57125 Sustaining Water for All in a Changing Climate World Bank Group Implementation Progress Report of the Water Resources Sector Strategy ©2010 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the 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, denomina- tions, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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ISBN: 978-0-615-37923-4 ©2010 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the 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, denomina- tions, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permis- sion may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978- 750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. ISBN: 978-0-615-37923-4 Sustaining Water for All in a Changing Climate World Bank Group Implementation Progress Report of the Water Resources Sector Strategy Table of Contents Foreword iv Acknowledgements v Abbreviations and Acronyms vi Executive Summary viii Part I--Context 2 1 Issues 4 2 The Water Business in the World Bank Group 7 3 Scope and Methodology of the Report 11 Part II--Water Resources Sector Strategy: Outcomes and Lessons Learnt, FY03-09 14 1 Strategic Vision for Water Resources in 2003 16 2 Bank Achievements and Lessons Learnt over FY03-09 18 2.1 Institutional Basis for an Integrated Approach 19 2.2 Progress in Conceptualizing an Integrated Approach 20 2.3 Adopting an Integrated Approach to Water Projects 23 2.4 Continued Support for Water Resource Management 26 2.5 Engagement in High Risk-High Reward Hydraulic Infrastructure Projects 32 2.6 Knowledge to Support the Dialogue on Water 36 2.7 Complex Trans-boundary Water Issues 39 2.8 Partnering with the Private Sector 40 ii SustainingWaterforAllinaChangingClimate Part III--World Bank Group Strategic Directions for the Sector, FY10­13 48 1 Validity of the Water Resources Sector Strategy 50 2 Core Business and Areas for Increased Attention 51 3 Operationalization of this Strategic Vision 54 3.1 Guiding Principles 54 3.2 Staffing and Skills 56 3.3 Innovative Instruments 57 3.4 Institutional Structure and Incentives System 58 3.5 Corporate Engagement on global/regional issues 58 Annex A: Implementation of the Strategy on the Ground--Seven Country and Regional Cases 61 1 Brazil 61 2 Central Asia 68 3 Andhra Pradesh 73 4 Nigeria 77 5 Philippines 82 6 Yemen 87 7 The Nile Basin Initiative 90 Annex B: Monitoring and Evaluation of World Bank Group Support for Water 96 Annex C: World Bank Group Results Framework for the Water Resources Strategy, FY10­13 100 Annex D: Outcomes of Selected IDA Water Supply and Sanitation Projects 105 TableofContents iii Foreword As the international community reduction, and thereby instrumental in approaches the deadline of the Millennium achieving the Bank's core mission. Development Goals, advocacy and support Looking at seven years of strategy imple- for advancing the water agenda are more mentation, this report shows that the important than ever. This sector faces pro- World Bank Group has responded at scale found challenges. About 900 million people to this growing agenda. The World Bank do not have access to improved drinking Group's water lending commitments water sources. Another 2.5 billion people do increased significantly, the quality of the not have access to improved sanitation. By water portfolio was turned around, and the 2015, it is likely that one billion people will outcome project rating now even outper- miss the Millennium Development Goal for forms the Bank average. Bank assistance sanitation. As three billion people are added has been going towards those countries to the planet by 2030, access to water for with the greatest water needs. What is producing food will be one of the main more, the Bank re-engaged in large and challenges in the decades to come. Adding complex hydraulic infrastructure projects, to the complexity, access to water will while continuing to support client countries need to be balanced with the importance in water resource management. of managing this resource in a sustainable This report places water at the core of the way, taking into account the impact of cli- World Bank Group's mandate on sustainable mate change, and other environmental and development. Going forward, it is critical social variables. to position water at the core of the adap- The World Bank's vision for the water tation and mitigation solution to climate sector was articulated in the Water change. Also, guaranteeing increased food Resources Sector Strategy in 2003. In security will require addressing the water- many ways, the Strategy was ahead of its agriculture nexus. Finally, providing access time in raising many issues which are now to water services, including sanitation, will gaining wider international attention, such continue to be an essential requirement to as climate change and rapid urbanization. fulfill our dream of a world without pov- The Strategy presented water as an inte- erty. The World Bank Group is committed grated sector that linked water resources to using its financing, knowledge and con- with water use. This integrated approach vening power to mobilize the international changed the Bank's vision for the sector, community around this vital agenda. moving away from a sector-based to a multi- sectoral approach. Under this framework, Jamal Saghir water resources infrastructure and man- Director of Energy, Transport, and Water agement are seen as beneficial not only for Chair of the Water Sector Board economic development, but also for poverty The World Bank iv SustainingWaterforAllinaChangingClimate Acknowledgements Preparation of the report was overseen Guy Alaerts, Harshadeep Nagaraja Rao, by the World Bank's Water Sector Board, Inger Andersen, John Briscoe, John chaired by Jamal Saghir. Nancy Vandycke Halpern, Joseph R. Goldberg, Karin E. is the lead author and manager of the Kemper, Konrad Von Ritter, Manuel report. The team of contributors includ- Marino, Marcus J. Wishart, Masood ed Blake Driscoll, Michele Diez, Julia Ahmad, Michael A. Toman, Patrick Mullen, Bucknall, Michael Jacobsen, Luis Garcia, Ronald Hoffer, Salman Salman, Sanjay Martha Jarosewich-Holder, Jaehyang So, Pahuja, Vahid Alavian, Vijay Jagannathan, Usha Rao-Monari, and Margaret Walsh. Wael Zakout, Wenhe Zhang, William Regional and country case contributions Kingdom, William Rex and Winston Yu. were made by Simeon Ehui, Jonathan Guidance received from the Executive Kamkwalala, Franck Bousquet, Barjor Directors of the Bank at the Committee Mehta and Amal Talbi-Jordan (Nigeria), on Development Effectiveness during the Martin Gambrill and Alexandre Baltar discussion of the draft report is gratefully (Brazil), Ahmed Shawky (Yemen), Barbara acknowledged. Miller and Eileen Burke (Nile Basin), Special gratitude is due to experts and Ousmane Dione (India), Sudipto Sarkar and Bank staff who generously provided the Christopher C. Ancheta, (Philippines), Anna team with valuable recommendations Cestari and Mahwash Wasiq (Central Asia). and guidance, including Marianne Fay, Overall guidance to the team was pro- Phillippe Marin, Kulsum Ahmed, Tracy vided by Alessandro Palmieri, Alexander Hart, Yewande Awe, Aiza Aslam, Gail Bakalian, Almud Weitz, Amal Talbi, Richardson, and John Briscoe. Ashok K. Subramanian, Ato Brown, Jaime We also acknowledge the assistance of Biederman, Carlos E. Velez, Claudia Sadoff, Jacqueline Dubow and Jeff Fabian (KINETIK) David Grey, Douglas Olson, Greg Browder, in preparing the manuscript for publication. Foreword|Acknowledgements v Abbreviations and Acronyms AAA Analytic and Advisory Activities Reconstruction and Development ADB Asian Development Bank ICR Implementation Completion and AFR Africa Region Results Report APL Adaptable Program Loan IDA International Development BNWPP Bank-Netherlands Water Association Partnership Program IE Impact Evaluation CAS Country Assistance Strategy IEG Independent Evaluation Group CDD Community Driven Development IFC International Finance Corporation CPS Country Partnership Strategy IFI International Financial Institutions CVI Climate Vulnerability Index INFRA Infrastructure Recovery and CWRAS Country Water Resources Assets Platform Assistance Strategy IP Inspection Panel DIME Development Impact Evaluation IPCC Intergovernmental Panel on DPL Development Policy Loan Climate Change EAP East Asia and Pacific Region IsDB Islamic Development Bank ECA Europe and Central Asia Region IWRM Integrated Water Resources ESSD Environmentally and Socially Management Sustainable Development LCBC Lake Chad Basin Commission ESW Economic Sector Work LCR Latin America and Caribbean Region FY Fiscal Year MCIPR Mid-Cycle Implementation GDP Gross Domestic Product Progress Report GEF Global Environment Facility MDG Millennium Development Goal GFCRP Global Food Crisis MIGA Multilateral Investment Response Program Guarantee Agency GFDRR Global Facility for Disaster MNA Middle East and North Africa Region Reduction and Recovery MUWFs Multi-use water facilities GHG Green-House Gas NBA Niger Basin Authority GDP Gross Domestic Product NBI Nile Basin Initiative GPOBA Global Partnership for NGO Non-governmental organizations Output-Based Aid O&M Operation and Maintenance GW-Mate Groundwater Management OBA Output-Based Aid Advisory Team ODA Official Development Assistance HNP Health, Nutrition & Population OECD Organization for Economic HR Human Resources Co-operation and Development HRHR High reward/high risk OP Operational Manual I&D Irrigation and Drainage OPCS Operations Policy and IAP Infrastructure Action Plan Country Services IBRD International Bank for PER Public Expenditure Review vi SustainingWaterforAllinaChangingClimate PPIAF Public Private Infrastructure Advisory Facility PPP Public-Private Partnership PRSP Poverty Reduction Strategy Paper QAG Quality Assurance Group RBOs River Basin Organizations SAL Structural Adjustment Loan SAR South Asia Region SDN Sustainable Development Network SEA Strategic Environmental Assessment SF Special Financing SFDCC Strategic Framework for Development and Climate Change SIAP Sustainable Infrastructure Action Plan SSA Sub-Saharan Africa Region SSIU Sector Strategy Implementation Update STC Short Term Consultant SWAPs Sector Wide Approaches SWAT Sanitation, Hygiene and Wastewater Support Service UNICEF United Nations Children Fund WB World Bank WB World Bank (IBRD/IDA) WBG World Bank Group WDR World Development Report WQMA Water Quality Management Areas WQMF Water Quality Management Fund WRM Water Resources Management WSS Water Supply and Sanitation WUA Water User Association WWF World Wildlife Fund AbbreviationsandAcronyms vii Executive Summary Water is essential to sustain life and economic devel- opment, and the livelihoods of the poorest people are critically associated with access to water services. The sustainable management of water resources has acquired a new urgency in the face a global population expected to reach nine billion by 2050, economic development spurring demand for more and better food, and increased hydrological variability caused by climate change. Sustaining Water for All in a Changing Climate reaffirms the strategic directions for the World Bank Group's approach to supporting water resources management. ExecutiveSummary ix Countries that borrow from the World poverty reduction. The report concludes that Bank Group (WBG) must provide clean the existing strategy's principles should be drinking water and good sanitation to their retained at the core of future work. It also citizens, ensure sustainable irrigation, use defines the changes needed to respond effec- hydropower to produce electricity, and main- tively to the more complex challenges now tain diverse ecosystems. They must prepare facing water resource management. for and respond to droughts and floods, while also working with neighboring countries to Achievements and Lessons Learnt over manage trans-boundary water resources. FY03-09. The Strategy has provided a solid Decisions about water resource management overarching framework to guide Bank assis- are further complicated by the lack of reli- tance in the water sector; the recent IEG able information about water availability, the evaluation on World Bank support for water quantity being used, and the impact of today's identified achievements in each of the 23 actions on tomorrow's resources. All coun- strategic objectives of the Strategy. tries face these challenges, but the developing To respond to a growing agenda, World world is particularly at risk. Bank Group assistance to the water sec- Food security, hit by price shocks in 2008, tor, led by the International Development remains dependent on agriculture which Association (IDA) and the International is, by far, the largest consumer of water--as Bank for Reconstruction and Development much as 90 percent of water use in some (IBRD) was significantly scaled up from countries. With more turbulent weather, FY03-09, and annual commitments including more frequent droughts and flood- increased from $1.8 billion to $6.2 bil- ing due to climate change, that urgency and lion. Overall, Bank assistance was directed complexity of integrated water resource toward those countries that face the greatest management is greater than ever. This water needs, and the sector outperformed report finds that both governments and the the Bank-wide average in terms of quality of WBG need to break down barriers between lending. However, this support was provided ministries, departments, public and private primarily through the public sector. It has sectors, and the communities they serve, to been difficult to attract the private sector integrate efforts in the water sector. A symp- to water-related projects, as evidenced by tom of the failure to do this, thus far, is the the relatively low levels of investment by reality that the Millennium Development International Finance Corporation (IFC) Goal for sanitation will not be met by 2015. and the Multilateral Investment Guarantee This report places water at the forefront Agency (MIGA) in water. of the WBG mandate for sustainable devel- The Bank re-engaged in infrastructure opment. It describes WBG achievements as a priority area. Infrastructure develop- in the water sector since 2003, identifies ment is critical for improved access and challenges, and defines how to move for- storage of water, as well as for protection ward. To date, WBG efforts have been from floods and droughts. Physical infra- guided principally by the Water Resources structure has often been an easier entry Sector Strategy, aimed at helping countries point for dialogue with client countries than improve water resources management and water resources management; however, the development for sustainable growth and Bank has continued to support management x SustainingWaterforAllinaChangingClimate reforms, despite benefits that take longer to materialize. In addition, policy reform in Governance and Anti-Corruption (GAC) issues have received increased attention This report places water at over the past several years. the forefront of the World In spite of high-reputational risks, the Bank increased its investments in large and Bank Group mandate for complex hydraulic infrastructure projects. sustainable development. It Such projects require a long-term engage- concludes that the principles ment by the Bank that goes beyond the traditional timeframe of projects. By their of the Strategy are still very sheer complexity, these projects have pushed much at the core of future the Bank's approach beyond ensuring the work, and defines what compliance to safeguards. Through its engagement in large infra- changes are needed to structure, the Bank gained knowledge and respond effectively to the experience in dealing with the reputational complexities of the rapidly risks which compromised project develop- ment in the 1990s. This knowledge was a changing environment. catalyst for the formulation of the Bank's safeguard Operational Policies. In addition, the Bank invested significant resources in building sector knowledge. New ana- lytic instruments, such as Country Water tional settings and governance structures of Resources Assistance Strategies (CWRAS), most client countries, which do not encour- Water Public Expenditure Reviews (PERs) age integrated planning, development, and and the recent IFC/McKinsey instrument management of water resources. have been developed to support engagement Since water transcends political bound- and holistic dialogue with client countries aries, the Bank has facilitated cooperation on water issues. in international rivers and trans-boundary Bank projects have made some progress issues. Its efforts focused on upstream ana- in adopting a multi-sectoral approach to lytic work and technical assistance to better water resources management. More proj- understand the political economy of trans- ects systematically linked the availability of boundary engagement, environment and local water with its use; water was mainstreamed development activities for short-term benefits, in environmental, social, poverty and health and large infrastructure investment programs projects. But these cross-sectoral projects for long-term benefits. While collective action are more complex and costly, and take longer for sustainable management of trans-bound- to design and implement than traditional ary resources requires considerable time and sector projects. The current internal incen- efforts from all involved parties, inadequate tives system still favors independent sectoral attention to trans-boundary issues can harm outcomes over cross-sectoral results. livelihoods, undermine growth, and exacer- Another constraint has been the institu- bate resource-based conflicts. ExecutiveSummary xi Strategic Directions for the World Bank Group, The Strategy was forward looking, FY10­13. For FY10­13, WBG water commit- anticipating the issues of climate change ments, led by IDA and IBRD, are projected to and rapid urbanization before they were at be between $21 and $25 billion. The Bank will the forefront of global discussion. But the continue to support infrastructure. However, external environment is rapidly evolving these projects will take a more integrated and the water agenda is becoming more approach, linking water services with water complex, requiring the WBG to be flexible resources. The Bank will favor irrigation and responsive to new challenges and oppor- projects that integrate water productivity, and tunities. The Bank responded by developing water supply projects that link water use to a new results framework of the Strategy, resource management, over stand-alone irri- which will help to monitor progress as the gation and water supply projects. Water will Strategy is implemented over FY10­13. also be increasingly mainstreamed in projects Adapting to increased climate variabil- of other sectors, including environment and ity will require better information and a energy. However, the actual mix will depend more integrated approach towards water on clients demand and country strategies. resources management. Efforts towards cli- Finally, improving client countries' access mate change mitigation will be paramount to technologies, such as remote sensing and in WBG investments and engagements early flood warning systems, will be critical to going forward. The WBG will scale up sup- increase the availability and dissemination of port for hydropower as the largest source of information for results-based decision making. renewable and low-carbon energy, and look for energy efficiency opportunities in water supply systems. Ensuring regional food security has become increasingly challenging given the volatile global food market. Supported by the The Bank will continue to recent World Bank Group Agriculture Action support infrastructure. These Plan, the WBG will increase its assistance to projects will, however, take a agricultural water management, giving more attention to both expanding irrigated areas more integrated approach, where feasible, and improving water use linking water services with efficiency of existing schemes. Support for water resources. Improving rainfed agriculture will focus on improved water control, including broader watershed client countries' access management. These efforts will become to technologies will also even more critical as climate change affects be critical to increase the drought incidence. Almost 39 percent of the world's popula- availability and dissemination tion, or over 2.6 billion people, live without of information for results- improved sanitation facilities, and the based decision making. international community will miss the 2015 sanitation MDG by almost one billion people. The Bank will put the full extent of xii SustainingWaterforAllinaChangingClimate its instruments to support this issue. In addi- tegic secondments. It is expected that global tion to using lending, the Bank will work expert teams will operate as integrated, together with partners and governments Bank-wide entities capable of recruiting and to ensure that critical policy dialogue and developing the best talent, managing knowl- technical assistance support global progress edge and dissemination across the Bank, and towards the MDGs. strengthening the networks with key knowl- To translate this vision for the water edge centers across the world. agenda into action, the Bank will continue to The Bank will continue to engage at the combine traditional and innovative financ- corporate level on regional and global issues ing and knowledge instruments. Experience that cannot easily be tackled by the country- of water PERs will be assessed from the based approach, such as water-sharing perspective of enhancing their effectiveness arrangements in international river basins in engaging client countries on the alloca- and engagement in major dams, as well as tion of fiscal resources to the water sector on more specific issues, such as drainage of and financing of water services. This work, peat land. in conjunction with the lessons learned on Finally, the Bank will continue to seek cost recovery from past projects, will sup- new ways to promote cross-sectoral outputs. port policy discussions on the efficiency Balancing these projects with more tradi- (and conservation) of water use under way. tional projects will be critical, given their To strengthen the link between CWRAS higher cost and longer time-frame to deliver and Country Assistance Strategy (CAS), the results. The Bank has been experiment- Bank will develop a rapid assessment tool to ing with various approaches to encourage be used to feed into the CAS and Country inter-sectoral cooperation and to promote Economic Memorandum (CEM) discussions the delivery of cross-sectoral outputs. The before undertaking a CWRAS. Work will lessons learned from these pilots will con- continue to define how the WBG/McKinsey tribute to the institutional reform effort instrument can be applied in specific coun- under way. The WBG's vision is to develop tries to support policy or lending initiatives more flexible ways of working across sectors of key strategic importance. Political econo- and respond more effectively to a complex, my analysis will be used more systematically rapidly evolving environment. to support sector engagement in trans- The Bank's Committee on Development boundary and GAC issues. The WBG will Effectiveness endorsed these strategic direc- explore opportunities presented by private tions for the sector on May 26, 2010. finance, including guarantees, mobilizing private financing for water utilities, and reforming public water utilities to improve their financial management through corpo- ratization and similar structural efforts. In response to the mounting water resource challenge, the Bank will address staffing to ensure the availability of appro- priate expertise through strategic batch recruiting, expert support teams, and stra- ExecutiveSummary xiii Part 1 Context Water features prominently in everyday life. On the front page of a major newspaper, one article focuses on the flooding in Mumbai, India while another describes how droughts in Kenya are forc- ing energy rationing in Nairobi.1 On another day, the front pages tell us how unbridled irrigation causes groundwater levels in Northern India to fall rapidly, and how pollution in the Black Sea causes algal blooms that suffocate fish. Ensuring the availability of water, harnessing its productive potential, and limiting its destructive impacts have been the most critical issues faced by all societies. Part1|Context 3 1. Issues have to cope with droughts and/or the growing risk of flooding. Meeting the growing demand for water ser- By forcing researchers to adopt a long- vices, while managing water in a sustainable term perspective on development issues, the way is the challenge of the sector. Water climate change debate has re-emphasized is a scarce resource that has a multitude of the centrality of water for sustainable devel- interdependent uses (irrigation, drinking opment. Water resource management must water, sanitation, energy and environmental follow a sustainable development path that services). At a global scale, access to water achieves human well-being without exceed- services is not guaranteed. More than one- ing the earth's capacities for natural resource sixth of the world's population does not have generation and waste absorption.4 The access to safe drinking water (80 percent of challenge is to manage the social, political, whom live in rural areas). And 39 percent of and institutional processes of balancing the the world's population does not have access water use of present generations with the to improved basic sanitation. If the current needs of future generations.5 trend continues unchanged, the interna- tional community will miss the Millennium Adapting to climate variability will require Development Goals (MDG) sanitation target hard and soft actions; many are related to for 2015 by almost one billion people.2 Access the water sector. Many water-dependent to electricity, where hydropower could play sectors will be affected by climate change.6 a role, is not a reality for 1.5 billion people; Agriculture in a few areas in the world will access to water for producing food will be one benefit from climate change, but in most of the important challenges the world will developing countries agriculture will suffer. face, when 2.3 billion people will be added Coastal zone management, water supply, to the planet by 2050 (see Box 1). All these and infrastructure rank as the top three services put significant pressure on this finite adaptation costs of climate change, totaling resource, making its sustainable management between 72 and 82 percent of costs depend- critically important. ing on the climate scenario. Increases in water-borne disease, casualties from By adding uncertainty, climate change flooding, and malnutrition will contribute will increase the complexity of managing to the human health impacts of climate water resources. Adapting to hydrological change. Adapting to a future world with a variability and scarcity has always been part of changed climate will entail not only invest- the challenge of water resource management. ing in water-related infrastructure but Climate models project that climate change also strengthening institutions that govern will intensify and accelerate the dynamics of water use. the hydrological cycle. In some parts of the world, there will be more available water but in Managing water and land in a more inte- other parts, including in most of the developing grated way is critical to addressing water world, there will be less.3 In some highly popu- supplies, water pollution control, flooding, lated areas, such as parts of Africa, South Asia, and food security, as well as emissions and East Asia, both averages and extremes will from natural and man-made ecosystems. change. Much of the developing world will As the world population is projected to sur- 4 SustainingWaterforAllinaChangingClimate pass 9 billion people by 2050 and societies grow wealthier,7 countries will need to get more from their agriculture and water use. TABLE 1 Feeding 2.3 billion more people and coping AnnuAl CoSTS of ADApTATion, 2010­2050 with the changing dietary demands from a uS $ Billions richer population will require more efficient water use, particularly in agriculture.8 Sector Climate Scenario Dry Wet Leveraging the power of water to support the transformation of the energy sector will Agriculture,Forestry,Fisheries 7.3 7.6 help to mitigate the effects of greenhouse WaterSupply 18.8 13.7 gas emissions. Hydropower accounts for HumanHealth 1.6 2.0 20 percent of the world's electricity supply CoastalZones 29.6 30.1 and 88 percent of the supply from renew- Infrastructure 13.7 29.5 able resources. Only 23 percent of the ExtremeEvents 6.5 6.7 hydropower potential has been exploited in developing countries. Countries in the Total 77.6 89.7 Africa region (AFR) store only about 4 per- cent of annual renewable flows, compared 2005ConstantPrices.0%Discounting with 70 to 90 percent in many developed countries.9 Hydropower has a dual role in adaptation and mitigation, as the largest Source: EconomicsofAdaptationtoClimate source of affordable renewable energy and ChangeStudy,WorldBank,2009 as a low-carbon fuel source. Taking the links between water and energy into account will be essential for dealing with both mitigation and water scarcity.10 Rapid urbanization and increased density of to be controlled. Coastal areas, in which 18 cities, fuelled by migration from rural areas, of the world's 27 megacities are located, will will exacerbate the urban-rural tensions for face the largest migratory pressures; many water, adding a spatial dimension to the will also be hot spots of climate change challenge of managing water appropriately. impacts. The combination of sea level rise, Urban population is expected to double increased intensity of rainfall, more frequent between 2000 and 2030. With a growing and more serious floods and droughts, and share of population living in cities, com- possible increased incidence of cyclones, will petition between agricultural and urban call for more attention to this freshwater- water users will increase, calling for inte- coastal linkage. grated urban water management as well as With added pressure on the already improved river basin management; increas- stressed and vulnerable water resources ingly scarce water resources will need to in many regions of the world, can the eco- be allocated, and pollution of surface and systems that support biodiversity and the groundwater bodies in urban areas will need livelihoods of the poor be sustained? There Part1|Context 5 Box 1 MoniToring WATEr ouTCoMES Indicators Baseline Data Recent Data Water Quality Emissionsoforganicpollutants Bycountry Bycountry (notaggregate) Sustainability of Water Resources Surfacewaterandgroundwater n/a 3.2%(2007) withdrawalaspercentageoftotal actualrenewablewaterresources Water Supply and Sanitation Accesstoanimprovedwatersource 72%(1990) 84%(2006) (%ofpopulation) Accesstoimprovedsanitationfacilities 44%(1990) 55%(2006) (%ofpopulation) Irrigation and Drainage Irrigatedland(%ofcropland) 20.0%(1990­1992) 20.4%(2003­2005) Hydropower Electricityproductionfrom 23.5%(1990) 21.5%(2006) hydroelectricsources(%oftotal) Note: Wateroutcomeindicatorsdonotlendthemselveswelltostandardizedreporting,as definitionsareinconsistentanddataisoftenunabletobeaggregatedorcomparedacross regionsorgeographies. Source: WorldDevelopmentIndicators,2009 is a growing recognition that functionally on trade to meet the growing demand for intact and biologically complex freshwater food to save water (often known as "virtual ecosystems provide many economically valu- water") often imposes a politically unten- able commodities and services to society able burden on economies. The geopolitical (ecosystem services) beyond simply direct dimension of water is further exacerbated by water supply. These services include trans- its trans-boundary nature: about one-fifth of portation, recreation, purification of human the world's renewable freshwater resources and industrial wastes, habitat for plants cross or form international borders, and in and animals, and production of fish and some regions, particularly in developing other foods and marketable goods. These countries, the share is far higher. ecosystem benefits are valuable and often impossible to replace or costly to redress 2. The Water Business in when aquatic systems are degraded. the World Bank Group The economic benefits of managing water Supporting the provision of water services resources adequately are large, as are the necessary for development, while ensuring economic costs of inaction. Country exam- the sustainable management of this scarce ples indicate that proper water management resource, has been at the core of the World could increase gross domestic product by Bank Group assistance on water. In FY09, 5 to 14 percent--an impact that may be the World Bank Group (WBG)'s active water unachievable through any other interven- portfolio amounts to $21 billion. From FY03 tions.11 Cambodia, Indonesia, the Philippines, to FY09, the WBG annual commitments and Vietnam lose an estimated 2 percent increased from $1.8 billion to $6.2 billion, of GDP from under-investment in sanita- with about three-quarters to support water tion.12 What is more, the costs of disasters supply and sanitation. This increase fol- as a share of GDP are much higher in poor lowed a period of consistent decline during countries than rich countries--14 percent the 1990s, which can be attributed to both an of GDP compared to 3 percent of GDP--as overall reduction in WBG commitments and poorer countries are often less well equipped a shift away from infrastructure lending. The to cope with disasters such as floods and WBG Infrastructure Action Plan,15 followed droughts.13 The cost of environmental deg- by the Sustainable Infrastructure Action radation from water pollution and excessive Plan16 and the Infrastructure Recovery and withdrawals has been estimated between 2 Assets Relief Platform, played a critical role in and 7.4 percent of GDP in the Middle East reviving the WBG's business in infrastructure and North Africa region (MNA).14 in general, and the water sector in particular. WBG commitments for water increased by The nature of water as a fundamental public 79 percent over the FY03­09 period rela- good makes its control and management tive to the FY96­02 period.17 The share of a sensitive political economy issue. Water International Bank for Reconstruction and security has become a greater concern in Development (IBRD) and International many client countries as the result of popula- Development Association (IDA) lending to tion growth, droughts, climate change, and water in total commitments increased from 5 over-extraction of groundwater. Relying percent in FY02 to 11 percent in FY09. Part1|Context 7 World Bank Group lending increased which in total received 76 percent of the new across subsectors. In line with the devel- water lending commitments over the FY03-09 opment community's push to achieve the period. However, water lending to IDA coun- MDGs18, IBRD/IDA lending for water supply tries has increased by nearly 80 percent when and sanitation increased from $6.5 bil- comparing the FY03­09 period and FY96­02 lion from FY98­FY03 to $13.9 billion from period. Total IDA lending for water increased FY04­FY09. In spite of the overall retreat of in some regions more than others; IDA sup- the Bank from the agricultural sector in the port for water was significantly increased in 2000s, lending for irrigation and drainage AFR and MNA. IFC water and hydropower increased from $2.6 billion to $4.3 billion investments in AFR, MNA, and SAR have over the same period. Significant regional totaled $797 million in the FY03-FY09 period. variations exist. In South Asia Region (SAR), for example, lending for the rehabilitation of While the volume of water lending has large irrigation systems increased while most remained relatively concentrated with a few regions continued to support management large borrowers, new borrowers have joined reforms, through water user association, the pool of large IBRD borrowers since 2003. stakeholder participation, and other institu- Over the FY96­02 period, only five countries tional reforms. Support for water resource (China, India, Pakistan, Indonesia, and Brazil) management increased from $4.9 billion to borrowed more than $500 million for water. $9.6 billion over the same period. IFC com- Since 2003, the level of lending concentration mitments in the water sector increased from has declined, with new clients joining the $78 million in FY03 to $748 million in FY09. pool of "large" borrowers, such as Argentina, Vietnam, Mexico, Colombia, and Azerbaijan. Analysis of the lending and patterns of prac- IBRD/IDA lending for water to the top 5 bor- tice by region shows that the Africa (AFR) rowers accounted for 37 percent of total water and Latin America and Caribbean (LCR) lending over the FY03­09 period compared to Regions led in numbers of projects approved. 