99276 A WATER-SECURE WORLD FOR ALL WATER FOR DEVELOPMENT: RESPONDING TO THE CHALLENGES SEPTEMBER 2015 © 2015 The World Bank Group Rights and Permissions This work is licensed under the Some Rights Reserved Creative Commons Attribution- NonCommercial-NoDerivatives 1818 H Street, NW, Washington D.C. 20433 4.0 International License. To view a copy of this license, United States of America visit http://creativecommons.org/licenses/by-nc-nd/4.0/. You are free to copy and redistribute the material in any The findings, interpretations, and conclusions expressed medium or format, under the following terms: in this work do not necessarily reflect the view of the Attribution — You must give appropriate credit, provide a World Bank Group, its Board of Executive Directors, or link to the license, and indicate if changes were made. You the governments they represent. 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Washington, DC: This translation was not created by the World Bank and should World Bank.” not be considered an official World Bank Translation. The World Bank shall not be liable for any content or error in this translation. FOREWORD Water as a sector in world affairs is reaching a tipping challenges of the 21st century without ensuring water point. Over the next two decades and beyond, the global security for all. This booklet summarizes a few of the most push for food and energy security and for sustaining pressing development challenges: urbanization will place new and increasing demands on the »» Ensuring access to sustainable services for water sector. Ours is a world in which “thirsty agriculture” everyone, especially the poor and “thirsty energy” compete with the needs of “thirsty »» Building resilient cities that can handle growing cities.” At the same time, climate change could potentially water stress, rapid urbanization, and climate change worsen the situation by increasing water stress as well as the »» Managing transboundary cooperation on number of extreme weather events. All of this is happening information, infrastructure, and institutions in a context where the important agenda of access to water »» Ensuring gender equality in access to water, which and sanitation services—despite impressive gains over the improves sustainability, health, and education past several decades—remains unfinished, requiring an »» Attracting commercial financing into the water and urgent push if we are to fulfill the promise of universal sanitation sector access. Water in all its complex dimensions remains a high priority The time has indeed come to shift from looking at water for the World Bank. As the world’s largest multilateral source through its traditional components—water supply, sanitation, of financing for water in developing countries, and with the irrigation, and water resources—to placing water at the support of our development partners, our commitment to a center of the development dialogue. This shift signals that water-secure world has been a constant. For some, “a water- we have now entered the world of water security, where secure world for all” is an aspiration. For us, it is a must. service delivery and management of water resources can no At stake is our fight to eradicate extreme poverty and boost longer be addressed separately and water becomes intricately shared prosperity. linked to development more broadly. Not surprisingly, according to the World Economic Forum, water security Junaid Ahmad has emerged as one of the major challenges and potentially Senior Director the number one global risk in terms of development impact. Water Global Practice In a context where water is critical for development, the World Bank Group world will not be able to meet the sustainable development CONTENT WORKING TOWARD SUSTAINABLE WATER SUPPLY AND SANITATION SERVICES FOR ALL 8 CLIMATE RESILIENT CITIES AND WATER 16 TRANSBOUNDARY COOPERATION HELPS BUILD CLIMATE RESILIENCE 22 WATER AND GENDER 26 ATTRACTING COMMERCIAL FINANCING INTO THE WATER AND SANITATION SECTOR 32 About the World Bank Water Global Practice About Junaid Ahmad, Senior Director, World Bank The World Bank provides financing and expertise to help Junaid Ahmad, a Bangladeshi national, leads the World countries overcome threats to water security. The World Bank Group’s Water Global Practice (GP), which supports Bank’s water projects and programs total US$22 billion across governments to build a water-secure world for all. 65 countries and also include country, regional and global The Water GP focuses on improvement of water resources packages of economic and technical expertise. Direct project management and delivery of services in a context of water beneficiaries from this portfolio total 155 million people. in the broader economy. Junaid takes on this role following his position as Director for Sustainable Development in Photo Credits the Middle East and North Africa Region. Junaid joined the Cover: Woman collecting water from a well. Woman with World Bank as a Young Professional in 1991 and spent 10 water container at well. Sri Lanka. Photo: Dominic Sansoni years in the field, in Africa and Asia. He holds a PhD in Applied / World Bank. https://flic.kr/p/42GZZL Economics from Stanford University, an MPA from Harvard University, and a BA in Economics from Brown University. Page 2: National Water and Sanitation Program brings ... The World Bank-supported National Water and Sanitation Media Contact Program will bring water to rural parts of Azerbaijan. Christopher Walsh Photo: Allison Kwesell / World Bank. https://flic.kr/p/dv77hX Email: cwalsh@worldbankgroup.org Page 7: Farm in Chimaltenango Guatemala. A farm worker cleans lettuce crops, in Chimaltenango, Guatemala. Photo: Maria Fleischmann / World Bank. https://flic.kr/p/dz7zz5 Connect with the World Bank Water Global Practice worldbank.org/water Page 15: Students handwashing with soap. Students of Teresa Gonzales de Fanning School wash their hands during @WorldBankWater celebrations for Global Handwashing Day (October 15th) in Lima - Peru. Photo: Ana Cecilia Gonzales-Vigil / World Bank. blogs.worldbank.org/water https://flic.kr/p/o4Rtx9 WorldBankWater@worldbank.org Page 21: Worker at waste water treatment facility. Manila, Philippines. Photo: Danilo Pinzon / World Bank. https://flic.kr/p/aFVDJ8 Page 31: 015 El Renacimiento School in Villa Nueva Guatemala. A girl pays attention in a classroom in El Renacimiento school, in Villa Nueva, Guatemala. Photo: Maria Fleischmann / World Bank. https://flic.kr/p/dz27Cc Page 37: Trung Son Hydropower Project site, Vietnam. Photo: Mai Ky / World Bank. https://flic.kr/p/dntTva WORKING TOWARD SUSTAINABLE WATER SUPPLY AND SANITATION SERVICES FOR