An institutional framework is needed to move from reform of water policy and law to implementation and thus to achieve effective water governance. Such a framework should be set up to deliver IWRM goals, and incorporate crafting of relationships with non-governmental and private partners.
Water institutions have many functions. They must address a variety of issues in implementing water governance. Some of their major functions are:
1. Planning sustainable development of water resources
Preparation of a national plan to determine the uses of the different water bodies and the sectoral uses of water according to national development and environmental policy.
2. Coordinating with other water-related institutions at the international, national and sub-national levels
Working with other nations in an international river basin at the political and technical levels.
Coordinating with other agencies, and provincial, basin and local water institutions, as well as with private and non-governmental organizations.
Engaging with agencies representing major water-using sectors such as agriculture, industry, power and urban development.
3. Fostering public involvement
Ensuring real participation by the public in water planning and development.
4. Implementing water distribution and development through regulations and negotiations
Maintaining or restoring the health of the water system to provide clean drinking water, recreation, and water supply regeneration.
Overseeing development of water works including water treatment systems, sewerage and sewage treatment facilities, irrigation and hydropower facilities.
5. Operating and maintaining water works infrastructure
Adopting measures related to water works and other hydraulic installations, their operation and maintenance either through governmental agencies or through contracting with private companies.
Developing clear stewardship regulations and contractual language for private operators.
6. Administering water rights
Implementing a system to manage water rights through authorizations, permits, licences or concessions.
7. Managing conflict resolution
Establishing mechanisms to resolve conflicts over water resources.
8. Conducting research for planning, monitoring and inspection
Collecting, interpreting and acting on scientific data starting with an inventory of the nation's water bodies (surface water, ground water and atmospheric water) in terms of quantity and quality.
Monitoring water quality, species composition, flow rates and other parameters before and after different interventions, and monitor use rates under permits.
9. Enforcing laws and regulations
Ensuring enforcement of, and compliance with, regulations.
“AN APPROPRIATE INSTITUTIONAL FRAMEWORK IS BUILT BY USING AN ARRAY OF TYPES OF INSTITUTIONS”
An appropriate institutional framework is built by using an array of types of institutions that combine different functions at different administrative levels (international, national, local). There is no blueprint for an institutional framework because effective frameworks must reflect the reality in which they operate and will vary according to a country's structure (e.g., unitary/centralized or federal), and other political, religious, geographical and climatic factors. The decision to follow a particular approach will also depend on the political will and circumstances in which a water reform is undertaken.
Case 4.1 Water institutional reforms in Morocco
Moroccan institutional reform has been influenced by customary rule, the Chraa – the religious interpretation of Islamic law – and by the rules introduced by the French Protectorate. Religious, historical and political factors led institutional reform before independence, but later other factors such as severe droughts and economic crisis played a major role. In the early 1990s, the government passed a water law aimed at creating river basin authorities (RBAs) to prepare – with the national government – river basin management plans based on the principles of IWRM. The reform shifted certain water management paradigms: from water development to water allocation; from a centralized system recognizing customary rights to a decentralized and private management set up; from a subsidized to an autonomous approach and from a sectoral approach to integrated management.
The Moroccan experience shows how the interaction between the three components of a water governance system (policy, law and institutions) can influence the evolution of institutional reform. In the early stages of the reform process, legal aspects were crucial. Once a new legal framework was consolidated, instruments such as water pricing, and administrative components like the creation of RBAs and WUAs, became more relevant for translating the legal framework into action. There is no linear evolution in the water reform process (policy objectives-legal instruments-institutional set up), but the quest to achieve an effective water governance system adjusted to national realities is a process with different entry points, influenced by different factors, and ultimately depending on strengthening the governance system.
“THERE IS NO BLUEPRINT FOR AN INSTITUTIONAL FRAMEWORK”
Water institutions can range from complex international basin commissions to local water user groups. Table 4.1 lists the functions of water organizations at various levels. Box 4.1 gives examples of some existing water institutions.
Table 4.1 Classification of water institutions
Countries with federal structures, such as Argentina, Australia or the United States, grant the water institutions in their federated states different degrees of autonomy, whereas in more centralized countries such as South Africa and Mexico, the national government controls water and environmental management.
In countries with centralized governments, water institutions tend to be managed by the State, whereas in countries with less centralized governments, public-private institutions tend to manage the resource, perhaps because in less centralized governments there is more room for multi-stakeholder negotiations. In the decentralized-communitarian type of societies, institutions tend towards the direction of individual user arrangements, enabling a bottom-up institutional framework. A number of countries have privatized some water management services and many others work with users' associations or environmental groups for water management (see Table 4.2).
Table 4.2 Water policy arrangement approaches
Bearing in mind the need for a national approach to equity, economic growth and environmental protection, there might be an argument in favour of having a central institution oversee the overall water administration. Nevertheless, since water management issues cut vertically and horizontally (vertically, from the top of the government to the final users, and horizontally among different sectors, such as agricultural irrigation, health and sanitation, land use and land planning, mining, energy, forests, environment), it is unlikely that all the decisions related to water management would reside in a single institution.
“IT IS UNLIKELY THAT ALL THE DECISIONS RELATED TO WATER MANAGEMENT WOULD RESIDE IN A SINGLE INSTITUTION”
The principle of subsidiarity applied in the field of government and state administration implies that all actions in social and political life should be performed at the lowest possible unit; that is, the main responsibility and decision making should rest with the lowest possible level of authority within a political hierarchy. In terms of water institutions, this means that, at the national level, the State should perform only those functions that cannot be performed effectively at a more local level. The State should take action only to the extent to which given objectives can be attained more effectively at the state level than at the local level.