51 percent over the FY96­02 period. Projects tended to be larger in the South Asia (SAR) and East Asia and Pacific (EAP) The bulk of the assistance for water has Regions, and those regions led in aggregate been directed towards those countries that borrowing along with LCR. Though AFR rank highest on the water poverty index.19 led in number of projects, it was fourth in At the aggregate level, prioritization of water amount of lending, indicating that projects in total IBRD/IDA supported activities is tended to be small, possibly due to limited noticeable. Nearly two-thirds of the IBRD/ IDA lending envelope for individual African IDA's active water portfolio is directed countries and limited absorptive capacity. towards the most water-poor countries. As of December 2009, active commitments in While the Bank Group has engaged across the water sector amounted to $10.6 billion the whole spectrum of clients, it has expand- in the most water-poor countries, compared ed its support to IDA countries significantly. to only $6.2 billion in the least water-poor The concentration of lending activity in India countries. What is more, water constitutes and China skews the Bank's water lending about 16 percent of the entire active portfolio towards IBRD/middle-income countries, in water-poor countries, compared to only 8 SustainingWaterforAllinaChangingClimate FIGURE 1 WorlD BAnk group CoMMiTMEnTS in WATEr-rEl ATED SECTorS, fY96 ­fY09 7000 7,000 6000 6,000 5000 5,000 uS$ 4000 4,000 Millions 3000 3,000 2000 2,000 MigA 1000 1,000 ifC World Bank 0 0 FY04 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY05 FY06 FY07 FY08 FY09 FIGURE 2 iBrD/iDA WATEr lEnDing prE/poST WATEr STrATEgY (BY SuB-SECTor) WaterSupplyandSanitation IrrigationandDrainage Hydropower Floodprotection WaterResourcesManagement 0 0 5 5 10 10 15 15 pre-Strategy (FY98­FY03) Commitments (US$Billions) post-Strategy (FY04­FY09) Source: (Figure1)WorldBankGroup(Figure2)WorldBank FIGURE 3 CuMulATivE iBrD/iDA WATEr CoMMiTMEnTS BY rEgion, fY03­fY09 6000 6 0006 250 227 5000 5 0005 200 4000 4 0004 152 150 Commitments number of 127 (uS$ Billions)3000 3 0003 projects 108 100 86 2000 2 0002 67 50 1000 1 0001 0 0 0 0 AFR EAP ECA LCR MNA FIGURE 4 WorlD BAnk WATEr lEnDing To 15 l ArgEST BorroWErS, fY96 ­fY09 SAR 250 052 4000 4,000 3500 3.500 3000 3,000 2500 2,500 Bank lending (uS$ Millions) 2000 2,000 1500 1,500 1000 1,000 500 500 0 0 Pakistan China India Brazil Indonesia Bangladesh Colombia Vietnam Argentina Ethiopia Mexico Egypt Turkey Iran Azerbaijan fY96­fY02 fY03­fY09 Source: WorldBank 10.5 percent in non-water poor countries.20 there has been a steady decline in the amount Lastly, nearly three-fifths of the Bank's of ESW Bank-wide, the water sector has economic and sector work, and non-lending maintained a relatively stable share. Since technical assistance, in the water sector was FY06, there has been a noticeable shift in the directed towards the water-poor countries. sector and Bank-wide in This work helped to reposition water at the the delivery of knowledge to client countries, core of the development agenda in the most with non-lending technical assistance (short water-poor countries. policy notes) becoming more frequently used than ESW. Global programs (such as the Since 2003, the outcome ratings of almost Water Sanitation Program, Public-Private all types of water projects have improved, Infrastructure Advisory Facility, Global reaching 100 percent satisfactory in 2008. 21 Partnership on Output-based Aid, and Bank- The most improved sub-sectors were rural Netherlands Water Partnership Program) sanitation, and water supply and sewerage, finance 86 percent which had the highest ratings. Among the of ESW and TA. highest outcome ratings were projects involv- ing floods, groundwater, and coastal zones. When broken down by region, project per- 3. Scope and Methodology formance improved steadily against stated of the Report objectives, led by notable project performance in AFR. Prior to FY03, the water sector had The World Bank Group Implementation generally below average performance, with Progress Report focuses on the Water urban water supply, sewerage, and sanitation Resources Sector Strategy and its imple- performing worse than other water-related mentation.22 The Bank's strategic vision for projects. Over the FY03­09 period, the water the water sector is principally guided by the sector generally outperformed the Bank-wide 2003 Water Resources Sector Strategy, which average in a number of quality indicators: it builds on the 1993 Water Resources Policy had a consistently lower percentage of proj- Paper.23 International Finance Corporation ects at risk over the period, and until recently, (IFC) activities have been guided by the has exceeded Bank targets for realism and IFC Water Strategy Update.24 This report pro-activity. reviews progress in implementing the Strategy over the FY03­09 period and exam- The Bank has delivered knowledge, with ines the relevance of the Strategy to respond global programs and partnerships playing to client needs in today's context. It also a key role in certain focus areas. From reports on IFC and Multilateral Investments FY03­09, 176 pieces of economic and sec- Guarantee Agency (MIGA) activities in order tor work (ESW) on water were delivered to provide a comprehensive picture of the to 106 countries, representing 4.2 percent WBG's response to the water challenges. of Bank-wide ESW. About 70 percent of all Building on these achievements and lessons water-related ESW directly supported dia- learnt, the report defines the WBG strate- logue and lending in client countries, while gic directions for the sector over FY10­13. remaining activities focused on regional Annex A illustrates how the Strategy was issues or knowledge generation. While implemented on the ground in seven cases Part1|Context 11 FIGURE 5 iEg projECT ouTCoMES rATing BY SECTor BoArD, fY01­fY08 100 100 100 94 90 90 90 87 80 percent 80 Satisfactory 76 75 73 70 70 60 60 58 50 50 Bank-wide FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Water Sector Board Source: IndependentEvaluationGroup highlighted by the Strategy (Brazil, Central lessons learned from the strategy implemen- Asia, Andhra Pradesh, Nigeria, Philippines, tation and strategic directions for the sector. Yemen, Nile Basin). The report draws on several desk reviews, The recent IEG Evaluation of water projects including the active water portfolio, com- provides a useful input for the report. The pleted projects, water development policy Strategy was devised to respond to the rec- lending (DPL) projects, analytic and advisory ommendations of 2002 evaluation on water activities (AAA), Country Water Resources by the Operations Evaluation Department. 26 Assistance Strategies (CWRAS), and sector That evaluation recommended the Bank make staffing/skills. Findings from these reviews further progress in integrating social and were complemented with those from the environmental concerns into water projects. recent Independent Evaluation Group (IEG) In a new evaluation of Bank water projects in evaluation of World Bank water projects.25 2009, IEG concluded that the Strategy for the The Bank team conducted consultations with water sector has been broadly appropriate, and more than 40 staff and managers from within that achievements have been made under each and outside the water practice to identify the of the 23 strategic objectives of the Strategy. 12 SustainingWaterforAllinaChangingClimate Endnotes 15 WorldBankGroupInfrastructureActionPlan, World Bank, 2003. 1 New York Times, July 14, 2009. 16 WorldBankGroupSustainableInfrastructureAction 2 The target estimates that 71 percent of people in the Plan,FY09­11, (CODE2008­0028, March 21, 2008). developing world to have access to improved sanitation facilities. WHO/UNICEFJMPReportonProgresson 17 World Bank Group commitments include World SanitationandDrinkingWater--2010UpdateReport. Bank commitments (IBRD, IDA, GEF, carbon financing, special financing, guarantees and recipient-executed 3 WaterandClimateChange:Understandingthe activities), IFC commitments, and MIGA commitments. RisksandMakingClimate-SmartInvestmentDecisions, World Bank, 2009. 18 From 2000 to 2006, the proportion of people in the developing world with access to improved 4 By acting under the principles of sustainable development, sanitation facilities grew from 49 percent to 53 economic considerations become accountable both to percent (2015 target = 71 percent). In terms of access an environment/ecological imperative to protect the to clean drinking water, it grew from 79 percent to 84 ecosystem, and to a society equity imperative to create percent (2015 target = 86 percent). See Millennium equal access to resources and minimize social suffering. DevelopmentGoalsReport (2008). 5 BeyondWRM--unbundlingwatermanagementin 19 IEG uses the water poverty index to categorize MNACountries, Jagannathan V, et al, 2009. countries by "water stress" level. The WPI composite index captures the resources, access, capacity, use, 6 TheCoststoDevelopingCountriesofAdaptingto and environment dimensions (TheWaterPoverty ClimateChange.NewMethodsandEstimates.TheGlobal Index:anInternationalComparison, L. Peter, M. ReportoftheEconomicsofAdaptationtoClimateChange Jeremy, and Sullivan C. Keele Economics Research Study(Consultation Draft), 2009. Paper, 2002). 7 UN population estimates and projections. Most of 20 As a share of approved and completed projects the additional 2.3 billion people will enlarge the over FY97­07, the share is 14 percent in water-poor population of developing countries, which is projected countries and 9 percent in non-water poor countries. to rise from 5.6 billion in 2009 to 7.9 billion in 2050 The correlation coefficient between the WPI and 8 WorldDevelopmentReport2010:Developmentand water lending as a share of the country's total lending ClimateChange, World Bank, 2010. is 0.35 in water-poor countries. 9 WorldWaterDevelopmentReport3:Waterina 21 AnnualReviewofDevelopmentEffectiveness2009: ChangingWorld, United Nations, 2009. AchievingSustainableDevelopment, IEG, 2009. 10 Conversely, desalination and wastewater reuse, 22 WaterResourcesSectorStrategyMid-Cycle which could increase the supply of water, will require ImplementationProgressReport­IssuesandConcept considerable energy and fuel the carbon cycle, unless Note (CODE2009­0071, August 5, 2009). technological innovations are adopted. 23 WaterResourcesSectorStrategy, World Bank, 11 WorldWaterDevelopmentReport3:Waterina 2003; WaterResourcesManagementPolicyPaper, ChangingWorld, United Nations, 2009. World Bank, 1993. 12 EconomicImpactsofSanitationinSoutheastAsia, 24 IFCWaterSectorUpdate (OM2008­0084, World Bank, Water and Sanitation Program, 2007 November 2008). 13 WorldWaterDevelopmentReport3:Waterina 25 WaterandDevelopment:AnEvaluationof ChangingWorld, United Nations, 2009. WorldBankSupport,1997­2007 (CODE2009­0106, December 2009). 14 MakingtheMostofScarcity:Accountabilityfor BetterWaterManagementResultsintheMiddleEast 26 BridgingTroubledWaters, Operations Evaluation andNorthAfrica, World Bank, 2009. Department, 2002. Part1|Context 13 Part 2 Water Resources Sector Strategy Part II reports on achievements and lessons learnt from the implementation of the Strategy over the FY03­09 peri- od. It also addresses findings of the recent IEG evaluation on water projects and goes further than the evaluation in terms of scope of analysis by considering all Bank instru- ments as well as the contributions of IFC and MIGA. Part2|WaterResourceSectorStrategy 15 1. Strategic Vision for to water. Over the 1990s, it became appar- Water Resources in 2003 ent that such an approach had limitations, as expanding demands on water were The Water Resources Sector Strategy, sup- exacerbating the competition among water ported by the WBG Infrastructure Action Plan uses, and availability of water resources (IAP), helped to reposition infrastructure at was increasingly documented as a binding the top of the Bank's development agenda. constraint. It became evident that water During the 1990s, the Bank's commitments services could not be delivered without to infrastructure sharply declined, reach- looking at the availability and quality of ing a low level of $5.2 billion towards the water resources. Supported by analytic end of the decade. This de-emphasis on work conducted in the 1990s, the Strategy infrastructure was in part deliberate--the put a marker on the sector, by defining it result of pressures to disengage from large within a broader integrated framework and complex infrastructure projects and that links water resources with water use the belief that the private sector could pro- (water supply and sanitation, irrigation and vide the bulk of the financing--but was also drainage, energy and environment).27 This the result of an institutional shift toward integrated water resources management poverty and social agendas. In the 2000s, (IWRM) framework changed the vision for infrastructure again became perceived as the sector and provided the basis for mov- a critical component for growth and even a ing away from a sector-based investment counter-cyclical instrument during periods focus to a multi-sectoral approach to plan- of economic downturn. Specifically, water ning.28 Coordination between development resources development (i.e. infrastructure) and management of water, land, and other and management were seen to be beneficial resources took center stage in the think- not only for economic development but also ing about water, on the basis that it would for poverty reduction, and thereby instru- be a necessary condition to maximize the mental in achieving the Bank's core mission. resultant economic and social welfare in Broad-based water resources interventions, an equitable manner without compromis- including dams and inter-basin transfers, ing the sustainability of vital ecosystems. were viewed as providing national, regional, IWRM is regarded as critical for sustain- and local benefits from which all people, able outcomes, and increasingly viewed as including poor people, could gain. offering the best available framework for building the resilience needed to adapt to The Strategy helped to re-define the water climate change. agenda as an integrated sector. In the 1980s and early 1990s, the sector was narrowly On the clients' side, the Strategy played a defined as delivering pipes and building critical role by advocating water infrastructure hydropower plants. While the principles of investments for country development. Major integrated water resources management for outreach and consultation efforts were under- sustainable water resources were already taken during the preparation of the Strategy articulated in the 1993 Water Resources to understand issues faced by clients, and to Policy Paper, the practice had continued to advocate for the centrality of infrastructure be dominated by an engineering approach for development. This consultation effort was 16 SustainingWaterforAllinaChangingClimate FIGURE 6 SCopE of WATEr rESourCES SECTor STrATEgY Water resources Management Water Supply irrigation and Energy Environmental other uses and Sanitation Drainage Services Source: WorldBankWaterResourcesSectorStrategy,2003 not without controversy, but proved to be a The Strategy aimed to re-engage the Bank useful process, triggering many discussions in high-reward/high-risk (HRHR) hydraulic on water, its position in societies, and its infrastructure projects. In the early 2000s, a role for development. The process motivated high-level panel of Bank managers and techni- politicians to become increasingly inter- cal experts (the "Patel Panel") was established ested in the principles of water resources to assess Bank engagement in the sector. At the management, and emboldened some large time, there was a sense that client countries borrowers, especially middle-income coun- perceived the Bank as walking away from tries, to assert leadership on the WBG Board high-risk infrastructure--even if potential of Executive Directors in support of the rewards in terms of development could also re-engagement in hydraulic infrastructure. be perceived as high--due to internal incen- This momentum has been maintained, tives, as these projects posed reputational leading to the WBG shareholders' endorse- risks for the institution. It was also believed ment of the Sustainable Infrastructure that the comparative advantages of leader- Action Plan,29 the Infrastructure Recovery ship and guidance of the Bank in these situ- and Assets Relief Platform, and the ations may not have been fully utilized. The Infrastructure Crisis Facility. Panel proposed a new business model geared Part2|WaterResourceSectorStrategy 17 toward reversing this trend by promoting Bank 2. Bank Achievements engagement in projects with high relevance to and Lessons Learnt over national development strategies, including pov- erty reduction, where the Bank has a compara- FY03­09 tive advantage in managing the risks involved. There were two basic underlying premises for The Strategy has contributed to the rein- this engagement: The first was that engaging vigoration of the Bank's infrastructure in these types of projects may involve a wide business. The Bank is now much better spectrum of reputational risks, but if these risks equipped both to provide analytic services are recognized and managed appropriately, the related to infrastructure and to respond to resulting high rewards from development will the many borrowers who see infrastruc- accrue, because infrastructure investments are ture as a priority area for development and beneficial for growth. The second was that it growth. From an institutional perspec- was precisely in these difficult and controversial tive, the Strategy gave a solid platform for areas where Bank engagement could be most engaging across the whole spectrum of useful to borrowers. 30 With the endorsement water projects, including large and complex of the Strategy by the WBG Board of Executive hydropower and irrigation infrastructure Directors, the Bank was given a framework projects. Infrastructure became the Bank's to engage in large and complex new hydraulic main business line, both for its classic infrastructure projects. Several Board chairs growth-enhancing role and its relevance to from some middle-income countries played a respond to major exogenous shocks, such critical role in supporting such a re-engagement.as the recent food crisis (for irrigation), the energy crisis (for hydropower), disasters Those who opposed the Bank's engagement and climate change, and the global econom- with major water infrastructure interpreted this ic and financial crisis. Strategy to mean that the Bank would provide less support for water resource management. The seven-year implementation period is In reality, the Strategy called for increased short to enable reporting on outcomes. engagement (relative to the 1990s) in those On average, both on the management and areas of water resources management where development side, programs and projects, "there is a broad consensus, Bank particularly the HRHR projects and water practices have changed for the better, and resources management reforms, have there is a need to do more of the same."31 long maturation time, so that outcomes Specifically, these include groundwater man- of projects will not be evident for a while. agement, environmental conservation, water Reporting on outputs and outcomes is quality, watershed management, community- further complicated by the fact that the based solutions, and institutional reforms. Strategy did not include a results frame- In those areas, the Strategy recommended a work, and core indicators for projects had "principled pragmatic" approach, recognizing not yet been developed. The results and that water resources management is intensely lessons learnt from ninety projects with political and that reform requires the articu- Investment Completion Reports (ICRs) are lation of prioritized, sequenced, practical, and included in the analysis below. 32 patient interventions. 18 SustainingWaterforAllinaChangingClimate 2.1 Institutional Basis for ance, and strategic work. Some Regional an Integrated Approach Units were re-organized to reflect a more holistic approach to water resources. The Major structural reforms helped to insti- Water Anchor Unit, which was made opera- tutionalize an integrated approach for tional in 2007, includes the four elements of water resource management. In 2007, an water practice (water supply and sanitation; institutional and organizational basis was water resources management; water quality established for the institution to think and and environment; and irrigation/water for deliver in a more integrated way, ensur- food programs). In practice, it has proved ing that Bank actions are anchored by a complex. The adoption of an integrated commitment to sustainable development. approach has been a challenge throughout In 2007, the creation of the World Bank the institution: it has required a shift in Sustainable Development Network (SDN), mentality at all levels, a move away from from the merger of the Environmentally and staff perception of little apparent common- Socially Sustainable Development (ESSD) ality of interests, and a change in incentives and Infrastructure (INF) networks, set the that favors the delivery of sector outputs basis for strategic leadership for integrated over cross-sectoral outputs. water resource management. The ensuing creation of the SDN council responded to Staffing and skills have played a key role in the need to promote specific policy objec- responding to the mounting challenges of tives that required a holistic approach. clients' needs and demands for integrated Finally, the Water Resource Management water resource management. The Strategy Group--a thematic group that was cre- was predicated on an investment in staff ated to support the implementation of the recruitment and training. 34 Over the last Strategy--was given a formal channel to three years, the Bank significantly staffed promote water resource management, when up in the infrastructure sectors, with it was consolidated with the Water Supply the water sector accounting for the larg- and Sanitation Sector Board, and a unified est number. The sector has 158 staff with Water Sector Board was created.33 The new professional skills ranging from general Sector Board oversees all activities relating sector specialists to sector engineers. This to water resources management, water sup- compares to 117 staff in energy and 118 staff ply and sanitation, irrigation and drainage, in transport. 35 A detailed skills review36 of and hydropower within the institution, dis- the sector shows that the number of engi- solving the earlier division of water between neers has declined markedly, while the different units within the Bank. number of general sector specialists has grown. Erosion of core skills appears to be To adapt and deal with the growing a serious issue in the area of economics and challenge of an integrated approach, finance, as well as specialized areas, such accountability and staffing arrangements as water management, water use efficiency, across the Bank have been reorganized. wastewater reuse, dams, hydrology, and The Water Sector Board has played a criti- public-private partnerships. In addition, cal role in linking the Bank's operational the Bank has very few skills to prepare and function and its knowledge, quality assur- supervise projects or engage in high-level Part2|WaterResourceSectorStrategy 19 policy dialogue with client countries on 2.2 Progress in Conceptualizing issues that have emerged as critical, such an Integrated Approach as wastewater reuse, water productivity in agriculture, use of new technologies Progress has been achieved in aligning for water management, and water quality Country Assistance Strategies (CAS) and monitoring. The Water Anchor Unit has Country Partnership Strategies (CPS) with the often secured experts in those areas, on call Sector Strategy on the principle of comprehen- as short-term consultants, through various sive water resource management. A review of technical support facilities (See Box 2). 98 CAS/CPSs from 40 countries showed that "comprehensive water resource management" featured in 36 CAS/CPSs as a top priority.37 Comparing the earliest CAS/CPS with the last CAS/CPS for each country, the review found that improved water resources management was the most common activity in the recent strategic documents in countries that are at the top of the water poverty index. In gov- ernment-owned Poverty Reduction Strategy Papers (PRSP), more attention has been devot- ed to water resources management post­2003, Independent management including stakeholder participation, water of water resources by quality improvement through establishment of monitoring systems, ground water manage- different water-using sectors ment, and legal and institutional reforms. is suboptimal because it does not take into account More than 20 Country Water Resources Assistance Strategies (CWRAS) were deliv- the water resource needs ered over the FY03­09 period, with the aim of of all users and balance producing an integrated analysis of the sector them in a sustainable way. that can be used as an entry point for a dia- logue with Ministries of Finance. The Strategy Integrated Water Resources proposed the CWRAS as a new instrument Management is regarded to integrate the range of Bank programs that as critical for sustainable have an impact on, or are affected by, water resources. The objective of the CWRAS is outcomes, and increasingly to produce an operational plan for Bank viewed as offering the best involvement in the water sector. CWRAS available framework for involves analysis, dialogue, and decisions that pinpoint a country's water challenges and building the resilience needed opportunities; and set those challenges and to adapt to climate change. opportunities within a framework in a long- term context, together with political, social, and economic constraints. 20 SustainingWaterforAllinaChangingClimate Box 2 ExpErT SupporT TEAMS for WATEr Ground Water Management Advisory Team GWMATEsupportsandstrengthensgroundwatercomponentsofWorldBankprojects andprovidespolicyguidanceongroundwatermanagementandprotectionissues. Since2001,GWMATEhascommittedabout$4.4millionforcapacitydevelopment, knowledgeproducts,andoperationalsupportin68projectsrepresenting$1.9billion incommitments.Overthelast10years,GWMATEhascapturedthisexperienceina varietyofinternalandexternalknowledgeproducts.Todate,GWMATEhaspublished 23caseprofiles,16briefingnotesand1strategicoverviewpaperaddressingawide rangeoftopicssuchasconjunctiveuseofsurfaceandgroundwater,groundwaterand irrigation,andstakeholderparticipationingroundwatermanagement. Hydrology Expert Facility HEFprovideshighlevelexpertadviceandalsoproject-focusedhydrologyand watermanagementservicestosupportoperationalneeds.HEFhasmorethan150 hydrologyandwaterresourcesconsultantsonitsrosterandalsoa6memberexpert panel.AspartofHEF'sdisseminationandlearningstrategy,HEFpreparesTechnical Notestodisseminateknowledgeandthestateoftheartinkeyhydrologicandwater resourcestopicsselectedfortheirrelevancetoBankoperations.Supportisalso providedfororganizingeventsinordertodisseminateinformationonwaterresources topicsofrelevancetoBankstaff. Sanitation, Hygiene and Wastewater Support Service SWATpromotesgreateraccesstobasicsanitationandhygiene.Thisservicesupports clientsandWorldBankstaffatcriticaljuncturesintheprojectcyclewithexpertiseto incorporatesanitationandhygienepromotioneffectivelyintotheirprojects.Sinceits inceptionin2005,SWAThascommittedaboutUS$1millionforoperationalsupport in28countriesand33projects.Theservicehasinfluencedatotalsanitationand wastewaterinvestmentvaluedoverUS$1.1billion. Source: WorldBank Part2|WaterResourceSectorStrategy 21 CWRAS have been used as a strategic tool to provide mutual benefits (e.g., water storage leverage Bank engagement and dialogue on infrastructure supported by catchment man- water issues. Most CWRAS were produced agement investments, both serving growing in FY04­06; in recent years fewer have been urban and industrial needs, in Kenya). prepared, except in Sub-Saharan Africa where While early examples of CWRAS have been some CWRAS are scheduled every year. Over able to mobilize intra-sectoral cooperation two-thirds of country-specific and regional within the Bank quite effectively, the integra- CWRAS were produced in water-poor coun- tion between water resources management and tries Overall, CWRAS have been effective sectors is still a work in progress. Most of the instruments to support a dialogue with client CWRAS discuss the need for water resources countries on water issues in general. For exam- management and development, and most link ple, the India and Pakistan CWRASs received the resource with the services to be provided extensive media coverage and laid the ground by this resource. In the China CWRAS, for for major increases in Bank water lending. example, water resources management was The Zambia and Mozambique CWRAS made brought for the first time, as the "missing" significant contributions to improved water theme that brings the analysis together. In the resources planning, highlighting the need Yemen, the CWRAS has been essentially an for a river-basin approach to investments. In update of the national water strategy. 