A scarcity of public resources and insufficient international aid have contributed to the deep crisis that water sectors in developing countries are in, as less has been invested than is considered necessary to improve and increase their efficiency. Private investment could therefore play a crucial role in the building of new infrastructure and in the restructuring of existing services. In fact, according to the Global Water Partnership’s forecasts, to achieve the UN Millennium Development Goal related to water, it will be necessary to increase the level of investment per year in the sector from 75 billion dollars to 180 billion dollars. The “Plan of Action” of the Second World Water Forum held in The Hague in 2000 stated that 95% of the additional investments in the water sector should come from the private sector, underlining the need for wider participation by the private sector through public–private partnerships. This means that water has to become a more attractive good from a financial point of view; however, this process requires the existence of a strong regulatory and legal system, transparent contractual procedures and risk allocation between parties. What is the present situation? Through analysis of the private sector’s behaviour and amounts invested, and a description of the economic features of production and provision of water that have made it difficult for the private sector to be involved in an efficient way, this paper proposes the conditions required for the financial sustainability of investments in water sectors in developing countries.
Financially sustainable investment in developing countries water sectors: what conditions could promote private sector involvement?
TECCO, NADIA
2008-01-01
Abstract
A scarcity of public resources and insufficient international aid have contributed to the deep crisis that water sectors in developing countries are in, as less has been invested than is considered necessary to improve and increase their efficiency. Private investment could therefore play a crucial role in the building of new infrastructure and in the restructuring of existing services. In fact, according to the Global Water Partnership’s forecasts, to achieve the UN Millennium Development Goal related to water, it will be necessary to increase the level of investment per year in the sector from 75 billion dollars to 180 billion dollars. The “Plan of Action” of the Second World Water Forum held in The Hague in 2000 stated that 95% of the additional investments in the water sector should come from the private sector, underlining the need for wider participation by the private sector through public–private partnerships. This means that water has to become a more attractive good from a financial point of view; however, this process requires the existence of a strong regulatory and legal system, transparent contractual procedures and risk allocation between parties. What is the present situation? Through analysis of the private sector’s behaviour and amounts invested, and a description of the economic features of production and provision of water that have made it difficult for the private sector to be involved in an efficient way, this paper proposes the conditions required for the financial sustainability of investments in water sectors in developing countries.
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