THE WATER SECURITY PROGRAMME
BUSINESS CASE
Final, 7 January 2013
Contents
Acronyms
Intervention Summary
Strategic Case
- Theory of Change
The Three Funding Windows
Impact & Outcome
Appraisal Case
Commercial Case
Financial Case
Management Case
2
3
7
19
24
26
34
46
49
54
Annexes
1. Full Appraisal Case : Economic & Social
2. Institutional Analysis
1
Acronyms
AfDB
AICD
ASAP
AsDB
BCR
CDKN
CED
CIWA
DANIDA
DGIS
EUWI
GVA
GWP
HERR
ICF
IEG
IFC
IMF
IPCC
IUCN
IWMI
IWRM
MDG
NBI
OECD
PRSP
RDB
SaciWaters
SADC
SAWGP
SAWI
SIDA
SRES
SSA
UCCRP
UNDP
VFM
WACDEP
WASH
WAVES
WHO
WPP
WRG
WRI
WRM
WSS
WWDR
WWF4
African Development Bank
Africa Infrastructure Country Diagnostic
Adaptation for Smallholder Agriculture Programme (DFID)
Asian Development Bank
Benefit Cost Ratio
Climate and Development Knowledge Network
Climate and Environment Department (DFID)
Commission for International Waters in Africa
Danish Cooperation - Ministry of Foreign Affairs Denmark
Ministry of Foreign Affairs Netherlands
European Union Water Initiative
Gross Value Added
Global Water Partnership
Humanitarian and Emergency Response Review
International Climate Fund
Independent Evaluation Group (World Bank)
International Finance Corporation
International Monetary Fund
Intergovernmental Panel on Climate Change
International Union for Conservation of Nature
International Water Management Institute
Integrated Water Resource Management
Millennium Development Goal
Nile Basin Initiative
Organisation for Economic Co-operation and Development
Poverty Reduction Strategy Papers
Regional Development Bank
South Asia Consortium for Interdisciplinary Water Resources
Studies
Southern Africa Development Community
South Asia Water Governance Programme (DFID)
South Asia Water Initiative
Swedish International Development Agency
Special Report on Emissions Scenarios
Sub-Saharan Africa
Urban Climate Change Resilience Programme (DFID)
United Nations Development Program
Value for Money
Water, Climate and Development Programme (GWP)
Water, Sanitation and Hygiene
Wealth Accounting and Valuation of Ecosystem Services
World Health Organisation
Water Partnership Programme
Water Resources Group
World Resources Institute
Water Resource Management
Water Supply and Sanitation
World Water Development Report
World Water Forum 4
2
The Water Security Programme: Intervention Summary
What support will the UK provide?
The UK will provide support of £28 million over three years (2012 - 2015) to increase secure and
sustainable access to water resources by poor people. This will benefit over 18 million people through
improved access to sustainable water services including water for drinking, sanitation and irrigation, and
107 million people indirectly through improved water planning, development and management in
strategic river basins.
Why is UK support required?
What need are we trying to address?
Over 450m people in 29 developing countries face severe water shortages1 while 2.6bn people lack
access to proper sanitation facilities2. The costs of water insecurity – poor access to water and the risks
of floods and droughts – are highest in some of the poorest countries - amounting to approximately 5%
of GDP in Sub-Saharan Africa3. The 2010 floods in Pakistan impacted on 21m people and caused
losses and damages of US$10bn – putting the economy into reverse growth. In such countries women
suffer disproportionately from inadequate management – from their role in food security at household
level to water’s impact on opportunities for education and economic productivity.
Climate change will increase the frequency and intensity of water shocks and stress making developing
nations vulnerable to even greater losses and damages. By 2025 up to 2.5bn people could be
vulnerable to water stress4. The Stern Review5 argued that climate change will be felt most profoundly
through water and that the poorest and vulnerable will suffer most. Stern concluded that tackling water
insecurity is the most cost effective way to build climate resilience.
Making counties more water secure will require large investments in infrastructure and capacity for
improved water resources management (WRM). In Africa less than 5pc of irrigable cultivated land is
irrigated and only approximately 7pc of hydropower potential is developed6. The Africa Progress Panel
identified the continuing widespread deficit in water infrastructure as a structural barrier to growth7.
Unlike investments in water supply and sanitation in which the link between inputs and outcomes is
more tangible (e.g. money spent providing toilets), those for WRM have huge potential benefit but are
often less evident, more indirect and cumulative. These investments typically take longer to deliver
results and cover wider geographic areas.
As a result, the market fails to deliver and WRM in
developing nations is ignored, resulting in weak policy, regulatory and investment frameworks. This
leads to insecure access to water and deficient services for households, farmers and industry and
makes poor people, communities and nations vulnerable to the devastating impacts of water shortages,
floods and droughts.
What will we do to tackle this problem?
The Water Security Programme will address these market failures and increase investment in the
1
Hanjra, M. A. and Qureshi, M. E. (2010), Global Water Crisis and Future Food Security in an Era of Climate Change, in Food
Policy, 35: 365.
2
World Health Organisation and United Nations Children’s Fund (2010), Progress on Sanitation and Drinking Water: 2010 Update.
WHO Press, Geneva: Switzerland.