40 Overall, Ethiopia, the CWRAS helped to show the links CWRAS have been successful at determining among sectors using water and the economic intra-sector priorities. CWRAS often outlined impacts of hydrological variability.38 This led effective interventions but did not succeed in to some realignment of the Bank's portfolio, ensuring that the targeted interventions were and the identification of investment priorities, realistically scheduled and funded, as evidenced including multipurpose hydraulic infrastruc- by the weak link between CWRAS and CAS/ ture development, water supply and sanitation, CPS. Experience shows the importance of a and watershed management. sequential approach--a quick policy note that can feed into the CAS and Country Economic By improving the understanding of the Memorandum discussions, followed by a longer sector, CWRAS have been correlated with assessment though CWRAS. improved project design. While lending to the water sector has increased substantially More recently, the World Bank Group engaged both in countries with a CWRAS and in in strategic work to assess options to reduce the countries with no CWRAS, the outcome of gap between water availability and use from all one dollar spent on water Bank projects has sectors. The IFC collaborated with McKinsey been significantly better in the first group of & Company to produce a report that identi- countries than in the latter.39 While CWRAS fied supply-side and demand-side measures to have often been developed within an overall close the water resource gap more effectively WRM framework, they often led to sector- and reduce the water demand in some areas.41 specific investments. Some regions, like AFR, Working with the WBG, McKinsey is now are experimenting with ESW that will take engaging with several countries--including a more integrated, sustainable approach to Pakistan, China, Brazil, India and Ethiopia--to projects, with an explicit attempt to identify help develop a common fact base, to engage all co-located sectoral investments that will stakeholders (including the often-missing private 22 SustainingWaterforAllinaChangingClimate sector) and to support government transforma- 2.3 Adopting an Integrated tion programs. Over the next few months, the Approach to Water Projects Bank will see if this approach can be applied in specific countries to support policy or lending The Strategy suggests that independent programs of key strategic importance. management of water resources by different water-using sectors is suboptimal because it Strategic Environment Assessments (SEAs) does not take into account the water resource have emerged as a useful instrument to main- needs of all users and balance them in a stream environmental and social priority sustainable way. Integrated water resource concerns into the water dialogue. A recent management is critical for sustainable out- review found that SEAs have supported inte- comes. This integrated approach can be grated water resources management principles applied at various levels--projects linking across diverse uses and sectors42 and have water services with water resource manage- covered a range of spatial scales from small ment, and stronger links among water-using catchments to large trans-boundary regions. sectors, and between water and other sec- The Nam Theun 2 Strategic Impact Assessment, tors. Since 2007, the Bank has been more together with the Cumulative Impact actively engaged in the delivery of integrated Assessment, looked at proposed sectoral devel- projects, but the structure of Bank incentives opments within countries bordering Lao PDR. still favors the delivery of sector outputs over These assessments supported expanded use of cross-sectoral outputs. Overall, these inte- irrigated approaches to river basin management grated projects have been more complex and and broader evaluation of potential downstream costly, and taken longer to design and imple- impacts. Environmental flow assessments have ment, than traditional sector projects. Another been another instrument to evaluate tradeoffs important constraint has been that client for ecosystem balance, a key element to integrat- countries are still organized by sectors; infra- ed water resources management and necessary structure projects are planned within sectoral for environmental conservation. boundaries, with little consideration of the implications for overall resource management. Some progress has been achieved in strength- ening the understanding of environmental Some advances have been made in terms health, as well as links between water sup- of incorporating the resource dimension in ply and sanitation and health outcomes. The traditional water services projects. Projects recent environment health study43 confirmed have begun linking the availability of water the links between sanitation, hygiene, and with water use more systematically. The health outcomes, by showing that diarrheal percentage of irrigation and drainage proj- diseases play a major role in malnutrition ects approved containing water resource in developing countries. In addition, several management components increased from 65 environmental degradation studies were con- percent (FY97­03) to 76 percent (FY03­09). ducted as part of the Country Environmental The majority of drought-related projects Analyses (CEA).44 These various pieces are were irrigation projects dealing with water consistent with the premise of the Health scarcity. Also, the percentage of hydropower Strategy that MDGs in health can be achieved projects approved containing water resource through infrastructure investments.45 management components increased from Part2|WaterResourceSectorStrategy 23 The integration of resource management has occurred mostly among water sub-sectors and less between the water sector and other sectors. Many agricultural projects rou- Integrated projects have been tinely include irrigation, drainage or flood more complex and costly mitigation, in addition to other water-related to prepare and implement activities, such as watershed management, forestry, and drought mitigation: the China than traditional sector Water Conservation project focused on projects. Another important sustainable use and management of water constraint has been that client resources in irrigated areas, including groundwater; it enhanced the beneficial use countries are still organized of water on 100,000 hectares and increased by sectors, with infrastructure the income of 257,000 families. Flood pro- projects planned within tection projects, which used to focus on flood control and storm drains, have tended sectoral boundaries. to adopt a broader integrated approach to water resource management that includes maintaining and managing the basin's land cover and managing wetlands and river channels, while appropriately planning and placing infrastructure and urban expansion. In Malawi, the Shire Valley Development project takes an integrated approach, while at the same time prioritizing and sequencing 19 percent (pre-2003) to 33 percent (post- a series of co-located sustainable develop- 2003). In FY09, 50 percent of the hydro ment investments (WSS, watershed, water portfolio addressed river-basin planning resources, irrigation, and energy). and water use management in project plan- ning and design, as opposed to 38 percent Water interventions have been increasing- in FY07. In water supply and sanitation,46 ly integrated in projects of other sectors. as well as in flood protection,47 the integra- The integration of water practice across tion of the water resource management Bank sectors envisioned in the Strategy is theme declined slightly after 2003. More well under way.48 While the Water Sector recently, some water supply and sanitation Board accounted for 35 percent of water projects have taken a broader perspec- lending for FY03­09, the remaining por- tive: the Integrated Water Management in tion was divided among the Agriculture Metropolitan Sao Paulo Adaptable Program Rural Development (22 percent), Urban Loan, for example, is addressing water sup- Development (15 percent), and Environment ply and sanitation, together with water (11 percent) Sector Boards. Development resource management, pollution control, policy lending (DPL) has also been increas- and land use in an acutely water scarce ingly used to mainstream water in multi-sec- urban area. toral projects. DPL with water components 24 SustainingWaterforAllinaChangingClimate increased from $114 million in FY03 to $1.2 sanitation from limited IDA funding. Other billion in FY09. Compared to water lending, countries have continued to finance sanita- the share of water support provided through tion, through government funds and exter- DPLs increased from 6 percent in FY03 to 22 nal support, using traditional approaches, percent in FY09. which have not always reached scale. For example, on-site sanitation49 is often viewed Water has made inroads into the environmen- by governments as a private household tal, social, and health agendas. More than issue, as opposed to most other infrastruc- two-thirds of completed water projects over ture services. In this context, advocacy and FY01­09 followed a more general approach learning became increasingly important. with integration across water and other sec- Water Sanitation Program (WSP) has played tors: the Mexico Structural Adjustment Loan an important role in piloting and testing, I and Environment Development Policy at scale, the most effective approaches to Lending II mainstreamed environmental sanitation. With funding from the Gates concerns into important sectors, such as Foundation, WSP has made significant water, and achieved institutional objectives investment in supporting national and local related to IWRM, water law, compliance government on-the-job learning, resulting with discharge parameters, and groundwa- in scaling up access to sanitation for over 6 ter and wastewater management; it estab- million people in 3 countries, while study- lished high-level institutional coordination ing and documenting how to operationalize mechanisms and supported the implementa- such successful approaches for use by all tion of fiscal instruments for cost recovery. sector stakeholders. A review of project appraisal documents showed that irrigation and drainage, and The growth in Bank assistance for sewerage water resources management (through water and wastewater investments was consistent users association) projects have made some with the growth in overall infrastructure, progress in integrating gender into water and clients' growing concerns for the envi- projects, but mainstreaming of gender in the ronment. The Bank portfolio in sewerage sector as a whole is work in progress. Several increased from $227 million in FY03 to $1.2 examples follow to show how integration billion in FY09. Much of this investment in with other sectors took place. sewerage and wastewater is undertaken to promote urban development and enhance Hygiene promotion has been increasingly the environment. While a recent study has incorporated in sanitation projects. This shown significant health benefits from city- trend reflects an increasing awareness wide sewerage in Salvador, Brazil, sewerage of the importance of behavioral change can rarely be solely justified as the most cost- to complement infrastructure (latrines) effective way to promote health, especially investments, as the most effective way to where households already have some form achieve sustainable sanitation. In practice, of alternative sanitation. It is the combina- countries have been reluctant to borrow for tion of benefits from urban development and basic sanitation. IDA countries, for example, environmental protection, combined with which face great resource constraints, public health protection that usually makes have prioritized basic water supply over the economic case for sewerage. Part2|WaterResourceSectorStrategy 25 The Bank has reengaged in hydropower IWRM.51 In Malawi, and Zambia, for exam- projects, integrating environmental and ple, the IWRM plans flow directly from the social risks more systematically in project national economic development plans, and design and implementation. The recent have been prepared jointly with the relevant WBG Hydropower Business Plan50 set the ministries responsible for economic planning. framework for scaling-up hydropower However, implementation of these practices investments, recognizing that hydropower has proved more difficult than envisioned. plays a key role in a low carbon future, as a Progress has been mostly achieved in terms renewable and indigenous energy source, of formulation of policies, drafting of laws capable of simultaneously allocating water and cooperation on shared resources; fewer for multiple uses. Since FY03, the WBG advances have been made on cost recovery has approved $3.7 billion for hydropower of expenses for water resources management projects. When accounting for client con- and capacity for water demand manage- tributions and co-financing, the total ment.52 Line ministries are still planning investment of these projects reached $8.5 infrastructure projects, within their sectoral billion, providing nearly 9,700 MW through boundaries, with little impact on the overall project investments. The active portfolio resources available. Coordination among is well distributed among regions, with government agencies is a major challenge AFR and EAP accounting for 58 percent of in client countries. And while ministries of total lending. Significant progress has been finance could potentially be the institutional achieved in terms of implementing the triple link among line ministries, they are often bottom line approach, integrating environ- neither equipped, nor mandated, to ensure ment, social, and economic dimensions in adequate planning of water resources. the design and implementation of hydro projects. In FY09, 27 percent of the total hydro portfolio integrated the enhancement 2.4 Continued Support for Water of development benefits to local com- Resource Management munity programs into project design and implementation, compared to 19 percent in Increasingly, the Bank has moved away from FY07. About 60 percent of active projects the simple "either infrastructure or manage- since 2003 included some hydrological ment" stance, toward matching solutions to analysis, and the share of the hydro portfolio specific contexts and conditions. Effective including downstream environmental flow water strategies now seek to combine best assessment increased from 25 percent in practices in infrastructure development with FY07 to 36 percent in FY09. effective institution building. The Bank, client countries, and other players have An important constraint for implementing adopted a more nuanced picture of develop- an integrated approach has been the gov- ment choices and conditions under which ernance structure in client countries. Many various combinations of interventions can middle-and low-income countries in AFR, work. Annex A describes the diversity of EAP, SAR and LCR have engaged in reform- issues and mix of instruments that the Bank ing their water resources planning policies used to address water issues in seven regional and laws, focusing on the principles of and country cases. 26 SustainingWaterforAllinaChangingClimate TABLE 2 WorlD BAnk group EngAgEMEnT in HYDropoWEr, fY03­fY09 Year Project* Country Source FY03 YixingPumpedStorageProject China WorldBank FY04 TurkeyRenewableEnergyProject Turkey WorldBank FY05 EnergyCommunityofSouthEastEurope Romania WorldBank HydropowerRehabilitationProject Ukraine WorldBank NamTheun2PowerCompanyLtd LaoPDR MIGA FY06 FelouSecondHydroelectricProject Regional WorldBank (Mauritania,Mali,andSenegal) AESSonel Cameroon IFC FY07 UgandaPrivatePowerGeneration(Bujagali) Uganda IFC,MIGA, WorldBank IngaRehabilitation Regional(DRC) WorldBank FY08 LaConfluencia Chile IFC MagatHydro Philippines IFC NigerBasinWaterResourcesDevelopment Regional(NigerBasin) WorldBank andSustainableEcosystemsManagementProject Enerjisa Turkey IFC RampurHydropowerProject India WorldBank FY09 JiangxiShihutangNavi&Hydropower China WorldBank Ambuklao-Binga Philippines IFC RenewableEnergyDevelopmentProject Vietnam WorldBank *Onlyincludesprojectswithgreaterthan$75millioninHydropowerFinancing. Source: WorldBankGroup Part2|WaterResourceSectorStrategy 27 The growth in water development policy lend- Over FY03­09, the Bank sustained its engage- ing (DPL) suggests that support for water ment in those areas for which the Strategy resource management has taken on a life of called for increased engagement, and learned its own. The bulk of Bank support for water is some important lessons about the complex- provided through investment lending opera- ity of this agenda. The Strategy called for tions. Those projects have combined hard-core increased engagement in several WRM areas, infrastructure with management components, including groundwater management, water through either support to planning and insti- quality, watershed management, environmen- tutional reforms, or commitment to implement tal conservation, community-based solutions, water reforms. Over FY03­09, there has and institutional reforms. It also recom- been, however, a sharp increase in DPLs with mended a "principled pragmatic" approach in water components. A review of prior actions demand management. in DPLs with water components shows that these projects helped establish important In groundwater management, Bank support background settings to sustain water resources has varied among regions, from conservation development and management, such as policy, to groundwater use projects and technical strategic and legal instruments (22 percent), assistance. Overall, Bank projects have shifted financing instruments (14 percent), sub- away from investments in extraction, such as sectoral and institutional reform (13 percent), construction of groundwater supply schemes monitoring and benchmarking (13 percent), or well construction for irrigation, toward water management (11 percent) and decentral- groundwater conservation, in countries where ization (10 percent). there has been a rapid and large scale ground- water development in the past. The number of groundwater conservation projects hovered around 25 per year.53 There are, however, some notable regional differences. In AFR, for exam- ple, water development is still very limited, and Effective water strategies hence the potential for sustainable ground- seek to combine best water development and use is significant. The practices in infrastructure on-going GEF-funded groundwater project is one example of efforts to raise the aware- development with effective ness of policymakers to groundwater potential institution building. The and management. The extent of groundwater Bank has moved away availability and depletion is poorly understood because groundwater data are rarely collected from the simple "either and even less often publicly available. Many infrastructure or management" countries do not have enough information at stance, toward matching hand to make long-term plans. In this context, the Bank has increased its support to strength- solutions to specific contexts en the understanding of the issue through and conditions. analytic work and provided technical assis- tance to client countries through GW-MATE (See Box 2). 28 SustainingWaterforAllinaChangingClimate There has been an annual increase in proj- managing trade-offs (e.g. Brazil Parana Land ects dealing with water quality management, management Project). The Morocco Lakhdar although less attention has been given to Project showed that successful participatory water quality monitoring.54 The increas- approaches require careful sequencing, inclu- ing degradation of water resources from sion, political commitments, and mechanisms pollution and improper water resource to ensure sustained capacity. A multitude of management practices has led to situa- additional parameters including policy and tions where the safe water supply is steadily legal frameworks, engagement of public insti- being reduced, and negative impacts on the tutions, profitability and economic viability environment have increased. The impacts of watershed interventions, and watershed on water quality (e.g. escalated incidences management externalities and their valua- of vector-and waterborne diseases, malaria, tion, in addition to the environmental, social dengue, and cholera as well as degraded and climate change perspective, and at times land and water ecosystems) have become veiled by the trans-boundary dimension, increasingly acute from intensified water substantiate the complexities of engaging in pollution in rapidly growing peri-urban and these programs. urban areas, increased agricultural runoff, and poor resources management. Over a In terms of environmental conservation, third of the lending for water quality man- Bank efforts to increase environmental agement goes to the top ten borrowers, for sustainability around rivers and lakes, and which China, India, and Brazil are the top wetlands have shown significant results. three.55 For example, in the Philippines, the Attention to environmental flows rose from Bank supported the department of environ- 20 projects in FY03 to 25 projects in FY07. ment and natural resources to implement the The aims and purposes of projects have Clean Water Act through the establishment evolved over FY97­07, with 26 percent of of the Water Quality Management Areas. all Bank-financed projects around rivers and lakes focusing on preventing pollution. In terms of watershed management, Bank Those projects were effective at restoring engagement has proven complex, but effec- physical assets, particularly flood-damaged tive when integrating both water and land infrastructure. The Bank has been using management issues.56 Under the right cir- payment for environmental services--a cumstances, the watershed management market-based approach to conservation. 57 A approach can achieve both sustainable soil handful of projects to reverse the degrada- and water conservation and the intensifica- tion of coastal areas from overexploitation tion of natural resource use that is needed were approved in the period FY03­09. 58 to improve livelihoods. In some cases, espe- For example, urban-based investments in cially in forest contexts, the achievement drainage systems in coastal towns in AFR of both resource conservation and liveli- have reduced flooding, and thereby pro- hood improvement has been challenging tected water sources. Finally, attention to (e.g. the Brazil Land management project). wetlands and mangrove restoration in Bank Participation from stakeholders is not always projects has increased steadily over the straightforward and requires a clear direc- 2000s, possibly due to the adoption of envi- tion and understanding of benefit sharing and ronmental safeguard policies OP 4.00 and Part2|WaterResourceSectorStrategy 29 OP 4.01, which stipulate the identification In water supply and sanitation, the Bank of potential impacts to wetlands during the has traditionally supported utilities and environmental screening process.59 municipal providers, in conjunction with investment infrastructure. In hydropower, In terms of community-driven develop- support has focused on energy providers and ment, the Bank has continued to promote a less on water management agencies. In con- demand responsive approach to rural water trast, in irrigation and drainage, the Bank supply. Communities have been offered a has balanced its support between service choice of water supply options, and allowed providers and resource management agen- to select the one for which they are will- cies, with massive support for water users ing and able to pay. This approach can be associations. One way to support an inte- embedded in a wide range of project designs grated approach to river-basin management and implementation procedures that are has been through river-basin organizations linked by three threads. First, the design (RBOs). A critical factor that has contributed and planning stage presents communities to the success of RBOs, such as establish- with several feasible options for improving ment of the Niger Basin Authority (NBA) their water supplies, along with a reliable bringing together nine countries to pro- estimate of the investment, operation, and mote IWRM across political boundaries, maintenance costs to the community of include political commitment and program each option. Communities have the right to of actions for cooperative development for select the option that they prefer, or to opt shared resources.60 out of the project altogether. Second, com- munities pay part of the investment (capital) One area of policy reform that received cost of the project. Third, they pay at least increased attention over the past several part of the recurrent operation and mainte- years is Governance and Anti-Corruption nance costs of the completed water schemes. (GAC). Consistent with the Bank-wide GAC Community-driven development projects strategy, water projects address governance have included much more social policy con- at the sector level by strengthening trans- tent and have focused more on poverty than parency, accountability, and participation other water projects. They use bottom-up across the value chain: in policy making, approaches, as both the stakeholders and investment planning, project implementa- beneficiaries have authority over decisions, tion, service delivery and regulation. Projects including direct responsibility to manage typically address these issues at the sector internal and external resources. An ESW is level by improving capacities of policy mak- currently investigating the circumstances ers, regulatory bodies, service providers, and that explain when and why one management user associations to monitor project imple- model may be preferable to another. mentation and service delivery performance more effectively, and to communicate with In terms of institutional reforms, the Bank and consult stakeholders. Good practices are has supported the establishment and emerging in the development of Governance strengthening of institutions for service Action Plans, Good Governance Frameworks delivery and water resource management and Risk Assessment Frameworks. For exam- agencies, with some sub-sector differences. ple, the Yemen Anti-Corruption Action Plan 30 SustainingWaterforAllinaChangingClimate complements the overall reform program of the water sector and builds on progress already achieved in a number of critical areas. Several instruments have been used In some areas of institutional to promote GAC efforts, including DPLs, reforms, such as water pricing output-based-aid and other results-based lending approaches, demand-side measures and water rights, the Bank to improve accountability to citizens, as well has followed a "principled as country governance and political economy pragmatic approach"-- studies. The establishment of the GAC Squad in 2009 helped to mainstream GAC in the principled because economic infrastructure sectors by providing direct principles ensure that users support to operations and advisory services take financial and resource and to document and disseminate emerging good practice. costs into account when using water, and pragmatic because The benefits of institutional reforms have "solutions need to be tailored often taken a long time to materialize. Water projects that include a major institutional to specific, widely varying development component entailing benefi- natural, cultural, economic, ciary participation require sufficient lead and political circumstances in time before the physical investment activi- ties start to allow for an adequate social which the art of reform is the mobilization process. Inter-institutional art of the possible." coordination is a complex process that requires substantial efforts and unwavering commitments on the part of participating entities, which are required to undergo a profound learning process and adopt sig- use as an entry point for a dialogue with nificant behavioral changes. This learning client countries than institutional reforms process is challenging, and carrying out (visibility and salability for politicians). these commitments is both difficult and time consuming. The Strategy acknowl- In some areas of institutional reforms, edged the complexity of this agenda in a such as water pricing and water rights, the political economy context. Following the Bank has followed a "principled pragmatic "principled but pragmatic approach"61 of approach"--principled because economic the Strategy, the Bank sequenced its inter- principles ensure that users take financial ventions, with institutional reforms often and resource costs into account when using setting the stage for infrastructure invest- water, and pragmatic because "solutions ments. In practice, these reforms have often need to be tailored to specific, widely vary- held back the completion of investment ing natural, cultural, economic, and political projects. Bank support for investment in circumstances in which the art of reform physical infrastructure has been easier to is the art of the possible."62 Balancing effi- Part2|WaterResourceSectorStrategy 31 ciency considerations with accountability, benefit such a broad swath of the popula- concerns for the poor, and the political tion--although they may often exclude the economy of reform has been the core of the poor who are not connected to the utility Bank's approach to water pricing. At the network in the first place. Well-designed sub- project level, the Bank has been pursuing the sidies have been an important component of gradual coverage of costs through a series of utility service pricing. water supply and sanitation projects, start- ing with operations and maintenance (O&M) Water Public Expenditure Reviews (PERs) costs. Issues that are addressed in these proj- have been increasingly used as another ects include how the service delivery will instrument to engage client countries on the be met, whether the project scope could be allocation of fiscal resources and financing either reduced to meet the financial capac- of water services. In many client countries, ity of the implementing utility, or whether most investments, as well as operation and transparent and targeted subsidies should maintenance costs of water services, are be part of the dialogue. Efforts are ongoing funded by the national budget. It is in the to strengthen the financial analysis of these ministries of finance that decisions are made projects, including identification of subsidies about the allocation of budget appropriations and agreement with all stakeholders on how among different water-agency ministries, such subsidies will be funded. which directly affects new sectoral invest- ment, rehabilitation, and cost recovery The Bank and its development partners have arrangements at the sector level. Since FY03, placed an emphasis on the effective and the Bank has produced more than 40 PERs equitable use of utility subsidies (e.g., well- that deal with water. Efforts have also been targeted connection subsidies for access). made to scale-up Water PERs in collabora- Achieving full cost recovery in water supply tion with Bank-administered trust funds. and sanitation (WSS) has proved to be elusive Water PERs have proved a useful instrument even in those countries that have had the for dialogue with client countries to tackle political will to embrace this goal, including the issue of sustainability of water utilities high-income countries. In many parts of Asia and tariffs (see Box 3). and Africa, tariffs would have to increase between twofold and tenfold in order to have residential consumers pay the cost of 2.5 Engagement in High the service they receive. Tariff increases of Risk­High Reward Hydraulic this magnitude would push about half of the Infrastructure Projects households in AFR and SAR, as well as about a third of households in EAP, to reduce their High-risk/high-reward (HRHR) projects are consumption of those services below subsis- those large and complex new hydraulic infra- tence norms.63 Such tariff increases would structure projects that require major financing also have unpredictable effects on demand in both countries that have investment choices for utility services and nonpayment rates. and those that are poorer. On the reward side, Beyond those social concerns, attaining full the Strategy posited that support for infra- cost recovery has also proved politically dif- structure was critical in order for growth to ficult, given that utility subsidies currently take off (minimum platform). On the risk side, 32 SustainingWaterforAllinaChangingClimate Box 3 EgYpT--WATEr puBliC ExpEnDiTurE rEviEW ArecentPublicExpenditureReview(PER)wasconductedforthewatersectorinEgypt, focusingonirrigationandwatersupplyandsanitation--thetwomajorrecipientsof publicfinancinginthewatersector.ThePERassessedtherecenttrendsofpublic expenditures,investigateddifferentsourcesoffiscalstressandsourcesoffinance, andexploredtheefficiencyandequityimplicationsofthevariousarrangements.Key findingsoftheEgyptPERincluded: Mostinvestmentaswellasoperationandmaintenancecostsofwaterservicesin Egyptarefundedfromthenationalbudget.Cost-recoverylevelsstillarebelow internationalcomparators. Thecompositionofwater-relatedpublicexpenditureshaschangedinthelasttwo years.Ahigherproportionisallocatedtonewinvestments--attheexpenseof recurrentexpendituresanddebtrepayments,therebyincreasingthesector'slong- termliabilities. WaterservicecoverageisadequateintheNileDeltaarea.However,itismostly lackingintherural/southernareas,inwhichwaterservicesareinequitableforlow- incomecommunities. Reallocatingbudgetappropriationsamongdifferentbudgetchaptersof wateragencies,amongdepartmentswithinagencies,andamongwateruser groupsrequiresafundamentalrearrangementofcurrentbudgetplanningand management. TheirrigationandWSSsubsectorshavethreeoptionsavailabletofinancefuture O&Mandinvestmentcosts,asidentifiedintheIntegratedWaterResources ManagementActionPlan. TheWSSsubsectorismovingtowardscorporatization.Iturgentlyneedsto addressthedebtoverhangcausedbythepastpolicyofserviceexpansionwithout costrecovery. Source: TheWorldBank.2009.Water in the Arab World: Management Perspectives and Innovations. Part2|WaterResourceSectorStrategy 33 Box 4 nAM THEun 2 HYDropoWEr projECT--lESSonS lEArnED NamTheun2(NT2)isatrans-basinhydropoweranddevelopmentprojectinLaoPDR thatcontinuestogeneratevaluablelessonsforthecountryandforthehydropower industry.Thepolicies,institutions,systemsandpracticesthathaveemergedshould shapethewayfuturehydropowerprojectsaresustainablydeveloped. Preparation:Investingincommunicationsandbuildingaworkingconsensusacross allstakeholderscreatesanenablingenvironmentforprojectapproval,aswellas makingimplementationeasier. Finance:TheWBGcanplayakeycatalyticrole--aUS$20mgrantandupto$250m inguarantees--helpedleverageanoverallfinancingpackageofaround$1.4billion. WhileotherIFIsalsocontributed,themajorityofprojectfinancewasprivate. Adaptive management:Stronglegalagreementsandgoodplanningiscritical,but effectiveimplementationrequiresongoingadaptivemanagement--theneedfor stableobjectivesshouldnotbeallowedtodiscourageflexibilityinhowissuesare addressed. Resettlement:NT2showsthatawellmanagedandresourcedresettlement processcanleavethevastmajorityofresettledpeoplebetteroffintheshort-term; translatingthistemporarygainintolonger-termandsustainablelivelihoodsrequires amulti-yeareffortbyallparties. Basedonongoingimplementationandstrongdatacollectionefforts,manymore lessonsarelikelytoemergepriortotheendoftheBank'sengagementin2017.Given theglobaldebateabouthydropowerandclimatechange,oneareatowatchisresults fromalong-termÉlectricitédeFranceandNamTheunPowerCompanyeffortto accuratelymeasureGreenhouseGasemissionsfromtheNT2reservoir. Source: WorldBank,UpdateontheLaoPDR:NamTheun2(NT2)HydroelectricProject, 2009andBankStaff. 34 SustainingWaterforAllinaChangingClimate the Strategy recognized that these types of While the Bank was often perceived as the projects could cause major reputational risks partner of choice to prepare and implement for the Bank that would have to be mitigated. these complex projects, they often entailed The understanding of what constitutes a significant reputational risks that had to be HRHR infrastructure project evolved over managed. By their sheer technical complex- time. The definition of what constitutes a ity, and multi-sectoral impact, water projects "high risk" project varies, from category A have been subject to a large number of inspec- (risk for the environment) to projects that tion panel cases. Some have even argued that trigger safeguard policies.64 Similarly, the defi- the Strategy was conducive to promoting a nition of what constitutes a "high reward"65 risk-taking approach to water infrastructure, project varies from large infrastructure proj- thereby contributing to increases in the num- ects to those that are innovative. ber of inspection panel cases against Bank projects. While it is true that the Bank has The World Bank Group delivered high risks/ learnt lessons from its experience in high- high-reward projects, beyond Bujagali profile complex hydraulic infrastructure (Uganda) and Nam Theun 2 (Lao PDR). The projects, it has also made major advances Strategy committed to deliver one corpo- in integrating multiple dimensions into its rate HRHR project per year, with the vision projects, beyond the technical design, with that those projects would engage senior long-term benefits far outweighing short- management from early stages of prepara- term costs (e.g. in terms of increased access to tion through implementation to ensure energy, food production, number of beneficia- an engagement at the corporate level on ries and flood protection). whether the Bank should be involved and how risks would be managed. While Bujagali The Bank is adopting a vision of sustainabil- in Uganda and Nam Theun in Lao PDR proj- ity that goes beyond ensuring compliance to ects are typically regarded as HRHR proj- safeguards. The Bank took center stage in the ects, other projects meet the HRHR criteria. preparation of these high-profile and complex For example, the Ethiopia Irrigation and projects, and it has been subject to some sharp Drainage project helped to support the irri- criticisms from some NGOs and stakehold- gation of 20,000 ha and contributed to ascer- ers. The Bank has responded over time by tain irrigation potential of 80,000 ha; but developing an extensive set of processes and the project triggered 7 safeguards, and an Operational Policies to ensure that these risks estimated 9 reward factors. The Urban Flood are appropriately addressed and mitigated Prevention project in Argentina supported in project design and implementation. As a 15 km of tunnels in urban environment, result, the Bank has a much longer and more affecting directly 1.5 million and indirectly complex list of Operational Policies than any 3.5 million of people. As another example, other development bank to consider when the Rampur Hydropower project in India is designing and implementing these projects. a self-classified high-risk run-of-river devel- It is now clear that the Strategy may not have opment in a highly seismic region with sub- put enough emphasis on the complexity with stantial potential gains for renewable power which social and environmental dimensions development, whose risk of non-engagement could be factored into the design and imple- was considered higher. mentation of projects. Those projects require Part2|WaterResourceSectorStrategy 35 long-term engagement of the Bank that goes to include them in projects, placing more beyond the traditional timeframe for projects. emphasis on borrowing to meet access needs. Many lessons have been learnt from these From none in FY03, the Bank completed 13 experiences (see Box 4). By their complex- IEs in FY09 focusing on hand-washing and ity, these projects have pushed the Bank's sanitation, mostly in LCR and AFR. The sec- thinking beyond ensuring compliance to safe- tor is also actively engaged into the World guards: sustainability is thereby integrated Bank's Development Impact Evaluation initia- into both water resource management and tive, with a large group of studies looking into development projects not because of a require- health impacts of water and wastewater inter- ment but because there are good principled ventions, and to a lesser extent into income/ social and environmental reasons to do so. productivity impacts of these interventions. For example, WSP is working on a state of the 2.6 Knowledge to Support the art, large scale impact evaluation project to Dialogue on Water document the wide range of health, develop- ment, social, and economic outcomes of a The Bank has been supporting client countries global project to scale up rural sanitation in efforts to obtain better information for deci- India, Indonesia, and Tanzania. In addition to sion-making. One reason that policymakers collecting a broad range of indicators to allow have found it so difficult to curb the overex- an intensive study of sanitation's economic, ploitation of land and water and their related developmental and social welfare impacts, ecosystems is that neither the managers the intervention costs and the value of these nor the users of the