ALL THE CHALLENGES Access to sanitation lags behind water. At the aggregate level, the world surpassed the Millennium Development Goal (MDG) to halve the proportion of people without access to improved water supplies by 2015, but failed to meet the equivalent for sanitation, and strong country and regional disparities in access remain, with Africa and Asia falling behind the rest of the world. Quality of service is poor and service providers lack financial resources. Intermittent supplies, continuing environmental degradation, and financially weak service providers who rely on subsidies to cover their operating and capital costs contribute to this challenge. Access to a connection is not enough. The Sustainable Development Goals (SDGs) aim to build on the global achievements made since 1990. Access continues to be important, but SDG 6 proposes a broader agenda, as set out in the draft definition: By 2030, achieve universal and equitable access to safe and affordable drinking water for all. By 2030, achieve access to adequate and equitable sanitation and hygiene for all and end open defecation, paying special attention to the needs of women and girls and those in vulnerable situations. These new goals reflects the growing importance of water and sanitation as a human right. Additional targets that go beyond access are also being considered, such as improving water quality by reducing pollution, and substantially increasing water-use efficiency. The scale of the challenge is large and becoming more complex. The challenges described translate to 663 million people without access to safe water, and 2.4 billion people without access to improved sanitation, of which 1 billion defecate in the open. A WATER-SECURE WORLD FOR ALL 8 Two-thirds of people in developing countries use onsite sanitation, but only 22 percent of fecal sludge is managed, whereas up to 90 percent of sewerage flows in developing countries are discharged untreated into water bodies. Moreover, the combined impacts of urbanization and climate change will converge to compound this challenge. Future water availability is not guaranteed. Uncertainty about the future availability of water resources will have its most profound effects on poor populations, which are often concentrated in disaster-prone areas such as overcrowded settlements and low-lying deltas. Water variability, whether too much or too little, will strongly impact the ability of providers to maintain adequate quality and quantity of water supply and sanitation services. Failure to address these issues is expensive. The World Health Organization (WHO) estimated the economic cost of poor sanitation at US$260 billion per year, which, depending on the country, can range from 1 to 6 percent of the national GDP. There is no universal solution, but experience suggests the challenge may fall under three broad areas: »» Governance, the state, and citizen engagement: The framework of behavior change, institutions, policies, and incentives that support or undermine achievement of SDG 6. »» Finance and pricing: The ability of service providers to fully cover their operations and maintenance costs, and access investment funds as needed to expand and improve services and leverage markets. »» Capacity: The skills needed by managers and staff to deliver services efficiently and effectively. WATER FOR DEVELOPMENT: RESPONDING TO THE CHALLENGES 9 RESPONDING TO THE CHALLENGES Strengthen sector governance, citizen participation, and utilities to improve service delivery. Effective service delivery depends not only on the governance and finance of service providers, but also on the relationship of the sector with the state. Increasingly, water and sanitation services are delivered in the context of a multitiered state—federal or decentralized—and aligning the water sector in terms of roles and responsibilities to the different tiers of government is fundamental to creating the right accountability and incentive for making services work, especially for poor people. In this context, strengthening local governments and their relationship to citizens can form an important platform for ensuring universal access to services. The formation of effective service providers—whether rural or urban providers, public or private, or community-based systems—requires a framework that enables each tier of the state to have formal mechanisms for citizen engagement in service provision. Furthermore, the linkage of the water sector to the fiscal, financial, and regulatory framework of a multitiered state will also define and set the context for leveraging markets and for the private sector to support the delivery of services. Similarly, local governments can play a critical role in developing incentives for household-level behavior change, which is especially important in the case of sanitation. Finally, the linkage between the water sector and the state is critical for scaling up service delivery and innovation and delivering on the promise of universal access. A WATER-SECURE WORLD FOR ALL 10 In terms of the governance of service providers, previous World Bank studies have shown that well-run utilities demonstrate four key characteristics: »» They are managerially and financially autonomous. »» They are accountable to their stakeholders. »» They are efficient. »» They are customer-oriented. Rarely do utilities in developing countries meet these characteristics, even though many best practices are known and replicable throughout the world. Greater separation of roles and responsibilities of sector actors is important, especially through ring fencing and better management of the service provider. There is a need to seek mechanisms for separating policymaking from service delivery and regulation—distinguishing “judge from the jury.” Interestingly, studies have shown that separation of roles and responsibilities of sector actors is often facilitated and triggered by the separation of roles and responsibilities between different tiers of government, suggesting that water sector governance reforms are intimately linked to the decentralization of the state. In the case of small towns, the need to consolidate into larger, more viable entities may become important. But more than anything, strong political leadership, which sees the benefits of universal and sustainable service delivery, is critical. It is only with this support that better incentives can be introduced, that utilities can be held accountable for the services they deliver, that opposition from vested interests can be withstood, and that customers can expect, and be asked to pay for, a service that meets their needs. WATER FOR DEVELOPMENT: RESPONDING TO