3
UNDP 2006 Human Development Report UNDP New York
4 UNESCO 2012 The United Nations World Water Development Report 4 World Water Assessment Report UNESCO, Paris
5
Stern, N. 2006 The Stern Review on the Economics of Climate Change
6
Rodriguez, D. 2012 Draft Report on Investment in the Water Sector for World Water Forum 2012, Marseille
7
http://portal.worldwaterforum5.org/wwf5/en-us/worldregions/Africa/Consultation%20Library/Preparatory%20meeting
%20reports%20and%20declarations/Outcomes%20Statement%20-%20Dakar%20final%20EN.pdf
3
information and evidence, institutions and infrastructure necessary to strengthen water resources
management on behalf of poor people. This will enable developing countries to reduce the destructive
potential of water – e.g. through investment in infrastructure and early warning systems to reduce the
impact of floods – whilst harnessing its productive potential to enable inclusive green growth – e.g.
through increased access to efficient irrigation technologies to improve crop productivity.
The Programme will do this through three funding windows: (1) The Governance and Enabling
Environment Window will support the development of knowledge and global policy and dialogue that set
the frameworks for influencing regional and national investment on WRM; (2) the Analytics and
Investment Window will provide the analytical and financial capacity to deliver this investment at river
basin and country level; and (3) the Innovation and Water Partnerships window will promote
partnerships with the private sector to mobilise currently untapped investment potential.
Who will be implementing the support we provide?
Governance and Enabling Environment Window – Core support of £9m to the Global Water Partnership
(GWP). GWP is an Inter-Governmental Organisation recognised as the leading and most authoritative
actor on evidence generation and global advocacy for investment in WRM. It works through its global
network of partner organisations at regional and country level with more than 2700 institutions as
members. Recent GWP work has provided global leadership on the “food, energy and water nexus”
policy debate and the development of a WRM strategy for the Africa Union which has created the
framework for the development of water financed investment strategies in eight countries in subSaharan Africa. DFID support will enable GWP to:- Commission and manage high quality research, knowledge and analytical work to influence global
and regional policy and investment planning;
- Scale up the Water Climate & Development Programme (WACDEP) benefiting 25m poor people in
Africa through support to AMCOW, the African Union and Regional Economic Communities to develop
climate resilient policies and investment and financing strategies for WRM across trans boundary waters
and shared aquifers;
- Develop and implement Climate Resilience programmes similar to WACDEP in the Caribbean,
South and South East Asia, Central Asia, and Central America; and
- Scale up the Global Flood and Drought Resilience Programme with the World Meteorological
Organisation to strengthen the science and policy frameworks for implementing early warning systems
to reduce the vulnerability of poor people to climatic extremes.
Analytics and Investment Window – Financial support of £12m will allow Phase 2 of the Water
Partnership Programme (WPP) – a World Bank multi-donor trust fund – to integrate WRM into World
Bank approximately 150 investments in the energy, agriculture and water supply and sanitation sectors
totaling $15 billion by 2016. One third of WPP spend on WRM will be in Africa. This innovative work is
unlikely to be undertaken as part of normal World Bank core costs because governments receiving
grants and loans perceive it to involve higher risks and because of the difficulties in getting them to cofund work at the regional level i.e. trans boundary level or across sectors. The Bank projects
themselves will benefit:


30m people with improved irrigation and drainage services,
35m through flood protection and water resources management, and
35m through sustainable water supply and sanitation.
Between 2009-2011 WPP activities influenced World Bank investments totalling $11.5bn which
delivered improved water services to some 52m people. Examples of recent results include:-
Hydrological modelling in Mozambique led to development of infrastructure and flood early
warning systems benefitting 2m urban residents
Groundwater modelling in the Limpopo Basin led to infrastructure projects benefitting 100,000
families from improved access to water resources; and
4
-
Mitigating land degradation to protect water resources for 680,000 people in Nigeria.
DFID core support for Phase 2 will contribute to WPP results which include :-
US$15 billion of World Bank investments influenced;
US$25 billion of total project value influenced in which the World Bank is involved;
100 World Bank project designs influenced;
100 million beneficiaries from projects influenced;
2 million hectares of new/improved irrigation/drainage services;
7 ecosystem valuation studies completed;
5 World Bank sector guidance notes on WRM;
Corporate agreement to update Operational Policies to integrate WRM for 2 sectors
Innovation and Partnerships Window - Support of up to £7m for a programme to promote partnerships
with the private sector to demonstrate how private finance can be mobilised to increase investment in
the information, institutions and infrastructure necessary to deliver water security. Partnerships would
bring the private sector into joint ventures with government and communities to address shared water
risks. Although the concept approved by the ICF board in 2011 set out the case to promote
engagement with the private sector it did not include a specific funding window. We are seeking
endorsement to proceed to detailed design of the Innovation and Partnerships Window and submit the
full appraisal for approval by first quarter 2013.
DFID funds will support risk and economic analysis, hydro-climatic modelling and scenario planning
leading, through partnerships, to the development of joint plans and investment strategies to mobilise
increased private sector investment in WRM.
Recent work by the GIZ Water Futures Partnership pilot programme demonstrates what can be
achieved. A partnership brokered by GIZ between SAB Miller Ltd and Polokwane municipality in South
Africa identified shared water risks and resulted in a coalition to fund technical and economic analysis
leading to a commitment to establish joint investment in a municipal water treatment facility. This will
secure long term water services for both the local population and the company at a lower unit cost than
if the municipality and SAB Miller had proceeded independently. Similar programmes are under way in
Tanzania and Zambia.