resources have accurate diverse benefits will be closely examined. The and timely information. They do not know study will provide insight on how best to posi- how much of the resource is present, how tion IEs in the water sector going forward. much is being used, or how their actions will affect quantities in the future. Bank projects As part of the Bank's broader efforts to have helped countries to establish systems strengthen results-based decision-making, to collect, analyze, and use hydrological and water has been among the four sectors that meteorological data. Over half of the projects have spearheaded the effort to define Core that used monitoring data for disaster preven- Sector Indicators for projects. Core indica- tion and mitigation succeeded in getting the tors are being implemented for IDA projects information in the hands of people whose in water supply, and are being developed for job involved mitigating natural disasters and sanitation, as well as irrigation and drainage.66 reducing damages. Improved and innovate use Efforts are ongoing through the preparation of technologies, such as remote sensing, has of the new environment and energy strategies improved the availability and dissemination to develop core indicators that are relevant of information. The Bank is working on com- for the water sector as well (e.g. water quality, prehensive monitoring systems combining the coastal zone management, and groundwater). latest remote sensing data with models and Several other initiatives are underway to sup- ground based monitoring data in projects. port more systematic efforts to strengthen While impact evaluations (IEs) may yield data collection for decision making. For exam- useful information on the impact of water ple, in the 1990s, the Bank started a major investments, clients have been reluctant initiative to standardize utility performance 36 SustainingWaterforAllinaChangingClimate Box 5 ouTCoMES of BAnk-finAnCED WATEr SupplY AnD SAniTATion projECTS AccesstosafewaterinIDAcountriesimprovedfrom65percentin1990to78 percentin2006. IDAdirectlycontributedtoshrinkingthewaterandsanitationaccessgapbyatleast 25millionpeople(22millionforwater)in2000­06. HalftheprojectsinIDA'swaterandsanitationportfoliomeasuredquantitative outcomes--itscontributiontoclosingtheaccessgapiscertainlymuchhigher. Asaresultoftheincreasedfocusonresultsmeasurement,67percentofwater supplyandsanitationprojectsnowhavebaselineoutcomeindicators,compared to32percentinFY05,despitethefactthatconstructingbaselinesindysfunctional utilitiesorrurallocationswheredataavailabilityisscarcecanbechallenging. Bank-financedwatersupplyandsanitationprojectsinIBRDandblendcountries, whichclosedbetween2000and2008,financedaccesstowaterformorethan20 millionpeople,sanitationtocloseto10million,andhaveupgradedservicetoat leastanother6million. ExamplesofoutcomesattheprojectlevelareprovidedinAnnexD. Source: IDAAtWork;IBRDResults,WorldBank2010. indicators, which was followed by a major major piece of Water ESW, the Bank approved data collection effort, resulting in current water-related lending in nearly 70 percent of database that tracks the performance of 2,500 instances. Thus, countries that benefited from water and wastewater service providers from Water ESW had a 40 percent higher probabil- 110 countries around the world (International ity of a new lending operation in the year that Benchmarking Network). followed. For example, major pieces of Water ESW in Niger FY06 and FY08 helped lay the Economic and sector work has played a foundation for two new water operations in critical role in laying the foundation for FY07 and FY09.68 Similarly, the Pakistan's future lending. The sector adopted a stra- CWRAS culminated in an Irrigation DPL tegic approach to ESW, with a few flagship for Punjab (the Bank's first irrigation DPL). products67 and the bulk supporting country- As a result of such support, there is evidence level engagement and dialogue. It has been that the Government of Punjab adopted good estimated that, following the delivery of a policies on intra-province water allocations, Part2|WaterResourceSectorStrategy 37 improved asset management, increased atten- which encompasses water, supports coun- tion to rehabilitation of critical infrastructure ter-cyclical spending on infrastructure in (e.g. barrages), reduced the gap between O&M the aftermath of the crisis and raise aware- expenditures and receipts from water charges ness on the need to continue financing by turning over responsibility to water user infrastructure to provide the foundation for associations, and improved measures to better rapid recovery and job creation and to pro- manage groundwater. The Ethiopia CWRAS mote long term growth. One of the primary led to a major reallocation and increase in objectives of INFRA has been to improve public funding for water. Through its engage- the effectiveness of harmonization amongst ment in large infrastructure projects, the Bank development partners on crisis response. gained knowledge and experience in dealing Toward this end, an INFRA Partners with reputational risks which compromised Forum took place on July 9-10 in Brussels project development in the 1990s, including co-hosted with the European Commission engineering, environmental flows, biodiver- and attended by the core MDBs and IFIs. sity protection, resettlement, social inclusion, The Forum discussed ways to improve optimization, and sharing of the benefits of cooperation and to leverage the resources water resource among all stakeholders. of INFRA partners in support of critical infrastructure initiatives in developing The leverage of Bank assistance by global countries hard hit by the global economic programs and partnerships has been signifi- downturn. Partnership arrangements range cant. It is estimated that the second phase from co-financing or parallel financing to of Bank-Netherlands Water Partnership and joint project development and/or coordina- BNWPP was linked to more than $13 billion tion on technical assistance support. One in Bank lending (while total disbursements of example of cooperation among MDBs is the these two trust funds amounted to less than Agricultural Water for Africa (AgWA) ini- $19 million). WSP's growth in operations has tiative, for which the African Development followed the Bank's lending trends in WSP- Bank and the World Bank are closely focus countries, often laying the foundation cooperating. This initiative will foster the for larger Bank investments. For example, implementation of the agricultural water WSP's technical support for operating in strategy: Investment in agricultural water slums and peri-urban settlements helped for poverty reduction and economic growth initiate a $150 million World Bank water in sub-Saharan Africa which was jointly and sanitation project in three districts of prepared by the World Bank, AfDB, Food Kenya. In Zambia, WSP was involved in the and Agriculture Organization, International project design and implementation support Fund for Agricultural Development, and for the $33 million water sector performance International Water Management Institute, improvement performance project. in response to the New Partnership for African Development's desire to imple- Cooperation with Other Multilateral ment Pillar I (land and water management) Development Banks was expanded of the Comprehensive Africa Agriculture under the Infrastructure and Recovery Development Program (CAADP). The Assets Platform. The Infrastructure CAADP encompasses among other objec- Recovery and Assets platform (INFRA), tives an increase in the area under sustain- 38 SustainingWaterforAllinaChangingClimate able water management in Africa to 20 million hectares; up from less than 7 mil- lion hectares at present. As water transcends political 2.7 Complex Trans-boundary boundaries, it becomes Water Issues a regional public good for As water transcends political boundaries, it which collective action can becomes a regional public good for which secure sustainable win- collective action can secure sustainable win- win benefits. Some 40 percent of the world's win benefits. Inadequate population lives in basins shared by two or attention to trans-boundary more countries, and there are more than 300 management of water rivers and lakes and numerous underground aquifers shared by two or more countries. resources can exacerbate AFR has more than 80 international rivers the livelihoods, undermine and lake basins, among which the largest growth, and underpin many include the Congo, the Nile, the Zambezi, the Senegal, the Niger, the Volta, the Gambia, resource-based conflicts. Lake Victoria, and Lake Chad. Some of these major river and lake basins are shared by as many as ten or more countries. Nine coun- tries share the Congo and Niger, ten share the Nile, and eight share the Zambezi and to support planning and investment in river Lake Chad. Unilateral development of water basin management. The Bank has used a resources by a single country is suboptimal, mix of instruments, including institutional and collective action for the sustainable capacity building for river-basin manage- management of water resources is necessary ment, using the river basin rather than the not only to mitigate water-related risks (e.g. state as the planning unit, large infrastruc- floods and droughts) to the population, but ture investments programs in hydropower also to maximize development opportunities and agriculture with long-term benefits, and and reduce the risk of conflicts. Inadequate environment and local development activi- attention to trans-boundary management ties with short-term benefits. of water resources can exacerbate the liveli- hoods, undermine growth, and underpin The Bank has supported cooperation among many resource-based conflicts. riparian states, often in multi-project pro- grams. The Bank delivered more than 300 As an international financial institution, the projects dealing with water resource man- Bank has a major role to play in facilitating agement linked to rivers, lakes, and coastal cooperation on international waters. The systems over the FY97­07 period. During Bank has acted at the strategic level to facili- that period, 27 Bank-funded projects with tate a political commitment to long-term activities related to international waterways cooperation, and at the programmatic level were closed, while 96 are still ongoing, Part2|WaterResourceSectorStrategy 39 pointing to the increasing importance of economy dimensions of trans-boundary trans-boundary projects in recent years. engagement through upstream analytical Almost 70 percent of the lending for trans- work, and technical assistance are critical boundary projects were to AFR and ECA. in reducing the risk profile of the invest- For example, the Bank has made progress ment projects. Coordination of support from in supporting the Nile Basin Initiative, development partners to ensure harmoni- a regional program led by the countries, zation of their assistance takes time and establish capacity for water-related manage- resources from all involved parties, but is ment, and continues to make progress in the essential for effective results. delivery of its investment programs (e.g., the Eastern Nile First Joint Multipurpose 2.8 Partnering with the Program, the Equatorial Lakes Power Private Sector Program, Tana Beles Integrated Water Resources project in Ethiopia). In most lake/ World Bank Group initiatives to encourage river basin projects, institutional capac- increased private sector involvement in the ity building has been a core component of operation of urban and rural water supply and Bank assistance. The Bank has supported sanitation had generally positive impacts.70 a diversity of institutions, from those with Public-private partnership (PPP) projects resource allocation responsibilities, to focusing on urban water supply and sanita- coordinating institutions, to advisory insti- tion generally resulted in increased supply, tutions. Institutional responsibilities may production, and quality of water as well as encompass resource development, service improved fee collection, tariff increases, and delivery, regulatory, or coordinating roles. installed water meters.71 Successful PPPs Informal institutions, such as traditional for urban water utilities which had received village committees or NGOs can also play an extensive support from the Bank, both in important role.69 design and financing, include affermages, management contracts, and mixed owner- From the perspective of the Bank and other ship companies, and concessions. Projects multilateral organizations, engagement with with private sector involvement in rural water riparian states on international rivers is dif- supply and sanitation generally featured ficult and risky. The Bank can only assist high outcome ratings, but represent a very its borrowers to address trans-boundary small share of PPP water projects. The role issues where there is a country willingness of the domestic private sector in the provi- to negotiate. Stark divergence of national sion of basic water supply and sanitation will interests, a weak regional institutional and increasingly be examined as a complement to regulatory framework for water, or political the large-scale traditional PPPs. More recent instability, can represent major constraints projects have featured stronger emphasis on and prevent the resolution of disputes integrated water resources management, fea- within a trans-boundary river basin. Long- turing greater cross-sectoral integration and term sustained efforts that go beyond the supporting institutional frameworks featur- time-horizon of traditional Bank projects ing the river basin as their unit of analysis. are required for engagement in those issues. For example, Malawi's Second National Water (See Box 7) Understanding the political Development Project developed an invest- 40 SustainingWaterforAllinaChangingClimate Box 6 SEnEgAl rivEr BASin MoDEl--BEnEfiT-SHAring in inTErnATionAl rivErS Toaddressmanyofthechallengesexperiencedoverthelastseveraldecades,anew WaterCharterwassignedin2002tofullyrealizethepotentialtosharethebenefitsof developmentwiththebroaderpopulationintheSenegalRiverBasin.Afteralmost30 yearsifactivitiesintheSenegalRiverBasin,someimportantlessonshaveemergedon benefit-sharing: TheexperienceofSenegalstandsoutcomparedtootherriverbasinsaround theworldontheadoptionoftheprinciplesandpracticesofbenefitsharing.The commitmenttothisprinciplewascodifiedthroughtheestablishmentoflegal conventionsandaremarkabledegreeofsupra-nationalexecutiveauthorityvested intheOrganizationpourlaMiseenValeurduFleuveSenegal(OVS). Benefit-sharingisnotonlyabouthownationssharethebenefitsofacommon resource,butalsoabouthowthosebenefitsandcostsofdevelopmentareshared withthepopulationatlarge.Somesegmentsofthepopulationhavebenefited(e.g. urban),whileotherhavenot(e.g.traditionalrecessionalfarmers). TheSenegalexperiencehighlightsanimportantdilemma:thefrequentdisconnect betweennationalandlocaldevelopment.Forexample,theobjectiveofachieving foodsecurityinhindsightwasdependentonnotonlyinfrastructurebutalsoon nationalpolicies(e.g.stagnantagriculturalextension,decreaseintheprovisionof ruralservices,country-widestructuraladjustment).Thus,toensurethatthesebenefits wouldbesharedbroadlyrequiredthatregionalinstitutionsbewellcoordinatedwith theactivities,andperhapsmoreimportant,policiesofmemberstates. Fortheconceptofbenefitsharingtobefullyrealized,institutionsneedtobe adaptableandhavelegalframeworkstoallowforflexibility. Source: BenefitSharinginInternationalRivers:FindingsfromtheSenegalRiverBasin,the ColumbiaRiverBasin,andtheLesothoHighlandsWaterProject,W.Yu,WorldBank,2008. Part2|WaterResourceSectorStrategy 41 ment strategy that integrates the development Unbundling the key functions of policy formu- needs for water resources by different sectors. lation, regulation, financing, asset ownership, IFC's investments have supported traditional and service provision, while establishing con- models (BOTs, BOOTs, leases, concessions), tractual relations between public and private but there has been increasing focus on PPPs partners, has enhanced the sector's account- as the financial model most appropriate to ability framework. Regarding tariffs, most bring private investment into the sector. IFC's poorly performing public utilities in develop- involvement in PPP projects comprised both ing countries have water tariffs that are well financing support to projects and advisory below full cost recovery levels, and raising interventions. For example, IFC has invested them is often a necessary component of reform in Manila Water in the Philippines, Epure towards financial sustainability. In practice, and Asia Environment in China, Metito the evidence from the literature on the impact in MNA, and the Sociedad de Acueducto, of PPPs on tariffs is largely inconclusive. Alcantarillado y Aseo de Barranquilla, among others. Those projects have generally resulted Output-based aid (OBA) has been used in operational improvements in service deliv- to support PPP transactions and promote ery and financial sustainability including access to basic water services to low-income reduction in non-revenue water and increase populations. There are currently 31 OBA in service coverage. projects in water supply and sanitation 74 with Bank participation (equivalent to $179 PPPs in water utilities have resulted in sub- million), mostly to support PPP in water stantial capital investment from the private supply schemes, with half of those projects sector in some successful cases, but have in AFR and a quarter in LCR. OBA ties the generally yielded fewer capital flows than disbursement of public funding in the form of originally intended. However, they have subsidies to the achievement of clearly speci- yielded other important benefits. In the 1990s, fied results that directly support improved an important rationale for implementing PPPs access to basic services. Several lessons was attracting private funds to the water sec- emerged from the implementation of these tor. But, given high country and sector risk, schemes: While OBA leverages private fund- private investment for water PPP projects ing, funding from private sector is limited declined significantly, and private financ- because of its pro-poor focus. OBA payments ing became scarce and expensive. The most have led to improvements in operational consistent contribution of PPPs has been in efficiency and the delivery of innovative solu- improving service quality and operational tions to serve the poor. Furthermore, OBA efficiency of water utilities.72 In this sense, has demonstrated efficiency gains through PPPs can have a significant indirect financial competition in most sectors when competitive impact by improving the overall creditworthi- pressures have been applied in the selection of ness of the sector. This point is well illustrated the OBA service providers. In many of these by the success of affermage schemes in schemes, the market is the one determin- Western and Central Africa.73 Such PPPs ing the level of appropriate subsidies. OBA is were part of well-designed sector reforms currently being scaled up through a program with clear policies and strict adherence of approach with several important client coun- governments to their policy commitments. tries (e.g. Mexico and Morocco), and is also 42 SustainingWaterforAllinaChangingClimate Box 7 ouTpuT BASED AiD--rESulTS in WATEr SupplY AnD SAniTATion AnumberoflessonscanbelearnedfromrecentOBAprojects.Somenotableresults whichemphasizetargetingbeneficiaries,managingperformance/limitingrisk,and monitoringresultsareprovidedbelow: Targeting AlmostallOBAwaterprojectsusegeographictargetingastheprimarymechanism,and anumberofuseselfselectionand/ormeanstestedtargetingtoincreasetheirtargeting effectiveness.India'sImprovedRuralCommunityWaterProjectinAndhraPradesh successfullycombinesthethreemajortargetingmechanisms.Totargetindividual beneficiariesinthevillages,theprojectusesthegovernment'swhiterationcard--asystem thatentitleslow-incomeindividualstoobtainbasiccommodities(e.g.,rice,flour)atareduced price.Thesehouseholdscanpurchasewaterinjerrycansfromcommunitywaterdistribution points.AsofMarch2009,watertreatmentplantshavebeeninstalledandindependently verifiedin16villagesservingover7,200householdsthatarebelowthepovertyline. Performance/Risk InmostprojectsfundedbyGPOBA,aportionoftheoutputbasedpaymentiswith-held untilseveralmonthsofservicedeliverytoenhancethesustainabilityofthescheme. InVietnam'sRuralWaterproject,80%ofthesubsidyisdisburseduponrealizationof theconnectionandtheremaining20%afterproofofsixmonthsofsatisfactoryservice provision.ByFebruary2009,tenwaterschemeswereoperationalwith2,726verified householdconnections. Monitoring TheMoroccoUrbanWaterandSanitationprojectprovidesagoodexampleofamore elaboratemonitoringandverificationsystemforanOBAscheme.Therearetwolevelsof monitoringforthisOBAscheme:1)aquarterlymonitoringreportprovidedbyeachoperator withinformationonnumberofconnectionsmade,totalnumberofbeneficiaryhouseholds, uptakeratioofbeneficiaryhouseholds,etc.;and2)anannualreportwithinformationon averageresidentialtariffforbeneficiaryhouseholds,projectunitcostsofhouseconnection operatorandtargetedareaasperactualincurredexpenditureanddiscrepancieswith estimatedprojectcosts.AsofApril2009,atotalof2,895waterconnectionsand2,846 sewerageconnectionshavebeenverifiedasdeliveredtopre-specification. Source: GlobalPartnershipforOutputBasedAid.OutputBasedAid:ACompilationof LessonsLearnedandBestPracticeGuidance,2009. Part2|WaterResourceSectorStrategy 43 being implemented as part of a new Bank- strategic projects, such as Bujagali and Nam funded affermage PPP in Cameroon. Theun 2, guarantees typically bridge a gap in market perception and have been crucial to The high risk profile of the water sector, in catalyze private sector involvement. Such stra- terms of political, tariff, currency, regulatory, tegic use is likely to continue. Also, guarantees and counterpart risk has resulted in caution cannot or should not make fundamentally on the part of long-term lenders and private unviable projects viable. IFIs offer a wide investors for larger projects, particularly in range of risk mitigation instruments designed large scale concessions. As a result, IFC to address the need for noncommercial, politi- has tended to finance water and sanitation cal risk mitigation products by lenders and investments focusing on extending reach debt or equity investors contemplating invest- and access, and to a limited extent on sup- ment in emerging markets. Innovative use of porting technologies in the sector. IFC has guarantees, such as Partial Risk Guarantee followed similar objectives in financing type structure to backstop government action investments in the hydropower and agri- or inaction, or specific regulatory risks, might culture sectors. At the end of FY09, projects further increase their usefulness, especially in municipal water supply and sanitation when coupled with a need to leverage further served a total of 20 million water customers. IFIs resources. IFC's water investments have increasingly supported local/regional emerging market Around $2.4 billion of foreign investment was players in the sector who are taking on a facilitated in the water and hydropower sec- larger share of the private water market. tor during FY03­09 though MIGA investment guarantees. From FY03­09, MIGA supported Although guarantees can be used to mitigate 20 water and hydropower projects with the risks of the private investors and finan- total gross exposure of $597.1 million. Over ciers, they have been called only for large this period, China had the largest portfolio strategic projects. Out of the 124 guarantees with 9 water projects totaling $234.2 mil- issued since 2001 by international financial lion, accounting for 39.2% of MIGA's total institutions, only four guarantees were issued water and hydropower portfolio. MIGA has for WSS projects, representing less than one provided guarantees in Russia, Uruguay, El percent of all guarantees issued, or 1.5 percent Salvador, Egypt, Jordan, Senegal, and Lao of the value of all infrastructure guarantees. PDR. MIGA has also been instrumental in Risk instruments can also improve private resolving investment disputes between foreign finance options for medium to more attractive investors and local partners/local government projects in villages and small towns. However, in water projects. For example, MIGA worked projects that fall into the areas that show together with the Chinese government to low potential for private financing and that successfully resolve an investment dispute are not viable are likely to need considerable between a private foreign investor and its local public sector investment and intervention partner/local government for a water project before they can qualify for the application of in Zhejiang Province. The project is now oper- risk instruments. Guarantees cannot force ating as originally envisioned, and the foreign certain groups of investors and financiers to investor and its local partner/local govern- alter their business models. However, for large ment have established a good relationship. 44 SustainingWaterforAllinaChangingClimate Endnotes 38 ManagingWaterResourcestoMaximizeSustainable Growth:AWorldBankWaterResourcesAssistanceStrategy forEthiopia, Water P-Notes 13, June 2008. 27 Separate strategic documents handle the sector- specifics, including WaterSupplyandSanitationSector 39 Based on a statistical analysis of the proportion BusinessStrategy:FY2003­07, September 2003; Sector of satisfactory outcomes (using IEG outcome Strategy Implementation Update FY05 (CODE2005­ indicator) for projects (weighted by dollars disbursed) 0100, November 8, 2005); ReachingtheRuralPoor:An in countries that have a CWRAS compared to the UpdatedStrategyforRuralDevelopment(R2002­0043, proportion of satisfactory outcome for projects in August 2002) and WorldBankGroupAgriculture countries that do not have a CWRAS. ActionPlan; EnvironmentStrategy--ConceptNote 40 RepublicofYemenCountryWaterResources (CODE2009­0036); and WorldBankUrbanandLocal AssistanceStrategy, Water P-Notes 8, June 2008. GovernmentDevelopmentStrategy (2009). 41 ChartingourWaterFuture:EconomicFrameworks 28 The graphic depiction of IWRM is figure 13 in the toInformDecisionMaking, 2009. Strategy (the "comb" refers to WRM and the "teeth" to the water-using sectors. The vision of the Strategy is 42 StrategicEnvironmentalAssessment:Improving one of "pragmatic but principled approach" to IWRM. WaterResourcesGovernanceandDecisionMaking: CaseStudies. World Bank, 2009. Also, Strategic 29 WorldBank,SustainableInfrastructureActionPlan, EnvironmentalAssessmentinEastandSouthEastAsia, FY09­11 (CODE2008­0028), March 21, 2008. AProgressReviewandComparisonofCountrySystems 30 The Concept Note of the Strategy included the andCases, World Bank Discussion Paper (Draft), 2009. Bank's formal response to the "Report of the World 43 EnvironmentalHealthandChildSurvival. Commission on Dams" (CODE2001-0096) Epidemiology,Economics,andExperience, World Bank, 31 See, WaterResourcesSectorStrategy, 2003, page 2. 2009. 32 For the majority of projects that involved 44 RepublicofColombia:MitigatingEnvironmental unsatisfactory IEG ratings, water was usually a small DegradationtoFosterGrowthandReduceInequality, component, and it could not be concluded from the World Bank, 2006; RepublicofPeruEnvironmental ICRs that the outcome rating was necessarily directly Sustainability:AKeytoPovertyReductioninPeru-- related to the water component. CountryEnvironmentalAnalysis, World Bank, 2007. 33 The Water Sector Board consists of the 6 regional 45 TheWorldBankStrategyforHealth,Nutrition,& managers, WSP, HR, DEC, IFC, MIGA, WBI, IEG, and PopulationResults, 2007. a representative of the Agriculture Rural Sector Board. 46 On average, the percentage of WSS projects The Agriculture and Rural Sector Board includes a approved containing the water resource management representative from the Water Sector Board. theme decreased from 38 percent (pre­2003) to 34 WaterResourcesManagementStaff--Human 33 percent (post­2003), with an annual increase ResourcesReport,Water Resources Management post­2003. Group, 2001 (internal) 47 The percentage of flood protection projects 35 This includes 95 internationally recruited staff, 48 approved containing the water resource management locally recruited staff, and 49 ETCs staff. theme decreased from 80 percent (pre­2003) to 61 percent (post­2003). 36 Energy,TransportandWaterSectors:AReviewof SkillGaps, Human Resources Networks Team, 2008 48 WaterandDevelopment:AnEvaluationof (internal). WorldBankSupport,1997­2007, CODE2009­0106, December 2009. 37 CoverageofWaterIssuesinCountryAssistance Strategy(background document), IEG, 2009. Part2|WaterResourceSectorStrategy 45 49 Financingon-sitesanitationforthepoor--ASix 64 The Bank has 10 environment, social and legal CountryComparativeReviewandAnalysis, Tremolet safeguard policies. OP 4.01 is the umbrella policy Sophie, Peter Kolsky and Eddy Perez, WSP and World for other safeguard policies (OP 4.12 on involuntary Bank, 2010. resettlement, OP 4.37 on safety of dams, OP 7.50 on international waterways, OP 4.11 on physical cultural 50 TheWorldBankGroup'sHydropowerBusiness resources, OP 4.04 on natural habitats, OP 4.10 on Plan:ScalingupforDevelopment, 2009. Indigenous Peoples, OP 4.09 on pest management, OP 4.36 on forests, and OP 7.60 on disputed areas). 51 At the World Water Forum in Mexico (2006), it was reported that out of 95 countries surveyed, 74 65 Contrary to risk factors (related to safeguards), percent either had IWRM plans/strategies in place, or there are no established "reward" factors. For had initiated a process for formulation for such plans/ the purpose of this analysis, factors such as the strategies. economic rate of return, number of beneficiaries, high water commitments, and high commitment of 52 See UNEP-DHI collaborating Centre on Water new infrastructure were used. Also, to account for and Environment compliance with the Strategy principles, a set of 12 53 Ibid. IEG. parameters was also used (related to the CAS, water resources management, water quality management, 54 Ibid. IEG. sector reforms, public private partnerships, NGO participation, Cost recovery, financial analysis, 55 Ibid. IEG. poverty related, stakeholder participation, gender, 56 RuralWatershedManagement--ThePowerof and M&E). Integration, Water P-Note 28, 2009. 66 Core indicators: water supply (Improved 57 For example, in Colombia, many water user groups community water points constructed or rehabilitated pay for watershed services; Costa Rica developed (number), new piped household water connections indices for biodiversity conservation and carbon (number), piped household water connections affected sequestration services that different land uses provide. by rehabilitation works undertaken (number), number of water utilities supported (number), number of 58 Croatia Coastal Cities Pollution Control and other water service providers supported (number)); Romania Pollution Control; and Sustainable Tourism Sanitation (Number of people trained to improve Development in Montenegro. hygiene behavior or sanitation practices, number of new sewer connections constructed, number of 59 WaterandDevelopment:AnEvaluationof improved latrines constructed; and irrigation and WorldBankSupport,1997­2007( CODE2009­0106, drainage (Area provided with irrigation and drainage December 2009). services, number of water users provided with irrigation and drainage service, Number of operational 60 TheNigerRiverBasin:AVisionforSustainable water user associations). Management, Water P-Notes 16, October 2008. 67 HealthImpactsfromWaterSupplyandSanitation 61 See WaterResourcesSectorStrategy,2003, page 3. intheMiddleEastandNorthAfrica, 2005; Agricultural 62 See WaterResourcesSectorStrategy,2003,Page22. WaterIssuesandApproaches, 2005; Making the Most ofScarcity:AccountabilityforBetterwaterManagement 63 Water,Electricity,andthePoor.WhoBenefitsfrom ResultsintheMiddleEastandNorthAfrica, 2009; Water UtilitySubsidies?, K. Komives, V. Foster, J. Halpern, andClimateAdaptation, 2008; RoadmapforUrban and Q. Wodon, World Bank, 2005. WaterSectorReforms, 2009. 46 SustainingWaterforAllinaChangingClimate 68 The Agro-Sylvo-Pastoral Exports and Markets Development Project, approved in FY09, is the single largest water project approved in Niger from FY03- FY09, with nearly 25 percent of the $40 million project allocated to water and irrigation sectors. The project appraisal document makes extensive references to the FY08 Irrigation Sector Review, which presented an overview of major constraints that hinder the full expression of the irrigation potential in Niger and provided strategic orientation for sustainable irrigation development in the future. 69 LessonsfromManagingLakeBasins--Measuring GoodGovernance, Water P-Notes 25, 2009. 70 Apart from the focus on water supply and sanitation services, relatively recent reforms supported by the Bank include the establishment and/or strengthening of user associations, public- private partnership in irrigation, and new legal and regulatory institutional frameworks to encourage private sector participation. 71 TheWorldBank'sExperiencewithPrivateSector InvolvementintheWSSSector, IEG, 2007. 72 Public-PrivatePartnershipsforUrbanWater Utilities, World Bank, 2009. 73 Public-PrivatepartnershipstoReformUrban WaterUtilitiesinWesternandCentralAfrica, P-Note 38, June 2009. 74 Seven of the projects involve OBA subsidies funded by IDA and IBRD, for a total OBA subsidy funding for the water sector of US$105.6 million. Twenty-one projects include GPOBA subsidy funding for a total of US$63.3 million. Part2|WaterResourceSectorStrategy 47 Part 3 World Bank Group Strategic Directions for the Sector, FY10­13 Part III shows that the Strategy adopted in 2003 is still very much at the core of the Bank's future work and defines what changes are needed to respond effectively to the complexities of the rapidly changing environment. The recommendations of the recent IEG evaluation on water projects can be accommodated within the framework of the existing Strategy. IEG called for the Bank to: (a) help clients and partners to ensure that critical water issues are adequately addressed; (b) strengthen the supply and use of data in water to better understand the links between water, economic development, and project achievement; and (c) monitor demand management approaches to identify which components are working and which are not, and build on these lessons. Part3|WorldBankGroupStrategicDirectionsfortheSector,FY10­13 49 1. Validity of the Water as an environmental problem but is also a Resources Sector Strategy development issue, with the water sector driving part of the solution for adaptation The current Water Resource Sector Strategy and mitigation to climate change. remains sound and relevant to address cli- While unforeseen, the sharp increase in ent needs. The issues that were identified food price in 2008 showed the continued by the Strategy (resource, access, capacity, importance of agriculture investment and use and environment) are still those that water as a key input to increase productiv- should be addressed today. As a result, the ity and ensure food security. The Strategy objective of the Strategy--to assist client noted that increased world food security countries to improve water resources man- has been one of the great development agement and development for sustainable achievements of the last 40 years, in part growth and poverty reduction--remains due to the contribution of irrigated agricul- relevant to client needs. The Strategy was ture. However, a changing global context, forward-looking, especially on topics such with global food prices more than doubling as population growth, urbanization, and from 2006 to mid-2008, and more than 100 climate change. But the external environ- million more people moving into poverty, ment is rapidly evolving. Three issues have added new urgency to improvements in gained more prominence in the international agricultural water management.75 The surge arena since 2003: (i) the role of water for in food prices was the result of a number of adaptation and mitigation for climate change demand and supply factors that converged post-Copenhagen; (ii) the centrality of agri- in 2008. Strong rises in per capita income in cultural water management for food security emerging economies raised the demand for in the aftermath of the global food crisis; and food, especially meat and the related animal (iii) the risk of not meeting the water-related feeds. The demand increase was ampli- Millennium Development Goals by 2015. fied by low global grains stocks and thin Climate change was discussed in markets. At the same time, supplies stag- the Strategy, five years before the Bank nated due to weather disruptions and rising would develop its Strategic Framework on energy and fertilizer costs. Despite declines Development and Climate Change. The from the peak prices of mid-2008, food Strategy recognized the relevance of climate prices in the medium term are projected to change for the sector and the complexity of remain higher than in the past, and likely to managing water resources when predictable become more volatile. and regular flows are low, and patterns of In spite of efforts from the international precipitation highly variable, under a chang- community to meet the water-related MDGs, ing climate. Since then, the understanding of the MDG sanitation target will not be met the impact of climate change has improved: by 2015. The Bank, other multilateral banks, there is now scientific evidence that the and bilateral donors have invested mas- dynamics of the hydrological cycle is intensi- sively in water supply and sanitation, but such fying and accelerating due to climate change, investments are necessary just to keep pace with notable effects on water (although not with a growing global population. IBRD/ quantified). It is now acknowledged that IDA increased its lending for WSS by more climate change cannot be considered solely than threefold, from $1.3 billion in FY03 to 50 SustainingWaterforAllinaChangingClimate $4.3 billion in FY09. 