Considering that locals can best identify their needs with respect to resource use and that local societal structures are more representative, many functions of water management should be carried out at the local level. Although many decisions may best be made at the most local level, local organizations must still be held to national and basin principles, visions and policies.
“THE MAIN RESPONSIBILITY AND DECISION MAKING SHOULD REST WITH THE LOWEST POSSIBLE LEVEL OF AUTHORITY“
However, because the hydrological cycle conforms more to the river basin than to any political jurisdiction, the river basin is the most logical unit of administration. In order to coordinate upstream-downstream uses and allocations, and to maintain a healthy ecosystem throughout the watershed for all users, it is necessary to work at the river basin level. For institutions, most of which are formed in governmental jurisdictions, working at the basin level, which probably overlaps many jurisdictions, involves a major challenge of coordination. Thus, it is essential that basin-level institutions coordinate their activities with government units such as federated states, provinces and municipalities, to avoid the risk of duplication of work, jurisdictional conflict and, as a result, ineffective water management.
“THE RIVER BASIN IS THE MOST LOGICAL UNIT OF ADMINISTRATION”
Coordination also needs to be achieved at various levels and within and between various state organizations. The aim should be not to change the power of those institutions, but to make sure they are complementary and try to synchronize interventions and actions as much as possible. A Water Ministry in charge of coordinating basin-level institutions will also need to coordinate with the Ministry of Environment to protect particular water bodies or provide environmental flow requirements, with the Ministry of Health to monitor levels of pollution and discharges, with universities for scientific research, with the municipalities for water recreation activities, and even with the police in relation to law infringements.
In summary, water institutions are a mixture of agencies, organizations and corporations at different levels. The critical issue is not to centralize or decentralize, but to coordinate the work of this multiplicity of institutions and agencies that have jurisdiction over different sectors of water management to follow a common vision and plan. The key is not to develop a few institutions that do everything, but to find a way to integrate and account for all the organizations that do everything. Case 4.2 describes how water institutions can be coordinated from the local to the international level.
“WATER INSTITUTIONS ARE A MIXTURE OF AGENCIES, ORGANIZATIONS AND CORPORATIONS AT DIFFERENT LEVELS”
Case 4.2 National, basin and local institutions within a regional context31
The European Union Water Framework Directive (WFD) sets out a European Union (EU)-wide framework of policy action that promotes sustainable water use and enhances the status of the EU aquatic environment. Member States must establish the appropriate administrative arrangements to implement the WFD provisions at the national level.
Germany illustrates how a federal and decentralized country organizes its water resources management at the national, federal and local level, and implements regional standards, like those established by the EU.
With an amendment to its Federal Water Act, Germany transposed the WFD into federal law, thereby creating the basis for achieving the EU-wide environmental objectives. However, according to the German Constitution, the Federal Water Act can only establish the main framework for water resources management, while the federal states must adopt all provisions necessary to implement the WFD. At the local level, communes play a critical role in implementing federal and state laws. They collaborate in associations to organize water supply and wastewater treatment. They are entitled to recover costs through consumer fees. Communes sometimes own small water bodies, and are responsible for their maintenance. In order to ensure water supply and wastewater treatment, communes are allowed to use different types of public or public-private business models. A number of technical agencies provide consultative and advisory functions.
While international river commissions (e.g., the International Commission for the Protection of the Rhine) coordinate the interests of the different basin states, there are also national river commissions (e.g., the German Commission for the Protection of the Rhine – DRK) and working groups on specific rivers (e.g., the Working Group of Federal States for the Protection of the Rhine – ARGE Rhein). The national river commissions are responsible for improving collaboration between the affected federal states and the relevant federal ministries in order to speak with one voice at the international level. The working groups of federal states discuss common problems of the basin, exchange experiences and seek joint solutions.
Coordination at the national level can be achieved in many ways. One option is the establishment of a central unit to consolidate the administration of water resources. This unit could be located at the Ministry of Water Resources, the Ministry of Environment, Natural Resources or equivalent, or within the ministry with the most responsibilities in the area of water. The centralized body would have decision-making, administrative, technical and executive powers.
“COORDINATION AT THE NATIONAL LEVEL CAN BE ACHIEVED IN MANY WAYS”
A second option is through a Water Council, composed of representatives of all the ministries with sectoral involvement in water resources. This council would ensure integration at the highest political level and decide issues ranging from environment to financial. An alternative is to provide the council with technical and economic powers, with which it can decide not only on inventories and plans, but also on specific investment projects or re-allocation of water rights.
A third option is to disaggregate the Water Council's political and technical functions, and establish a Water Commission or Water Committee for coordinating work only at the technical level.
A fourth option is a National Water Agency not linked to any ministry, which interacts with several line-function ministries on an equal basis. The National Water Agency should be able to both formulate and regulate more local institutions.
There are more than 260 shared river basins in the world, one-third of which are shared by two or more countries. Nineteen basins are shared by five or more countries. About 145 nations have a portion of their territory in an international river basin. Water conflicts among nations have been common throughout history and efforts to find peaceful solutions have resulted in more than 1,000 water treaties. There are currently nearly 200 international river basin organizations (IRBOs) in operation around the world.32 Many have a long history of successes and frustrations, and river basin experts have concluded that it takes a long time to build a competent basin organization, but, as discussed in detail in the IUCN toolkit SHARE,33 the benefits can extend beyond water issues to driving economic development, improving sustainable management, and spreading to cooperation in other sectors.
“THERE ARE MORE THAN 260 SHARED RIVER BASINS IN THE WORLD”
International basin organizations usually start with the joint appointment of a technical committee that tries to deal with data collection and assessment of resources in a non-political framework. Eventually a diplomatic-level commission may agree on principles and objectives. A fully functioning IRBO might include a diplomatic-level commission, a board of trustees, a funding mechanism, a group that settles disputes, working groups on various technical issues, and a secretariat for administrative work.