Options for engagement with the private sector will be fully explored including a combination of support
for the ICF led Water Resources Group; the GIZ led Water Futures Partnership, other donor or private
sector programmes, establishing partnerships directly with companies and a challenge or other
competitive fund. Initial discussions with key private sector players indicate interest on their part to
explore potential partnerships around water security with DFID.
Institutional analysis and reform in GWP and WPP
Institutional review and a MAR-style analysis for GWP and WPP demonstrate that both institutions have
produced significant results, influenced global, regional and national policy, programming and
investment and provide good value for money. The reviews noted that both could deliver even stronger
results by increasing their focus on climate change, targeting WRM in key energy and agriculture
programmes, working through partnerships, and adopting more rigorous results and M&E frameworks.
Design of this Programme recognises the need for institutional reforms to strengthen delivery of results.
Key reforms are included as indicators within the log frame against which future payment will be
conditional. The indicators specify that GWP will increase capacity in project management including
implementing a new results and M&E framework. WPP will integrate WRM into guidance, core
indicators, operational policies and, ultimately, core costs, and DFID has signalled the need for WPP to
develop an exit strategy.
Risks
Fiduciary risk for both GWP and WPP is low because both institutions have established track records of
sound financial management and effective systems to minimise fiduciary risks. WPP capacity to deliver
5
results is strong and for GWP will be increased through implementation of its results framework and
through increased project management and monitoring and evaluation capacity. The Innovation and
Partnerships window carries risk in terms of results delivery because of the challenges of establishing
strong partnerships between private sector, government and communities within the time frame
required. Given the potentially high returns this risk is considered worth taking. To mitigate we will work
through reputable institutions such as GIZ or IFC with proven project and financial management
systems.
What are the expected results?
Results achieved through the Water Security Programme and attributable to DFID will include:
 18.6 million people benefiting from improved and sustainable access to water services e.g.
access to irrigation, drainage and flood protection, through integration of WRM into World Bank
programmes.
 107 million people benefiting from improved water governance e.g. through river basin planning
and management.
 At least £1.7 billion of investment committed and contributing towards climate resilience through
improved water resources management and increased access to water services.
 Six nations with early warning systems to reduce vulnerability to flooding.
 At least 10 national development plans and policies with enhanced integration of water security
and climate change and associated investment strategies.
 Seven water based ecosystem services valuations completed.
 180,000 hectares brought under enhanced biodiversity protection.
6
BUSINESS CASE
STRATEGIC CASE
A
CONTEXT AND NEED FOR A DFID INTERVENTION
Introduction to Water Security and Climate Change
1. Water security reduces poverty and increases living standards by generating opportunities
for secure livelihoods. It improves the quality of life for all especially the most vulnerable – often
women and children – who benefit most from good water governance8.
Water underpins
development - driving all social and economic development and ecosystems.
Delivering water
security means ensuring sustainable and equitable access to water of appropriate quantity and
quality for all users (e.g. for drinking water & sanitation, agriculture, energy, industry and
ecosystems) whilst reducing the impacts and costs of water related shocks and stresses including
floods, droughts and pollution to an acceptable level. In essence it is about harnessing the
productive potential of water whilst managing its destructive potential.
2. Tackling water insecurity is the most cost effective mechanism to respond to unavoidable
climate change9. A key component involves delivering effective water resources management
(WRM) that ensures sustainable and equitable access to water. This is not least because water is
crucial for food and energy security. Climate change will increase pressure on scarce and poorlymanaged water resources but there is uncertainty regarding the specific impacts of climate change
upon hydrology. Climate change models typically are unable to provide sufficient resolution to
enable decision-makers to make informed choices about climate change impacts upon society,
economy and the environment. This generates a high level of uncertainty which, coupled with poor
information including hydro-geological data, means that decision-makers often avoid policy
decisions on water and climate change, particularly those relating to investment.
3. A “low regrets” approach to enhance climate resilience through water helps to manage
uncertainty by focusing on those interventions and initiatives which will pay dividends whatever
climate scenarios play out – in other words governments will have no regrets later about spending
money now on key priorities, regardless of what the future holds10. Low regret options include
effective river basin management, watershed management including storage mechanisms,
demand management including water efficiency. In addition investments in water resources
infrastructure may encompass both hard and soft approaches to deliver climate resilience.
4. Successive sections of this Strategic Case explore in more detail the issues to be addressed in
considering support: the essential underpinnings that water security provides for sustainable
economic development and growth, the importance of the food-water-energy nexus for poor
people, the challenges currently increasing the potential for insecurity, the gains available from
increasing resilience to climate change through water security, the evidence of what works in
providing water security and the scope to mobilise increased investment from a range of sources.
The final sections of the Strategic Case describe in more detail what the proposed programme will
do, in line with a coherent theory of change, and in the context of other initiatives by the UK and
other donors.