76 Bilateral donors more than doubled their support for WSS, from $2.2 billion in 2003 to $5.5 billion in 2008.77 A large fraction of the budget for large global The current Water Resource programs has been devoted to sanitation, including $21 million from WSP. Other play- Sector Strategy remains ers focusing on sanitation include the Gates sound and relevant to address Foundation, which has recently made a policy client needs. The Strategy was decision to focus on sustainable sanitation services, and UNICEF with its work on sanita- forward-looking, anticipating tion access for the poor. Most countries are on the issues of climate change track to meet the water supply MDG target. and urbanization before The sanitation MDG target has fallen behind. they were at the forefront of global discussions. But 2. Core Business the external environment is and Areas for Increased Attention rapidly evolving. To address the large unfinished access agenda, the Bank will continue to focus on infrastructure for water services. The challenge of meeting access needs is large: the costs of exploitation and supply are ris- other infrastructure, it will seek to support ing: the easiest investments for exploiting clients in better investment planning and water resources have often already been operation. The Bank will favor irrigation made, viable dam sites are harder to find, projects that integrate water productivity, water tables are falling, and the distances and water supply projects that link water between the point of abstraction and water use to resource management, over stand- use increasing. Costs have also been pushed alone irrigation and water supply projects. up by the growing need to treat water However, the actual mix will depend on before use. clients demand and country strategies. The Bank will monitor the extent to which water Efforts to link the quantity and quality of services projects adopt a more integrated water to infrastructure investments in ser- approach to water resource management by vice delivery will be continued. For example, tracking over time the percentage of water flood-protection investments that target projects containing a water resource man- construction of infrastructure to reduce vul- agement component. nerability will be complemented by a greater focus on strategic planning. While the Bank Technological advances will present new will not prioritize an increase in wastewater opportunities to build client countries' operations (sewerage, wastewater treatment capacity for results-based decision-making. works, and wastewater disposal) relative to The Bank will provide advisory services to Part3|WorldBankGroupStrategicDirectionsfortheSector,FY10­13 51 facilitate the integration of technologies action, and a driving part of the solution. on technological advances (e.g. remote The Strategy provides sufficient ground sensing, early flood warning) in new proj- for scaling up engagement in this area. ects. Several regional units will pilot new It will require strengthening the links approaches to take advantage of these new between water, environment, and energy sources of information, tackling these with and further investment in infrastructure existing data sources in projects. Bank and agriculture. The Bank will support assistance in building this capacity in cli- countries scaling up programs by leveraging ent countries will respond to client needs climate finance, including financing for more reliable information for decision- from the Climate Investment Funds and making. Increased efforts in this area will other sources. also address IEG's recommendation on strengthening the use and supply of data. The Bank will continue to strengthen the In the context of strengthening information linkages between water, environment and on the impact of Bank projects, the Bank energy. Among others, future activities will continue to develop new core indica- include the preparation of an analytical tors, and implement those for water supply framework for investment planning under and sanitation projects. It is also expected uncertainty, a new framework of economic that the implementation of results-based analysis, an assessment of the greenhouse investment lending will support a greater gas impact of dams and water utilities, focus on results. and a study of the role of hydropower on But the external environment is rapidly environmental flows. As part of its commit- evolving and the water agenda is grow- ment to the implementation of the Strategic ing in complexity, making it necessary for Framework on Development and Climate the Bank to be flexible and responsive to Change, the Bank has begun developing a new challenges. The Strategy was forward screening tool for water projects and will looking, anticipating the issues of climate explore how it can be implemented in water change and rapid urbanization before they projects. The screening will take various were at the forefront of global discussions. forms, depending on the sub-sector, the It will, however, be critical to strengthen country, and the vulnerability of the infra- the core business of the Bank--infrastruc- structure. Water will also be an important ture for access, integrated water resource component of the new environment and management, capacity for results-based energy strategies (under preparation). decision-making--with an increased focus on three areas: (a) water for climate Adaptation to climate change will become a change adaptation and mitigation (b) agri- key driver of Bank investments and engage- cultural water management and (c) MDG ment. Ongoing efforts will be strengthened sanitation targets. to address climate variability in Bank proj- ects through improved storage, emergency Managing water for climate change adapta- response preparedness, flood control, water tion and mitigation is a development issue. management, and coastal zone management. Going forward, the Bank will position Well-functioning hydromet and early warn- water more actively at the core of climate ing systems, sustainable infrastructure, and 52 SustainingWaterforAllinaChangingClimate institutional arrangements for coordinated not have any direct involvement. Efforts action will have to be an essential part of toward mitigation will also include encour- an integrated flood management agenda. aging the energy efficiency of water Adaptation in water will also address the supply systems (replacing pumps) as well challenge of "right-sizing" already con- as emissions reductions related to water structed hydraulic infrastructure; the fill (wastewater treatment technologies to rates in dams that were designed based on reduce methane emissions and mangrove past rainfall trends are projected to be seri- carbon sequestration). ously affected, depending on which of the rainfall scenarios hold true. Each of these Supported by the recent World Bank Group scenarios has very different implications for Agriculture Action Plan, the Bank will scale- agriculture water management, groundwa- up its assistance in agriculture in general, ter exploitation, and water supply and sani- and agricultural water management in par- tation. Also, increased rainfall variability ticular. Support for irrigated agriculture will and changes to runoff and flooding patterns include: (1) market-oriented irrigation based may require reviewing the incentives to col- on public-private partnerships; (ii) indi- laborate among countries that share water- vidual smallholder irrigation to high-value courses. Water diplomacy may have to move markets; (iii) small-scale community-based beyond benefit sharing toward risk sharing. irrigation for local markets; and (iv) mod- Integrating climate change into the water ernization of existing large-scale irrigation. agenda will introduce additional uncertain- The Bank will focus both on expand- ties in policy, planning and implementation ing irrigated areas where feasible, and of long-lived projects, affect the manage- improving water use efficiency of existing ment/infrastructure mix, and increase the schemes. Sustainable water management complexity of Bank interventions. will be supported through local water users associations, incorporation of broader river- In terms of mitigation, the Bank will scale basin management, and through improved up support for hydropower and look for use of shared watercourses, including sup- opportunities to improve the efficiency of port for cooperation between different water supply systems. Hydropower repre- riparians. Greater attention will be paid sents the largest source of renewable and to strengthening the links between the low-carbon energy. The WBG Hydropower different water using sectors, including Business Plan projects to expand opportu- multi-sectoral support for water manage- nities for hydropower projects in all regions ment (e.g. multipurpose hydro). Support for of the world, not only those most active rainfed agriculture will focus on improved in the past. The big untapped potential in water control, including broader watershed developing countries amounts to more than management. This will complement efforts 1,300 GW of unutilized hydropower. While to invest in more drought tolerant crop the WBG's actual investment will remain a varieties. Investments in improved water relatively small share of total hydropower management can be catalytic--reducing the investments worldwide, triple bottom line barriers to adoption of otherwise costly soil practices are increasingly being adopted and crop management practices by increas- by investments in which the WBG does ing the returns to these investments. Part3|WorldBankGroupStrategicDirectionsfortheSector,FY10­13 53 In an effort to put the sanitation Millennium 3. Operationalization of Development Goals back on track, the this Strategic Vision Bank will continue to support low-cost onsite sanitation.78 Experience shows that To monitor progress in implementing the MDG target of reducing the propor- the Strategy, a new results framework of tion of people without access to improved the Water Sector Strategy was developed. sanitation by one half by 2015 can best be While the Strategy adopted in 2003 did addressed through low-cost onsite sanita- not include a results framework, the Bank tion. Such efforts require a good deal of developed such a framework in this report high quality software (e.g. policy dialogue, along the three strategic priorities of the technical assistance, and sharing of experi- Strategy--integrated water resource man- ence), but not necessarily large borrowing. agement for sustainable use, infrastructure Other factors, such as IDA ceilings and for access, and client capacity for results- reluctance from client countries to bor- based decision-making. A set of indicators row for software make a lending target for for the Bank, IFC and MIGA, was identi- Bank activities in sanitation inappropriate. fied, with baselines and targets established The WBG will contribute by funding or for the next implementation period. Such co-funding critical technical assistance to framework links the overarching objective promote the basic access agenda. of the Strategy with WBG achievements, and will allow assessing whether and how To respond to growing needs from client the Strategy met its goals by the end of the countries, World Bank Group water commit- implementation period. ments, led by IDA and IBRD, are projected at between $21 and $25 billion over FY10­13. 3.1 Guiding Principles IDA/IBRD commitments are projected to grow steadily from FY10­13. IFC is preparing The guiding principles of the Strategy a new Business Plan, which will focus on five remain valid. The Bank will continue to be investment areas (water demand manage- guided by the principles articulated in the ment and efficiency, wastewater treatment Strategy, including pursuing an integrated and re-use/sanitation and solid waste, water approach to water resource management, supply, distributed services, and innovative adopting a balanced approach to infrastruc- technologies). MIGA hopes to continue to ture and management, bringing corporate work together with its existing clients to sup- attention to more risky projects with port more water and hydropower projects. At long-term benefits, and following the the same time, MIGA will endeavor to estab- "principled pragmatic approach" on water lish partnerships with new private investors resource management. and clients in this sector, support projects in The Bank will continue to follow the more countries and expand into new sectors "principled pragmatic" approach of the such as seawater treatment. Strategy on water pricing, balancing effi- ciency considerations with accountability, concerns for the poor, and the political economy of reform. At the project level, the Bank will continue to focus on cost 54 SustainingWaterforAllinaChangingClimate TABLE 3 ACTuAl AnD projECTED WATEr CoMMiTMEnTS uS$ Billions Actual Projections* FY06­FY09 FY10­13 FY10­13 Actual LowCase HighCase WorldBank(IBRD/IDA)1 15.3 17.2 20.3 IFC 2 2.4 3.1 3.8 MIGA 3 0.3 0.3 0.4 World Bank Group 18.0 20.6 24.5 1 WorldBankprojectionsarebasedontheprojectionofINFRAtargetsthroughFY13, withthewatersector(includinghydropower)maintainingitshistoricalshareof infrastructurelending(31%fromFY06­FY09).Thisestimateisalsoconsistentwith growthprojectionspresentedintheWBG'sAgricultureActionPlanandtheWBG HydropowerBusinessPlan,whichrepresentthetwosignificantareasofgrowthinthe Bank'sWaterBusiness. 2 IFCprojectionsarebasedonIFCBusinessPlan(draft).FY09actualfiguresreflect IFCnewmethodologylookingatwaterprojectsbeyondinfrastructure(CINdept.)and includingwatercomponentsinagribusiness,manufacturingandhydropower. 3 MIGAprojectionsarebasedontheMIGA'sBusinessPlan,FY10­12andthehistorical shareofwaterandhydropowersectorguaranteesfromFY06­09. Source: WorldBankGroup Part3|WorldBankGroupStrategicDirectionsfortheSector,FY10­13 55 recovery in water projects. Through a learnt on cost recovery from past projects, series of projects, the Bank will support will help to inform on-going policy discus- the gradual coverage of costs, starting with sions on the efficiency (and conservation) of O&M costs. To ensure that cost recovery is water use. being addressed in each project, the Bank To achieve sustainability, the Bank will will conduct a more thorough review of the continue to focus on the quality of its financial aspects of water projects (including engagement. The Bank will continue to the identification of subsidies and agreement improve the performance of the water port- with all stakeholders on how such subsidies folio (in terms of outcome ratings, realism, will be funded), strictly enforce the projects' pro-activity and reducing the number of financial covenants related to cost recovery, projects at risk). This is all the more impor- and pay more attention to financial issues tant given that there has been a significant in water projects in general. Lessons learnt increase in the number and size of water from 40 water PERs will be examined with a projects, with significant back-loading of view to developing a standard methodology project design in project preparation. The to enhance their effectiveness in engaging Bank will continue to focus on the quality of client countries on the allocation of fiscal its engagement in the sector through regular resources and financing of water services. portfolio monitoring. This work, in conjunction with the lessons 3.2 Staffing and Skills The Water Anchor Unit will consider options for providing corporate support to fundamental water reforms in some client countries, bringing world-class strategic The Bank will position water advice to support country teams. This will be part of a Bank-wide reform to establish more actively at the core global-expert practices in each sector.79 of climate action, and a These practices will operate as integrated, driving part of the solution. Bank-wide entities capable of recruiting and developing the best talent, manage knowl- It will require strengthening edge generation and circulation across the the links between water, Bank, and strengthen the networks with key environment, and energy knowledge centers across the world. The Bank will address the issues of staff- and further investments in ing and availability of appropriate expertise infrastructure and agriculture. in three ways. First, the Bank will adopt The Strategy provides a process of strategic batch recruiting. A recent Bank-wide matrix working group on sufficient ground for scaling mobility recommended that Sector Boards up engagement in this area. take a corporate view regarding strategic staffing, and the Water Sector Board was chosen as one of the three Sector Boards to 56 SustainingWaterforAllinaChangingClimate pilot the reform in staffing and HR manage- the link between CWRAS and CAS, the ment. Building on the recommendations Bank will develop a rapid assessment tool from the recent skills review of the sector, that can feed into the CAS and Country the Water Sector Board will be piloting Economic Memorandum (CEM) discussions batch recruitment; thereby changing the before a full CWRAS is undertaken. Water way the sector (and the Bank) operates by PERs and other analytical instruments will approaching recruitment in a more collegial continue to support the dialogue with cli- way rather than case by case. Second, the ent countries on the issue of sustainability Bank will pursue strategic secondments of water utilities and tariffs. The Bank will from key countries and organizations that explore the new instrument that was devel- have expertise in the emerging technical oped by WBG/McKinsey can be applied in issues. Third, the Bank will maintain expert specific countries to support policy or lend- support teams--forerunners to the global ing initiatives of key strategic importance. expert teams recently established in the Political economy analysis will be Bank--that will call on global experts outside used more systematically to support sector the institution. engagement in trans-boundary and GAC Other proposals that are currently issues. To assist clients to improve develop- discussed in the water practice include ment impact and reduce leakage of funds, integrating reviews of skills as part of the the Bank will sustain its support for main- regular functions of the Sector Board. These streaming GAC in the water sector through annual reviews would form the basis of an direct support to operations, advisory servic- annual operational and staffing strategy es and knowledge management. Instruments and result in a specific recruitment strat- and approaches introduced under the Bank- egy for the ensuing six months. Sustained wide Investment Lending Reform will need efforts to promote training of staff through to be tailored to the sector, and in particular, various channels, including the Sustainable the Operational Risk Assessment Framework Development Learning Program, Water and results-based lending instruments. Orientation Course, and the six water-relat- The WBG will also explore opportuni- ed thematic groups, will also be pursued.80 ties presented by private finance, including mobilizing private financing for water 3.3 Innovative Instruments utilities, and reforming public water utili- ties to improve their financial management While the institutional settings and gov- through corporatization and similar struc- ernance structure of most client countries do tural efforts. Innovative use of guarantees, not encourage integrated planning, develop- such as Partial Risk Guarantee type struc- ment and management of water resources, it ture to backstop government action or will remain critical for the Bank to support inaction, or specific regulatory risks, will a holistic dialogue with client countries on also be explored. water issues. At the country level, the Bank will continue to use instruments, such as CWRAS, water PERs and SEAs as strategic tools to structure dialogue and engagement on water in an integrated way. To strengthen Part3|WorldBankGroupStrategicDirectionsfortheSector,FY10­13 57 3.4 Institutional Structure and needed to adapt to climate change, the Bank's Incentives System repositioning toward addressing global chal- lenges, such as climate change, will offer As part of the broader institutional reform new opportunities to promote further the effort under way, the Bank will continue to cross-thinking and align the structure and seek ways to address cross-cutting issues incentives system to respond more effectively and promote cross-sectoral outputs. Several to a complex, rapidly evolving environment. regional units, such as AFR and ECA, have been experimenting with various approaches 3.5 Corporate Engagement on to encourage inter-sectoral cooperation and global/regional issues promote cross-sectoral outputs. For example, in ECA, the program team leader for water While the Bank model is geared toward resource management reports to both the effective engagement at the country level, sector manager of water supply and sanita- it will also have to find ways to respond to tion, and the sector manager of irrigation. issues that cannot be tackled at the country Lessons learnt from these pilots will con- level. Traditionally, the demand for water tribute to the on-going institutional reform has been determined by forces and processes effort, involving knowledge, matrix review, generated by human activities: demograph- HR and decentralization. Since it is now ics, spatial population shifts, and increasing increasingly recognized that IWRM is the consumption that comes with rising per cap- best available model to increase the resilience ita incomes. Those factors have fallen mostly within country boundaries. With the grow- ing recognition of the relevance of climate change for the sector, there has also been recognition that the sources of pressure on water lie beyond country boundaries, making the task of managing resources appropriately The Bank's repositioning even more complex. Engagement in global toward addressing global or regional issues, such as water-sharing arrangements in international river basins, challenges, such as climate engagement in major dams (e.g. hydroelectric change, will offer new power in the Congo basin), and more spe- opportunities to promote cific issues, such as drainage of peat land in Indonesia, cannot be tackled at the country further the cross-thinking level. By focusing exclusively on a country- and align the structure level model, there is a risk of losing sight of and incentives system to these issues which may require attention, not only from country directors, but also respond more effectively from senior management. Strategic corporate to a complex, rapidly decisions will need to be made on whether evolving environment. or not to engage in these issues of global importance with support from all parts of the WBG. 58 SustainingWaterforAllinaChangingClimate Endnotes 75 On biofuel production, see LiquidBiofuels:A BackgroundBrieffortheWorldBankGroupEnergy Strategy, Kojima Masami, 2010 76 The World Bank business in water supply is guided by the WaterSupplyandSanitationSector BusinessStrategy:FY2003­07(September 2003), update (Sector Strategy Implementation Update FY05, CODE2005-0100, November 8, 2005) and remains valid. 77 OECD, International Development Statistics (IDS) online databases, accessed January 2010. 78 Consistently with the 2010 Hashimoto Action Plan II, UN Secretary-General's Advisory Board on Water and Sanitation, to galvanize the international development community in sanitation. 79 KnowledgeStrategy (Draft Board paper), Knowledge Strategy Group, World Bank, 2010. 80 World Bank Institute is developing a new course on integrated water resource management for client countries. Part3|WorldBankGroupStrategicDirectionsfortheSector,FY10­13 59 Annexes Annex A 1. Brazil Implementation of the Strategy on Issues the Ground--Seven Country and Despite Brazil's huge endowment of water Regional Cases resources and significant achievements The WBG has been working with cli- over the last 50 years in water resources ent countries to address a wide range of development and water services expansion, water issues, from access to drinking water, important challenges remain. While the to supporting cooperation among riparian country is blessed with significant water countries, nurturing institutional reforms, resources, they are unevenly distributed addressing risks of floods and droughts, across the territory. Furthermore, there restoring ecosystems and promoting sustain- is an institutional complexity to the legal able irrigation. Seven country and regional framework governing water in Brazil which, cases that were discussed in the Strategy will through the country's federalist structure, be used to illustrate how the Strategy was provides important roles to federal state and translated into Bank actions (Brazil, Central municipal governments in different aspects Asia, Andhra Pradesh, Nigeria, Philippines, of water resources management (WRM) Yemen, and Nile Basin Initiative). Although and water supply and sanitation (WSS). The the Strategy did not cover IFC and MIGA, federal government regulates concessions efforts have been made to report on IFC and regarding federal rivers, for example, but MIGA activities, and how they have comple- has no control over water use at the basin mented Bank's activities as well. The country or state level. Water transfers are highly cases show that the challenges facing differ- political, and there are no established market ent countries and regions vary widely, and mechanisms to minimize conflicts. Water that WBG support has varied widely accord- scarcity is prevalent in the northeast region ingly. This diversity notwithstanding, it is and in some large metropolitan areas, such clear that in most settings, WBG engagement as São Paulo. In urban areas, degradation has involved a mix of financing, knowledge of water quality is a major issue as a conse- and capacity building. quence of untreated wastewater discharges It is important to note that WBG activities from municipal, industrial, and agricultural in a particular country are the outcomes of a users. Water also plays a key economic role combination of three factors: (a) the nature of through the development of hydropower the challenges in the country; (b) the Country and navigation infrastructure. However, Assistance Strategy, in which the govern- decisions concerning water allocations to ment and the Bank/WBG agree on priorities hydro-power schemes take place without and approaches; and (c) the sector strategies. specific rules regarding environmental and While the sector Strategy has provided the navigational use or compensation, often overarching framework to guide Bank assis- leading to regional disputes. Furthermore, tance in the sector, these country and regional hydro-power schemes are not leveraged to cases also show that the Bank has responded achieve a financing role for river basin devel- flexibly to address country needs and ensure opment. Irrigated land has increased by at ownership of assistance programs. least one third in Brazil over the last decade. AnnexA|ImplementationoftheStrategyontheGround 61 BRAzIL iBrD 32193 Such infrastructure development and ties to those floating shares on the national allocation of water across competing uses and international stock exchanges, and from often involves complex trade-offs between public to private concessions at the municipal environmental conservation and economic level. The 2007 Federal WSS Law brings long- development. The financial resources awaited clarity to the roles of different levels required to meet universal coverage of WSS of government in sector regulation, planning services far exceed recent investment levels. and service delivery. However, institutional Nevertheless, Brazil has made many impor- capacities at state and local levels remain tant legal and institutional reforms in the weak in many cases, hindering further water sector since the mid-1990s, and their substantial improvements in water manage- National Water Agency (ANA) is considered ment. Meeting the challenges related to the to be a world-class water management institu- country's water resources and water services tion. In terms of WSS service provision, Brazil requires further strengthening of policies and has a full spectrum of models and of sector institutions, replication of successful institu- efficiency, ranging from world class to very tional models, as well as investment in viable weak utilities, from fully public state utili- infrastructure development projects. 