The international basin commissions tend to function at one of three levels: coordinating, planning and management, or actual regulation. Only a few are in the regulation category.
To participate effectively in an international basin organization, a country needs: high-level diplomats who understand the advantages of the basin approach and have the ability to effectively negotiate win-win results. It also needs a strong technical capacity to participate in inventories, monitoring and innovation and real public participation from all levels and sectors.
“INTERNATIONAL BASIN ORGANIZATIONS USUALLY START WITH THE JOINT APPOINTMENT OF A TECHNICAL COMMITTEE”
Case 4.3 Problem solving through international basin institutions in West Africa
The Volta Basin Authority (VBA) was formed by six states: Benin, Burkina Faso, Ivory Coast, Ghana, Mali and Togo. The process of creating the VBA began in 2004 with the formation of a Technical Committee of the Volta Basin (TCVB), which held a series of meetings and negotiations leading to the development and adoption of the ‘Convention on the Status of the Volta River and the Establishment of Volta Basin Authority’ on 19 January, 2007.
The mandate of the VBA is to promote integrated water resources management and the equitable distribution of benefits. The organs of the VBA include the Conference of Heads of States and Governments, the Council of Ministers in Charge of Water Resources, the Forum of the Parties involved in the development of the basin, the Technical Committee of Experts as well as the Executive Directorate of the Authority.
It is expected that the parties will be able to prevent further conflicts, such as those that have characterized the area for the past decade, by solving any issues that may arise through the organs of the VBA. Therefore, the convention is seen as a new opportunity for securing peace in the region.
National water institutions reflect all or some of the functions mentioned in Table 4.1. The combination of functions depends on the institutional framework, and the distributions of competencies among different sections of the government, and the type of water policy followed by the country.
Countries following an authoritative type of water policy as discussed in Chapter 2, tend to have stronger national water institutions with different degrees of decentralization or devolution of authority to basin-type water institutions:
Authoritative water policy --> Strategy --> Design--> A plan --> A national-level water institution
Institutional functions also depend on the country's centralization level. In countries with a decentralized structure, functions such as agricultural, fishing, municipal and domestic uses tend to be administered by the federated states, whereas navigation and infrastructure tend to be central government responsibilities. It is more likely that policy formulation and the compilation of a national waters inventory are central government responsibilities, whereas administration of water rights, operation and maintenance of water works, and monitoring and inspection are done, as a matter of efficiency, at the more local level (see Box. 4.1).
“THERE ARE GEOGRAPHICAL, PHYSICAL AND POLITICAL REASONS FOR A BASIN APPROACH”
Almost all recent international conferences dealing with water have advocated for the river basin as the most appropriate unit to implement water management. The United Nations Water Conference (Mar del Plata, 1977) recommended that states should consider the establishment and strengthening of river basin authorities. The International Conference on Freshwater (Bonn, 2001) noted that river basins are the most appropriate frame of reference for water resource management, and the World Summit on Sustainable Development (Johannesburg, 2002) recommended countries adopt an integrated water basin approach.
There are geographical, physical and political reasons for a basin approach and the establishment of basin-level institutions. River basins are the physical areas in which natural processes connect with socio-economic processes and in which water interacts with other natural resources through the hydrological cycle. This is also where the relationships between consumptive and non-consumptive uses of water take place.
Geographically, the basin territory does not include the sea (where part of the hydrological cycle takes place) and hydrologically, it does not necessarily coincide with the ground water located underneath the basin. Politically, management at the basin level needs to reflect the existing political divisions such as municipalities and provinces, whose borders do not necessarily coincide with the geographical boundaries of the basin.
The establishment of basin-level institutions derives from a policy decision, which entails a judgement on the scale on which to manage the water resources of a country. Countries with a pluralistic-liberal type of government are more likely to place an emphasis on the establishment of empowered basin-level institutions:
Pluralistic-liberal water policy --> Strategy --> Negotiations --> A deal --> Basin-level institutions
“THE ESTABLISHMENT OF BASIN-LEVEL INSTITUTIONS DERIVES FROM A POLICY DECISION”
Although no matrix fits every country's needs, there are essential foundations for a basin institution to work effectively as described in the IUCN toolkit SHARE:
A strong governance structure.
A system for knowledge management of both scientific, and social and organizational infor-mation.
Participation of all stakeholders, especially public participation.
Monitoring of scientific and social data in order to find out if programmes are having the desired effect.
Adaptive management that can change course if needed to achieve its goals.
Although there is ample consensus on the benefits of managing water at the basin level, and an increasing tendency to decentralize water management to river basin organizations, there are many examples of organizations that have failed in their broader IWRM mandate. Faced with that mandate, basin commissions may either suffer a ‘paralysis by analysis’ problem, or may abandon their broader mandate in favour of simple water sharing, pollution prevention and water resource development. This is a particular risk in developing countries facing severe skills and funding shortages.
“WHAT IS IN THE BEST INTERESTS OF THE BASIN MAY NOT BE IN THE BEST INTERESTS OF THE COUNTRY OR THE REGION”
To address at least some of the risks posed by the establishment and operation of basin-level water institutions, a series of recommendations can be made:
Before establishing a new basin institution, analyze the country's needs and have a close look at past experiences. Have basin institutions been set up in the past? Did they work? If not, why not?
River basin institutions must operate within a wider national (and even international) frame-work. Basin institutions can no longer focus on the simple expedient of sharing the water to the benefit of existing water users within the basin, but must look at a wider national and international, social, economic and environmental framework and understand that what is in the best interests of the basin or its water users may not be in the best interests of the country or the region.