Changing patterns of water security
5. Water is already intensely developed and physically scarce in a number of emerging economies
and in parts of Southern and Eastern Africa. However for many low income countries water
insecurity is not caused by insufficient availability. Instead it is caused by under-investment in the
institutions and infrastructure needed to capture and effectively manage water resources.11
8
GWP Strategy 2009-13 GWP Stockholm
Stern, N. 2006 The Stern Review on the Economics of Climate Change
World Bank 2009 Economics of Adaptation to Climate Change Washington DC
11
EU 2012 Confronting Scarcity The European Report on Development
9
10
7
6. By 2025, 1.8 billion people could be living in countries or regions with absolute water
scarcity12, and two-thirds of the world population could be under water stress conditions (UN
Water, 2010)13. This compares with the 800 million people experiencing water stress today14.
Different scenarios estimate that the number of people living in water-stressed river basins by 2050
could be between 2.8 and 6.9 billion (the latter would be equal to 77% of the population, mainly
living in developing countries).
7. Water shocks and stresses threaten development gains. The costs of water insecurity are
greatest in some of the poorest countries – amounting to approximately 5% of GDP in SubSaharan Africa15 and in Ethiopia it is estimated that water insecurity causes GDP to be one third
less than its potential16. Evidence points to a strong correlation between rainfall variability and
national GDP in countries as diverse as Ethiopia, Kenya, Mozambique, and Zambia17.
The
challenge is thus to make investments in water security which counter erratic rainfall through, for
instance, water storage which spreads availability of water across the year.
8. Figure 1 below summarises the key issues contributing towards water insecurity. This problem
statement sets out key challenges impeding progress towards water security.
12
The terms water stress and scarcity are widely used terms with water scarcity defined as per capita water availability of 1000m 3
or less per annum and water stress indicating per capita water availability of 1700m 3 or less per annum.
13
http://www.un.org/waterforlifedecade/scarcity.html
14
UNESCO 2012 The United Nations World Water Development Report 4 World Water Assessment Report UNESCO, Paris
15
UNDP 2006 Human Development Report UNDP New York
16
World Bank 2006 Managing water resources to maximise sustainable growth – a country water resources assistance strategy for
Ethiopia World Bank, Washington DC
17
Grey,D. & Sadoff,C. 2007 Sink or Swim? Water security for growth and development. Water Policy Vol 9 No 6 pp 545–571
8
Figure 1 Water Security Programme – Problem Statement
Summary of the need for a DFID intervention to support enhanced climate resilience through improved water security
Challenges
for
Water
Governance
Insufficient water data, analysis & evidence
to support decision making e.g.
Lack of meteorological & climate, hydrogeological data. Poor understanding of CC
impacts on water resources including surface &
ground water, ecosystems & water quality.
Need for tools to aid effective wrm. Insufficient
info on water supply-demand, water undervalued, inequitable, inefficient & unsustainable
water allocations. Uncertainty about water
resources hampers decision-making &
increases perceived risks & tensions within
nations & at regional level.
Shocks/stresses
- Climate variability & change
- Population growth
- Growth & Inc. consumption
- Ink demands for industry,
energy & agriculture
- Urbanisation
- Environmental degradation
- Resource scarcity
Water Insecurity:
vulnerable nations with
weak water governance
and difficult / complex
hydrology
Weak institutional frameworks for water
governance
Weak policy, legal & enforcement frameworks.
Limited integration of water across development
plans and budgetary processes. Fragmentation
of responsibilities, limited political and
institutional attention to water & its contribution
to prosperity, poverty reduction & climate
resilience. Limited private sector engagement.
Weak integration with key sectors including
energy, agriculture & DRR.
Inefficient, inequitable &
unsustainable management of
water resources & services
Weak water governance
coupled with climatic
variability make the poorest
nations vulnerable to water
shocks and stresses
including drought, flooding,
declining quantity and quality
of water & mudslides
threatening people and
infrastructure. Climate
change will significantly
amplify water insecurity.
Adverse Social, Economic and
Environmental Impacts
Water insecurity impacts through
-reduced or even reversed economic
growth & human development outcomes
-degradation of ecosystems and services
-increased vulnerability to climate change
and increased investment costs for
infrastructure and management
And missed opportunities to harness
water to increase prosperity e.g. by
improving water quantity and quality for
productive and consumptive use and
reducing costs of floods and drought.
Links to reduced food & energy insecurity.
Insufficient commitment for /investment in
water security
Limited commitment (political, institutional and
financial) to deliver water security by key
decision-makers. Water plans not linked to
investment strategies. Emphasis upon
emergency responses i.e. to floods rather than
development/adaptation. Lack of donor finance.
Need for evaluation of adaptation measures to
support scale up.
- Political economy runs across all above
Water Insecurity Increases
- Vulnerability to water stress could increase from 700 million today to 3 billion in 2025
9
Water Security Delivers Prosperity
9. Water services are a key part of economic growth and development. Reliable water services
for productive purposes are critical for stimulating economic activity and providing employment
opportunities. Investing in water resources management can contribute significantly to increased
production and productivity within economic sectors. Analysis in the United States revealed that
US$1 investment in watershed protection can save anywhere from USD 7.50 to nearly USD 200 in
costs for new water treatment and filtration facilities18. A study in China identified the considerable
gains that can be made by improved water quality. The industrial income lost annually due to water
pollution amounts to some US$ 13.4 billion – or 1.3% of GDP19. Water security at national and
household level depends on good water management to reduce water shocks and stresses
including floods and droughts. Reducing the impacts and costs associated with water insecurity through risk management and disaster risk reduction - is a key mechanism to unlock the potential
to achieve growth and prosperity of households, communities and nations. Water security also
ensures conservation and enhancement of water based ecosystem services which are important in
reducing poverty and building resilience to environmental change.
