of poor sanitation on health, water, tourism, and other aspects of welfare, based on analyses of secondary data. Health impacts are included based on well-established links between sanitation and disease incidence. The total economic Water impacts are deemed important because poor sanitation is one of the causes of water pollution that, in turn, leads to costly avertive behaviors cost of poor sanitation by households seeking clean water. Other welfare impacts are included as is equivalent to well, such as the productivity lost at work and in schools in the absence of 3.94 percent of convenient sanitary facilities when people must spend extra time accessing distant facilities. Finally, tourism is included in the study because poor GDP in Pakistan sanitation facilities can influence a country’s attractiveness as a tourist destination. The analysis has interpreted sanitation to comprise activities related to human waste, particularly excreta. In measuring impacts, it has used standard peer-reviewed methodologies. An attempt has also been made to distinguish between financial and economic costs. 1 Throughout this report, the phrase poor sanitation is used broadly to include both sanitation and water facilities and practices that are poor in availability or effectiveness. Poor sanitation therefore includes both unimproved sanitation and lack of sanitation. Based on availability of data, the study includes the following components: Data Sources a Impacts related to health: These include the attributed costs due to the effects of sanitation-linked illnesses, including premature The detailed estimations mortality, cost of health care, productivity-time lost, and time lost to in this study are based on care for sick household members. disaggregated data, including actual incidence numbers for a Impacts related to drinking water and domestic water: These diseases, such as diarrheal include the attributed costs of the following avertive measures: illnesses, and for related household treatment of drinking water; use of bottled water; piped premature deaths. water costs attributed to sanitation; and time spent hauling cleaner water from distant sources. The data were obtained and determined from a Impacts related to user preferences and welfare: These include various relevant secondary the cost of additional time required for accessing shared toilets sources, including Pakistan’s and open defecation sites; and the cost of school absences due to Demographic and Health inadequate or unavailable toilets for girls and work absences among Surveys; WHO Global Burden women for the same reasons. of Disease reports; health statistics from the Government a Impacts on tourism: These include lost tourism revenues as well as of Pakistan for priority diseases; economic impacts of illness among tourists. and the Pakistan Social and Living Standard Measurement Survey. Since the study drew on available nationally representative surveys and on routine data sources, adjustments were made to ensure comparability during the same time periods. For example, when data were not available for 2006, older or more recent data were used to obtain the estimates for the estimation year of 2006. Key Findings Status of sanitation and hygiene: resources and practices The current status of sanitation and poor hygiene practices has led to significant public costs, such as premature deaths, economic and financial costs due to diseases attributable to poor sanitation, environmental costs, and other welfare costs. For example, as of 2006: a The coverage level for sewage collection was estimated at 50 percent nationally (with only 20 percent coverage in rural areas), and only 10 percent of sewerage was being effectively treated. Treatment plants existed only in a few cities, and few of them were fully functional. a Forty-two percent of the population were living with unimproved toilet facilities in 2006 out of which 11 percent had access to facilities that were either shared and/or unimproved. a Approximately 50.1 percent of households had access to improved toilets, of which 55.8 percent had a sewer connected to a flush toilet, and 29.1 Figure 1: Breakdown percent had a flush toilet connected to a septic tank. of total economic impact on Pakistan a Of the total population, approximately 50 million people (31 percent) of poor sanitation, defecated in the open, and an estimated 8 million people (5 percent) used by cost area shared toilets. If we combine both groups, we find that 58 million people (36 percent) either defecated in the open or had access to shared toilets. 6.63% a National figures hide rural-urban disparities. While 90 percent of the 4.65% urban population had access to improved sanitation (that is, the kind that 1.57% hygienically separates human excreta from human contact), this compares with just 40 percent of the rural population. In rural areas, 45 percent of the population still practiced open defecation. All these data indicate the degree of inadequate sanitation conditions that expose the population to fecal-oral diseases. Health costs 87.16% The total economic cost of poor sanitation for the year 2006 was estimated as 343.7 billion PKR (US$5.7 billion). This amount is equivalent to 3.94 percent of GDP in Pakistan. Of this cost, 69.52 billion PKR (US$1.15 billion) constitutes Health costs the direct financial cost, which is equivalent to 0.8 percent of GDP. Water costs Health impacts accounted for the vast majority of total economic costs. They Other welfare constituted 87.16 percent of the total quantified economic costs, equating to Tourism the equivalent of 3.43 percent of GDP. The total economic impact on health is estimated to cost 299.55 billion PKR (US$4.93 billion), of which 48.76 billion PKR (US$801.53 million) represents financial costs. The major component of total health-related costs was from premature mortality. The cost of premature mortality is estimated at 216.29 billion PKR (US$3.56 billion), equivalent to 2.48 percent of GDP. The cost of premature mortality comprises 72 percent of total health costs and 63 percent of total economic costs. Figure 2: Breakdown of health costs due to productivity loss, Productivity losses due to illness are estimated at 40.55 billion PKR (US$666.61 million) or 0.46 percent of GDP. Total productivity by type of illness losses contributed 11.80 percent of the total health costs. The major component (70.61 percent) of productivity losses was due to diarrhea, 21.64% accounting for 8.33 percent of total health costs. The second largest 3.72% share (21.64 percent) of productivity losses was from ALRI, which 3.59% accounted for 2.55 percent of total health costs. 