As a matter of principle, the more aware people are of water issues, the easier it is to estab-lish an effective decentralized institutional system. A basin-wide consensus-building approach open to public participation holds the best hope for implementing the policy and the law. Major stakeholders can be identified, common interests and conflicts explored, and potential resolutions identified and agreed upon, where possible. However, participation must be tem-pered with consistency with core national principles, and should be monitored at a national level, perhaps in a National Ministry, or National Water Agency.
Consider self-funding mechanisms such as member dues or user fees for at least part of the budget, so that the institution will not be totally dependent on funds from other institutions.
“A BASIN-WIDE CONSENSUS-BUILDING APPROACH HOLDS THE BEST HOPE FOR IMPLEMENTING THE POLICY AND THE LAW”
There is a potential inconsistency between IWRM goals and principles, which demand a basin-wide vision on the one hand, and the need for local decision making on the other. Local political structures and communities often find it difficult to conceptualize impacts over larger basin scales. This potential dilemma can be addressed by the principle of subsidiarity in such a way as to encourage stakeholders to ‘think basin, but act local’.
“THINK BASIN, BUT ACT LOCAL”
Decentralized management at the basin level that includes community groups and the private sector is becoming increasingly popular. This alternative encourages awareness and responsibility towards water and facilitates the acceptability of the legal system. In addition, the participation of a wide range of actors in water management processes offsets the frequent institutional adjustments deriving from cyclical changes in governments. New governments may reverse policies, restructure staff, and change budget priorities – with positive or negative results on the institutional framework. However, the impacts of such changes on the stability of the institutional set up can be attenuated if stakeholders have been empowered to share responsibilities.
“DECENTRALIZED MANAGEMENT AT THE BASIN LEVEL ENCOURAGES AWARENESS AND RESPONSIBILITY TOWARDS WATER”
According to the law in some countries, users taking water from the same source must organize themselves into Water User Associations (WUAs). When the water is used for irrigation, user associations are called irrigation communities. These groups govern themselves and are funded by a statute submitted for approval to the relevant basin institution. Within the policy framework discussed in Chapter 2, these types of local partnerships are more likely to be adopted in countries where the water policy is decentralized or communitarian. The equation will then be:
Water policy --> Strategy --> Joint action --> Learning by doing --> Local-level institutions
The law can establish provisions for the recognition of WUAs as autonomous bodies with legal personality and financial autonomy. WUAs also offer a good platform for resolving possible conflicts between traditional or customary rights and statutory rights, by facilitating the implementation of water law through an active participation of the users at the final stage of water distribution. They can also fulfil an important role in monitoring, usually an expensive task carried out by larger agencies, but one that can be boosted by local attention to basic parameters such as gauge heights and simple water quality tests.
In Venezuela, more than 2,800 Mesas Técnicas del Agua have organized themselves to actively participate in decision-making processes that affect their specific community in coordination with the local water service providers.
Case 4.4 Implementing national policies through local institutions in Tanzania
In Tanzania’s Pangani River basin, which covers 48,000km2 from the high slopes of Mount Kilimanjaro to the Indian Ocean, many water disputes are settled by local water user groups. In the Soko Spring region, local tensions built up due to pollution, overextraction, and problems with livestock travelling long distances, through land planted with crops, to access water. On one tributary of the Pangani, six villages depend on the healthy functioning of the Soko. The government established the Kahe East Water Users Association, to prioritize water uses. The agriculture-livestock conflict was generating the most passionate conflicts. Using the Association as a discussion panel for achieving solutions, the elders from the villages agreed on a project to pipe water 500m from the spring, under the railway line, to a proposed drinking area away from the farmlands. This simple project will secure the livestock and the livelihoods of the farmers, and reduce the pressure on the spring.
Photo 4.1 Stakeholder discussions during the Joint White Volta Basin Communities Consultative Forum (Burkina Faso). Community Involvement is an important element in the development of water governance capacity, incorporating local concerns and interests will help to develop more effective management systems.
WUAs can operate at a very local level, but can also have limited responsibilities with regard to monitoring and visioning for the larger system (apart from perhaps direct abstractions from the system). These organizations typically manage allocations among individual users. Larger allocation decisions may have to be made by basin-level structures. Organizations covering several sub-basins may also be necessary to take advantage of the economies of scale for funding. Basin organizations are better placed to undertake visioning exercises, and to plan water allocation scenarios which meet the criteria of social equity, economic growth and environmental sustainability.
The point of departure for IWRM is that water is part of an ecosystem. Different water uses are interdependent and thus need to be considered in an integrated manner. Following the principle of subsidiarity, IWRM deems the river basin as the most appropriate management scale, recognizing that it is integrated in terms of surface water and ground water, fresh water and land issues, fresh water and coastal zone issues, quantity versus quality issues. Management too must be integrated to consider the effects of every water use over the others, and work within the framework of the country’s overall social, economic and sustainability goals.
“IWRM DEEMS THE RIVER BASIN AS THE MOST APPROPRIATE MANAGEMENT SCALE”
The difference between IWRM and sectoral approaches is that IWRM is a systematic process for allocation and sustainable management of water within the context of economic, social and environmental objectives. What are the institutional requirements to implement IWRM? They can be grouped in four clusters:
1. The government coordinates water management at the national level
Effective water management requires the coordination of a range of agencies, operating at different levels and with different mandates:
National agencies must take on cross-cutting roles supporting national growth, development and social priorities, integrating across several government agencies at all levels.
Locally based WUAs are best placed to undertake the day-to-day management of the resource, and the administration of water-use entitlements.
