The economics of water

John Gibbs, PwC’s global water leader, reflects on the discussion he chaired this week at the 45th Annual Meeting of the Asian Development Bank on how Asian cities will meet the water challenge.

Arriving in Manila to chair a discussion on the Asian water challenge, fresh in my mind were the headlines local to me in London. Drought has been officially declared in southern England, only to be paradoxically followed by the wettest April on record. Water is moving up the agenda across the globe with a complex feed of drivers, challenges and solutions, given its fundamental role in development and poverty reduction. Just a couple of months before Rio+20, the debate on water is heating up.

For some Asian countries, an unprecedented rate of growth has put huge pressure on water sources and is depriving a significant proportion of the population of Asia of clean water and basic sanitation facilities. The shortfall has been  compounded by the loss of millions of cubic meters of water due to leakages, waste, theft and inefficient practices.

So our discussion drew on experts, drawn from across Asia including Cambodia, Manila and India, who shared their experiences on making improvements in the delivery of water in cities, the practicalities of public – private – partnerships and how they could work for their cities, whilst continuing to focus on poverty reduction.  Experts from the Indian Government, Manila Water Company, Asian Development Bank and the  Phnom Penh Water Supply Authority of Cambodia took part.

The seminar highlighted the significant challenges that exist in both meeting rising demand and improving service efficiency, effectiveness and coverage in urban water utilities across Asia Pac. Services need to be transformed in many countries to ensure that utilities can provide clean, safe, reliable supplies 24/7.

Predictably when you’re looking for the best practice solution, there is no one model. We heard success stories involving both the corporatisation of a public utility (Phnom Penh Water Supply Authority) and a Public Private Partnership (Manila Water).

Good financial management and carefully designed tariff policies can allow service provision to be extended to poorer households without undermining the overall financial robustness of the water supply company. Poorer households gain both through improved access and a reduction in the overall cost of supplies.

Integrated water management plans covering both urban and rural water supply plus other uses including agricultural supplies are urgently required to help ensure resources are allocated on an efficient, cost effective basis. Sanitation and wastewater treatment remain two areas for significant further development; while Asia Pac should achieve its Millennium Development Goals with respect of water supply, significant gaps will remain in respect of wastewater and or sanitation.

The consistent theme from all was the need for institutional strengthening, corporate independence, action to tackle water losses and tariff reform to allow cost recovery. Creating a sound, creditworthy utility whether run by the public or the private sector, provides a platform from which the necessary capital can be raised for future investment and from which services can be extended to all sections of society.