THE CHALLENGES 11 Secure a reliable revenue stream sufficient to cover operation and maintenance costs. Maintaining revenue remains a day-to-day challenge for many utility managers. Data from the International Benchmarking Network for Water and Sanitation Utilities (IBNET) shows that only 64 percent of the 4,500 utilities in the database cover more than their operation and management (O&M) costs from user fees. User fees are, in most cases, the most reliable source of revenue given that government transfers can be unreliable, or may come with political patronage requirements. Increasing reliance on user fees also means that managers and staff will focus more of their attention on meeting customer needs, rather than trying to satisfy politicians on a day-to-day basis. This requires attention to commercial operations (billing and collections), price setting (cost recover tariffs), and the design of tariff structures that achieve cost recovery while considering affordability. Pricing. Revenue and affordability, however, raises the issue of pricing water. Today, in the context of climate change, the world is seeking to put a price on carbon but there is uncertainty as to how to value water. Yet, in the context of water security, pricing and valuation of water has become essential. Pricing will need to play the role of supporting water efficiency and reducing waste; facilitating the allocation of water between competing needs such as energy, agriculture, and municipal sectors; creating accountability in service delivery; meeting environmental needs; and securing universal access and affordability. A single price cannot meet these differing objectives, but no pricing or underpricing has the same impact—inefficiency, inequity, and misgovernance. Indeed, the most expensive water, especially for the poor, is free water. Time and again studies have shown that water subsidies are often captured by the better-off households, and poor revenue streams for providers undermine their accountability and ability to universalize service delivery, leaving poor households outside the ambit A WATER-SECURE WORLD FOR ALL 12 of formal service delivery. The Gordian knot of water pricing can only be cut in the context of institutional reform, sector governance, and assurance that the linkage with the state can allow distributional goals to be addressed through effective safety nets financed separately and securely. Improve operational efficiency to ensure that each revenue unit delivers the maximum service possible. The two largest areas of inefficiency are typically energy consumption and leakage. In both cases, greater use of performance-based contracting provides service providers with opportunities to leverage their public-sector skills with the technical capacity and incentives of the private sector to reduce costs and improve quality of service. Increase and improve access to investment capital. To achieve universal and quality services, investment capital must extend beyond what has historically been available from government grants, subsidies, and loans. The next period must see a move toward mobilization of more domestic capital, whether from banks, capital markets, or other sources such as pensions and insurance companies. Given the limited use of such sources in the past, there is a lot of ground to be made up. Often borrowers and lenders have limited understanding of each other’s needs and constraints. They simply don’t know how to talk to each other, and there may even be legal constraints that block potential lending to water companies. As a result, extensive capacity building will be needed to create that market— to build credit-worthy utilities, educate lenders about the sector’s opportunities, and remove legal or policy obstacles to mobilizing those funds. In the meantime, governments and donors should focus on building infrastructure by providing more results-based financing that creates a mindset around outcomes and institutions. Using government- backed financial institutions to supply finance and compensate for credit worthiness does not have a track record of triggering or sustaining effective service delivery. WATER FOR DEVELOPMENT: RESPONDING TO THE CHALLENGES 13 Increase capacity building of utility staff and managers to professionalize the sector. Capacity is often perceived through the lens of training, and that too, through a prism of supply-driven, top-down training methodologies. Capacity building in reality is much more and, importantly, intimately linked to the institutional setup of the service provider. A local government or a service provider that has operational flexibility with its own revenue sources and is held accountable for service delivery will constantly seek to invest in its own capacity through organizational changes, contracting of systems and skills, and, yes, training. Capacity building in such a setting becomes more demand driven and related to operational needs. In this broader institutional context for the water sector, national governments can offer resources and incentives for individual utility and service providers to invest in capacity building at their level. Both private and public institutions have a role to play, and there should be an effort to build upon past successes and develop new partnership modalities. For the private sector, there is potential to move from delegated or service contracts to larger-scale efforts, such as capacity building at scale for multiple utilities. Likewise, public-to-public twinning partnerships can be expanded in both depth and scale, as long as they remain founded on key success factors such as shared interests, geographic proximity, and cultural and linguistic considerations. The World Bank will continue to provide infrastructure financing to support clients in their drive to meet the SDGs. This will be balanced by an increasing use of the Bank’s international knowledge and experience to improve service providers by linking governance, financing, and capacity building, helping our clients move toward universal, quality water and sanitation services in a sustainable manner. A WATER-SECURE WORLD FOR ALL 14 CLIMATE RESILIENT CITIES AND WATER THE CHALLENGES Water stress is growing. Population and economic growth are bumping up against a finite—and increasingly degraded—water resources, and this is particularly evident in urban areas. Although the extent and nature of this stress varies from area to area and from city to city, many parts of the world will need to manage their water resources much more effectively to sustain their growth, and in some cases, prevent a major regression in water-derived welfare. Furthermore, with higher