62 SustainingWaterforAllinaChangingClimate Proposed Directions for Bank where there was strong commitment to Engagement in 2003 implementing water reforms. From FY03 to FY09, the water sector The 2003 Strategy highlighted four main portfolio included 16 projects, representing lines of action for Bank assistance to Brazil: US$949 million in investment lending. The (i) continued support through investment WRM portfolio accounted for US$542 mil- and advisory services to WRM programs in lion. At the federal level, the Bank-financed states that undertake water reforms, with Federal Water Resources Management focus on the Northeast; (ii) continued sup- Project (PROAGUA) has been the main port to complete reforms in the WSS legal instrument to provide support to ANA and and regulatory framework, with particular to improve water resources management focus on efficiency, expansion of coverage in the dry and impoverished northeastern to the poor, and reduction of water pollution states with some investments in priority in selected urban river basins; (iii) support infrastructure, including the rehabilitation for developing institutional arrangements and construction of dams and pipelines. and financing priority investments in a Engagement with selected reforming states, few stressed river basins, with focus on the such as Ceará, Bahia, and Rio Grande do Paraiba do Sul and São Francisco river basins; Norte, has been maintained through state and (iv) support to ANA's federal programs specific investment lending operations and institutional strengthening by helping that also linked infrastructure investment the agency to develop adequate partnerships to improved WRM (legal and regulatory and arrangements with states, with a focus improvements, information systems, state on improved water-rights administration at and river basin planning, and institutional federal and state levels and more effective strengthening). A new policy-and output- water management in priority basins. The based operation in Bahia state is under 2003 Strategy also stressed that many in the preparation that combines institutional and Brazilian water sector wanted the Bank to be investment activities in both WRM and WSS. engaged in the more complex and difficult Over the same period, the WSS portfolio issues, including major hydraulic infrastruc- comprised US$407 million: US$55 million ture projects, where the value added by the was for federal operations (PMSS 2 and Bank was perceived to be higher. PROSANEAR-TAL), US$211 million for state operations (Espirito Santo, Pernambuco World Bank Group Achievements Prometropole, and Federal District), and over FY03­09 US$141 million for municipal operations (Betim, Uberaba, Teresina, Recife and São Over FY03­09, Bank assistance in the Luis). PROSANEAR helped develop and test water sector in Brazil has been consistent methodologies for undertaking the prepara- with the above directions. The Bank has tion of participatory engineering designs maintained a successful parallel track for integrated WSS and urban development strategy associating support to the federal interventions in densely occupied, low- government in its planning efforts and insti- income urban communities throughout the tutional reforms (for both the WRM and country. PMSS contributed to the develop- WSS sectors) with support to selected states ment of national policies, the undertaking of AnnexA|ImplementationoftheStrategyontheGround 63 cutting-edge sectoral analytical work, coor- IFC has undertaken a number of activi- dination among stakeholders, supporting the ties in the Brazilian water sector between national WSS benchmarking database, and 2003-09, including the following: (i) Andrade the carrying out of an important role in the GutierrezConcessõesS.A. signed a US$50 formulation and approval of the Consortia million deal in December 2007 comprising Law and the Federal WSS Law, among other a US$25 million A loan and a US$25 million endeavors. The Bank has also engaged in a standby facility to support its PPP activities new generation of state and municipal proj- in their water supply and wastewater collec- ects with an integrated, watershed-oriented tion and treatment programs throughout the approach to urban water management and country; (ii) an advisory engagement with pollution control in a variety of states (São the federal government to assist in structur- Paulo Metropolitan Region Espírito Santo, ing its Pontal PPP irrigation scheme in the Federal District, Pernambuco Water and semi-arid northeast, which should create Sergipe Water) and municipalities (Betim, some 22,000 direct and indirect jobs; and Uberaba, Teresina and Recife), as well as to (iii) a recently signed commitment with an innovative output-based project in water FozdoBrasil to provide US$75 million in scarce basins throughout São Paulo state. At financing in wastewater treatment for reuse the other end of the scale, it is financing a schemes around the country. project in Amazonas State to develop a new Recent activities of the World Bank/IFC WSS service model for small towns in the Subnational Financing Group offer a prom- state's interior. ising line of business for supporting state The World Bank portfolio has also includ- and municipal WSS utilities in standalone ed two environmental DPL operations with operations (Santa Catarina and Campinas) WRM and WSS components. The first in and in complementary operations to sup- 2004, in the amount of US$502 million, sup- port Bank lending (Sergipe and Rio Grande ported the preparation of the National Water do Norte), encompassing macro and micro Resources Plan (PNRH) and the increased metering programs on the water-supply side, use of bulk water charging as a water man- and wastewater treatment and effluent reuse agement instrument. The second DPL in the sanitation sector. MIGA have had no operation, approved in 2009 in the amount activities in the water sector in Brazil during of US$1.3 billion, focuses the water-sector the MCIPR evaluation period. supported actions on water quality manage- Following a period of economic stabil- ment and wastewater treatment. PRODES, the ity, Brazil launched its flagship Growth output-based pilot wastewater collection and AccelerationProgram (PAC) in early 2007 treatment program which had financed 42 which significantly increased federal invest- wastewater treatment plants by 2008, and the ment in infrastructure, including large and National Water Quality Evaluation Program complex water infrastructure as well as (PNQA), which was launched in 2008 to WSS service provision. The Bank played an improve the knowledge base for policy making important advisory role regarding some of and implementation regarding water pollution the major water infrastructure being imple- control and water quality management, are mented under the PAC, including technical also supported by the Bank DPL for environ- assistance on designing the Rio Madeira mental management approved in 2009. hydropower auction process and recom- 64 SustainingWaterforAllinaChangingClimate mendations regarding the São Francisco Interbasin Water Transfer project. Also in 2007, Brazil passed a national WSS law that clarified the sector's planning, regula- Structural reform processes tion, service provision, and other roles and have their own pace and timing responsibilities for each of the three levels and require participation of of government in the sector. The Bank- supported federal PMSS program played a a wide range of stakeholders key role in contributing to the different draft as well as firm government versions of the long-awaited WSS law. From commitment at different US$11.4 million of participatory engineering designs, the Bank-financed PROSANEAR- levels. It is important to TAL leveraged US$600 million of PAC address institutional objectives investments in integrated urban WSS and in the context of long-term complementary services in over 30 poor urban communities throughout the country. programmatic engagements, The TAL also produced a manual for the rather than individual projects. preparation of participatory engineering designs that was taken as the basis of the federal government's own manual for pre- paring such interventions for PAC funding. In the irrigation sector, a national policy and ity, which presented conclusions from the law is under discussion in Congress aimed Bank's involvement in urban water pollution at improving public investment, efficiency, control projects in the country, and a series and sustainability of irrigated agriculture. of BNWPP-funded studies including one Within this context, the federal government that analyzed institutional models for small has been preparing, with technical support town and rural WSS service provision in from the Bank and IFC, the first two irriga- the country. In 2004, the Bank prepared the tion PPP projects in the country. IrrigatedAgricultureintheBrazilianSemi- Between 2003 and 2005 the Bank pro- AridRegion:SocialImpactsandExternalities duced the BrazilWaterSeries with a number publication and, in 2008, launched the ESW of technical reports covering themes such EnvironmentalLicensingforHydroelectric as: the effectiveness of decision support ProjectsinBrazil:AContributiontothe systems for water rights administration in Debate. The Bank-financed PMSS has Brazil; the analysis of integrated urban water produced a number of strategic analytical resources management and related WSS, studies and think pieces (including those drainage, land-use and other issues in the concerned with the costs of universal WSS Metropolitan Region of São Paulo; WRM and service provision; PSP in the Brazilian WSS WSS policy recommendations for federal and sector; and condominial sewerage). This state governments; and analysis of national compendium of studies have provided valu- and international experiences of inter-basin able inputs to Bank operations as well as water transfers. The Bank also produced a contributing to dialogue with sector stake- report, Brazil:managementofwaterqual- holders at the different levels of government. AnnexA|ImplementationoftheStrategyontheGround 65 Lessons Learnt reviewed in IEG's 2007 PPAR, presenting, interalia, the following conclusions: (i) The As emphasized in the 2003 Strategy, water PQAs laid the groundwork for a new approach reforms take time and persistence to succeed. to managing water quality in large urban The Brazilian case clearly shows that struc- areas, breaking the conventional mold and tural reform processes have their own pace representing important new standards of and timing and require participation of a wide policy and practice in Bank assistance to the range of stakeholders as well as firm govern- water sector in Brazil, establishing the rudi- ment commitment at the different levels. In a ments of global best practice in urban WRM federative and highly decentralized country involving the poor; (ii) The projects moved like Brazil the reform process can be particu- the emphasis to a basin-wide scale to achieve larly complex and time consuming. Thus, it is quality and efficiency objectives in dense important to address institutional objectives urban areas, while learning that the water in the context of long-term programmatic quality challenges were inextricably linked engagements, rather than individual projects; with urban poverty issues; (iii) Brazil is still this will require persistence, patience, follow decades from consolidating the approach up and flexibility in the Bank's assistance. to sustainable urban water resources and The main water issues in Brazil will not land use management; (iv) No separate proj- be resolved without stronger institutions at ect approach, be it slum upgrading or WSS state and municipal levels improving technical alone, has succeeded any better than the capacity, credibility and stability. Incentives PQA hybrids in regard to water quality objec- for efficiency and adequate regulation are also tives; and (v) The projects contributed to an issues that the water sector needs to address. understanding of how to manage difficult Assessments of climate change impacts on intersectoral issues involving the many actors the sector, and the development of adaptation in Brazilian metropolises;. and mitigation measures need consideration, Despite positive experience of cross- with emphasis on critical climatic regions and sectoral work in the Brazil water portfolio, on priority national rivers and watersheds. the Bank's ability to work across sector silos Fiscal space for expanding expenditures in is an ongoing challenge that requires further public administration is very limited and effort, including a change in incentives and fiercely disputed with other important sec- internal processing practices including: (i) the tors. Within this context a gradual approach shared mapping of projects across the water must be followed and, as highlighted in the and related portfolios so that sector units get 2003 Strategy, selectivity and sequencing are balanced recognition; (ii) recognition for staff extremely important. Principled pragmatism working on projects not mapped to their unit; and patience are also often required in Brazil and (iii) increased use of local staff who find to maintain dialogues between changes of it easier to break across silo boundaries. administration on both the side of the govern- ment and within the Bank. Directions for Future World Bank The first generation of Bank-financed Water Quality and Pollution Control Group Engagement (`PQA') projects in São Paulo, Curitiba, Belo An updated water sector strategy was Horizonte and Espirito Santo were positively prepared by the Bank as part of the prepara- 66 SustainingWaterforAllinaChangingClimate tion of the 2008­2011 Country Partnership the availability of bankable projects (in terms Strategy (CPS). The strategy has defined six of quality, technical viability and cost benefit main lines of business and opportunities analysis), and the ability to bring them to for Bank engagement: (i) improving water fruition, taking into account the generally resources management, (ii) expanding and low technical capacity of executing agencies improving water supply and sanitation, (iii) and the lengthy administrative processes developing more effective irrigation, (iv) (at feasibility study, design preparation, bid- integrating water and urban environmental ding and environmental licensing stages). management, (v) supporting multi-sector, Strengthening public sector decision-making integrated approaches to complex infra- and executing agencies' capacity and stream- structure, and (vi) addressing climate lining of procedures are among the key change and other issues of regional and solutions to these problems. Third, some global concern. regulatory and policy gaps still need to be Within and across each business line, addressed to complete the reform agenda and the Bank will focus on the following the- to consolidate the policy framework in some matic issues: (i) strengthening of policies, sectors in order to eliminate uncertainties regulatory frameworks and institutions; (ii) and make better use of public funds to lever- improving sectoral and investment plan- age private investment. ning and project monitoring instruments; Within this context, the federal gov- (iii) introducing innovative service delivery ernment and the Bank have started the models (for example, PPPs in irrigation and preparation of a new US$98 million lending in urban WSS, corporate governance and operation in the water sector, Interaguas, to access to financial markets by state owned help improve the federal government's capac- operators, results-based approaches for ity to promote more effective and productive efficiency gains, models to expand services use of water resources by tackling a number to the poor especially in small towns and of the key challenges described above (in rural communities); and (iv) international water resources management, water sup- exchange of best practices, especially related ply and sanitation, irrigation, hydropower to economic instruments. and navigation), with a focus on piloting As directed in the CPS, Bank assistance such integration in selected priority national at the federal level will be largely TA-based river basins. The Bank should support the with the primary objective of strengthen- development of improved corporate gov- ing the enabling environment to allow the ernance generally in the water sector and PAC objectives to be substantially met. First, of new corporate WSS utility models more there is a need for a consolidated approach specifically, drawing on, for example, the to infrastructure planning to coherently successful experiences of SABESP's and and systematically identify and prioritize COPASA's public-private governance model. long term infrastructure and management In addition to the second generation of PQA needs. Sectoral plans have commonly been projects (notably Espirito Santo additional structured in isolation of each other, and financing and São Paulo Integrated Water better coordination among the multiple enti- Management `Mananciais'), a new generation ties involved in infrastructure in Brazil is of state level operations have been prepared required. Second, there is a need to increase in Pernambuco and Sergipe that incorpo- AnnexA|ImplementationoftheStrategyontheGround 67 rate a broad and comprehensive approach has obtained GW-MATE funds to undertake to integrating WRM, urban and rural WSS, a study of urban groundwater in selected irrigation, solid waste management, and Brazilian cities with the objective of provid- urban drainage, and that include integrated ing lessons and recommendations for policy planning, sector regulation, and corporate definition; the Pernambuco and Sergipe State governance of sector entities. Water projects include studies and management At the state and municipal levels, tools for groundwater; (iii) Sanitation--Many operations would continue to support a com- of the Bank's ongoing and planned operations bination of infrastructure investment and include institutional and investment activities improvements in service delivery, as well as in related to urban and/or rural sanitation includ- policy, regulations, and institutions. There are ing São Paulo Reagua and Mananciais; Bahia five operations (US$529 million of lending) SWAp, Espirito Santo, Sergipe, Amazonas already in advanced stages of preparation, and Pernambuco state projects and Teresina, under negotiations, or recently approved by Uberaba, Recife and São Luís municipal opera- the Board: São Paulo Mananciais (US$129 tions; and (iv) SupplyandUseofData--the million), São Paulo Reagua (US$78 million), proposed federal Interaguas project will support Pernambuco Water (US$190 million), Sergipe ANA's national water resources information Water (US$72 million), and Bahia Water and system and the Ministry of Cities national WSS Health SWAp (US$60 million). benchmarking database, the Espirito Santo state In regard to high-risk high-reward proj- project is using an information system to inform ects, current demand for Bank support at the public and monitor/regulate the WSS sec- the federal level is for technical assistance tor, and Pernambuco and Sergipe state water as the GoB has sufficient resources to operations will support the development of state finance its priorities. The Bank will contin- water resources information systems. ue to provide technical assistance to prepare and deliver PPPs to help Brazil further real- 2. Central Asia ize its irrigation potential. Examples of Bank planned and ongoing Issues activities in Brazil that will respond to a num- ber of IEG's recent recommendations include The Central Asia sub-region comprises five the following: (i) CoastalZoneManagement-- countries with a total population of 59 million the proposed Sergipe Water Project will over an area of 4 million square kilometers. support the demarcation and management of There are large differences in available water protected natural resources in the coastal area resources, from Tajikistan with an average of of the Metropolitan Region of Aracaju, partic- 4,900 m3 per person annually, to Turkmenistan ularly the mangroves and natural lagoons as with only 274 m3 available per person annually. well as other urban interventions to improve Tajikistan and the Kyrgyz Republic include the CZM in the region; the ongoing Espirito major glaciated mountains of the regions and Santo Water & Coastal Pollution Management their upstream position is advantageous for Project involves wastewater collection and water availability and hydropower. In contrast, treatment and other environmental interven- Kazakhstan, Turkmenistan, and Uzbekistan tions in the state's regional coastal capital; are in a downstream position and are largely (ii) GroundwaterManagement--the Bank dependent on inflow from the other Central 68 SustainingWaterforAllinaChangingClimate CEnTRAL AsIA iBrD 32197 Asian republics. Agriculture is a key compo- further reforms and sustainable financing nent of the region's economy and accounts has proven to be a continuing challenge. The for 90 percent of its water use. Following the Soviet Union's mismanagement of the Aral collapse of the Soviet Union in the early 1990s, Sea basin resulted in an ecological, economic, most of the region's water infrastructure and social disaster. While there has been sig- continues to decay as the result of unsustain- nificant progress in repairing the Northern able development and the lack of financing Aral Sea, significant water resources manage- for maintenance and rehabilitation. The ment challenges remain. national budgets remain inadequate to cover the costs for maintenance, and investments Proposed Directions for World Bank for rehabilitation from IFIs have not been suf- Engagement in 2003 ficient to reverse the deterioration. Soviet-era legacy institutions for funding infrastructure The Strategy stressed the importance operation and maintenance have not been sus- of both management and infrastructure tainable. While each state still has operational instruments, with a focus on rehabilitation irrigation or water resources departments, and maintenance of an appropriate stock of AnnexA|ImplementationoftheStrategyontheGround 69 infrastructure. Major aspects of the 2003 Vulnerability Index (CVI) ranging from Strategy included (i) the development of a medium to high for all countries; the only regional water strategy, (ii) continued ana- positive exception being Kyrgyz Republic lytic and advisory work to better understand with a low CVI. the economic, social, and environmental The Strategy defined the challenges of impact of rehabilitation, energy use, water water resources management and development and salt strategies, and water and waste water in Central Asia as daunting; solutions would strategies, (iii) a focus on infrastructure require concerted actions across sectors. The rehabilitation, (iv) restoration of negatively World Bank work in Central Asia has focused impacted ecosystems (wetlands, grasslands, on a number of elements discussed in the fisheries, etc) and especially the Aral Sea, and Strategy that still remain relevant. (v) continued restructuring of water utilities While an overarching regional water and support for water user associations. strategy and action plan is still not in place, national water strategies have been pre- World Bank Group Achievements pared addressing subsector issues such as over FY03­09 water supply and sanitation. The develop- ment of a regional strategy is difficult due to For the period 2003­2013 the World Bank the underlying political differences among will have provided investments in the sector countries where an agreement on upstream- for nearly US$1.5 billion. Other multilateral downstream water use is still not in place. The donors, including the Islamic Development Bank has generally supported this effort with Bank (IsDB), Asia Development Bank (ADB), investment support that is complementary and and European Bank for Reconstruction and consistent with regional sharing. The Bank Development (EBRD), along with many also works with United Nations and bilateral bilateral donors also continue to be active. organizations whose goals are more directly International assistance has helped rehabili- related to an enhanced political environment tate and maintain some of the infrastructure for shared water management. in key cities and productive centers, but the Since the WRS was issued in 2003, a WSS region-wide situation remains serious. The dialogue was held in Kazakhstan between restoration of the Northern Aral Sea is a 2004 and 2005 followed by a TA on tariff major success story for multilateral donors-- settings completed in early 2009. Two water both for the ecosystem and the communities supply and sanitation sector notes were that now can enjoy fishing and a cleaner prepared in Uzbekistan and Tajikistan. The environment. Nevertheless, the problems latter was launched with a workshop attended of inadequate institutional capacity and by national authorities and donors in April governance have been further weakened by 2009, while the note for Uzbekistan will be the emigration of qualified professionals. publicly launched in mid-2010. In Tajikistan, Governance arrangements and incentive the strategy note has galvanized government policies still lag behind and pose a serious and donor attention, providing a platform impediment to the development of modern to continue the dialogue and promote nec- and efficient water management systems. essary reforms. For the critical irrigation Climate change is expected to have a signifi- sector in Uzbekistan, the Bank completed a cant impact in the region--with the Climate report in late 2009 to help rank and prioritize 70 SustainingWaterforAllinaChangingClimate investment funds for rehabilitation and mod- ernization of systems. In cooperation with the Uzbek Technical Working Group, 26 crit- ical investment projects have been assessed. Restoration of the North Aral Sea has been Experience from project a major success in the region; as water levels implementation suggests increased by about 3 meters, adding about that rigorous economic and 50 percent to the surface area of the North Aral Sea, the once vibrant fishing industry environmental criteria should was resurrected. Work has continued with always be applied in project the first phase of the financial assistance that planning and design, and will be completed at the end of 2010, and a new project is in the pipeline for 2011. Other that the involvement of local rehabilitation projects have been financed in institutions and affected many Central Asian republics, although IDA populations is critical to allocations have limited the size of projects in Tajikistan and Kyrgyz Republic. Financing enhance ownership of projects. dedicated to address water pollution from mining and industrial water has been ongo- ing, especially in Kazakhstan. Within the framework of the irrigation projects in Kyrgyz Republic, Tajikistan and the second On-farm Irrigation Project. In Uzbekistan, water users associations have addition to WUA development, the two been supported and their capacity enhanced to projects support the rehabilitation and operate and maintain the systems and collect modernization of WUA-managed irrigation fees. However, the centralized management systems commanding about 160,000 hectares. system inherited from the Soviet era has IDA also supports the rehabilitation and mod- slowed institutional reforms. The management ernization of higher-order irrigation systems contracts tested in Tajikistan and Uzbekistan commanding over 400,000 hectares managed have not been successful and a new paradigm by the Department of Water Resources. The needs to be explored to enhance the perfor- Irrigation Rehabilitation Project (closed) and mance of the water utilities. Water Management Improvement Project In the Kyrgyz Republic, about 570 WUAs (ongoing) also support efforts to transform were legally established for the manage- the Department of Water Resources into an ment of over 750,000 hectares under the agency that is technically capable of managing first On-farm Irrigation Project. WUAs were complicated irrigation systems in a financially trained and supported for several years by sound manner, with full transparency and dedicated WUA support units that were set accountability to water users. up in the Department of Water Resources in The Tajikistan Ferghana Valley Water order to develop the WUAs into technically Resources Management Project (FVWRMP) and financially sustainable organizations. has been under implementation since 2006. Realizing that WUA development is a long- The project addresses the water resources term activity, this support continues under management issues in Ferghana Valley in AnnexA|ImplementationoftheStrategyontheGround 71 Tajikistan which is a part of the Syr Darya demand for power supply and construc- River catchment area. FVWRMP includes tion of large impoundments from countries several elements of integrated water resourc- upstream creates tensions with their down- es development including the rehabilitation stream neighbors. of irrigation and drainage systems for about The practicality of bringing about insti- 30,000 hectares in the valley, as well as the tutional strengthening of water supply and establishment of a number of WUAs, reduc- sewerage utilities through a performance ing flood risk and improving the operation based management contract (as had been the and safety of the Kayrakkum Dam on the Syr intent under the Bukhara and Samarkand Darya River. Although the funds allocated Water Supply Project and the Dushanbe Water to this project are modest (total project cost Supply Project) needs to be re-examined. In is only US$14.0 million), the project has the future, a more flexible approach should be already had positive impacts on the lives of adopted balancing weaknesses in local capacity the people living in the project areas through with external, preferably domestic, partner- increasing agriculture production and reduc- ships to strengthen operational performance. ing the risk of flooding and waterlogging Given the importance of irrigated of agriculture land. In addition, under the agriculture in Central Asia, infrastruc- project, a number of studies and steps have ture rehabilitation, capacity building, and been taken to improve the safety of the dam, improved water management technologies including geo-technical investigations, sur- have brought great benefits to the people of veys, and a study to improve dam safety, as Uzbekistan, especially in the poorest areas. well as the preparation of the dam safety Continued infrastructure rehabilitation and monitoring and emergency action plan. modernization is crucial for the development and livelihood of rural areas. The benefits of Lessons Learnt system rehabilitation would be even greater if it was accompanied by sustainable agri- The Strategy presents a clear picture of the cultural reforms; water management should sector and socio-political context of Central not be seen in isolation from the rest of the Asia and is still valid today. Experience from agricultural production process. ongoing project implementation in Central The capacity of water user associations Asia suggests that rigorous economic and should be strengthened to support improved environmental criteria should always be water distribution in Uzbekistan, especially applied in project planning and design, and given the lack of reforms in the state-run that the involvement of local institutions and agricultural sector in which the government affected populations in project preparation is is responsible for O&M. critical to enhance ownership. Coordination among government agencies is difficult, and Directions for Future World Bank this has to be taken into account for cross- Group Engagement sector activities that involve an integrated approach to water management. Through its investment lending and Dialogue among countries on equitable analytic work, the Bank has engaged the use of water resources and international principal aspects of water management water ways remains challenging. Growing defined in the Strategy with a focus largely 72 SustainingWaterforAllinaChangingClimate on rehabilitation and national sub-sector has now reached the end of its useful life. reform. In order to move the water agenda In terms of analytical and advisory forward, more substantive reforms and work, the Bank's advice is increasingly updated management instruments--on the sought on the sustainable development of national level but reflecting regional con- hydropower resources in the Region; issues cerns--will require even greater effort from include domestic energy needs, the potential all stakeholders. for energy trade/exports for poverty alle- Several projects have been proposed to viation, and broader transboundary water address the restoration of ecosystems and management considerations. Apart from improved use of water supply for sustainable sustainable development considerations, irrigation. A major project will continue the Bank engagement will support a broader revitalization of the Northern Aral Sea and goal of building cooperation at the political promote the sustainable use of water from level. Technical assistance support is being the Syr Darya River. A second project seeks augmented by pilot projects on adaptation to improve agricultural production in areas to climate change in vulnerable sub-sectors of Uzbekistan affected by waterlogging, and and regions. to reduce damage to housing and infrastruc- ture from rising groundwater levels and 3. Andhra Pradesh salinity in the project areas. Another major irrigation and drainage project is planned for Issues irrigated agriculture in Kazakhstan that will expand service delivery and land and water Water resources management and develop- management in order to increase sustainable ment has played a major role in development, productivity. This will be achieved through food security, and poverty reduction in India. rehabilitation and modernization of irrigation The World Bank has been a key partner for and drainage systems, better management, India in water development over the decades, operation, and maintenance of these systems, including assisting in negotiating the historic and more efficient use of associated irrigated Indus Water Treaty with Pakistan and in pro- lands, all with broad participation of users. viding the investments in water development Rehabilitation, especially in the areas of projects that underpinned the treaty. water supply and sanitation, is also a prior- The Strategy noted that while important ity. The Bukhara and Samarkand Sewerage opportunities exist for the development of Project will seek to improve Uzbekistan's water resources, major challenges for India municipal services, which have severely include getting the greatest productivity from deteriorated and are often energy inefficient. existing resources, paying greater attention Maintenance is necessary to improve service to the environment, and managing scarce reliability, thus improving the public's quality resources in an efficient and accountable of life and supporting economic growth. The manner. The Strategy noted that public irriga- proposed Syr Darya Water Supply Project will tion agencies were inflexible and ineffective improve the coverage, quality, efficiency, and in providing food security, rural development, sustainability of public water supply services and poverty reduction. As the largest water- through rehabilitation and/or replacement of using sector, irrigation is the key to improved the existing water supply infrastructure that water resources management in India. AnnexA|ImplementationoftheStrategyontheGround 73 AndhRA PRAdEsh iBrD 32199 A critical turning point came in the late state, water user associations were formed in 1990s with the World Bank's focus on reform- all the state's public irrigation systems and ing states. The first and strongest reformer showed early signs of success. was the government of Andhra Pradesh. Drawing on international best practice, the Proposed Directions of World Bank Bank provided strong support for the intro- Engagement in 2003 duction of water user associations as a first step in this reform process. With strong Global experience shows that water political and bureaucratic leadership from the user associations are a necessary, but not 74 SustainingWaterforAllinaChangingClimate sufficient, condition for improving irriga- (including hydropower) and would only con- tion performance. Equally important is sider re-engaging if there are fundamental reforming the way in which managers of the energy sector reforms. infrastructure perform. The state govern- The World Bank is actively engaged in ment of Andhra Pradesh realized this next Andhra Pradesh in the provision of knowl- challenge, and held discussions with the edge and advisory services: on the water Bank centering on the assessment of options components of the state's "2020 Vision" for developing service providers that operate document, on benchmarking and irrigation on modern institutional principles, including reform options, on utility reform, on ground- competition and accountability to users and water management and on water rights for management and maintenance of assets. administration and ecological flows. On the water resources side the challenge in Andhra Pradesh was to assist the state World Bank Group Achievements in its efforts to be a facilitator. For example, over FY03­09 the state has made substantial advances in the collection of data, but interpretation and Irrigation reforms have been pursued use of those data for decision making lag with World Bank support through the behind. The challenge includes developing Third Andhra Pradesh Irrigation Project a legal, regulatory, and institutional basis (AP-III) and Andhra Pradesh Economic for making water reallocation more flexible Restructuring Project. Experience from and voluntary, with careful attention to the those projects indicates that further highly sensitive issue of the water rights of reforms are needed to broaden and deepen users and to ecological requirements. These statewide sector reforms while improv- are key elements of an integrated river basin ing sector performance on a sustainable approach to water management, a central basis. Building on the successes of reform principle in the Indian National Water in Andhra Pradesh, additional states have Policy and in the water policy of most Indian embarked with Bank support on reform- states, and fits well with the government of ing their irrigation; these include ongoing Andhra Pradesh's SMART (Simple, Moral, projects in Maharashtra, Madhya Pradesh, Accountable, Responsive, Transparent) phi- Rajasthan, and Uttar Pradesh. losophy. But it is a task that will take decades In urban water, the focus has been on of persistence to complete, and that will sectoral reform building on ongoing good require a sequenced, prioritized program of examples such as Haryana and Uttar actions tailored to evolving political realities. Pradesh. A more pragmatic approach has In the urban water sector, the Bank also been adopted by combining these focused on analytical and advisory services reforms with activities on the ground as in states that have shown commitment to fis- incentives, thus increasing the investment cal and institutional reforms. portfolio with innovative approaches such India has substantial undeveloped hydro- as decentralization. power potential, but the electricity sector In hydropower, the reform process has still has major institutional and financial also made progress through the energy agen- problems. The Bank has declined to finance da. Bank engagement has been consolidated the development of new generation capacity in India with the financing of two major AnnexA|ImplementationoftheStrategyontheGround 75 Water Initiative (SAWI) aimed at supporting riparian countries on both international and national river basin issues is an important Identifying key decision- step forward. Building on Bank experience in other international basins SAWI stands makers and champions as a support to countries in implementing a is critical to promote basin management approach. important reform agenda, IFC has also been active in the region, most notably its Clean Tech and but it is equally crucial Infrastructure investments in Water Health to consider the political International (WHI), an innovative private economy environment distributed services provider that entered the Indian market in 2005. WHI provides and incentives to drive an innovative, bottom-of-the-pyramid busi- the process forward. ness solution using low-cost membrane and ultraviolet technology to treat water at the community level for sale at affordable prices to low income consumers who are not connected to a utility water distribution network. IFC provided an early-stage ven- ture capital US$1.2 million investment. This helped attract more investment from large companies like Dow Chemical and India's hydropower projects in