Wasamed 3rd Workshop on Non conventional water use Cairo Egypt Water sector and Institutional reform

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Wasamed 3rd Workshop onNon conventional water
useCairo EgyptWater sector and Institutional
reformA. Billi, Y. Meroz, A. Quarto,
University of Roma La Sapienza- CIDEM
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• In the Mediterranean Basin the problem of water
  shortage is a constant political struggle and to
  reach an efficient water use, management and
  allocation represent a chief priority.
• In this context the traditional perception of
  water as a free (and thus non-excludable) good
  has been increasingly replaced with its
  perception as an economic and social good.
• Policies such as water pricing, project selection
  and, basically, the whole range of water-related
  policies have to be adjusted in order to reflect
  this change.

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• Such a shift in perception would primarily imply
  altering the policies used to manage the water
  sector mainly based on supply-side solutions
  (i.e. developing additional resources), replacing
  it with a demand-side approach, which implies
• Moving from a state-dominated institutional
  arrangement to one which allows also the
  participation of private entities, such as user
  organisations, non-governmental agencies, and
• the development of a more efficient
  organisational framework composed of state-level
  management, private water-rights system and
  collective action institutions that will promote
  such a demand-oriented management.

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The policy dimensions of the water crisis
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• Given the low performance and ineffectiveness of
  the centralised system observed throughout the
  world, the institutional-level reform is one of
  the priority
• The trend towards a decentralised management is
  the result of various factors
• the increasing awareness to the water crisis
  situation
• the conclusion of the infrastructural phase of
  development (e.g. the construction of large dams
  and reservoirs)
• the demands made by international development
  agencies for fiscal austerity and structural
  reform, and the higher weight attributed to the
  environmental impacts of water infrastructures1.
  

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• In order to avoid a water crisis - and implement
  demand-side management option - policies to
  enhance supply-augmentation capabilities should
  consist in two main elements
• on the one hand, the adoption of an economic
  approach (as opposed to an engineering approach)
  and
• on the other, the creation of institutions to
  support an allocation framework (as opposed to
  supply framework).
• The combination of these two elements will
  ultimately be grounded in a water policy based on
  decentralised management, market-based allocation
  and full-cost pricing

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• From an institutional economics perspective, the
  interaction between institutions, agents of
  change, and economic performance occurs within a
  complex system consisting of
• an institutional environment (a set of
  fundamental political, social and legal rules
  which are the basis for production, exchange and
  distribution in a society),
• institutional arrangements (or governance
  structure, which provides a structure for
  cooperation or competition in economic or
  political spheres), and
• individual decision makers (e.g. farmers).

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Institutional environment and governance
structure
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• In the particular case of the water sector,
  Saleth and Dinar (2004) decompose institutions
  into three groups of constituent variables, each
  one is further decomposed into various elements
  that take into consideration issues that are
  related to integrated water resources management,
  conflict resolution, accountability, financial
  viability, decentralisation and capacity building
  
• water law variables,
• water policy variables and
• water administration variables,.

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Water sector institutional structure
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Decomposition of water sector performance
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• The variables identified intend to measure the
  effect of the elements on institutional
  performance, as well as the impact of the
  socio-economic, political and resource-related
  environment in which they function.
• In other words, as shown in previous figure,
  they attempt to reveal the impact of
  institutional arrangements variables and
  institutional environments variables on the
  performance of water institutions

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• Water performance is determined by
• endogenous variables (e.g. water scarcity, water
  conflicts, financial and physical deterioration
  of infrastructure)
• exogenous variables (e.g. the political and
  legal systems, level of economic development or
  environmental conditions) and
• the linkages and interaction among the various
  water institutions (that include
  intra-institutional linkages which are endogenous
  to the water sector as well as inter-institutional
  linkages with the performance and the exogenous
  factors)
• These three sets of factors are equally
  determinant in fixing transaction and opportunity
  costs associated with the institutional change.
  In other words, besides having a crucial
  importance in influencing performance they also
  play a key role in promoting the institutional
  change by itself, as we shall shortly see.

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Decomposition of water sector performance
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• The empirical analysis of the process of
  institution-performance interaction in the water
  sector conducted by Saleth and Dinar offers an
  insight into the issue of how to effect water
  institutional change within the constraints and
  opportunities of a political economy approach.
• the need to identifying a strategy for water
  institutional reform with minimum transaction
  costs and maximum political acceptability
  requires sharp understanding of the analytical
  and operational linkages among the components of
  water institutions and their ultimate impact on
  water sector performance.

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• World Bank (Saleth and Dinar, 2004) argues that
  in the actual context there is a general
  consensus that phisical, financial and
  ecological constraints limit the relevancy of
  supply-side solutions
• Countries are now trying their best, within their
  political economy constraints, to set an
  institutional and legal environment necessary to
  promote demand-side solutions.

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Common ingredients of water sector reform

• From water development to water allocation
• investment in water-resources development is
  failing, mainly because of its high cost, on the
  one hand, and its failure to prompt a meaningful
  change in the water situation, on the other.
• However, such a paradigm shift requires not only
  changes in law and policy framework but also in
  the organisational and administrative
  allocation-structures

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• Decentralisation and privatisation
• D Decentralisation processes are needed to
  successfully implement the water rights
  allocation system in the most consensual manner
  (through the transfer of managerial
  responsibilities, including cost recovery and
  system maintenance, to private entities and the
  participation of water users in all
  administrative levels of the decision making
  processes)
• Centralised arrangements are required for the
  provision of co-ordination, enforcement and
  conflict resolution mechanisms. The key to this
  centralisation-decentralisation dilemma lies in
  carefully crafting the institutional arrangements
  at different geographical levels so as to achieve
  both local flexibility and regional co-ordination
  in water use decisions

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• Toward integrated water resources management
• At the Dublin meeting, the United Nations
  Conference on Environment and Development (UNCED)
  has defined integrated water resources management
  as based on the perception of water as an
  integral part of the ecosystem, a natural
  resource, and a social and economic good,
  acknowledging thus the need to balance between
  the conception of water as a public and as
  private good.
• Such an integrated management should thus take
  account of resource allocation and protection,
  use and conservation, monitoring, planning,
  development and operation. The integrated-manageme
  nt approach calls for a precise, as far as
  possible, evaluation of the competing water-uses
  on the basis of optimum rather than simply
  beneficial use

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• Ecological sustainability and water quality
• drainage infrastructures, the physical
  sustainability of water sector cannot be ensured
  without controlling pollution and water quality
  problems
• Financial Viability
• many Countries have officially adopted the
  target of full cost recovery of Operation and
  Maintenance during the 1990s but most countries
  have not fully eliminated water subsidies both
  for urban and rural use.
• A more viable financial management of the water
  sector will allow eventually raising the
  necessary capital for the development of services
  to meet raising future demand