Water aid and development: Improving the flow

Spotlight on Water

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Water aid is an important part of official development assistance, but it has declined. Moreover, the way it is disbursed and targeted leaves room for improvement. 

Halving the population without access to safe drinking water by 2015: achieving this Millennium Development Goal is feasible, but it will not be easy.

Urbanisation and industrialisation are taking place at a fast pace in several countries, and water stress is beginning to show as resources are being depleted faster than they can be replenished by the natural cycle, whether in groundwater, rivers or lakes. High levels of investment in the water system will be needed: one UN estimate indicates that between $14 billion and $30 billion a year would be required worldwide on top of the $30 billion already being spent to achieve the access target.

This is a tall order, particularly against a background in which bilateral development aid from OECD countries has stabilised or fallen. The Development Assistance Committee (DAC) based at the OECD – a committee whose member countries oversee 95% of total world bilateral development aid – nonetheless has specific programmes to improve international water supplies and sanitation. It also assesses water resource policy, its legislation, development, protection and sanitation. But the aid question is key.

As the chart shows, DAC members’ bilateral aid for the water sector increased by an annual average rate of 9% over the two decades to 1993, although it has fallen since then. Yet the share of aid for water supply and sanitation in total Official Development Assistance (ODA) remained relatively stable in the 1990s, at 6% of bilateral aid, and some 4-5% of multilateral aid. In recent years, total aid allocations to the water sector have averaged about $3 billion a year. An additional $1-1.5 billion a year is allocated to the water sector in the form of non-concessional lending (mainly by the World Bank).

Water supply and sanitation projects account for more than three quarters of the contributions to the water sector during the last five years. Still, aid for water supply and sanitation is dominated by only a handful of large projects in urban areas. Yet while most aid projects are classified as “large systems”, the number drawing on low-cost technologies (hand pumps, gravity-fed systems, rainwater collection, latrines, etc.) seems to be increasing. In turn, many of these projects are financed through repayable loans rather than grants. In 2000-2001, about 57% of total ODA in the water sector took the form of loans – in fact, over three-quarters of aid from Austria, France, Italy, Japan, Portugal and Spain was extended as loans. In comparison, the share of loans in ODA to all projects and sectors combined in 2000-2001 was just 22%.

About 10% of aid in the water sector is directed to water resource policy, planning and programmes. This category includes a few large projects and reforms, and numerous smaller activities to improve water resource management through institutional support, technical assistance and capacity building. Education and training in the water sector represents only a tiny share of the total.

By region, about half of the total water aid goes to Asia, which is roughly in line with the continent’s share of total ODA commitments. Africa’s share of the aid has slightly decreased while that of America has slightly increased.

To be sure, water sector aid is still channelled to relatively few countries. In 1995-1996, ten countries received nearly two-thirds of all aid, though from 1997-2001, the ten largest recipients received 48% of the total. China, India, Vietnam, Peru, Morocco, and Egypt were among the top ten in both periods, whereas Turkey, Indonesia, Tunisia, and Sri Lanka slipped out of the top ten to be replaced by Mexico, Malaysia, Jordan, and the Palestinian-administered areas.

Ironically, many countries where most of the population lacks access to safe water received very little, if any, aid, as reflected in the drop in Africa’s share of water aid. In fact, only 12% of total aid to the water sector in 2000-2001 went to countries where less than 60% of the population had access to an improved water source, including most of the least-developed countries.

So, who are the donors? Japan is by far the largest donor in the sector in value terms, accounting for about one-third of total aid to water. Activities funded by the World Bank’s International Development Association, Germany, the US, France, the UK and the EC add up to a further 45%. The share of aid for water supply and sanitation in total ODA by sector is above the DAC average of 9% for Austria, Denmark, France, Germany, Japan and Luxembourg.

It is very hard to determine whether aid is directed to where it is most needed, particularly without more institutional transparency on the part of recipients. Indeed, aid may actually benefit the better off. Data limitations notwithstanding, it does seem that water projects could be better targeted. DAC members are aware of this need. It is time to move to action in partnership with those who need the water most.

©OECD Observer No 236, March 2003

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