10. Harnessing the productive potential of water resources and managing its destructive
potential is illustrated in the diagram20 below. In essence this schematic diagram argues that
delivering water security requires a nation, or communities in a river basin, to reduce the
destructive values of water and harness those productive ones -in other words shifting the “Scurve” upwards delivering growth and prosperity using water. For instance, investment in water
storage infrastructure (including natural infrastructure such as wetlands) reduces the impacts and
costs of floods and droughts and through the potential for, say irrigation, increases productivity in
the food sector thus reducing flood risk and increasing food productivity.
Agriculture
Municipal
Ecosystems
Productive
Values
Pollution
Destructive
Values
Drought
Flood
11. Water security is essential to maintaining open societies. Sustainable and secure access to
water enables individuals, communities and nations to harness the productive potential of water,
whether for drinking, sanitation, cooking, irrigating crops, industrial processes, transport or
producing energy to improve their livelihoods and prosperity. Together with reducing the
vulnerability of households and nations to the impacts of erratic rainfall, floods or droughts peoples’
potential can be unlocked – allowing girls to attend school rather than collect water, encouraging
investment in crops through irrigation or increasing access to clean energy through small or large
scale hydropower. To achieve water security requires commitments from governments and the
private sector to address market failures in order to deliver reliable and affordable water services
and from communities to contribute towards their cost. This requires effective enabling
18
ibid
ibid
20
GWP (2012) Economics of Water Security Draft Concept Note of the GWP Technical Committee
19
10
environments including stable policy frameworks, regulation and enforcement in which the
incentives to invest in water security outweigh the disincentives. Delivering water security helps to
achieve economic, social and political stability allowing individuals and societies to provide for their
livelihoods and achieve prosperity supported by effective governments and service providers.
The Water-Energy-Food Nexus
12. Water is crucial for agricultural production. A lack of water and/or inefficient usage adversely
affect agricultural productivity, impacting on food availability and access through productivity
losses and increases in market prices, and leading to increased food and nutrition insecurity.
Inadequate water quality, quantity and sanitation facilities can result in water and vector borne
diseases, which severely limit the ability of individuals to absorb nutrients, increasing malnutrition
and affecting food utilisation. Erratic rainfall patterns, lack of irrigation, poor soil and water
conservation practices and lack of access by farmers to improved crop varieties affect the stability
of food supplies especially where rain-fed agriculture dominates. By 2025, 20% more water will be
needed to help produce the food needed to feed an additional one billion people.21
13. Globally, agriculture is responsible for about 70% of water demand but this rises to up to
90% in some developing countries22. Current demand is expected to increase from current
3100 to 4500 billion cubic metres by 2030 with demand expected to be highest in Sub Saharan
Africa, India and China. Modelling based on the IPCC’s Special Report on Emissions Scenarios
(SREX) suggests that total global water demand could
rise by 35–60% between 2000 and 2025. In most Water Security – a concern for the private
sector
cases current management of water is inefficient
“Global water consumption is the issue of our
providing considerable scope to improve water
lifetime - one I believe is still under-estimated.
efficiency and deliver “more crops per drop”.
Today, agriculture is responsible for 70% of
world water withdrawals. This is where we
14. Water and Energy Security are co-dependent. believe the main risk to food production lies:
massive shortfalls in the volumes of water
Energy production consumes significant amounts of
needed to grow the amount of raw materials
water; and providing water, in turn, consumes energy.
required. But this is also where we see huge
With water scarcity a major and growing challenge,
potential for transformation. The amount of
meeting future energy needs depends on water
water withdrawn by agriculture is almost 2.5
availability, and meeting water needs depends on times the amount needed by plants, so
massive savings can - and must - still be
energy availability23. Many forms of energy production
made”.
need large volumes of water - to activate turbines for Peter Braebank, Chairman of Nestle, 2012
hydropower, to cool thermal power plants, refine crude
oil and produce biofuels.
In the water sector,
significant quantities of energy are used in conveyance, treatment, and distribution. About 7% of
commercial energy production is used globally for managing the world’s fresh water supply24.
Socio-economic changes are placing increased strain on both energy and water supply. As
population growth total demand for water and energy increases and economic growth increases
per capita demand. Climate change is intensifying the hydrological cycle making attainment of
energy and water security more difficult. Constraints in securing one source - energy or water –
exert constraints upon the other25.
Water Insecurity As A Driver Of Poverty
15. Water insecurity is a key driver of poverty.
Deprivation in water and sanitation produces
21
Hanjra, M. A. and Qureshi, M. E. (2010), Global Water Crisis and Future Food Security in an Era of Climate Change, in Food
Policy, 35: 365.
22
Molden, D. 2007 Water for Food, Water for Life – a comprehensive assessment of water management in agriculture. Earthscan,
London and IWMI, Colombo
23
Glassman, D., Wucker, M., Isaaeman,T. & Champilou,C. (2011) The Water Energy Nexus – adding water to the energy agenda.