0.31% 0.14% Total health care costs or cost of treatment comprised 12.42 percent of total health costs. The largest share (50 percent) in health care costs was the cost of treating diarrhea (6.16 percent of total costs), followed by ALRI (38 percent of health care costs and 4.78 percent of total costs). Water costs The water-related economic cost of poor sanitation is estimated as 15.98 billion PKR (US$262.68 million), equivalent to 0.18 percent of GDP. This represents 4.65 percent of the total impact; of this amount, 70.61% 15.51 billion PKR (US$254.85 million) were financial costs. Productivity loss Piped-water costs (the excess cost made necessary by poor sanitation, due to diarrhea which is estimated in this study as 50 percent of all piped-water cost) were the largest component of water-related costs, estimated as Productivity loss 7.47 billion PKR (US$122.89 million). The cost of piped water accounts due to ALRI for 47 percent of all water-related costs (and 2.18 percent of total economic cost) due to poor sanitation. Productivity loss due to trachoma Bottled water consumption comprised 29 percent of water-related costs, equivalent to 1.4 percent of total economic costs and Productivity loss 0.05 percent of GDP. The cost of bottled water consumption was due to typhoid 4.67 billion PKR (US$76.72 million). The cost of household water treatment was 3.36 billion PKR (US$55.23 Productivity loss million), equivalent to 21 percent of water-related costs, 1 percent of due to malaria total costs, and 0.04 percent of GDP. Productivity loss due to hepatitis A & E Welfare costs Other welfare losses, such as user preferences (which, while intangible or difficult to quantify, include comfort and acceptability, privacy and convenience, security, avoidance of conflict, and status and prestige) and time loss, are estimated as 22.77 billion PKR (US$374.4 million), Only a few cities have equivalent to 6.63 percent of total impacts and 0.26 percent of GDP. sewage treatment plants The major share is from the time loss due to household access to open defecation sites (which was 16.5 billion PKR [US$271.6 million]), and most of them are not equivalent to 73 percent of total welfare costs or 5 percent of total costs. fully functional The second largest share is from time loss due to household access to shared toilets (5.64 billion PKR [US$92.74 million]). Losses to tourism accounted for 5.38 billion PKR (US$84.03 million), equivalent to 1.57 percent of the total impact and to 0.06 percent of GDP. The financial costs included in tourism losses account for 4.98 billion PKR (US$81.99 million) or 7.1 percent of total financial losses. Among total tourism losses of 5.38 billion PKR, 93 percent was due to lost tourism revenue, while the remaining 7 percent was due to tourist illness. Tourism revenue losses make up 1.5 percent and tourist illness costs make up 0.1 percent of the total costs. User cost for solid waste management was estimated as 147.87 million PKR (US$2.43 million). All of this cost consisted of the financial burden on households. The cost of solid waste management is not, however, included in the total cost of poor sanitation. User cost of household solid waste management was found to be 147.87 million PKR (US$2.4 million) which is equivalent to 0.05 percent of total costs and 0.01 percent of GDP. Economic impact of interventions Interventions that could be carried out to mitigate economic losses due to poor sanitation will not only reduce the sanitation-related losses but may also provide improvements in non-sanitation areas such as water supply and so on. Sanitation and hygiene-related interventions could mitigate 52 percent of economic impacts, which amounts to 1,125 PKR per capita and 2.05 percent of GDP. Mitigation through the provision of improved access to toilets is estimated to cost 124.02 billion PKR (US$2.04 billion), equivalent to 1.42 percent of GDP and 36 percent of total economic cost. Mitigation through improved hygiene behavior is estimated to be 157.57 billion PKR (US$2.59 billion), equivalent to 1.81 percent of GDP or 46 percent of total economic impact. Improved access to adequate quantity and improved Sanitatio​n and hygiene- quality of water could mitigate 30 percent and 36 percent ons could related interventi​ of economic losses, respectively, while safe confinement prevent 52 percent of these and disposal of fecal matter could mitigate 30 percent of economic losses, equivalent economic losses, equivalent to 1.19 percent of GDP or to 2.05 percent of GDP 653 PKR per capita (US$1.71 billion). Excluded from this Study This study has excluded various important aspects of sanitation due to the non- availability of reliable relevant data to determine the physical units of impact and to estimate the related economic and financial costs. These include estimations for various diseases, including polio, skin diseases, urinary tract infections, and oral diseases that are identified in medical literature as caused by poor hygiene practices and sanitation, particularly in Pakistan’s rural areas. The cost of informal health care and traditional/home remedies is not included. Health costs arising from poor sanitary management of livestock, agricultural waste, and fisheries and pisci- culture are not included. Furthermore, other intangible welfare benefits— including benefits from the acceptability of improved sanitation arrangements (e.g., privacy, security, status and Conclusions dignity, and social acceptability) are not included, nor is the cost of environmental conditions stemming from poor sanitation, such as air quality and odor, or the cost of other aesthetic values. Similarly, costs Priority treatment needs to be given to the issue of poor associated with lost trade and business, sanitation at all administrative levels—local, provincial, property value, and many other related