Basin-level agencies can play a vital role in maintaining a focus on basin-level management, ensuring upstream use does not compromise downstream users, and that water allocations and discharge regulations remain consistent with national objectives. These agencies may consequently play a role in issuing water-use and waste-discharge entitlements and rights.
“IWRM REQUIRES THE ESTABLISHMENT OF AN ADMINISTRATIVE SYSTEM”
2. The institutional set-up must be cross-sectoral
IWRM requires the establishment of an administrative system that allocates tasks among different agencies and pursues a high level of communication among those agencies. Water institutions for IWRM go beyond the regular decision making and management of water resources to creating an enabling environment for water management. The concept of enabling refers to enhancing arrangements that go beyond decentralization models. The same dynamic can play out within poor communities on a gender basis. A representative, principle-based model of democracy should be followed within water institutions. However, decisions made by locally based water institutions should be tempered by a core set of national values and principles and, in many cases, by customary law.
3. Water management follows the hydrological boundaries of the river/lake basins
An IWRM institutional set up revolves around the river basin as the basic unit of management. However, this approach involves many sectors and political and administrative jurisdictions, which imposes another level of coordination at the sub-basin and WUA levels.
4. Principal stakeholders are informed and consulted in decision making
Transparency, state accountability and the option of legal redress for failure to uphold the law are vital elements in the institutional set up and ultimately for effective water governance. Gender equity considerations must be mainstreamed into decision making processes.
Capacity building at all levels, through training and education, as an ongoing strategy enhances institutional capacity and efficiency.
“DECISIONS MADE BY LOCALLY BASED WATER INSTITUTIONS SHOULD BE TEMPERED BY A CORE SET OF NATIONAL VALUES AND PRINCIPLES”
The costs of providing water services and maintaining healthy water basins can be high. Water services include large infrastructure and maintenance costs for water treatment, delivery pipes, sewerage and sewage treatment. Irrigation involves its own infrastructure, as does hydropower or industrial use. Government must fund constant monitoring (both scientific and contractual), enforcement, and conservation or restoration efforts.
Many international agencies promote payment for services schemes, in which water users pay for the water they use. However, many governments are reluctant to charge poor people who would not be able to pay and may react badly to a new charge. Any schemes for full cost recovery for industrial water use and wastewater treatment services should be balanced by subsidies to low-income consumers.
“THE COSTS OF PROVIDING WATER SERVICES AND MAINTAINING HEALTHY WATER BASINS CAN BE HIGH”
Traditionally, national agencies are funded out of the national budget, but there is an increasing tendency to make water management agencies self-sustaining by imposing water-use charges. Smaller WUAs, directly involved with the management of water, can usually be funded from direct user charges. However, agencies with more IWRM responsibilities need support from the national government. National funding also recognizes the broader social and economic benefits of IWRM.
Good planning can only be achieved through informed and rational decision making. This usually requires investment in studies on environmental, economic and social impacts before a decision is made. However, private interests often represent a small group of individuals, and public interest groups are often underfunded. Therefore, national, state and local governments should assume the primary role in making these investments. Private consultants and publicly employed experts can and should continue to be used to assess impacts, but responsibility for decisions should lie with those individuals that the public has entrusted to make them.
Ecosystem services are the benefits people obtain from ecosystems. They can relate to provision of goods such as fish, timber, crops or clean water, to regulation of river flows and natural hazards, to cultural amenities and habitat for wildlife. Degradation of ecosystems in watersheds can lead to loss of benefits for people because of changes in the quality, quantity, or timing of the availability of water. As shown in the IUCN toolkit VALUE, economic values can be determined for ecosystem services in watersheds. As a result, schemes can be put in place to enable beneficiaries to pay for the upkeep or restoration of ecosystem services. The IUCN toolkit PAY provides a guide to the design and application of payment schemes for watershed services.
Development and implementation of payment schemes for ecosystem services must be supported by laws that establish transaction mechanisms and set clear and enforceable rules. Payments can be made when sellers agree to forego an activity that they have a legally protected right to carry out. Such a provision would enable, for example, a landowner to be paid for refraining from cutting down trees, thus preventing soil erosion and run-off in a nearby watercourse. As described in PAY, such transactions must be supported further by reliable contract law, clarification of rights and institutional mechanisms that enable agreement of obligations among parties, and credible compliance monitoring and enforcement of the rules (see Case 4.5).
“DEVELOPMENT AND IMPLEMENTATION OF PAYMENT SCHEMES FOR ECOSYSTEM SERVICES MUST BE SUPPORTED BY LAWS AND RULES”
Case 4.5 New York pays upstream users to keep its water clean
New York City has had a public payment for environmental services watershed management programme since 1997, when it signed the New York City Watershed Memorandum of Agreement (MoA) with the State of New York, watershed towns, villages and counties in the Catskill/Delaware region and with environmental and agricultural organizations. This watershed supplies 90 percent of New York City's water demand, which averages a daunting 1.2 billion gallons a day for a population of nine million people.
The decision behind the MoA was an affirmative choice to invest in the environmental quality of the Catskill/Delaware watershed and thus in the quality of the water that flows downstream to New York City; rather than to invest in the construction and development of water treatment and filtration plants that would impose a heavy financial burden on city consumers. With the MoA, the EPA has granted New York City a five-year Filtration Avoidance Determination (FAD), indicating that with implementation of this watershed management programme, the water is of a sufficient quality for human consumption. This was a luxury that had been rapidly disintegrating in the late 1980s and early 1990s when unsustainable and harmful changes in land use and agricultural practices in the watershed territory altered the once highly-regarded water quality of New York City. The MoA provides a legal framework for the City's direct investment in watershed protection programmes, such as land acquisition and land easement purchases as conservation set-asides in the Catskill/Delaware watershed and for the voluntary Whole Farm programme, which finances farmers in their shift to sustainable agricultural practices that allow for better environmental stewardship. This urban-rural watershed management agreement resulted in a nine percent increase in water fees to New York City, thus financing the acquisition of approximately 70,000 acres (or 28,328 hectares) of land and land easements at a cost of US$168 million and the implementation of 288 Whole Farm best practice plans (out of the 290 voluntarily participating commercial farms, which represent 95.7 percent of the commercial farms in the watershed area), at a cost of US$384,344. Lauded as one of the most successful examples of public payment for environmental services, implementation of this system is founded in the cooperative protection of a watershed environment that provides critical natural ecosystem services. This has resulted in substantially lower costs to New York City for potable water and better relations between the co-dependent urban and rural populations.