rates of urbanization, competition between agricultural, industrial, and municipal water uses will increase, putting stress on existing water sources, and this will disproportionately impact the poor. An increasing number of people live in urban areas. Currently, 54 percent of the world’s population (i.e., 3.9 billion people) resides in urban areas; by 2050, 66 percent of the world’s population is projected to be living in urban areas, with nearly 90 percent of this increase concentrated in Asia and Africa. Growing cities will need to provide services to 70 million more people each year over the next 20 years, further increasing the already massive challenge of providing universal access to water supply and sanitation (WSS) services by 2030. In this context, growing demand for WSS services, accompanied by unplanned land use in urban areas, will likely lead to unchecked contamination of surface and groundwater sources. This poses a threat to the security of water supplies, increases flood risk, and affects the quality of life of urban residents. In particular, small and medium-sized towns and cities experiencing high population growth in developing countries will face increasing challenges to provide basic urban services as they prepare to become the larger cities of tomorrow. A WATER-SECURE WORLD FOR ALL 16 Urban water management systems are inefficient. Current approaches to urban water management remain sector-specific, lacking scope to address cross-cutting water-related challenges. Watershed approaches to urban water management, where they exist, are rarely well coordinated with urban planning or with the provision of other urban services. Local authorities may also lack information about and experience with available technical options. Thus, approaches to urban water management remain fragmented. As a consequence, variations in the quantity and quality of water available to cities for drinking water, agriculture, energy, industry, and the environment lead to growing water insecurity. Climate change affects water resource availability. In addition, urban water management must consider the increased variability in water resource availability stemming from the effects of climate change, including rising temperatures, changes in precipitation patterns, and climate variability. An estimated 150 million people currently live in cities with perennial water shortage; population growth and climate variability may increase this number to 1 billion by 2050. Furthermore, most of the key climate risks are concentrated in urban areas, as high urbanization and rapid growth of large cities are accompanied by an increase in highly vulnerable urban communities living in informal settlements, many of which are on coastal land at high risk from sea-level rise, extreme weather, and climate events. The poor are the most vulnerable. The level of vulnerability to the effects of increasing water insecurity and climate change differs across and within cities, and differences in adaptive capacity are to a great extent determined by poverty and inequality, as well as by access to infrastructure, institutions, and information. The urban poor are most vulnerable to these challenges, because they have less access to resources to cope with extreme weather events and are often marginalized from decision making, particularly in the informal settlements of growing urban areas in developing countries. CLIMATE RESILIENT CITIES AND WATER 17 RESPONDING TO THE CHALLENGES Addressing these increasingly urgent challenges requires an array of interventions and services at the city level to build resilience not only in physical infrastructure but also in cities’ social architecture, governance structures, financial systems, and ecosystems. Increasing uncertainties coupled with sudden shocks or accumulating stresses could lead to infrastructure failure, economic decline, or social breakdown. A resilient city can adapt to a variety of changing conditions and withstand shocks while still providing essential services to its residents. Such a city will have a series of systems in place capable of absorbing the stresses imposed by climate change as well as those resulting from nonclimate risks. The World Bank is supporting its client countries in building resilient cities through different sectors and approaches. The Water Global Practice of the World Bank is contributing to this effort by focusing on three major responses. Promote water security by integrating the wider resource perspective. This integration is achieved by identifying solutions that take into account resource constraints and extreme weather events. It entails broadening the scope of analysis to include a basin-wide understanding of the availability of water resources, both surface and groundwater, the quantity and quality available, and the existing competing uses. It also includes helping clients to navigate the risks and uncertainties from climatic and nonclimatic risks, incorporate robustness in system design and operations, and strengthen utilities. For example, in Bogota, Colombia, and Buenos Aires, Argentina, the Bank is supporting the government through lending instruments to build resilient cities through comprehensive upstream watershed management coupled with urban water management and flood control. A WATER-SECURE WORLD FOR ALL 18 Promote the principles of integrated urban water management. IUWM offers a framework that can complement traditional approaches to resolving the challenges that affect the provision of services in urban areas. It is underpinned by the idea that cities are fundamentally dependent on, and have an impact on, the wider watershed and must account for all elements of the urban water cycle. Under an IUWM approach, planning for the water sector is integrated with other urban sectors, such as land use, housing, energy, and transportation, to overcome urban planning fragmentation with the aim of improving system-wide performance. Within an IUWM framework, it is also important to promote activities that close the water cycle and improve infrastructure design and operation through the incorporation of hard and green solutions (e.g., drainage systems, green roofs, and room for the river). In Teresina, Brazil, for example, the World Bank has been providing financing for soft and hard investments to integrate drainage infrastructure with water supply and sanitation, create green areas to mitigate the effects of urban flooding, and regenerate urban areas to promote economic development. Most recently, the World Bank provided support to Uruguay to develop a roadmap for an IUWM national strategy for sustainable urban development and strengthening