Rampur (412MW) ICICI Bank; today WHI sells clean, affordable and Vishnugad Pipalkoti (444MW). water in more than 200 Indian communities. Encouraging progress in promoting Additional IFC financing is backing WHI's the river basin agenda has been noted new $32 million expansion, enough to make since 2003. In India, the initial reform in an impact on the waterborne diseases that Maharashtra laid the groundwork for river claim hundreds of thousands of lives each basin institutions with adequate instru- year in India--more than any other country. ments for water regulation and allocation. The pioneering work in Maharashtra has Lessons Learnt further stimulated other states in cham- pioning the basin approach with ongoing Experience in Andhra Pradesh has work on the Alaknanda River Basin and shown that actions on the ground tailored most recently the establishment of the with reforms have proven to be strong Ganga National River Basin Authority in incentives in fostering the reform agenda. February 2009 in India. Additional initia- Sustainable institutions and policies are tives have also burgeoned in neighboring largely driven by internal champions but riparian countries, with emerging activity require pragmatism in sustaining them on the Indus Basin in Pakistan and river and consolidating their impact in the long basin work in Nepal. On the international run. Identifying key decision makers and water stage the launch of the South Asia champions is critical to promote important 76 SustainingWaterforAllinaChangingClimate reform agenda, but is it equally crucial to lives below the poverty line. Nigeria is also consider the political environment and among the countries with the lowest level incentives to drive the process forward. of access to water. The political reality of Good governance should be measured Nigeria poses a major challenge in design- not only in financing terms (i.e., pricing, cost ing and implementing World Bank activities, recovery, and private sector participation), especially those involving infrastructure but also by institutional performance, effi- investments. Nigeria presents many insti- ciency of regulatory instruments, and policy tutional limitations and features complex incentives and enabling environment. environmental, social, and governance issues. This daunting set of challenges is par- Directions for Future World Bank ticularly evident in the water sector, where Group Engagement the most immediate and visible problem is urban water and drainage services in large, The impact of climate change will be rapidly growing cities such as Lagos. Poverty further incorporated into the water resources is highest among households in rural areas agenda. This will influence both the design who work in agriculture. Nigeria possesses and management of water resources develop- low-lying floodplains, known as Fadama, ment in SAR, especially given that it is one of which are fertile land and have easy access the most vulnerable regions in the world. to water. But the Fadamas have also been A proposed fourth Andhra Pradesh water the scene of conflict among farmers, fish- sector improvement project will consolidate ers, and pastoralists who are vying for land, gains of past projects and focus on: (i) the water, and grazing resources. Historically, adoption of a State Water Policy, (ii) ensuring performance of Nigeria's water institutions-- allocation of full annual O&M needs in the agencies for managing urban and rural budget, (iii) decentralizing irrigation service water supply and sanitation, irrigation, and delivery and system maintenance to WUAs, the domestic and international rivers--have (iv) adoption of new water management been extremely poor. Despite these extreme practices/instruments, (v) establishment of challenges, the World Bank's strategy for a regulatory framework in the water sector, engagement with Nigeria can be considered and (vi) restructuring/capacity building of best practice under such difficult circum- existing Irrigation & CAD Department. stances. Additional hydropower infrastructure is also in the pipeline in other SAR countries Proposed Directions for World Bank including Pakistan (extension of Tarbela Engagement in 2003 IV--4960 MW) and Nepal (Kali Gandaki rehabilitation--144 MW). Given the many complex challenges in Nigeria, the World Bank developed a multi- 4. Nigeria track engagement strategy consisting of three primary strands: (i) to assist Nigeria in Issues rapidly addressing the most politically visible issues--notably the performance of public Poverty remains entrenched in Nigeria, utilities--in innovative ways, such as the pri- where 70 percent of the rural population vate management of water services in Lagos, AnnexA|ImplementationoftheStrategyontheGround 77 nIGERIA iBrD 32195 (ii) to assist in developing a sustainable strat- World Bank Group Achievements egy to address urban and rural sanitation in FY03­09 issues by encouraging user-level participa- tion and applying ideas of benchmarking, The Bank has been engaged in the reform of competition, private sector participation, the urban water supply sector under two water and accountability; and (iii) laying the sector reform projects (for a total of US$350 groundwork to address long term water million) with a few selected states--Cross management challenges, such as institu- River, Kaduna, Enugu, Ogun, and Lagos--while tional rationalization, legislative reform and the FCT Water Board is being financed under development of capacities for strategic water the NG-Privatization Support Project (US$25 resources management planning. Lastly, the million). The Urban Water Reform Project is Bank was also expected to play an important trying to change the way the present system is facilitating role in international water issues managed by reviewing and improving water relating to the management of the Niger and legislation, developing the capacities of utilities Benue Rivers and the Lake Chad Basin. to manage water supply systems properly and 78 SustainingWaterforAllinaChangingClimate to improve their financial performance, and project also sought to empower communi- separating the roles and responsibilities for ties to take charge of their own development water resource management and water supply agenda and reduce conflicts among resource provision; these goals which are supported at users. The participatory component of the the federal level. project was based on Fadama user groups These two water sector reform projects with common economic interests, such as have also played a critical role in promoting farmers, fishers, pastoralists (people who the involvement of the private sector through raise livestock), women, the disabled, and stu- operator management contracts as part of dents. The project encouraged these groups to the investments in rehabilitation of the WTP develop plans, and then each group requested and distribution networks. Cross River State money to pay for income-generating commu- is leading the way with a private operator nity-level assets, such as fishing nets, fertilizer, managing its water systems, and Kaduna water-pumps, or generators. This lead to a 590 State is following a similar approach with percent increase in the value of group-owned the water treatment operations in Kaduna productive assets. Fadama II also supported and Zaria being managed by a private opera- off-farm activities such as agroprocessing, tor. Enugu State Water has also recruited a business training, and rural marketing. While private operator to manage some of its water the project's objectives were to improve the operations. The objective of these activities is welfare of the citizens in the region, it also to improve cost recovery of the water utilities contributed to a secondary objective of sus- as a way of improving the sustainability of the tainable community management of water institutions. Performance targets under each resources, in a region that often faces water management contract include cost recovery conflicts that could result in water stress and targets, consistent with the Bank's focus on shortages among competing water users. this aspect of water utility management. As the Fadama II project intended, the The Bank has been working in Lagos poor and vulnerable groups saw a greater State since the 1990s and has developed a share of the increase in the value of produc- close working relationship with the Lagos tive assets. In addition, the distance and Water Corporation. The Lagos Water travel time to the nearest market and travel Corporation has started the process of costs declined significantly following infra- engaging the independent private operators, structure investments. Average household but given the complexity of the Corporation incomes increased by about 60 percent, and the overall political economy of the though these benefits were realized more by state, it will take many years of sustained middle-income beneficiaries than by the poor. efforts before real reforms can be realized. It is expected that incomes of all beneficia- The Bank has also provided US $125.4 mil- ries will continue to rise over time given the lion to support the ambitious Second National acquisition of productive assets, improvement Fadama Development Project, approved in in rural infrastructure, and improvement in 2004. The project hoped to increase sustain- capacity building. The project inspired the ably the incomes of Fadama users though African Development Bank (ADB) to imple- capacity building, supporting acquisition ment similar projects in six states, raising of productive assets, and developing rural the total number of Nigerian states benefit- infrastructure across 12 states in Nigeria. The ing from Fadama from 12 to 18. The ADB AnnexA|ImplementationoftheStrategyontheGround 79 institutionalized sustainable and cooperative management of the shared water resources. The riparian States and Federal Government Long term effort is of Nigeria also established a US$13 million Trust Fund to finance the KYB-CMP. The essential to show CMP's proposed action plans will target sustainable impacts. identified water problems and institute Engagement and integrated natural resources management instruments in the region. partnership with other The Bank has two ongoing projects in the donor agencies is Niger River Basin. The first, a GEF-funded essential to leverage project expected to close in August 2010, was valuable because it was one of the first limited resources projects implemented with all 9 countries of towards achieving a the Niger River Basin. This project provided common project objective. support for the completion of the Shared Vision Process and was endorsed by the Council of Ministers in 2007. The second, a US$132 million IDA-funded APL project expected to close in 2013, focuses on the rehabilitation of two major dams in Nigeria: projects incorporate funds from the Global the Kainji and Jeba. Environment Fund to support sustainable The Bank has also supported agricultural land use and water management. The project development activities in Nigeria through also inspired the Government of Japan to an active program of analytical work and support social infrastructure (e.g. schools, technical assistance. Analytical works pro- dispensaries) around Fadama communities to duced in collaboration with the Government enhance the welfare of the rural people. of Nigeria include: (i) Getting Agriculture Since 2003, the Bank has also focused on Growing in Nigeria (Sectoral strategy-FY06); improving water resources management of (ii) Nigeria Agriculture Public Expenditure two international basins: the Lake Chad Basin Review (FY08); and (iii) Nigeria Rural and the Niger River Basin. The GEF-funded Finance: Assessment of current programs Lake Chad Project went to the Board in and options (FY08). When the Avian Flu out- January 2003 and closed in December 2008. breaks emerged in 2006 in Nigeria, credit for At the Basin level, the major contributions of the Fadama Project was reallocated to help this project were (i) the institutional assess- provide the first early responses. This early ment of the Lake Chad Basin Commission response provided a platform for the govern- (LCBC), (ii) the Transboundaray Diagnostic ment to request credit of US$50 million to Analysis, and (iii) the strategic Action minimize the threat posed by the Avian Flu Program. This project also included pilot virus to humans and the poultry industry. demonstration project activities, one of which Currently, the Bank is providing technical was Komadugo Yobe Basin (KYB) in Nigeria. assistance to the Government of Nigeria This pilot resulted in a water charter which for the drafting of a national Agricultural 80 SustainingWaterforAllinaChangingClimate Development strategy. As a result of the vari- services is the responsibility of the state and ous analytical works conducted, the Bank local governments. However, this institutional has been invited to join the government agri- structure does not work in practice; all the cultural team drafting the development of three tiers of the Nigerian system of govern- the 2020 Vision for Nigeria. ment are involved in the provision of water supply in one way or another, as water supply Lessons Learnt has significant sociopolitical implications for local politicians. As a result there is a lack of The Bank has learnt many valuable lessons coordination among the three tiers of govern- in Nigeria relating to the urban water sector. A ment, and this has resulted in a lack of reliable long term and constant engagement is essen- data on access to water supply and availability, tial to show sustainable impacts. Engagement since there is not one single data source for and partnership with other donor agencies is service access and availability; and (b) The essential to leverage limited resources towards lack of a clear policy and enabling legislation achieving a common project objective. and framework is a major problem facing the The Fadama project succeeded in raising development of the sector. The institutional the value of productive assets of the poor- framework is not strong, and most, if not all, of est households, but had a limited impact on the state water authorities are not fully inde- improving their income. In the future, con- pendent but depend on subsidies from the state sideration of access to affordable rural credit government for capital investments as well services would be helpful to help the poor as operations and maintenance. Even though access productive assets. Furthermore, addi- utilities are supposed to collect revenue from tional training can further improve the local water sales, the amount collected is usually capacity to manage productive assets. inadequate and does not even cover the operat- Regarding international boundary issues, ing costs of the treatment plants let alone the the establishment of a trust fund for catchment entire operating cost of the water utility. plan management in the Komadugu Yobe (KY) Following the success of Fadama II, the is considered best practice and has been pos- Government of Nigeria is strongly commit- sible due to coordination among partners in ted to the community-driven development the catchment (e.g., UNDP, WB, DFID, WWF). approach, and has requested national cover- It has been effective to work on both soft age in the shape of a Third Fadama project. aspects (knowledge/institutions building) and This was approved by the Board on July hard aspects (investment pilots, rehabilitation 1, 2008, and officially launched on August of infrastructure, etc) in parallel. 24, 2009 in Zamfara State by the Minister of Agriculture and Water Resources. Like Directions for Future World Bank its predecessor, the new project is rely- Group Engagement ing on demand-driven investments and empowerment of local community groups The World Bank has been active in all and individuals with the aim of improving three strands identified in the 2003 Strategy. productivity and land and water quality. It is However some challenges still remain. being implemented in Nigeria's 36 states and There are two main lingering challenges: (a) the Federal Capital Territory, with IDA sup- Constitutionally, the provision of water supply port in the amount of US$250 million. AnnexA|ImplementationoftheStrategyontheGround 81 Looking forward, the Bank will continue due to its highly fragmented institutional its focus on improving utility sustainability arrangements. This has resulted in under per- though activities aimed at improving cost formance, and must be addressed if desired recovery, while also focusing on improving health and poverty impacts are to be achieved. service availability and sustainability. For the The Water Resources Board (NWRB) is water supply sector, the lessons learnt are the lead agency of the Philippine Government that where there is more, strong commitment responsible for policymaking, regulatory, by the state or the governor, the impact of and quasi-judicial functions of the water lending is greatly enhanced; the Bank should sector. The NWRB ensures the optimum continue to support states that take their exploitation, utilization, development, conser- own initiatives in improving service perfor- vation, and protection of the country's water mance, whether though PPPs and/or greater resources. However, the NWRB has limited improvement in management of the sector to capacity to execute these functions because of the extent that urban water supplies are able inadequate financial and technical capacities. to cover the cost for operation and mainte- The NWRB is currently being downsized nance from sales of water. This would allow and consolidated into the Department of the Bank to assess how it can complement Environment and Natural Resources, a and add value to a preexisting commitment change that could further impair its economic to change. In addition, the Bank would also regulatory functions and create a vacuum in increasingly focus on sanitation as a way to the regulation of the sector. improve health outcomes to complement the There is also need improve and expand investments in water supply. urban water service by strengthening service Regarding international basin initia- provider capacity, establishing an enabling tives, the portfolio of water resources in the environment that provides incentives for Niger Basin will continue to be implemented good performance and facilitating access through the IDA APL Project. There is no to investment financing. Sanitation, a long near-term project to follow up work on the neglected sector, presents an increasingly Lake Chad basin. complex challenge to address both supply-and demand-side constraints to sector develop- 5. Philippines ment within a compressed timetable. Surface water is still the main source of Issues water for urban water supply, meeting 60 per- cent of the total demand in the Philippines. The Philippines have a strong history of However, the quality and availability of water user associations dating back to the surface water is under threat due to catch- 1970s, the success of which has inspired ment degradation and pollution, making the much of the participatory irrigation move- investment cost of treatment and operation ment around the world. But there has been extremely high. Groundwater is increasingly little progress in modernizing irrigation becoming a major source of drinking water. It management since then. Today, fundamental currently accounts for 40 percent of demand institutional problems plague the Philippines' in the country and this will further increase water sector, including poor sector plan- due to rapid urbanization. Based on the ning, weak accountability, and a redundancy water rights granted by the National Water 82 SustainingWaterforAllinaChangingClimate ThE PhILIPPInEs iBrD 32201 Resources Board (NWRB) since 2002, 49 Proposed Directions for Bank percent of groundwater is consumed by the Engagement in 2003 domestic sector, and the remaining shared by agriculture (32 percent), industry (15 percent), The 2003 Country Water Resource and other sectors (4 percent). About 60 per- Assistance Strategy identified the need to cent of the groundwater extraction is without support and reform the National Irrigation water-right permits, resulting in indiscrimi- Association (NIA) in closing the gap nate withdrawal. A recent study shows that between the irrigable service area and groundwater resources in Manila and other the actual area irrigated, recommending metropolitan cities are being rapidly depleted, that irrigation management transfer to resulting in subsidence, salt water intrusion, Irrigators' Associations be pursued more and contamination from sewage and industri- deliberately. This was to be accomplished al pollutants. While agriculture only accounts both working from the top, by enabling leg- for 32 percent of groundwater consumption, islation, and from the bottom, by supporting irrigation is the largest user of water from all local efforts where there is strong demand sources accounting for 80 percent of total use. for reform. AnnexA|ImplementationoftheStrategyontheGround 83 World Bank Group Achievements aside some funds to support sewerage and in FY03­09 septage management programs. To date, the fund has not been resourced and local gov- The Philippine Clean Water Act of 2004 ernments are running out of time to comply aims to protect the country's water bodies with the 2009 targets. from pollution from land-based sources-- The Bank-assisted Laguna de Bay industries and commercial establishments, Institutional Strengthening and Community agriculture and community/household Participation (LISCOP) Project, which activities. It provides a comprehensive and commenced in 2004, attempted to address integrated strategy to prevent and mini- water pollution and watershed degradation mize pollution through a multi-sectoral and in Laguna Lake and its watershed through participatory approach involving relevant reforms and modernization of the regula- stakeholders. Based on estimates, the tory, planning and economic instruments Government needs PhP25 billion per year of the Laguna Lake Development Authority for ten years for the construction of physical (LLDA). The implementation of environ- infrastructure required by the Act. However, mental sub-projects such as solid waste key national agencies and local governments management, wastewater treatment, envi- are faced with multiple challenges in fully ronmental enhancement/ecotourism and implementing the provisions of this law. local flood control by the local government Through its Water and Sanitation units using ecosystem-based and community Program, the Bank has been supporting the and participatory approach has improved the Department of Environment and Natural water quality of the lake. The implementation Resources to implement the Act through the of the environmental user fee system (EUFS) establishment of Water Quality Management for industrial discharges to complement Areas (WQMA) in Silway River and regulations has been responsible for the sig- Sarangani Bay in Southern Philippines. A nificant reduction in industrial biochemical WQMA is a contiguous area that has similar oxygen demand (BOD) loading. Industrial geologic, hydrologic and physiographic char- BOD loading was reduced from 40 percent acteristics and which drains to a water body in 1996 to only 11 percent in 2006 despite an like the river, lake and bays that may cover increase in the number of firms. Scaling up one or more local government jurisdictions. of lessons learned from LISCOP can be used Under the law, a WQMA Action Plan must to help cleaning up the water quality in other be prepared setting (i) goals and targets for watershed areas of the country. sewerage; (ii) a schedule of compliance to In the irrigation sector, Bank work since meet the applicable requirements; (iii) water 2003 has largely focused on institutional pollution control strategies or techniques; strengthening and infrastructure repair (iv) water quality information and education and rehabilitation, rather than new con- programs; (v) resource requirements and struction. This includes building capacity possible sources; (vi) enforcement proce- for irrigation associations, introducing new dures; and (vii) rewards and incentives. The cost recovery policies and self-sustaining Act also provides for the establishment of a systems for O&M; and restructuring of the Water Quality Management Fund (WQMF), NIA. During two recent Bank-supported which envisions national government to set projects, the Second Irrigation Operations 84 SustainingWaterforAllinaChangingClimate Support Project and the Water Resources to the recommended reforms. While poli- Development Project, the NIA piloted cies are there to support partnership with the Irrigation Management Transfer the private sector, studies have shown that scheme with some success, with 12 per- for the partnership to be mutually beneficial cent of all NISs now covered. However, and productive, a robust and credible regula- the rollout of the IMT scheme to more tory regime should be in place. NISs was stalled by NIA's field personnel In April 2008 the Bank conducted a scop- who would stand to lose their jobs. The ing mission to do initial assessment of the recently approved Participatory Irrigation risks of global warming on the groundwater Development Project, or PIDP, will be a and its impact on water utilities. Given that unique opportunity for NIA to pursue this small towns and cities account for the bulk of reform in conjunction with its approved urban population growth, and the effects of Rationalization Plan, which is the main climate change--such as lowering or depletion measure authorizing NIA to reorganize and of the groundwater table, seawater intrusion, downscale their operating units through and land subsidence--should be mitigated, an incentive package for early retirement there is a need to expand the assessment of of affected staff. The reforms envisioned in groundwater nationwide and come up with a the irrigation sector in the 2003 Country groundwater management plan that outlines Strategy are all embodied in the PIDP. appropriate actions and strategies suitable in In urban water services, the Bank is different parts of the country. currently addressing domestic wastewater Responding to a near-crisis situation, under the Manila Third Sewerage Project the Philippine government privatized (MTSP). It has committed to further sup- Metropolitan Waterworks and Sewage port the concessionaires in the accelerated System, the state-owned utility in 1997. A investment program to address domestic 25-year concession contract was awarded wastewater in response to the Supreme to Manila Water Company, a private water Court ruling to clean-up the Manila Bay. and wastewater concessionaire. Today, with While the transformation on the resource IFC's help, Manila Water has transformed management succeeded in the Angat Dam, the public utility into a world-class pro- the main source of bulk water for Manila and vider--showing that water privatization can about 30,000 hectares of irrigation facili- succeed economically and deliver for the ties, the development of other prospective poor. IFC acted as transaction adviser in sources (i.e. Liban Dam and Laguna de Bay) structuring the concession and provided a to meet the increasing demand for potable $15 million investment in equity. It granted water remains a challenge. three $30 million loans to help finance The Bank also attempted to re-engage infrastructure rehabilitation, expanding with Local Water Utilities Administration water, sewerage, and sanitation services to (LWUA) to help them reform under the Manila's low-income areas. In addition, it Executive Order 279 and support less credit- brokered a relationship with a local micro- worthy water districts' improve their service finance institution and helped develop a delivery performance in order to graduate sustainability strategy and sustainability them to the commercial market, but were report, and contributed to company's corpo- unsuccessful due to management's resistance rate governance manual. AnnexA|ImplementationoftheStrategyontheGround 85 With solid operational and financial per- can subsume the interim functions of several formance, Manila Water expands service to regulatory units and come up with a frame- an additional 100,000 people in low-income work towards integrating management of neighborhoods every year. It also works water resources in the country. Finally, the with partners to protect watersheds vital Bank has an opportunity to demonstrate to the city's water supply. Since its contract an integrated water quality management began in 1997, Manila Water has achieved approach to cleaning watershed areas in the significant improvements in water quality Manila Bay-Pasig River-Laguna Lake Basin, and availability, with a particular emphasis especially given the momentum from the on service to poorer areas. The company recent Supreme Court ruling to clean-up the has almost doubled service coverage (from Manila Bay. 325,000 to 600,000 households) and the volume of water running through its dis- Directions for Future World Bank tribution network (from 440 million to 864 Group Engagement million liters). Water loss is down from 63 percent to a record low of 35 percent. Manila PIDP is scheduled to be implemented Water accomplished these improvements in from October 2009 to March 2015, and will a cost-effective manner that has earned it contribute to the government's objectives growing profits every year since 1999. The of increased agricultural productivity and company successfully launched an IPO in enhanced food security, through its focus on 2005, raising an additional $65 million to irrigation sector restructuring and reform invest in the continuing rehabilitation and and rehabilitation and modernization of expansion of the water infrastructure. existing irrigation systems. The Philippine Government recognizes Lessons Learnt the importance of private sector participa- tion in the provision of public infrastructure, Based on implementation experience particularly in the water sector where since the Strategy, lessons have been learnt huge capital investments are required. The both about the process and political economy Bank has supported this approach through of reform as well as on technical sector the recently closed LGU Urban Water and issues. First, reforms must include appro- Sanitation Project, which piloted public- priate incentives. This was demonstrated private sector participation (PPP) such as the during the restructuring of the NIA when design-build-lease (DBL) contracts in small opposition from employees was sufficient towns, concession contracts, management to hold up the process; retirement packages contracts, and even organized providers had to be offered to the affected staff to towards sustainable community-based sys- ease the transition. Second, while end-user tems. Currently, private commercial banks participation is critical, absence of a prop- and donor agencies are participating in erly functioning apex regulatory body will successor projects such as Water Revolving further increase the fragmentation in the Fund of JBIC and USAID. sector. As institutional issues have become With the increasing demand for the pro- one of the obstacles in the management of vision of safe and potable water to the urban water resources, an apex regulatory body and rural population, irrigation, and other 86 SustainingWaterforAllinaChangingClimate uses, a detailed knowledge of groundwater While groundwater in the highlands is a and surface water resources is essential. An non-renewable over-utilized resource, spate assessment of water resources to be applied water (flash floods) in the coastal areas is as a tool for water use regulations is critical exactly the opposite: renewable yet under-uti- in urban areas, with due consideration of the lized. Much of the spate water is lost to the sea effects of climate change. or to the desert fringes, and could be diverted or harvested through low-cost solutions. 