Evidence shows that public participation in water management makes for better governance. Civil society participation in the decision making process is being incorporated in legal instruments and institutional procedures as a result of reform processes.
Public participation can help create networks of water arrangements, bringing dynamism as well as publicity to the water sector. It generates trust and empowerment among stakeholders and creates respect and support for the decision-making process. People who help set up the rules are more likely to abide by them.
Public engagement in water governance is examined at four levels:
Awareness through media campaigns linking the benefits of a water project to the needs or wants of the public.
Public participation, in which the public becomes more informed and participates in decision making.
Co-management in which civic groups engage in management of water projects or in moni-toring, inspection, implementation and enforcement of water arrangements.
Citizen initiatives, in which citizens can lead the way towards better water management.
“PUBLIC PARTICIPATION IN WATER MANAGEMENT MAKES FOR BETTER GOVERNANCE”
If a government agency is leading the way towards IWRM, public-awareness building activities are needed to generate public support. Lack of attention to public awareness can lead to failure of reforms.
Public participation includes not only access for individuals, but also access for, and relations with, NGOs representing various public interests. These groups might include local environmental groups, residents' associations, farmers' groups and many others. They may be long-lived and well known, or small, single-issue and temporary. Water User Groups (described elsewhere in this and other chapters) are a more formal organization of direct water users, but water issues are pervasive, touching many concerns.
Access to information is critical in involving civil society in decision making. Technical issues must be presented clearly to a lay audience because the public must understand the issues if they are to help decide the outcomes. Information for the public must be available, timely and free of charge, or provided for a reasonable fee. Information should only be denied for credible reasons, such as national security.
“WATER STAKEHOLDERS WILL DISENGAGE FROM WATER ARRANGEMENTS IF THEIR PARTICIPATION IS NOT TAKEN INTO ACCOUNT”
Not only is citizen input critical in forming policy and making decisions, citizens can also implement policies and co-manage water schemes or assist with monitoring or other activities.
Case 4.6 “Comunidades de Regantes”
The Comunidades de Regantes (Irrigation communities), a unique type of Water User Association, are of enormous importance as ancient institutions where farmers grouped themselves to self-manage and distribute waters in an equitable, efficient and organized manner. In their origins in Spain, water was distributed according to customary rules that were transmitted verbally from generation to generation. In time, these rules were set in written documents expedited by the mayor of the town. The 1979 Spanish Water Law recognized the irrigation communities for the first time, and the 1985 Amendments strengthened them by making water users participate in, and share responsibility for, the management, planning and finance of irrigation water together with the State administration. Principles, rights and obligations governing the organization of the irrigation communities are set out in the Water Law.
Finally, an aware and empowered citizenry can take the lead in water reform (see Case 4.7). Although citizen groups lack the power of government, they can be effective through the use of lawsuits, changing public opinion through media campaigns and other tactics.
Case 4.7 Citizen action wins case to create a basin authority
The Matanza-Riachuelo represents an example of how environmental awareness and citizen action led to the establishment of a river basin institution. The Matanza-Riachuelo basin, located south of Buenos Aires, one of the largest cities of South America, is highly polluted resulting from a long history of dumping untreated sewage, heavy metals, sediments, pesticides and a long list of other pollutants. Along the basin there are more than 3,000 chemical, oil, food, paper, textile and metal industries and over 100 clandestine dump sites. The management of the basin is far from effective, as there is a multiplicity of authorities, jurisdictions and districts with overlapping competencies, which causes inefficiency in decision making and implementation.
In 2006, a group of citizens filed a claim before the Supreme Court against some of the polluting industries, alleging collective environmental damage. They sought an injunction to stop the polluting activities and the re-establishment of the original situation before the damage took place. As a result of the Court's decision, a ministerial plan was developed to clean up the basin and to establish a Basin Authority (Autoridad de Cuenca Matanza-Riachuelo), which operates under the Secretary of the Environment (equivalent to a Ministry). The Basin Authority will monitor industrial activities affecting the basin environment, develop uniform criteria for dumping effluents and emissions, adopt preventive measures to protect human health and the environment, and promote a system of penalties. The powers and decisions of the Basin Authority pre-empt any other authority. A fund administered by the Basin Authority was established in order to protect individual rights, and prevent, mitigate and restore environmental damages in the basin.
The rationale for privatization in the water sector has rested on at least three propositions:
Privatization is seen as a means of addressing the perceived inefficiency of public-sector agencies in providing water services.
Privatization may also be a response to the inability of governments to afford the funds required to extend water services to new users, which results from the widely observed divergence between the relatively low prices beneficiaries pay for services and the higher costs of service provision.
Particularly in irrigation (an often wasteful use, with low economic value, which can account for about 70 percent of water use), proponents of privatization argue that appropriately higher charges for water will reduce demand and leave more water for higher value uses, and hence a more rational allocation.