and national—and investments should be made to welfare, social, and environmental costs build moderately improved and hygienic latrines in both are not captured in this study. urban and rural areas. These investments could include increased sanitation coverage, as already targeted in In summary, this study provides the various government policy papers. evidence about the adverse economic impact of lack of sanitation at the national Special treatment and attention are needed in the areas level. It also provides estimates of where the poor population lives and in rural areas, where ill-effects of inadequate sanitation children are more at risk from diarrhea and malnutrition. that can be mitigated with sanitation Education and awareness campaigns are needed at all interventions. This study is intended levels, particularly in schools, to promote personal hygiene, to serve the needs of those who make such as hand-washing, and other inexpensive means to decisions about resource allocations, minimize the incidence of diseases and the impact of poor technical expertise and advocacy: national sanitation indirectly. policymakers, national and international donor agencies, multilateral organizations, This study was conducted on the basis of secondary and technical partners working in the data and hence was constrained by the non-availability of area of development assistance. Decision relevant data in many cases. It would be preferable that makers and stakeholders below the information on health education and sanitation-related national level are also an audience for this information be incorporated in future national surveys. study where the information is relevant There is still a need to empirically establish the attributable for their work. For this reason some impact factors based on primary data from Pakistan estimates are provided at rural and urban surveys for a variety of topics, in order to ensure that levels. However, given the structure in estimates are as accurate as possible. Pakistan and to inform decision makers at the local level, additional studies are needed to further disaggregate the results in future. Acknowledgments Dr Mohammed Nishat, Professor of Economics and Finance and Associate Dean of the Institute of Business Administration at Karachi, Pakistan, was the lead analyst and author of the ESI study summarized here, The Economic Impacts of Inadequate Sanitation in Pakistan. A sincere appreciation to the Government of Pakistan especially the Planning Commission, Statistics Division of the Ministry of Finance and the Ministry of Environment whose support and data has helped us formulate the local basis of the statistics. We are also thankful to the federal Ministry of Environment for their review and collaboration and the provincial governments especially Local Government Departments, Public Health Engineering Departments, Health Departments and Public Utilities for their availability to discuss and clarify many technical issues. Rachid Benmessoud, Country Director, World Bank, Islamabad, led the peer review process across World Bank experts whose able inputs helped improve the draft study. All peer-reviewers spent their valuable time in re-examining a complex assignment and provided deep-rooted and long-term vision and comments. Farhan Sami, Country Team Leader, WSP, guided the Pakistan study through all processes and led coordination with the guidance of Christopher Juan Costain, Regional Team Leader, WSP in South Asia, Guy Hutton, WSP and Vandana Mehra, Communications Specialist, WSP. WSP thanks the Asian Development Bank and AusAID for their generous assistance to support this ESI impact study. Water and Sanitation Program Funding Partners WSP is a multi-donor partnership created in 1978 and administered by the World Bank to support poor people in obtaining affordable, safe, and sustainable access to water and sanitation services. WSP provides technical assistance, facilitates knowledge exchange, and promotes evidence-based advancements in sector dialog. WSP has offices in 25 countries across Africa, East Asia and the Pacific, Latin America and the Caribbean, South Asia, and in Washington, DC. WSP’s donors include Australia, Austria, Canada, Denmark, Finland, France, the Bill and Melinda Gates Foundation, Ireland, Luxembourg, Netherlands, Norway, Sweden, Switzerland, the United Kingdom, the United States, and the World Bank. Economics of Sanitation The Economics of Sanitation Initiative (ESI) is a multi-country initiative of the Water and Sanitation Program (WSP). ESI was launched in 2007 as a response by the Water and Sanitation Program (www.wsp.org) to address major gaps in evidence among developing countries on the economic aspects of sanitation. The study aims to provide evidence that supports sanitation advocacy, elevates the profile of sanitation, and acts as an effective tool to convince governments to take action. The first study completed in Southeast Asia found that the economic costs of poor sanitation and hygiene amounted to over US$9.2 billion a year (2005 prices) in Cambodia, Indonesia, Lao PDR, the Philippines, and Vietnam. Its second phase analyzes the cost-benefit of alternative sanitation interventions and will enable stakeholders to make decisions on how to spend funds allocated to sanitation more efficiently. Due to that study’s successful traction, WSP has carried out ESI studies in India and Bangladesh as well as the Pakistan study summarized here. ESI studies have also been carried out for countries in Africa, Latin America, and the Caribbean. DISCLAIMER: Water and Sanitation Program (WSP) reports are published to communicate the results of WSP’s work to the development community. Some sources cited may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed herein are entirely those of the author and should not be attributed to the World Bank or its affiliated organizations, or to members of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank Group concerning the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to wsp@worldbank.org. WSP encourages the dissemination of its work and will normally grant permission promptly. Water and Sanitation Program Printed by: PS Press Services Pvt. 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