of local capacities. Promote mainstream water in broader city resilience exercises. Several global initiatives on building resilient cities focus on a large number of sectors and services—e.g., the Rockefeller Foundation’s 100 Resilient Cities, work by the C40 Cities Climate Leadership Group (C40), ICLEI, and the United Nations Human Settlements Programme (UN-Habitat). In addition, the World Bank is implementing its City Strength Program. This program facilitates dialogue with city stakeholders about risk, opportunity, and the performance of urban systems, and provides a tool for identifying priority actions and investments to enhance resilience in city systems CLIMATE RESILIENT CITIES AND WATER 19 as a whole. The Water Global Practice collaborates with these broader initiatives to ensure that resilience is built into water systems, thus providing proper service provision and protection of the most vulnerable. Promote decentralized cities. In the context of today’s urbanization process and the growing economic importance of urban systems, the governance framework of cities will determine the impact cities will have on the welfare of nations. At the heart of the governance story is the extent to which cities have devolved political, fiscal, and regulatory powers. South Asia’s megacities (e.g., Dhaka, Mumbai, and Karachi) are relatively centralized, with limited fiscal and policy powers. In contrast, cities in Southern Africa and Latin America have more decentralized powers. Importantly, the level of decentralization is a critical determinant of how accountable city policymakers are to urban citizens. Policies to build resilient cities will therefore be sharply influenced by the governance structure of cities and their level of decentralization in an intergovernmental system. However, building resilience is equally a national responsibility. Therefore, the fiscal and policy relationships between upper tier governments and city governments become equally important in the governance of cities and supporting programs that strengthen resilience. Building resilient cities requires various sectors to work together to ensure integrated city-wide planning, including effective water resource management. It also requires a careful understanding of the governance system of cities and their place in the intergovernmental system. The World Bank will continue to work across sectors and with diverse institutions and stakeholders to help cities become resilient for the challenges ahead while ensuring decreased vulnerability of the poor and strengthened urban governance and accountability. A WATER-SECURE WORLD FOR ALL 20 TRANSBOUNDARY COOPERATION HELPS BUILD CLIMATE RESILIENCE THE CHALLENGES The growing development in transboundary river basins increases water-related risks. Around 60 percent of the world’s freshwater flows are in transboundary rivers and 40 percent of the world’s population lives in their river basins. Globally, there are approximately 276 transboundary river basins; Africa alone has 63 transboundary basins where the five largest rivers are shared by eight or more countries. Managing water-related hazards and risks in transboundary basins will be a central challenge in strengthening global resilience to climate change. As demand grows, these rivers will become increasingly developed, and pressure on the resource base will further complicate the challenges they face on political, institutional, economic, and financial fronts. Climate change and growing hydrological variability and uncertainty in these basins will affect billions of people, particularly the poor. Increased uncertainty and shifting crop water requirements will threaten poor rain-fed farmers in particular. Moreover, the increasing intensity of droughts, floods, typhoons, and monsoons, along with uncertainties around waterborne disease, glacier melt, glacier lake outburst floods, and sea-level rise pose the highest risk to poorer communities that are least able to cope. For example, in the Niger Basin, the predominantly rural population relies on rain-fed agriculture, pastoralism, or other natural-resource-based livelihoods. Food security and social well-being depend on unpredictable rainfall patterns that are projected to become more extreme as the climate changes. Subsistence economies that rely on the environmental services provided by the river are the most vulnerable to climate risk. Sound water management, which is key to adaptation, is weakest in the poorest countries in the basin, thereby magnifying their climate vulnerability. A WATER-SECURE WORLD FOR ALL 22 The transboundary nature of most major rivers, lakes, and aquifers adds complexity to planning and implementing these crucial adaptation and mitigation interventions and may introduce the risk of maladaptation. Countries face technical, financial, political, and logistical challenges when they seek to manage or develop their transboundary waters—challenges that spill over and complicate efforts to build climate resilience and adapt to change. Examples of the complexities of transboundary waters include: »» Hydrological and meteorological boundaries seldom coincide with political boundaries, so national data sets only provide a subset of information needed to characterize available water and project water-related climate vulnerabilities. »» Political relationships can dominate the extent to which data is shared and investments are explored collaboratively. »» Competing national priorities for common water resources have different payoffs for different riparians; national-level interventions that do not consider riparian interests risk having maladaptive consequences. »» Having multiple borrowers and/or multiple beneficiaries adds complexity to institutional and financing arrangements for infrastructure. »» Coordinating among multiple countries adds time and expense to any process; riparians may become frustrated with the pace of multilateral development and see international cooperation as a hindrance rather than a solution. WATER FOR DEVELOPMENT: RESPONDING TO THE CHALLENGES 23 RESPONDING TO THE CHALLENGES Despite its complexities, transboundary cooperation on information, infrastructure, and institutions presents countries with an important opportunity to effectively and efficiently build climate resilience. The World Bank is supporting its client countries in building climate resilience through transboundary cooperation by focusing on three major responses. Promote cooperation in information and data sharing to reduce uncertainty, manage climate risks, and strengthen livelihoods in the face of a changing climate. Information needed for resilience-building interventions