World Policy Institute, New York
24
Bazalian,M. et al 2011 Considering the Energy, Water & Food Nexus Energy Policy 39 pp 7896-7906
25
Webber, M.E. (2008) Water vs Energy in Scientific American October 2008
11
profound costs for human development: some 1.8 million child deaths each year as a result of
diarrhoea, the loss of 443 million school days each year from water related illness and millions of
women and girls spending several hours a day collecting water preventing engagement in
economic activities including schooling. At any one time, half of all hospital beds in developing
countries are filled with people suffering from water-related diseases. The impact of poor
sanitation is significant – in Bangladesh, India and Cambodia it exceeds 5% of GDP26.
16. The poor and vulnerable are hardest hit by water shocks. Wealthier communities tend to live
and work in less vulnerable locations and are able to insure themselves and maintain assets to aid
recovery after a flood or other water disaster. The social and economic impacts that ensue from
floods and droughts are often more severe than they could have been because of a lack of
disaster preparedness. Water related shocks or stresses can often act as the tipping point to push
people below the poverty line.
17. The 2010 floods in Pakistan impacted upon 23 million people and cost over US$ 10 billion whilst
drought in the Horn of Africa has adversely impacted upon the livelihoods of 12 million people.
The more resilient a nation, the less damage disasters cause and the quicker they can recover.
Resilience is about being prepared for disasters, and having good systems for responding to them.
This includes investing in infrastructure. The Humanitarian and Emergency Response Review27
concluded that “if we are to meet the challenge ahead we have to be ahead of the curve rather
than always being behind, preparing for disasters as well as reacting to them”.
18. Women, children and vulnerable groups are affected most severely by water insecurity.
When water resources are scarce and/or when rights to land and water are unequally distributed,
competition for supplies means that those at the lowest end of the power spectrum - poor women
and men - will go without. Unequal power relations typically place women in a disadvantaged
position when it comes to access to, and use of, scarce water resources.
19. Women and girls are typically responsible for managing water, protecting water quality, and
maintaining domestic hygiene and sourcing water which can mean travel over long distances.
Between one and eight hours of a woman’s day is spent fetching water. Combined with women’s
lead role in agriculture in some societies this means that water shortages and shocks impact more
severely upon women than men. Lack of access to water directly affects women’s’ health,
education, employment, income and empowerment. In addition ensuring safety when accessing
water for domestic use or bathing is a high priority for women and girls in many developing
countries. In addition women and vulnerable groups have least access to irrigation, depending
instead on less productive rain-fed agriculture - adversely affecting household nutrition and income
levels. Climate change will exacerbate existing vulnerabilities to water insecurity. It is now widely
recognised that any interventions on water need to ensure a clear focus upon women and girls.28
20. Whilst women are the most likely to suffer from impacts such as floods and drought, they are often
pivotal in promoting adaptation within their communities. Women play a key role in the provision,
management and safeguarding of water and these roles need to be reflected in policy and
institutional, arrangements for the development and management of water resources.29 A survey
of 121 World Bank financed projects concluded that women’s involvement was key for effective
and sustainable water projects. Benefits include empowerment, better health for women and girls,
improved household food security, enhanced school performance, and increased household
income.30
26
World Bank 2011 Water and Sanitation Programme www.wsp.org
HERR 2011 Humanitarian & Emergency Response Review – report by the committee chaired by Lord Ashdown
28
London School of hygiene and Tropical Medicine 2012 Evidence review and research priorities: Water, sanitation, and hygiene
for emergency response
29
Ivens, S. (2008) Does increased water access empower women? in Development (2008) 51 pp 63-67 Society for International
Development
30
ibid
27
12
21. Poor water management threatens valuable ecosystems and services. The impacts of climate
change on people and ecosystems will be felt mainly through water31. Well-managed ecosystems
provide “ecosystem goods” – such as fish and timber – and ”services” – such as flood control and
water purification. In Uganda ecosystem services through forest catchment protection, erosion
control and water purification services are worth US$ 300 million a year32.
However many ecosystem goods and services are degrading rapidly. The Millennium Ecosystem
Assessment audited natural systems and their capacity to support human well-being. It concluded
that, at a global level, freshwater ecosystems were so seriously degraded that their capacity to
maintain key assets and deliver services, such as freshwater, supporting fisheries or wetlands and
regulation such as storage of flood waters, was in jeopardy. The Assessment concluded that the
impacts in terms of vulnerability to flooding, household food security and incomes would be
significantly harmful for the poor33.
Private Sector Leadership On Water Security For Growth
22. Water insecurity as a risk to business. Price Waterhouse Coopers’ 2012 Global CEO Survey34,
launched at the World Economic Forum in Davos, highlighted water supply as one of the top four
risks concerning major global companies. A range of private sector initiatives such as the Water
Resources Group 2030, the UN’s CEO Mandate, World Business Council on Sustainable
Development Water Initiative and the Carbon Disclosure Project’s water disclosure programme are
a few of the well regarded industry-wide activities representing private sector interests in water
security.
23. The private sector has a number of key roles to play in supporting effective water
management including capital investment and service delivery. It also can play an important role
in influencing debates and policy about water security, particularly by convening key decision
makers. The private sector and representative organisations are increasingly engaging in debate
and taking action to improve water security. Notable players are the Water Resources Group
managed by the IFC, the CEO Mandate with UN support and the Water Futures Partnership
managed by GIZ. All of these programmes aim to support increased private sector involvement in
delivering water security reflecting that water risks are a primary concern to many industries. A
critical dimension of this increased private sector engagement is that the CEOs of major
transnational companies have proved effective in taking issues of water security to a wider
audience including decision makers in Ministries of Finance.