The stewardship functions of water management i.e., ensuring that the resources are managed on behalf of citizens, and for their maximum sustainable benefit, cannot be privatized. Stewardship functions include: policy making and the political bargaining processes, legislation, decentralization, institutional management of government agencies and regulatory functions. Activities such as data collection and planning, which are intrinsically linked to stewardship functions, may be privatized on a limited basis. For example, private-sector involvement is feasible in specific tasks such as installation and monitoring of flow measuring equipment, routine planning of water supply and sanitation requirements for a new settlement, or assessment of options for irrigation management in an area. Overall guidance of such activities, though, must be the responsibility of government agencies. (see Figure 4.1).
The activities where privatization offers most promise are the design, construction, operation and maintenance of infrastructure for water services. Although this is a narrow slice of the assortment of functions required for water management and provision of water services, the vast bulk of the financial resources are allocated to these activities.
Governmental stewardship includes protecting public health by providing clean water and sewerage. Environmental stewardship includes providing treatment for sewage and industrial effluent, maintaining water flows and protecting aquatic habitats. Private companies do not have stewardship functions. They may, however, have the capital to invest in setting up an infrastructure to deliver a service.
Privatization breaks the institutional link between stewardship and service provision. When the stewardship functions of public institutions are well developed, separation of service-delivery functions through privatization can facilitate more effective stewardship alongside improvements in the efficiency of service provision.
Figure 4.1 The core elements that must remain within the public sphere
Adapted from: World Bank, (2004), see note 34.
“PRIVATIZATION BREAKS THE INSTITUTIONAL LINK BETWEEN STEWARDSHIP AND SERVICE PROVISION”
The reform of the water sector provides an important opportunity for both strengthening supervision of environmental and public health, and for improving the effectiveness of regulatory arrangements. In preparing for privatization, assessments should be made, for example, of the standards, institutional roles and decision making processes used in environmental regulation, and of the relationship between economic and environmental regulation. It is especially important to ensure that standards are consistent with economic and social policies.
If regulation of private companies is too heavy-handed, that is if the requirements on the companies are beyond what they can achieve and still make a profit, privatization can fail. Conversely, clear rules on environmental protection and water management are actually in the interests of private service operators. For example, if government does not detect illegal water abstractions, ground water resources could be depleted, creating the need for the service operator to develop new water sources to fulfil its service obligations. If government does not halt illegal discharges by polluting industries upstream, treatment costs may increase for service providers. Therefore, regulations and enforcement capacity to avoid or overcome such issues should be in place and operating effectively before private participation. If the public institution responsible for stewardship is weak, there is a danger that the private-sector agency might succeed in negotiating a contract favouring its interests over stewardship. Before privatization of water services takes place, there should be a process of creating, if necessary, and separating the monitoring of environmental and public health standards from service functions.
Privatization does not only apply to large companies and large infrastructure. In Asia a large proportion of irrigation water is provided by private tube wells, and worldwide many small-scale irrigation systems are collectively funded, constructed, operated and maintained by groups of farmers. Non-agricultural water supplies are often derived from the same sources, which are nominally within the control of government, but for practical purposes are unregulated. In this context, the prevailing institutional arrangements allow direct interventions by government for stewardship reasons into service provision activities, which they also nominally control. In reality, many developing countries are struggling to meet appropriate stewardship targets.
“PRIVATIZATION DOES NOT ONLY APPLY TO LARGE COMPANIES AND LARGE INFRASTRUCTURE”
Attempts by governments to address these issues are politically sensitive. Interventions, such as reducing abstractions, controlling the operation of industries, investing in sewage treatment and other pollution control mechanisms, provoke controversy or compete with other development and economic objectives.
There is a wide range of political and regulatory contexts for private-sector involvement in water services and management. As a result, different schemes for private-sector participation are possible. These can be broadly grouped as follows:
Service contracts: Transfer responsibility for a specific aspect of service provision to a private contractor. Examples of contracted tasks are maintenance of facilities, record keeping, billing and collection. Clear and narrow specification of the task combined with competitive bidding or fee negotiation ensure an appropriate rate is paid for the job.
Management contracts: Transfer responsibility for managing a utility to a private operator, often for a limited period. The simplest management contracts pay a private operator a fixed fee for performing managerial tasks. More complex versions offer efficiency incentives by basing the fee in part on performance targets. Since very little risk is transferred to the operator, large improvements in operating and investment performance are less likely than under other arrangements.
Leases: Make the operator responsible for operating and maintaining the business, but not for financing investment. The operator retains revenue collected from customers and makes a specified lease payment to the contracting authority. Profits depend on sales and costs, which typically gives the operator an incentive to improve operating efficiency and increase sales. The contracting authority is usually responsible for financing investment in infrastructure assets and it must therefore raise the finance needed and coordinate its investment programme with the operator. In some cases, the operator designs and manages the investment programme.
Concessions: Give a private operator responsibility not only for the operation and maintenance of assets but also for financing and managing investment. Asset ownership typically rests with the government from a legal perspective, however, rights to all the assets, including those created by the operator, typically revert to the government when the arrangement ends, often after 25 or 30 years.
Discharge fee: Although the contract is nominally referred to as a concession, it manages tariff revenues reserved for investments but, as in an affermage contract, therefore it is not required to invest from its own funds and receives an operator tariff, different from the customer tariff. It is better understood as an ‘affermage-lease with concession features’.
Divestitures: Give the private operator full responsibility for operations, maintenance and investment. Unlike a concession, legal ownership of the assets rests with the private operator. However, the operator may be given a fixed-term licence, without which the divested assets have little value. The assets may revert to the government if the licence is revoked.