exceeds geopolitical and sectoral boundaries, and transboundary cooperation allows: »» expansion of the information and knowledge base to improve understanding of weather and climate phenomena and increase predictive accuracy. »» use of available information by countries to collaborate and coordinate in making strategic regional and national decisions in the face of extreme climate variability and unpredictable long-term climate change. »» effective and efficient dissemination of processed information to populations vulnerable to climate disaster. For example, in Central Asia, the World Bank is supporting efforts to strengthen national and regional hydrological and meteorological information systems that will improve accessibility, reliability, and analytical capacity to use water resource information for improved water resource planning, monitoring, and management. These systems will help countries reduce uncertainty as they plan for and operate hydropower, irrigation, and municipal water supply investments. A WATER-SECURE WORLD FOR ALL 24 Promote basin-wide planning and development of strategic natural and man-made infrastructure to mitigate impacts of climate variability and reduce risks of long-term change. Transboundary cooperation allows countries to strategically, in the context of their hydrogeologic landscape, advance sound and sustainable regional and national infrastructure that will equip people to better store, regulate, and exploit their water resources. As a result, these countries will be able to advance their development objectives and reduce their climate-disaster and environmental vulnerability in the face of increasing climate variability and shifting long-term water availability trends. For example, in the Niger Basin, the World Bank contributes to the funding of the Kandadji Program, which involves construction of the Kandadji dam and investments to increase power-generation capacity, boost agribusiness, increase irrigation, and support community development. These investments will help the people of Niger and the basin to overcome their vulnerability to water- related shocks and take steps toward meeting their development objectives. Strengthen the range of institutions needed to implement effective cooperative adaptation. Transboundary cooperation allows countries to develop a strong foundational institutional framework, which includes formal legal frameworks; informal, accepted norms; and organizations such as river basin organizations and regional economic commissions. This framework enables effective sharing of information and collaboration on sustainable infrastructure critical to reducing climate disaster risk and mitigating environmental vulnerability. For example, in the Zambezi Basin, the World Bank, through the Cooperation in International Waters in Africa (CIWA) program, is supporting the Zambezi Watercourse Commission (ZAMCOM) in its effort to develop a basin-wide master plan, a basin-level information platform, and a flood-forecasting and early warning system. A strong ZAMCOM will be an important tool for countries as they work together under an uncertain future to equitably develop the basin’s shrinking resources. WATER FOR DEVELOPMENT: RESPONDING TO THE CHALLENGES 25 WATER AND GENDER THE CHALLENGES Women lack voice and representation in water management. Since the Beijing Platform of Action for the Advancement of Women was defined 20 years ago, international policy declarations have stressed the importance of addressing gender differences in water needs and have emphasized the central role women play in water management to achieve sector goals. Although sector policy and strategies at country and institutional levels have registered modest success in consistently channeling women’s contributions, women continue to be disproportionately underrepresented in sector decision making at many levels. Domestic water collection leads to time poverty for women and girls. In spite of the progress realized in the global Millennial Development Goals 2015 milestone for water, in 70 percent of households in 45 developing countries, domestic water collection is done by women and girls, disadvantaging other spheres of life. In India, for example, women and girls spend an estimated 150 million work days fetching water per year; in Tanzania, school attendance levels are 12 percent lower for girls in homes more than an hour away from safe water supply than for girls within a distance of 15 minutes. Women have unequal economic opportunities. The water sector continues to reflect unequal economic opportunities in spite of growth. For example, in patriarchal societies, the membership requirement for water user associations is often tied to land ownership, which reduces women’s chances to participate in decisions on water resource management. Men benefit disproportionally from economic opportunities generated by the capital-intensive nature of water development and management. A WATER-SECURE WORLD FOR ALL 26 Women and girls have specific sanitation needs. Globally, 52 percent of the female population is of reproductive age. Managing menstruation requires several essential elements, including clean materials to absorb or collect menstrual blood, a private place to change these materials as often as necessary, soap and water for washing, and access to safe and convenient facilities to dispose of used materials. Taboos around menstruation have rendered these needs invisible, but without such facilities or with unisex facilities with no privacy, girls have been known to lose school days or even drop out of school at puberty. Moreover, walking to communal toilets in urban informal settlements or humanitarian camps, or, in the absence of facilities, to secluded areas for open defecation, has been associated with gender-based violence. RESPONDING TO THE CHALLENGES For water in its multidimensional role in economic development and poverty reduction, addressing gender is essential to achieving quality results. Substantial evidence shows that a gender-inclusive approach increases sustainability. Data from a 2001 World Bank study of 15 countries shows that water supply projects that used gender and demand-responsive approaches, such as separate meetings for women and men, capacity building, and quotas for women’s participation, sustained their results better and used the services more effectively to promote better health outcomes. To respond to the challenges, gender-inclusive water programs need to reflect the integral roles of women and girls as providers, users, and managers of water. In addition, more analysis of qualitative and quantitative data is required. Finally, synergies