Development Opportunities Through Trans boundary Water Management
24. Water does not respect political boundaries. Some 40% of the world’s population live in trans
boundary river basins. These are governed by over 150 international treaties but do not always
include all riparian states.35 Cooperative management of water resources in international river
basins is weak and has led to paralysis that blocks investment for food, power, and other
economic opportunities as well as managing droughts and floods.36 Non-cooperation creates
political tensions and, in some contexts may contribute towards conflict, over shared resources. It
also results in forgone benefits of joint water resource development37.
25. A focus upon trans boundary benefits and cooperation can support development. When
31
IPCC 2008 Climate Change and Water. Technical Paper of the Intergovernmental Panel on Climate Change, IPCC Secretariat,
Geneva.
32
SIWI 2006 Putting water in economic development, SIWI, Stockholm
33
World Resources Institute 2007 Restoring Nature’s Capital WRI, Washington D.C.
34
Price Waterhouse Coopers 2012 Global CEO Risk Survey for World Economic Forum, Davos
35
World Bank: World Development Report 2010, Development and Climate Change citing Doern and Gattinger 2003.
36
UN Water 2008 Trans boundary Waters: Sharing Benefits, Sharing Responsibilities: UN-Water Task Force, UN Water Geneva
37
Africa’s Infrastructure: A Time for Transformation, WB and AfDB, 2009
13
tensions arise over management of and access to water, riparian states are increasingly
encouraged to focus not upon negotiating maximum water abstraction rights but upon collective
management of shared water resources to maximise socio-economic benefits such as
hydropower, flood prevention or irrigation that come through trans boundary water management.
For example, the UK supported Nile Basin Initiative promotes co-operation between nine member
states and contributes towards improvements in the lives and well-being of the 232 million people
living within the Nile Catchment. Less than 10% of basin residents have access to electricity and
under-investment in water resources infrastructure for irrigation and flood defences is a major
barrier to reducing poverty. By promoting cooperation and capture of shared benefits the Initiative
has leveraged investment of US$1 billion in hydropower generation, transmission and trade and
plans to leverage a further US5 billion through pipeline investments38.
26. Within nations limited access to water can be a trigger for tension and conflict as well as a barrier
to opportunity and wider human development objectives39. Competition over access to water may
lead to conflict but more often will lead to trade-offs in which marginalised households and
communities suffer reduced access.
Social, Economic And Environmental Challenges Are Increasing Water Insecurity
27. Today, about 800 million people in 43 countries are under water stress40 while 2.6 billion people
lack access to proper sanitation facilities41. By 2025 up to 2.5 billion people could be vulnerable to
water stress. A number of factors are contributing towards water stress including population
increase, urbanisation economic growth and increased water consumption and climate change.
28. Rapid population growth is placing heavy demands upon water resources. With the world’s
population projected to grow from around 7 billion today to around 9 billion by 2050, competition
over access to, and use of, available resources will intensify. It is estimated that by 2050, 3.9
billion people – 40% of the world’s population – are likely to be living in river basins under severe
water stress42. Due to population increase alone, global per capita water availability is expected to
decrease and 20% more water will be needed to feed an additional 1 billion people by 202543.
29. Rapid rates of urbanisation will impact water security. Between 2009 and 2050 the urban
population is expected to grow by 2.9 billion to reach 6.3 billion. Over 90% of this growth is
forecast to be in cities and small towns in developing countries, increasing and concentrating water
demand and pollution stresses, with impacts likely to most affect the poor. Planned urban growth
may facilitate increased access to water services through economies of scale but this is dependent
upon robust urban planning. In many instances evidence points to the vulnerability of the poorest
urban communities to water insecurity including contaminated drinking water, poor sanitation and
threats from flooding and poor drainage44.
30. Environmental degradation reduces nature’s capacity to deliver water services. Disasters
can have adverse environmental consequences, while degraded environments cause or amplify
the detrimental impacts of disasters. Global climate change accelerates ecosystems degradation
and disaster risk due to increasing and extreme weather events like heat and cold waves, floods,
landslides and prolonged droughts. Healthy and well-managed ecosystems, on the other hand, are
more robust against hazards45.
38
Nile Basin Initiative 2012 Annual Report for 2011 NBI,
Bass, S. & Steele, P 2004 Reducing Poverty Earthscan London
Independent Evaluation Group 2010 Water and Development – an evaluation of World Bank Support 1997 to 2007 IEG
Washington DC
41
World Health Organisation and United Nations Children’s Fund (2010), Progress on Sanitation and Drinking Water: 2010 Update.
WHO Press, Geneva: Switzerland.
42
OECD 2012 Environmental Outlook to 2050 – Chapter 5 Key findings on Water page 208 OECD, Paris
43
Hanjra, M. A. and Qureshi, M. E. (2010), Global Water Crisis and Future Food Security in an Era of Climate Change, in Food
Policy, 35: 365.
44
HERR 2011 Humanitarian & Emergency Response Review – report by the committee chaired by Lord Ashdown
45
National Institute for Disaster Management 2012 Environmental Extremes New Delhi, India
39
40
14
31. Climate change will increase the frequency and intensity of water shocks and stresses
exacerbating insecurity further. The IPCC concluded that the impacts of climate change will be felt
mainly through water and with developing countries hit hardest46. It also concluded that current
water management practices are unlikely to be robust enough to cope with the impacts of climate
change on water supply reliability, flood risk, health, agriculture, energy and aquatic ecosystems.
