Water and the economic crisis

Back to basics
Chair of BIAC Water Group & Senior Water Advisor, AquaFed

©Oswaldo Rivas/Reuters

Water, is as essential to human activity as air. When cities or societies neglect water, they face collapse. The discussions and analyses emerging from the current economic crisis focus on what went wrong, how to stop the downward spiral, and how to create a better society in the future. But one thing is missing in all the talk of short-term stimulus packages and developing “green growth” economies and that is water.

Water is as essential to human activity as air. When cities or societies neglect water, they face collapse. The discussions and analyses emerging from the current economic crisis focus on what went wrong, how to stop the downward spiral, and how to create a better society in the future. But one thing is missing in all the talk of short-term stimulus packages and developing “green growth” economies and that is water.

Water is the basis of life and health care, education, economic production and social activity depend on it. Even the OECD’s “Strategic response to the financial and economic crisis” fails to mention water at all. Other overviews commit the same error. Do they really undervalue the direct and indirect benefits of water, or just not see the costs of neglect and inaction?

Indeed, meaningful figures on spending, costs and benefits in water are scant, if they exist at all. Specialists from the water sector have the impression that in the current situation the burden of costs exceeds the value of the benefits. If they are right, then the prospects for a sustainable future are bleak. In the absence of real information, how can the experts convince decision- makers of the seriousness of the situation we now face? It’s time to get back to basics.

The economic crisis provides an important opportunity to promote water’s vital role in our lives. There is an urgent need to make up lost ground and tackle the growing pressures on water supply—from population growth, lifestyles and climate change–with the seriousness they deserve.

Part of the trouble is that many politicians do not seem particularly interested in water. Even before the current crisis, public and private funds needed to maintain and extend water services had been inadequate. The perceived risks of investing in water have been growing, leading to reduced investment for new capital works and maintenance. Unrealistic approaches to cost recovery have resulted in unsatisfactory operational performance, reduced coverage and lower-quality services. People and businesses, particularly in less-developed countries, are not getting the access they need to clean water, sanitation, and other essential services. ,The internationally agreed Millennium Development Goals are not being achieved. According to the UNDP Human Development Report for 2006, reaching goals on water and sanitation in sub-saharan Africa alone, will require annual investments of some 2.7% of GDP, or some $7 billion annually, well above what is being achieved now of some 0.3% of GDP, or $800 million annually.

This is clearly unsatisfactory, and the situation may get worse with the current crisis, for as the World Bank noted recently, water infrastructural investment has tended to bear a disproportionate share of declines in public investment.

Ultimately, if this situation is not addressed, the costs of neglect and inaction will be catastrophic. These costs will affect every facet of the economy: Jobs will be lost as farmers and industry face shortages and reduction in consumption; individuals and families will feel the impact on their standard of living; and a crucial life-sustaining resource will be threatened.

Agriculture, which is the biggest user of water, will be hit hard, as a lack of water reduces yields, leading to food shortages and increases in commodity prices, which could choke trade with emerging economies. Energy security will be threatened and the development of low-carbon energy sources will be held up. Manufacturing will be at risk as water and water-dependent inputs become more expensive and limited.

The failure to collect and treat polluted water to protect populations and aquatic ecosystems will lead to rising costs associated with illness and disease, which in turn will affect education and productivity, not to mention the loss of usable water resources, and ecosystem destruction. How much all of these consequences of inaction will cost, and how much will be needed to prevent them, is unknown, but it is a scenario to be avoided in any case.

This is where governments, business and global organisations such as the OECD come in. National strategies must be devised to ensure that water infrastructure and services get the investment they need. For example, we should move now to earmark some of the public money provided through fiscal stimulus packages for improving water infrastructure. After all, as WHO and others have shown, the cost-benefit ratios of such investment are around 1:8, reaching as high as 1:40 in some cases (“Global cost-benefit analysis of water supply and sanitation interventions”, Hutton, Haller and Bartram, WHO Journal of Water and Health, 5 April 2007). While water investment is important in short-term recovery plans, it must also be maintained into the future.

As for businesses, many of these have been working for years towards greater efficiency in their use of water, including by improving related technologies. They should nonetheless double their efforts, by working together in associations such as the World Business Council for Sustainable Development and the Water Environment Federation, and by seeking to engage with other stakeholders to find better ways to use and manage water. They should also continue to encourage politicians to recognise and promote water conservation.

The OECD could help too, by developing further its analyses of water economics to assess the current investment situation and help plan for the future. BIAC believes such analyses should include evidence of the economic benefits of access to clean water and of the cost of inaction. They could also demonstrate the value of new financing strategies in support of the broader economy. Decision-makers need to be well informed if they are to push for short-term infusions of funds into water infrastructure and support longer-term investments in sustainable development.

This global crisis is severe, but a collapse is avoidable. Discussions about launching stimulus packages and growing healthy economies offer a perfect opportunity to focus on the basics—and there is little more basic to life than water.

Visit www.biac.org

For more on water, see www.oecd.org/water and www.oecdobserver.org/water

©OECD Observer




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