with other sectors such as health and education as well as stakeholder engagement need to be promoted. WATER FOR DEVELOPMENT: RESPONDING TO THE CHALLENGES 27 The World Bank is supporting its client countries in reducing gender inequities through different sectors and approaches. The Water Global Practice of the World Bank is contributing to this by focusing on three major responses. Increase the institutional space for gender. Sector actors can address gender inequality when sector objectives, strategies, institutional arrangements, and resources are in alignment with international and national gender goals and commitments. To explore the barriers that prevent, as well as the positive factors that lead to, effective implementation, the Water Global Practice is undertaking a global study to determine if countries have gender-informed water policies and strategies, and to what extent they are being implemented. The findings will be used to support the development of gender action plans in water for selected countries, and at a global level to promote knowledge on creating the institutional space to address gender gaps as part of regular water sector development. Recently, the government of Papua, New Guinea, with the partnership of the World Bank, developed and adopted a gender-informed national water, sanitation, and hygiene (WASH) policy that addresses gender dimensions of access, voice, and gender-based violence. Built on broad stakeholder engagement with civil society, academia, and government, the policy was enacted in January 2015. In this past year, the Water Global Practice reviewed the portfolio for trends and good practices in addressing gender in the 2000–2014 period. The findings are being used to increase support of gender in all aspects of water, with increased attention to water resource management. Building on the review, the Practice is also preparing new tools and checklists to guide staff, clients, and partners in addressing gender as part of sector reform and project design. A WATER-SECURE WORLD FOR ALL 28 Promote equal economic opportunities in the water sector. Analysis, monitoring and evaluation, and special interventions are required to ensure that women benefit from the economic opportunities that water generates. Peru’s Sierra Irrigation Project found that 75 percent of the water managers were men, land titles were almost exclusively in men’s names, participation in the Water User Organization (WUO) was linked to land ownership, and meetings were held at times women were unavailable and conducted in Spanish rather than the local language most women knew. Overcoming the challenges required removing the land title requirement for WUO membership and irrigation access, setting aside a portion of irrigated land for women, and, through exposure and training to men and women, raising awareness of women’s role in irrigation management. By the end of the project, all of the WUOs had at least one woman leader and participation in WUO meetings registered at least 30 percent women. Vietnam’s Red River Delta Water and Sanitation Project incorporated training for women on financial literacy, management, and business development, and provided access to credit through rotating funds and credit cooperatives. The intervention enabled women to make increased decisions on and investments in sanitation. Increase the capacity of the state and service providers to address gender and water. Kenya’s Water and Sanitation Service Improvement Project (WASSIP) built capacity within government water boards and 24 urban water utilities to address gender in sector policy and operations. Results included new gender action plans implemented with the institutions’ own resources; reform of access policies such as social connections and adoption of alternatives to land title requirements for water and sewer connections; increase in women’s opportunities for paid work; and enhanced women’s visibility in utility management. A compilation/toolkit of lessons learned is now being used to guide utilities beyond the project investment area in Kenya. WATER FOR DEVELOPMENT: RESPONDING TO THE CHALLENGES 29 A compilation/toolkit of lessons learned is now being used to guide utilities beyond the project investment area in Kenya. At a regional level, platforms like the Africa Minister’s Council on Water (AMCOW), which adopted the “AMCOW Policy and Strategy for Mainstreaming Gender in Africa’s Water Sector” in 2011, provide an entry point for countries to learn from one another. Similarly, the Nile Equatorial Lakes Subsidiary Action Program established a gender action plan, guidelines, and built capacity of riparian government staff for joint monitoring using gender-sensitive indicators for transboundary water management. Finally, the decentralization of the state and formation of local governments offer a space to increase the capacity of the state to address the linkage between gender and water. As India has shown, ensuring that local councils have a dedicated portion of seats for women councilors has enabled women to leverage their voice into service delivery decisions. States such as Kerala and West Bengal have seen this voice reflected in greater demand for water services. In Bangladesh, this has translated into greater demand for sanitation services. At the same time, water service delivery innovations can strengthen the voice of women in state management. The linkage of service delivery with the system of the state and mechanisms of voice that make a state inclusive are therefore critical to ensuring that the state is able to address the policy nexus defined by gender and water and can be held accountable for doing so. A WATER-SECURE WORLD FOR ALL 30 ATTRACTING COMMERCIAL FINANCING INTO THE WATER AND SANITATION SECTOR THE CHALLENGES Risky and uncertain revenues impede the water and sanitation sector from accessing commercial financing. Delivering good quality water and sanitation services requires that service providers be accountable to their customers and have financial and managerial autonomy to maintain assets and expand investments. Long-term commercial financing is required to support infrastructure development while short- and medium-term commercial financing is needed to support short- and medium-term rehabilitation, operating expenses, and bridge financing. Although both sources of financing are crucial, access to long- term financing is particularly difficult in developing countries where risks are high and future revenue streams more uncertain. Service providers in many developing countries confront the additional risk of foreign exchange rate volatility, which increases the cost of borrowing from