Build, operate and transfer arrangements: Provide the maximum involvement of the private sector in provision of water services, possibly also including design of facilities. Under such arrangements the operator is usually responsible for raising investment funds, supervision (or execution) of construction, operation and provision of water services for an agreed period, and finally transfer of the facilities to the contracting authority.
Choice of a scheme and the potential benefits of privatization depend on the institutional capacities and the regulatory framework in place, as well as the basis for determining tariffs for services. The design of arrangements for private-sector involvement has implications for the affordability of water services and the accountability of the private contractor to the government, especially in regard to environmental issues. Table 4.3 summarizes how the suitability of different options for private-sector involvement relates to features of the political and institutional context. Broadly, it indicates that as the complexity of private-sector involvement increases, the potential benefits also increase, but there are more and more stringent criteria for the institutional environment in which privatization takes place.
The key issue in respect to levels of tariffs and affordability is that the funds received by the operating agency must be sufficient to ensure that the service is provided on a continuing basis. This means that the facilities must be maintained adequately on a day-to-day basis, and provision made for more significant expenditures when major infrastructure items need replacement. If the government is not prepared to force users to pay the charges, it must supplement revenues to the contractor accordingly, but in such a way that efficiency incentives are not diluted. For those categories of privatization that must attract investment of private capital, the risk premium required by investors depends on the degree to which the government can assure the operator that tariffs can be set that allow appropriate profits.
Accountability and control of potential environmental impacts depends, even for the most moderate levels of privatization, on strong regulatory capacity. Where the regulatory capacity to enforce proper environmental compliance is inadequate, the priority must be to develop stronger capacity for regulation within government institutions before considering privatization beyond service contracts (see Chapter 5 on implementation).
Table 4.3 Features of alternative options for the privatization of water services34
1. Institutions for water management should be designed to reflect national realities.
Make sure that water institutions make sense within the political, economic and social con-text in which they are established.
Outline the institutional set up that already exists in the country.
Check the history of the institutional framework relating to water, the successes and the pitfalls, and in particular the reasons why certain efforts may have been abandoned or amended.
Find out if there is a river/lake authority in the country (or in neighbouring countries) and evaluate its effectiveness in terms of managing the waters of the river/lake basin.
2. Water institutions must reflect a country's political structure: centralized or federal. Whether to use a centralized or decentralized approach for an institutional framework will depend on many circum-stances, but particularly on the political will and political timing of institutional reform.
Determine what political agencies in the country have decision making powers on water issues.
Evaluate the level of autonomy given to national (in federal countries) and local (federal and centralized) governments with regard to the administration of natural resources, including water.
Consider geographic realities (water distribution, inter-jurisdictional basins).
3. When establishing or reforming an institutional framework consider the following facts:
Functions related to agricultural, fishing, municipal and domestic uses are better dealt with at the provincial or basin level, whereas navigation and water infrastructure are best left as central government responsibilities.
Policy formulation and national water inventories are more likely to be central government responsibilities, while administration of water rights, operation and maintenance of water works, and monitoring and inspection are taken over, for efficiency reasons, at a more local level.
4. Decentralized management might lead to higher levels of transparency and accountability, but also increase corruption in the absence of a national system of supervision and control.
5. The most adequate level of water management is the basin level.
Basin organizations must relate to the wider water institutional set up of the country.
Basin organizations must be provided with a certain level of autonomy to take decisions, hire qualified staff, and manage their own budgets.
Within the context of shared rivers and lakes, in an ideal case, they have to be compatible or harmonized with other basin or sub-basin authorities with jurisdiction over the river/lake basin.
6. The establishment of a basin-level institution is a learning process from past experiences, failures and successes.
Evaluate past experiences, particularly within the country or in similar countries, in terms of what went well and what went wrong.
Consider the advantages and disadvantages of a basin organization and respond to realities on the ground in terms of water management.
Establishing a basin organization should be accompanied by a capacity-building and learn-ing process within the institution.
7. When setting up a basin institution, an essential institutional foundation, including a clear mandate, a long-term strategy, a clear organizational structure, and a clear definition of roles and responsibilities of the staff, must be established. Basic parameters such as consistency with national objectives, rec-ognition of subsidiarity and customary law, and appropriate funding mechanisms must be followed.
8. Independently of the management structure, it is critical to establish an effective coordination mechanism among institutions with responsibilities over different sectors of water management.
This coordination mechanism can be a council, a committee, a commission or an agency and its composition will vary according to the political realities of the country.
Its goal is to coordinate the activities of the different institutions relating to water manage-ment.
It can be a discussion forum, with certain decision-making powers, but it has to be represen-tative and inclusive of all the water governance levels within the country.
9. The constant tension between the need for smaller local institutions directly answerable to stake-holders, basin institutions with a more integrated vision of the whole river basin, and national bodies ensuring consistency to national objectives and international obligations can only be addressed by a number of institutions at different levels and with different mandates.
Recognize that a certain level of institutional dispersion is unavoidable.
The complexity in terms of jurisdiction (local, municipal, basin, national, international) cannot be managed effectively within the scope of a single institution.
Coordination mechanisms among institutions should be established, as well as monitoring, compliance and enforcement mechanisms for all the institutional levels.
10. Achieving an effective water governance system is not just adopting the right institutional structures, but also making a commitment to accountability, transparency, and the elimination of corruption.
A cohesive and solid institutional framework for water is a prerequisite to achieving an effective water governance system that delivers on IWRM goals.
A well designed institutional framework that responds to country realities in terms of water availability, distribution, geographical realities and jurisdictional boundaries, is the best assurance to deliver on the country's policy priorities.
Elimination of corruption depends on several factors: government's commitment and the stakeholder's trust in the political system, proper devolution of authority, empowerment of civil society, a system of fees and penalties and a timely and effective administration of justice (due and timely process).
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