Abstract
The cause of institutional reform could be furthered considerably if capacity is built to ensure that appropriate technologies and financing packages are designed, implemented and effectively monitored. For this reason, it is important to understand that infrastructure financing trends vary by sub-sector (water supply, wastewater), by geographical region and by sources of financing (domestic or international private sector). There are a number of lessons that can be drawn from financing of investments in sectors like energy and telecom; one of the most significant lessons is the importance of legal and policy frameworks and autonomy and accountability of local authorities. Subsequent sections of this chapter attempt a categorisation of countries depending on levels of economic growth and sector reform with a view to exploring differences in types of demand for multilateral financing in the water sector. The importance of multilateral development issues like aid harmonisation, budget support and local twinning projects are discussed. Private sector financing of investments in the water sector are also discussed based on examples of Dutch development cooperation; role of commercial banks, small-scale service providers and usefulness of a franchise approach by NGOs.
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Notes
- 1.
Improved sanitation: connection to public sewer, connection to septic tank, pour flush latrine, simple pit latrine, ventilated improved latrine. Not improved sanitation : bucket latrines (manual removal of excreta), public or shared latrines, open pit latrines.
- 2.
Gender Water Alliance (GWA) notes that sanitation programmes are often built around assumptions of gender-neutrality. Gender specific concerns relate to construction of toilets with doors facing streets and pour flush toilets that require women to spend time on transporting water. Failure of sanitation interventions imposes a greater burden on women since it is difficult for women to find a place to defecate in urban slums when compared to rural areas.
- 3.
Economist Rosenstein-Roden pointed to the challenge of ‘absorptive capacity’. Arguments that aid can and should be used to promote development seem reasonable but have run into problems; not only because corrupt dictators have been want to funnel money away but because even in democracies, provision of aid creates perverse incentives (Bhagwati 2010).
- 4.
Upfront capital investments in the case of energy and transport projects are usually designed in the form of Build- Own-Operate (BOO), or Build, Own, Transfer (BOT) projects with the justificcation that they would generate employment and economic growth due to improved connectivity. In the case of urban sanitation projects, public investments could be justified in terms of adverse economy-wide impacts on health, tourism, etc. from pursuing business as usual policies. Further, like investments in transport and energy, direct government involvement is required because of multiple agencies and jurisdictions involved and because of issues of eminent domain, especially when it comes to acquisition of private property, which is required for construction of wastewater plants, roads or electricity distribution networks.
- 5.
Studies in Brazil and India indicate that when policy framework is weak or unambiguous, the effects of private sector participation on service delivery may be limited to only relatively well to do segments of the population. This is because private sector may be uninterested in setting up facilities in regions where poor consumers are unable to pay for services. A robust policy framework would use a range of instruments (examples include corporate tax breaks, subsidies, etc) to channel private sector financing effectively to meet the service requirements of poor consumers.
- 6.
For a detailed discussion on reform of inter-governmental finances, see Rajaraman I. and Sinha, D. (2007). See also World Bank (2006b). Fiscal decentralization in India. Oxford University Press.
- 7.
Output Based Aid: A Compilation of Lessons Learned and Best Practice Guidance, Final Draft, GPOBA and IDA-IFC Secretariat, Washington DC, September 2009.
- 8.
We refer to Dutch examples given the significant contribution of the Netherlands to international development cooperation (as a percentage of GDP) and examples of innovation in the Dutch water sector.
- 9.
For an interesting discussion of local government planning issues, see WSP (2009).
- 10.
It must be recognised that when reward schemes operate outside the normal budget process their usefulness in creating a hard budget constraint may be weakened. However, they may play a powerful role in generating awareness of the links between sanitation/hygiene practices and public health.
- 11.
IWA’s 2008 paper titled Sanitation Challenges and Solutions makes a strong case for addressing sanitation challenges by targeting the city as a unit of planning.
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Khurian, M. (2010). Financing the Millennium Development Goals (MDGs) for Water and Sanitation: Issues and Options. In: Kurian, M., McCarney, P. (eds) Peri-urban Water and Sanitation Services. Springer, Dordrecht. https://doi.org/10.1007/978-90-481-9425-4_6
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