6. Yemen Proposed Directions for World Bank Issues Engagement in 2003 Yemen faces major issues in the water Prior to 2003, Bank projects in Yemen sector: groundwater is rapidly dwindling generally focused on building water supply as a result of overdraft for agriculture, both infrastructure rather than addressing the urban and rural water coverage have barely fundamental issue of water resource man- kept pace with population growth, and flood agement. The 2003 Water Resource Sector hazards are increasing. Strategy outlined four key strategies focusing Yemen's water availability is only 130 m3/ on water resources management: (i) improv- capita/year, which is among the lowest in the ing the efficiency of water use in agriculture, world. A majority of the Yemeni population focusing particularly on reducing real losses lives in the highland areas and relies upon (i.e., water lost through evapotranspiration) groundwater with relatively low recharge rather than paper losses (i.e., water that per- rates. Over the last twenty years, this limited colates down into the aquifer); (ii) reinforcing resource has been depleting rapidly because strong, traditional, community-based man- of rapid expansion of groundwater-irrigated agement systems for managing flash flood agriculture, which has escalated after the flows in the coastal rivers; (iii) improving introduction of drilling rigs and energized the efficiency of urban water supply; and (iv) pumps, and the rising competing demands starting to address the enormous task of sus- from irrigation and urban users in areas tainable management of selected aquifers. It close to large urban centers. also reinforced that when effective manage- The use of groundwater for qat production ment instruments are few, as is the case in has been a particularly significant feature Yemen, even greater modesty, patience and in the highland areas of the country. This persistence are required. revolution has brought some prosperity to rural areas in terms of growth in agricultural World Bank Group Achievements incomes. However, large parts of the rural in FY03-09 economy could disappear within a generation as groundwater is being pumped at an aver- The Government of Yemen has under- age rate approximately one and a half times taken significant restructuring to support that of natural recharge. What is more, urban better management of water resources and centers continue to experience shortages in its related services. In 2003, the Ministry of water supply and coverage of adequate water Water and Environment (MWE) was created service continues to remain limited. to oversee three national-level agencies-- AnnexA|ImplementationoftheStrategyontheGround 87 YEmEn iBrD 32203 NWRA for water resources management, and approaches for the medium and long the General Authority for Rural Water and term, defines action plans with short and Sanitation Projects (GARWSP) for rural medium-term horizons, and also includes a water supply, and the National Water and medium-term investment program. In the Sanitation Agency (NWSA)--as well as the 14 water supply sector, fourteen autonomous newly decentralized and autonomous water Local Corporations have been created with and wastewater utilities. As a result of the a major investment program for rehabilita- 2003 strategy, a Country Water Resources tion and plans for the expansion of services Assistance Strategy (CWRAS) was prepared covering more than 90 percent of the urban in 2005. The CWRAS was a main catalyst population. The rural water institution has for the government of Yemen to develop its been restructured, and a rural water sub- own National Water Sector Strategy and sector strategy has been prepared. Investment Program (NWSSIP) also in Since 2003, there have been five water- 2005. NWSSIP is now regarded as one of related operations ongoing in Yemen. The the most comprehensive water plans in the projects described below have strived to Arab world. It defines objectives, policies, (i) better address the integrated manage- 88 SustainingWaterforAllinaChangingClimate ment of land and water through watershed accelerating aquifer recharge to allow for management or IWRM components, (ii) give a gradual shift to a less water-based rural further attention to maximum return per economy. These objectives are designed to be unit of evapotranspiration, (iii) support the attained through demand management and development of local capacity to improve irrigation improvement, supply management the legal and institutional framework and and recharge improvement, institu- (iv) selectively improve the capacity of tional development and capacity building, national agencies such as the National Water information and public awareness, and envi- Resources Authority (NWRA) especially in ronmental management programs. IT and decision-support systems, in parallel Irrigation has also been a focus of Bank to supporting decentralization and commu- activity. A groundwater and soil conserva- nity participation. tion project, which became effective August Given the scarcity of water in Yemen, 2004, was undertaken with the objective the Bank has engaged in a mixture of urban to conserve water in farming areas, espe- and rural supply projects, as well as irriga- cially groundwater, and to improve recharge tion projects. A major urban water supply and protect watersheds by: (i) improving and sanitation project was approved in water use efficiency and increasing farmer fiscal year FY03 to (i) support the rehabili- returns to water, creating the conditions tation and expansion of water supply and that would allow farmers to reduce pump- sanitation services in five main urban areas ing of groundwater from aquifers towards (Sana'a, Hodeidah, Taiz, Mukallah and sustainable levels; (ii) increasing surface and Ibb), (ii) support local water corporations groundwater availability through watershed to become financially viable, and (iii) create management and groundwater recharge opportunities for increased private-sector by supporting the rehabilitation of small participation. This coincides with an ongo- to medium spate irrigation schemes, bank ing rural water supply and sanitation project protection works, water harvesting struc- which was active 2002­2007, and, upon tures, and the rehabilitation of terraces and completion, received a US$20 million grant other soil and water conservation invest- to help bridge the gap between project clo- ments; and (iii) supporting a groundwater sure and the start of a Water Sector Support management framework and institutions Project (WSSP) in 2009. These additional that will have the incentive and capacity to funds would finance activities under the manage local water resources in a sustain- three components of the original project and able manner. This project was extended to scale up the achievement of the MDGs in the 2011 and received supplemental financing project's areas of intervention. of approximately to continue the successful The five-year Sana'a Basin Water implementation of the project over a larger Management Project became effective area. Another irrigation improvement proj- January 2004 with the objectives of assist- ect, started in late 2000, recently closed after ing Yemen in: (i) managing groundwater two extensions. Its objective was to ensure conflicts between urban and rural usage in sustainable water resources management in the Sana'a basin in a sustainable manner; the main spate irrigation schemes in Yemen, (ii) increasing the efficiency of agricultural contributing to improved agriculture pro- water use within the Sana'a Basin; and (iii) ductivity and smallholder income in these AnnexA|ImplementationoftheStrategyontheGround 89 areas. To achieve this, two spate-reliant can, and should, be done to organize and schemes in western and southern Yemen harness this potential in both irrigation and were rehabilitated and improved, intensive urban water services. agriculture demonstration programs imple- mented, and institutional changes (namely Directions for Future World Bank Participatory Irrigation Management) intro- Group Engagement duced. Recently, flash floods in Hadarmoot have caused major damage and claimed A Water Sector Support Project (WSSP) human lives. The Bank responded by devel- was approved in February 2009. In addition oping an emergency flood control project to a $90 million commitment from the World (under OP8.0). Bank, the project draws co-financing from IDA, Germany, and the Netherlands total- Lessons Learnt ing US$340 million. It will support Yemen's implementation of the National Water Sector In Yemen there are few issues relating Strategy and Investment Program (NWSSIP) to major water infrastructure, but many by: (i) strengthening institutions for sus- issues relating to minor infrastructure and tainable water resources management; (ii) the political economy of integrated water improving community-based water resource resource management. management; (iii) increasing access to water One lesson is to be realistic about what supply and sanitation services; (iv) increas- change is possible and in what time frame. ing returns to water use in agriculture; and When effective integrated water resource (v) stabilizing and reducing groundwater management instruments are few as in Yemen, abstraction for agricultural use in critical greater patience and persistence are required. water basins. The Project is based on funda- Another lesson is the need to shift policy mental reforms relating to implementation dialogue from project investment and the efficiency, coordinated donor harmoniza- support of large parastatal organizations tion, and improved water sector governance. to the use of institutional and economic The project is aligned behind the revised instruments that align incentives of service and updated NWSSIP (2008) and imple- providers with the users of water in both mentation is entrusted to mandated national rural and urban areas. In this area, sig- agencies (NWRA, GARWSP, and MAI). nificant progress has been made since the adoption of the 2003 WRM strategy. Large agencies such as the NWRA have 7. The Nile Basin Initiative not been able to fully fulfill their mandates and must reorient their objectives to achiev- Issues able targets given their limited institutional The River Nile is an asset of extraordi- capabilities. Decentralization and increased nary regional and global importance and community involvement have shown to be is shared by 10 countries: Burundi, DR important in all stages of donor projects. Congo, Egypt, Ethiopia, Eritrea, Kenya, By contrast, the informal private sector has Rwanda, Sudan, Tanzania and Uganda. been playing a significant role, mostly in The Nile Basin is home to more than 300 urban water supply. There is still much that million people who rely on Nile waters for 90 SustainingWaterforAllinaChangingClimate basic needs and economic growth. With the development partners has provided the NBI potential for both conflict and mutual gain, riparians the forum and the resources needed the Nile remains at the nexus of security and to simultaneously develop investments and development in the region. Recognizing the build capacity to manage the river basin, potential gains from cooperation, nine Nile using the river basin rather than the state as riparian states established the NBI in 1999 the planning unit in both endeavors. Finally, as an unprecedented regional partnership to the Strategy's call for re-engagement in high- develop and manage their shared resources risk high-reward infrastructure enabled the to fight poverty, catalyze economic develop- Bank to work with NBI member countries ment and regional integration, and promote in planning for future high-risk high-reward stability in the region. At the request of Nile projects that make sense from a regional states, the Bank facilitates NBI engagement perspective, and for which the Bank may and development, coordinates partner sup- eventually provide investment financing. port, manages the multi-donor trust fund, provides technical assistance, and finances World Bank Group Achievements projects. The NBI has been supported by a in FY03­09 strong donor partnership, comprising more than 17 bilateral and multilateral partners, Over the past decade, the NBI has had the ten of which contribute to the World Bank- unique opportunity to pursue three mutu- administered Nile Basin Trust Fund (NBTF). ally reinforcing parallel tracks of activity: (i) Donors have committed more than US$250 the development of a transitional regional million to the NBI for capacity building, institution, (ii) the building of management project preparation and implementation of capacity for basin-wide water management, pre-investment activities. and (iii) the launch of a significant invest- ment portfolio to support water development. Proposed Directions for World With regard to institutional development and Bank Engagement in 2003 managerial capacity building, key outcomes thus far include increased communica- The principles outlined in the Strategy tion, involvement and cooperation among reinforced the World Bank's mandate to sup- Nile Basin governments and populations; port the work of the NBI, as lead development enhanced basin-wide management capabili- partner and as administrator of the multi- ties based on best practices; and increased donor Nile Basin Trust Fund. In particular, convergence of institutional frameworks of the Strategy's recognition that the develop- Nile Basin countries on transboundary issues. ment of strong water resource management In parallel, Nile cooperation has led to more institutions is a long-term process gave the than US$1 billion in a first round of invest- World Bank additional endorsement to sup- ments under the NBI, and an equal amount port the NBI institution-building activities. under other programs that have been enabled Second, the Strategy highlighted the need by the NBI. Subsequent rounds of invest- to pursue development of water infrastruc- ments are focused on more complex joint ture in parallel with the development of regional projects. capacity for river basin management: the Since its inception, the NBI has made unique partnership between the NBI and the progress in building a regional institution. AnnexA|ImplementationoftheStrategyontheGround 91 Over the past decade, the NBI has painstak- ects under the Subsidiary Action Program, ingly built a transitional regional institution, agreed at the International Consortium for including a Secretariat in Uganda; two sub- Cooperation on the Nile in June 2001, are basin project development offices in Rwanda now under implementation or are at advanced and Ethiopia (NELSAP Coordination Unit stages of preparation. Over US$725 million and Eastern Nile Technical Regional Office, of investments in the NBI portfolio are now respectively); national offices in each country, under implementation, in the areas of irriga- and advisory committees and technical work- tion and drainage, watershed management, ing groups. The NBI has formed a network of power trade and flood management, and over about 500 national and regional professionals US$375 million are being prepared, in power from the NBI, government, non-government generation, flood management and modeling. and private sectors who are actively engaged This has provided a solid foundation from in Nile activities and in fostering regional which larger, more complex projects and cooperation. Countries have recently con- programs are now being identified, includ- cluded "technical negotiations" on the ing the Eastern Nile First Joint Multipurpose Cooperative Framework Agreement, the first Program and the Equatorial Lakes Power comprehensive treaty on the Nile, which Program. In addition, Nile cooperation has would establish a permanent river basin orga- played a key role in facilitating other coun- nization. The one issue to be resolved now try and regional projects, such as the Tana rests with the Heads of State. Beles Integrated Water Resources Project The NBI has also helped establish capacity in Ethiopia and the Eastern African Power for river basin management. A US$90 million Market (EAPM) Program, with US$185 mil- (grant funded) basin-wide capacity build- lion in implementation and nearly US$900 ing program (the Shared Vision Program) million under preparation. As such, NBI work is now near completion, featuring projects has yielded approximately US$1 billion in in water, environment, agriculture, power investment projects under implementation or trade, applied training, macro-economics, advanced preparation. communications, and stakeholder involve- ment, this program is building the intellectual Lessons Learnt capital, analytical frameworks and technical foundation to sustainably manage the shared There are several important lessons that Nile waters. Conceived in 2001 as a capac- have been learned or reaffirmed through ity and confidence effort, the Shared Vision the course of the NBI's twelve years of work. Program has been restructured to establish While some of the following lessons were the management functions of a river basin articulated in the Strategy, the importance of organization and to provide an enabling envi- the lessons has become more evident through ronment for investments. The SVP projects NBI work since the release of the Strategy. will conclude by the end of 2009, with core First, local ownership is essential. The activities being absorbed by the NBI or other Nile riparians have owned, led and staffed appropriate institutions in the region. the work of the NBI. The World Bank has Lastly, the NBI continues to make marked acted merely as a facilitator, to support the progress in the delivery of its investment work of the countries in the NBI process. programs. Most investment-oriented proj- Without commitment from all participating 92 SustainingWaterforAllinaChangingClimate nILE RIvER BAsIn iBrD/BirD 32900 AnnexA|ImplementationoftheStrategyontheGround 93 riparians, the support of the donors would projects, and in enhancing technical, environ- have yielded far fewer results. mental and social aspects of these projects. In Second, undertaking parallel efforts the case of the NBI, coordinated donor efforts to develop regional institutions, capacity have enabled the Bank and other development for management, and joint investments partners to engage early, over a long period of was mutually-reinforcing and was critical time with the NBI riparians, to identify and to to the advancement of the NBI. The cre- begin to prepare high risk investments, build- ation of a transitional regional institution ing the capacity of the clients and enhancing through which these investments could be the quality of projects being prepared. implemented was a necessary first step in Finally, coordination of support from forming a regional river basin organization development partners is critical. The seven- and to undertake capacity building efforts. teen development partners supporting the Simultaneous activities to increase capac- NBI meet formally twice a year to ensure ity within the new organizations and at the harmonization of their assistance. While national level were critical in enhancing ten of the development partners funnel sup- the local skill-base. In implementing the port through the Nile Basin Trust Fund, the investments within the NBI portfolio, NBI remaining donors are actively engaged and affiliates strengthened capacity to man- their bi-lateral funding is closely coordinated age the resources of the Nile, developed a with the support that is channeled through shared understanding of the possible bene- the multi-donor trust fund. While these fits to be derived from regional cooperation, coordination efforts take time and resources and increased commitment to the regional from all involved parties, the partners have institution. All three tracks of activity recognized the benefits: partners have were designed to be flexible, to allow the requested that the same type of coordination countries to adapt their programs to incor- mechanism be put in place for other river porate the lessons learned through the basins across Africa before the Nile Basin other tracks of activities. Without any one Trust Fund closes in 2012. of the three parallel tracks of activities, the impact of the NBI work would have been Directions for Future World Bank substantially reduced. Group Engagement Third, long-term sustained effort and high-level commitment are required to sup- In the past year, the NBI has made port the parallel efforts referred to above. continued progress in the development The efforts of the NBI over the past 12 years of its institutional capacity and delivery would not have been possible without the of its investment portfolio. The Nile Basin commitment of top leaders and officials in- Initiative Secretariat (Nile-SEC), Eastern country, as well as at development institutions, Nile Technical Regional Office (ENTRO), and including the World Bank. In particular, high- NELSAP Coordination Unit (NELSAP-CU) risk­high-reward projects require a great have forged closer executive-and working- deal of preparation, requiring both time and level relationships as they begin resources. Technical assistance in the early to jointly create policies, develop NBI strate- stages of project identification and prepara- gies on issues like basin sustainability and tion is critical in reducing the risk profile of environmental safeguards, and prepare 94 SustainingWaterforAllinaChangingClimate investments. A clear example of the latter Lastly, the NBI continues to face the is the goal of a basin-wide power network challenge of moving from `implementing spanning both regions. Harmonized policy projects' to `behaving as an institution' in development is also underway through the an uncertain environment. The NBI is at a NBI-wide Institutional Strengthening Project critical juncture as it looks to the future and (NBI-ISP). With the Shared Vision Program the closure of the NBTF in 2012. Under the (SVP) projects focused on successful comple- NBI-ISP, the NBI has the opportunity to tion, this close collaboration will help to consolidate and institutionalize cooperative ensure that the gains made under the SVP gains to-date, complete the first round of will be sustained throughout NBI operations. capacity building and investments projects, As SVP projects close and Nile invest- streamline its focus on the `core business' of ment projects scale-up, the NBI faces the a river basin organization, and solidify the ongoing challenge of aligning national and financial basis for sustainability. The long- regional agendas. Linking NBI projects to term fate of the Nile cooperation, however, national priorities is critical to maintaining will be influenced by final negotiations on NBI relevance and ensuring that `identified' the Cooperative Framework Agreement projects are financed. In the past, the NBI (CFA). While the Nile Council of Ministers has maintained a national presence through (Nile-COM) has demonstrated leadership SVP activities and national offices. As SVP this year in advancing these discussions, projects complete this year, Nile countries and all Nile countries express commitment must assume responsibility for national NBI to continued cooperation, the uncertainty offices and find new ways to maintain a around alternative futures presents a clear country presence. challenge for the NBI. AnnexA|ImplementationoftheStrategyontheGround 95 Annex C World Bank Group Results Framework for the Water Resources Strategy, FY10­13 oBjECTIvE oF sTRATEGY | ASSiST CliEnT CounTriES To iMprovE WATEr rESourCES MAnAgEMEnT AnD DEvElopMEnT for SuSTAinABlE groWTH AnD povErTY rEDuCTion Strategic principles Country-level indicators WBg activities and outputs WBg indicators1 Baseline fY09 Target fY13 2. Infrastructure for Volumeofwatersupplyprojects(Bank,IFC)($million) WB$872 WB$1,300 improved access IFC$295 IFC$500 VolumeofMIGAguaranteesinWSS(MIGA)($million) $75 $160 WaterSupply Numberofcountriesinwhich Continued support for Changeinthevalueofthecoreindicatorforwatersupply (*) (*) accesstoimprovedwater sustainable water supply NumberofWaterPublicExpenditureReviews 8 12 sourceincreased ShareofPADsandICRsofwatersupplyprojectsthatinclude (*) (*) strengthenedfinancialanalysis. Sanitation and wastewater Numberofcountriesinwhich Improved attention to Numberofnon-lendingtechnicalassistanceforsanitation 8 12 and reuse accesstoimprovedsanitation low-cost onsite sanitation Changeinthevalueofeachcoreindicatorforsanitation (*) (*) facilitiesimproved Irrigation & Drainage Numberofcountrieswith Increased attention to Volumeofirrigationanddrainageprojects $600 $1,000 improvedproductivityofcereals agricultural water management (WBGAgricultureActionPlanimplementation)($million) (kg/ha) Changeinthevalueofeachcoreindicatorfor (*) (*) irrigationanddrainage Hydropower Percentofthetotalpopulation Increased hydropower Volumeofhydropowerprojects(Bank,IFC)(WBGHydropower $428 $1,000 withelectricityproductionfrom projects BusinessPlanimplementation)($million) hydropower Generationcapacityforhydropowerinstalledunder 1,700 2,500 WBGprojects(Bank,IFC)(MW)13 3. Build Capacity for Numberofcountriesmaking Better water information Numberofprojectsthatincludefinancingformonitoring (*) (*) Results-Based Decision- investmentsinimproving in client countries andinformationsystems making hydrologicalandmeteorological Build Bank capacity for Advisoryservicesonremotesensing,advancedtelemetry N/A FY11 monitoring results-based project monitoring andothernewsourcesofdata. IntegrationofbasinleveldataonwaterintoBank'sclimateportal N/A FY11 PublicationofaPracticeNoteonWaterAccounting N/A FY11 Adoptionofcoreindicatorsinwatersupplyandsanitation, N/A FY11 andirrigationanddrainageinprojects.14 Development of core Incorporationofwater-relatedindicatorsinthenew N/A FY11 indicators for environment environmentstrategy. Notes: (*) denotes work in progress. 102 SustainingWaterforAllinaChangingClimate AnnexC|WorldBankGroupResultsFrameworkfortheWaterResourcesStrategy,FY10­13 103 Annex C World Bank Group Results Framework for the Water Resources Strategy, FY10­13 oBjECTIvE oF sTRATEGY | ASSiST CliEnT CounTriES To iMprovE WATEr rESourCES MAnAgEMEnT AnD DEvElopMEnT for SuSTAinABlE groWTH AnD povErTY rEDuCTion Strategic principles Country-level indicators WBg activities and outputs WBg indicators1 Baseline fY09 Target fY13 1. Integrated water Numberofcountrieswithwater Improve/Maintain Water ProjectsatRisk(percent,bysectorcodes,QAG) 20 15 resource management/ resourcesmanagementplans Portfolio Quality/Outcomes CommitmentsatRisk(percent,bysectorcodes,QAG) 16 15 development for orawaterstrategylinkingwater Proactivity(percent)--target:Bank-wide 78 80 sustainable water use resourceswithwaterservices Realism(percent)--target:Bank-wide 62 70 and climate change Numberofcountrieswithformal IEGOutcomeRatings(percent) 2 100 100 mitigation/ adaptation planningattheriverbasinlevel Continued support for Volumeofsectorinvestmentswithwaterresource 971 1,500 integrated approach among managementtheme($million). 3 Waterresourcemanagement sectors at the country level Shareof"integrated"waterprojects(percent).4 47% 55% addressedinfutureclimate Volumeofagricultureprojectsfeaturingwater $1,512 $2,300 changediscussions/climate changeadaptationstrategies resourcesmanagement($million). 5 NumberofEconomicandSectorWorkthatadopts 31 45 ShareofPRSPthatinclude acomprehensivewaterframeworkorincludes comprehensivewater analysisofseveralwater-usingsectors.6 resourceconsiderations Water-Environment WaterisapillarofthenewEnvironmentStrategy N/A FY11 (adaptation to climate change) Number/volumeofwaterlendingthatisbasedonawater (*) (*) resourceanalysisdonebygovernment,Bankoragency. 7 Numberofwaterprojectsthataddress (*) (*) adaptation/climatevariability. 8 Adoptionofascreeningtoolforwaterprojects N/A FY11 Water-Energy Waterisanelementofthenewenergystrategy N/A FY11 (mitigation to climate change) Shareofhydropowerprojectsthataddressriverbasinplanning 50 60 andwaterusemanagementinplanninganddesign.9 Water-Social Shareofhydropowerprojectsenhancingdevelopment 27 50 benefitstolocalcommunityprograms.10 Shareofwaterprojectswithgender-responsivedesign.11 40 50 Trans-boundary Numberofwaterprojectswhichaddresstrans-boundary 18 25 issuesduringprojectplanning/design.12 Notes: (*) denotes work in progress. 100 SustainingWaterforAllinaChangingClimate AnnexC|WorldBankGroupResultsFrameworkfortheWaterResourcesStrategy,FY10­13 101 Annex B Monitoring and Evaluation of World Bank Group Support for Water Quality and Output Indicators for Water Projects FY03 FY04 FY05 FY06 FY07 FY08 FY09 Total Project performance f NumberofProjects 176 178 179 181 198 233 246 - NetCommitmentAmount(US$Millions) 12,751 12,875 13,264 13,606 15,889 16,923 19,256 - ProjectsatRisk(Percent) 13 15 13 13 15 17 20 - CommitmentsatRisk(Percent) 12 14 10 11 14 17 16 - Realism(Percent) 85 80 75 84 76 64 62 - Proactivity(Percent) 98 83 87 83 81 83 78 - AmountDisbursedinFiscalYear(US$Millions) 1,209 1,182 1,237 1,568 1,692 1,798 1,692 - Rating of completed projects (IEG Evaluation of Water Sector Board Projects)g NumberofProjects 18 15 16 12 11 11 - 80 NetCommitments 972 902 655 583 383 550 - 3,894 Outcome(%Satisfactory) 76 87 94 75 91 100 - 86 Sustainability(%likely) 75 86 86 57 100 - - 79 Institutionaldevelopmentimpact(%substantial) 59 67 63 38 100 - - 60 NetDisconnect 6 0 0 0 0 0 - 1 Process indicators WorldBankWaterStaff(IBRD/IDA)h 73 80 87 83 143 151 158 - WaterandSanitationProgramStaff h 20 27 27 31 37 56 62 - a World Bank figures are based on the Water Anchor Unit's Hydropower Database (which provides greater sector detail economic rate of return, number of beneficiaries, high water commitments, and high commitment of new infrastructure than is available in the Business Warehouse) and Business Warehouse. WB figures based on OPCS Sector Codes for were used. Also, to account for compliance with the Strategy principles, a set of 12 parameters was also used (related water (Water Supply, Sanitation, Sewerage, General Water, Public Administration, Irrigation and Drainage, and Flood to the CAS, water resources management, water quality management, sector reforms, public private partnerships, NGO Protection). World Bank figures include IBRD, IDA, and others (GEF, Guarantees, Carbon Finance, Special Financing, participation, Cost recovery, financial analysis, poverty related, stakeholder participation, gender, and M&E) and Recipient Executed Activities). IFC figures include WSS and Hydropower. MIGA figures include WSS, Waste d Sum of components containing water-related sector codes or water-related theme codes (ie, a non-lending TA project Management, and Hydropower. which is 75% WSS and 25% Central Government Administration would be considered three-quarters of one non-lending b Based on OPCS Theme Codes (#85 Water Resources Management). water activity, rather than one full non-lending water activity.) c The definition of "high risk" project varies, from category A-type of projects (risk for the environment) to projects that e Annual actual expenditures on AAA activities (direct costs to Bank Budget or annual disbursement from Trust Funds). trigger safeguard policies. The Bank has 10 environment, social and legal safeguard policies: OP 4.01 is the umbrella QAG Portfolio Status Indicators for Water Sector Codes (Water Supply, Sanitation, Sewerage, General Water, f policy for other safeguard policies (OP 4.12 on involuntary resettlement, OP 4.31 on safety of dams, OP 7.50 on Public Administration for Water, Irrigation and Drainage, and Flood Protection) as of 1/14/2009 international waterways, OP 4.11 on physical and cultural resources, OP 4.04 on natural habitats, OP 4.10 on indigenous g IEG Evaluation Data of Water Sector Board Projects is provided in Business Waterhouse. people, OP 4.09 on pest management, OP 4.36 on forests, and OP 7.60 on disputed areas). Similarly, the definition (Projects ending in FY09 have not yet been evaluated by IEG) of a "high reward" project varies from large infrastructure projects to those that are innovative. Contrary to risk factors h Staff includes World Bank (IBRD/IDA) employees, Grade GF and above who are mapped to the Water Sector. (related to safeguards), there are no established "reward" factors. For the purpose of this analysis, factors such as the These numbers DO NOT include JPO, JPA, SPA, Secondees, GE and below staff. WSP staff 98 SustainingWaterforAllinaChangingClimate AnnexB|MonitoringandEvaluationofWorldBankGroupSupportforWater 99 Annex B Monitoring and Evaluation of World Bank Group Support for Water Inputs and Intermediate Output Indicators FY03 FY04 FY05 FY06 FY07 FY08 FY09 Total World Bank Group Commitments in the Water Sectora (US$ Million) WorldBank(IBRD,IDA,others) 1,776 2,689 3,633 2,264 4,183 3,445 5,415 23,405 InternationalFinanceCorporation 78 125 99 557 559 517 748 2,683 MultilateralInvestmentGuaranteeAgency 0 129 170 47 157 20 75 597 Total 1,854 2,944 3,902 2,867 4,899 3,981 6,238 26,684 World Bank Commitments Numberofprojectsapprovedcontainingwatercomponents 76 80 99 94 133 129 128 739 Volumeofprojectsapprovedcontainingwatercomponents(US$Million) 1,776 2,689 3,633 2,264 4,183 3,445 5,415 23,405 By Sub-sector: WaterSupplyandSanitation 1,312 1,513 1,956 1,594 2,433 2,073 4,329 15,210 Irrigation&drainage 235 787 1,085 422 912 493 589 4,523 Hydropower 196 282 226 118 387 678 237 2,125 Floodprotection 33 108 366 130 450 201 259 1,547 NumberofprojectsapprovedwithWRMComponentsb 23 32 43 32 42 33 33 238 VolumeofprojectsapprovedwithWRMComponentsb(US$Million) 213 409 763 274 794 487 971 3,911 Disbursementsforprojectswithwatercomponents(US$Million) 1,209 1,182 1,237 1,568 1,692 1,798 1,692 10,376 NumberofHighRisk/HighRewardProjectsc 0 1 1 2 3 1 0 8 VolumeofHighRisk/HighRewardProjects(US$Millions) c 0 65 125 150 340 400 0 1,080 NumberofDevelopmentPolicyLoanscontainingwater-relatedsectorcodes 5 5 9 7 8 11 18 63 ValueofDevelopmentPolicyLoanscontainingwater-relatedsectorcodes(US$Million) 114 46 94 158 286 430 1,203 2,330 World Bank Non-Lending AAA NumberofWaterESWDeliveredd 27 26 34 30 22 23 14 176 NumberofWaterNon-lendingTADelivered d 24 18 37 16 18 17 28 158 Links to CAS and PRSPs NumberofCWRASscompleted 3 6 5 4 1 0 2 21 96 SustainingWaterforAllinaChangingClimate AnnexB|MonitoringandEvaluationofWorldBankGroupSupportforWater 97 Endnotes 1 IBRD/IDA indicators, unless otherwise noted. 14 Core indicators: water supply (Improved community water points constructed or rehabilitated 2 FY08 Baseline data. (number), new piped household water connections (number), piped household water connections affected 3 Projects with water sectors codes that include the by rehabilitation works undertaken (number), number water resource management theme. of water utilities supported (number), number of 4 Projects with water sector codes which contain other water service providers supported (number)); at least one thematic code from two of the three Sanitation (Number of people trained to improve relevant thematic groups (Urban Development, Rural hygiene behavior or sanitation practices, number Development, and/or Environment and Natural of new sewer connections constructed, number of Resource Management). improved latrines constructed; and irrigation and drainage (Area provided with irrigation and drainage 5 Projects with agriculture, fishing, and forestry services, number of water users provided with sector codes and water resources management irrigation and drainage service, Number of operational theme code. water user associations). 6 Examples include country Water Resources Assistance Strategies and Water PERs that include at least two water sector codes. 7 Examples include Country Environmental Assessments, Strategic Environmental Assessments, River Basin Planning, Hydrological Analysis. 8 Project examples: improved storage, water resource management, preparedness, coastal zone management (based on forthcoming new SAP classification on climate change adaptation and co-benefits). 9 Percentage of total portfolio (based on active projects since 2003) for which project planning and design address river basin planning and water use. See Hydropower Business Plan: Sustainability Balanced Scorecard (Annex II), December 2008. 10 Percentage of total portfolio (based on active projects since 2003) for which enhancing development benefits to local communities programs has been integrated into project planning, design and implementation. See Hydropower Business Plan: Sustainability Balanced Scorecard (Annex II), December 2008. 11 See Making Infrastructure Work for Women and Men (Draft- March), Prepared by SDN. 12 Number of projects that trigger OP7.50 on International Waterways. 13 Baseline data is average of FY07­FY09. 104 SustainingWaterforAllinaChangingClimate Annex D Outcomes of Selected IDA Water and Sanitation Project in Uganda succeeded Supply and Sanitation Projects in improving water supply services for over 190,000 people in 11 towns and significantly Urban water projects in Senegal helped reduced time spent on water collection. usher a reform of the water sector in 1996 The Yemen Social Fund for Development which led to increased efficiency and provided basic social and economic services expanded access, particularly for the poor, to almost 10 million people, of which almost without increasing water tariffs beyond the 2 million benefited from access to water sup- rate of inflation. Following the engagement ply services. A follow-up project provided of a private operator in an innovative public- more than 820,000 people with improved private partnership, water losses decreased environmental sanitation. from 32 percent to 20 percent between 1998 In the Cambodia Urban Water Supply and 2003. Between 1996 and 2006, access Project, water losses were reduced from 57 to water supply services was extended to percent in 1998 to 18 percent in 2003, while approximately 1.6 million people in Dakar adding almost 100,000 new connections to and secondary cities. IDA helped finance the piped network system and resulting in 140,000 new household connections at subsi- a 34 percent increase in access to improved dized rates for poor families and 400 public water sources in the country's urban areas standpipes. Sanitation improved in urban between 1998 and 2004. The increased sales areas with 830,000 people gaining access to and lower cost of production had a positive sewerage connections or on-site sanitation. impact on the financial performance of the Two successive projects leveraged utility. In rural areas of Indonesia, 600,000 important funds from other donors and com- households and 3,000 schools have ben- mercial banks and contributed to expanding efited from improved WSS services under global access to water to 98 percent of people the Second Water and Sanitation for Low in Senegal's cities in 2006, up from 74 per- Income Communities Project. cent 10 years earlier. The level of household The on-going Second Community Water connections in urban areas (76 percent) is Supply and Sanitation Project in Sri Lanka now the highest in sub-Saharan Africa. In has succeeded in providing so far safe Ghana, the Second Community Water and access to water supply to 46,000 house- Sanitation Program adopted a community- holds and supported the construction of driven approach to water supply, supporting some 10,000 latrines. Ghana's decentralization strategy through grants. More than 2,014 communities are now using and managing water and sanita- tion facilities that they planned and helped build. Overall nearly 800,000 people in four regions (6 percent of Ghana's total rural population) gained access to potable water. The project also provided training to 500 service providers. The Small Towns Water AnnexD|OutcomesofSelectedIDAWaterSupplyandSanitationProjects 105 1818 H Street, NW Washington, DC 20433 USA www.worldbank.org