foreign sources. For them, tapping into long- term domestic sources such as pension funds and insurance companies is critical to better match revenues and debt services and thus minimize the foreign exchange risk. Weak enabling environment discourages investment and results in low quality of service. Effective resource mobilization essentially implies that governments need to bring to market projects that are of interest to commercial financiers and create regulatory certainty. This requires interventions across several fronts—lowering risks, creating deeper local financial markets, and mobilizing international capital markets and institutional investors. That said, financing for projects will be hard to come by if governments do not have a facilitating regulatory and institutional framework in place. This means ensuring a service provider’s financial and managerial autonomy to limit day-to-day political interference. A WATER-SECURE WORLD FOR ALL 32 It also means accountability to stakeholders, including lenders, who focus on efficient service delivery. Many utilities in developing countries do not yet meet these thresholds, and this poor governance is reflected in poor operational performance with high levels of leakage, endemic inefficiency, and low quality of service. As a result, it is critical to look at sector governance as well as the enabling environment for private financing, both of which tend to be very weak in the water sector. Significantly less private capital has been committed to water and sanitation than to other infrastructure sectors. In 2013, private-sector participation in the water and sanitation sector totaled $3.4 billion, or just 7 percent of the money that flowed into energy and information and communications technology (ICT). Perhaps the single biggest constraint relates to the sources of income to support water projects. There are only two revenue streams to support infrastructure investments: consumers and government. However, unlike ICT and energy, where market forces tend to determine these revenue streams, there is often a public perception that water costs to consumers must be kept to a minimum. As a result, water and sanitation services are often underpriced, thus undermining opportunities to develop and maintain infrastructure as well as mobilize commercial finance. WATER FOR DEVELOPMENT: RESPONDING TO THE CHALLENGES 33 RESPONDING TO THE CHALLENGES As focus shifts to the SDGs and achieving universal access to water and sanitation, there will be a need to mobilize private capital to finance the infrastructure. To scale up (“billions to trillions”), it will be necessary to reconsider the systems and incentives needed to attract and sustain such capital flows. Over the past five years, the Global Water Practice at the World Bank has been working with key public and private- sector partners in numerous countries to explore innovative financing arrangements. There is no “one size fits all” and the solutions vary from models of contracting out specific services, to full-scale public-private partnerships (PPPs), to mobilizing domestic credit. Although much remains to be done, significant achievements have been realized in such diverse countries as Bangladesh, Benin, Cambodia, Kenya, and Indonesia. The World Bank’s approach is to tailor solutions to the financing, development, and delivery challenges of each country and city. Ho Chi Minh City in Vietnam offers a good example. The World Bank supported the water utility in outsourcing its leakage operations in part of the city. This project used an innovative performance contract where payments to the contractor were contingent upon water leakage savings. The saved water could then be used to expand services and increase revenues, thus improving both the quality of service and the financial performance of the company. Cairo is a booming and vast metropolis where the Bank has supported the local private and public sectors in gaining expertise in new technologies by partnering with foreign operators with obligations to maintain assets. In Senegal and Benin, there has been successful use of private operators in rural water with small schemes that are grouped to attract finance and achieve economies of scale. A WATER-SECURE WORLD FOR ALL 34 A number of instruments and tools exist to facilitate or “crowd-in” commercial financing. Many of these have been used successfully in other infrastructure sectors and, in the right enabling environment and with viable projects, can be used to significantly increase private financing. A host of tools have been used to attract investors to the infrastructure markets. For instance, financial guarantees are used to reduce the risks for private investors and increase the pool of capital. Partial credit guarantees have been structured in multiple ways to share risk and can be tailored to meet specific mitigation needs. They are best used when the capital risk is clear and the guarantee is targeted to overcome the specific risk. Another popular tool is insurance, which can be used to mitigate investor risk and, like guarantees, may be structured to share risk or tailored to address specific issues. For example, insurance has been used to mitigate concerns about such diverse challenges as the political economy, and catastrophic circumstances such as natural disasters. Subsidies, when structured correctly, reduce the overall financing costs, target benefits to specific segments of the population, and extend service coverage areas. Equity grants, or blended finance, is another form of subsidy that replaces equity capital with no or low return finance. Other examples include tenure extensions, pooled finance, and project preparation funds. In sum, there are tools to suit particular country circumstances and call for targeted responses. WATER FOR DEVELOPMENT: RESPONDING TO THE CHALLENGES 35 Innovative financing can transform marginal projects into financially viable transactions. However, no amount of innovation can make nonviable projects bankable or overcome lender’s concerns about sector governance, utility performance, and revenue predictability. How public finance and public institutions of service delivery are structured will determine the ability of the water sector to leverage private finance. Poorly structured public systems will not attract private finance or will do so at the risk of creating moral hazard and placing commercial risk implicitly on public resources. Without a concerted push to address these issues, the chances of achieving the SDGs could be threatened. A WATER-SECURE WORLD FOR ALL 36 A WATER-SECURE WORLD FOR ALL 38 WATER FOR DEVELOPMENT: RESPONDING TO THE CHALLENGES 39