Delivering Resilience To Climate Change Through Water Security
32. The Stern Review concluded that tackling water insecurity can be the most cost effective
mechanism to respond to unavoidable climate change47. Supporting developing countries to
adapt to the effects of climate change is a priority for the UK government. The IPCC Technical
Paper on Water48 argues that “an integrated water resources management approach provides an
important framework to achieve adaptation measures across socio-economic, environmental and
administrative systems”. In almost all developing countries capacity to adapt to climate change will
be linked to efforts to improve water resource management.
33. The Stern review identifies the need for greater public and private sector investment in
adaptation and support for community led approaches. It acknowledges the significant investment
required for adaptation but argues that it is cost effective compared to a business as usual
approach.
34. The Costs of adaptation are high and the World Bank’s ‘Economics of Adaptation to Climate
Change’ Study49 ranked water as one of the top three climate adaptation costs in both its “wetter”
and “drier” scenarios, with Sub-Saharan Africa footing by far the highest costs . The combined
annual costs of adaptation in developing countries for water supply and riverine flood protection
are between $13.3–$16.9 billion (net), and $20.2–$22.8 billion (gross).
35. There is uncertainty regarding the specific impacts of climate change upon hydrology.
General Circulation Models typically are unable to provide sufficient resolution to enable decisionmakers to make informed choices about climate change impacts upon society, economy and the
environment. This generates a high level of uncertainty which coupled with poor hydro-geological
data means that decision makers often avoid climate-water policy decisions particularly those
relating to investment50.
36. A low regrets approach helps to manage uncertainty. Given the high costs and uncertainties
regarding adaptation, the World Bank51 and WRI52 recommend focus upon low–regret options
which deliver developmental benefits regardless of uncertainty around future climate change.
These would increase water security in the face of current climate variability and resilience against
future climate change. Low regret options include effective river basin management, watershed
management including storage mechanisms and use of ecosystems, hard and soft infrastructure
and demand management including water efficiency.
37. Supporting adaptation in developing countries is a priority for the UK Government. The
Adaptation Thematic Paper to the ICF identified better management of water resources and
sustainable access of the most vulnerable to water for agriculture and human consumption
Intergovernmental Panel on Climate Change 2008 Climate Change and Water – IPCC Technical Paper by Bates, B.C., Z.W.
Kundzewicz, S. Wu and J.P. Palutikof, IPCC Secretariat, Geneva.
47
Stern, N 2006 The Stern Review on the Economics of Climate Change
48
IPCC 2008 Climate Change and Water. Technical Paper of the Intergovernmental Panel on Climate Change, IPCC Secretariat,
Geneva.
46
49
World Bank 2009 Economics of Adaptation to Climate Change Washington DC
IPCC 2008 Climate Change and Water. Technical Paper of the Intergovernmental Panel on Climate Change, IPCC Secretariat,
Geneva.
51
World Bank 2009 Economics of Adaptation to Climate Change Washington DC
52
World Resources Institute 2010 Delivering Climate Change Adaptation Washington DC
50
15
purposes as a priority intervention and a low regrets activity with high returns.
Evidence On Approaches To Tackling Water Insecurity
38. The evidence that water insecurity hits the poor hardest, reduces or even reverses development
gains and will worsen under climate change is considerable. The follow section explores evidence
on key approaches to improving water security.
39. Erratic rainfall and weak institutional frameworks are at the heart of water insecurity. Least
developed countries often suffer marked climatic variability and extremes. Moreover, they have
inadequate human capacity and institutional structures to manage the challenges and impacts that
may result both in terms of capital for infrastructure as well as capacity and systems to maintain
and operate infrastructure53. Weak water governance is a major barrier in which the architecture
to deliver water security involving key information (data and evidence), institutions (policies, plans,
institutional capacity, legislation and enforcement) and investment (public-private and formalinformal) is ineffective54.
40. Water resources management is complex and largely ignored. Unlike investments in water
supply and sanitation in which the link between inputs and outcomes is more tangible for poor
people (e.g. money spent providing toilets), those for WRM are often less evident, more indirect
and cumulative. Typically they take longer to deliver results and have to cover wider geographic
areas. As a result, the market fails to deliver and WRM in developing nations is largely ignored,
resulting in weak policy and investment frameworks. This in turn leads to insecure access to water
for households, farmers and industry and
makes poor people, communities and
“There has been a widespread failure to recognise
nations vulnerable to the devastating
water’s vital role in providing food, energy,
impacts of floods and droughts.
sanitation, disaster relief, environmental
sustainability and other benefits. This has left
The contribution of water resources hundreds of millions of people suffering from
management to pro-poor economic growth poverty and ill health and exposed to the risks of
and social well-being is often unseen and water related disasters”.
derives from the importance of the many Ban Ki-moon, Secretary General of the UN 2010
sectors that rely directly on water
productivity as inputs, in particular into
agriculture, energy and industry. These sectors in turn provide the bulk of employment and
contribute significantly to the GDP especially for developing countries. Managing water resources
also contributes directly to management of the eco-systems on which many of the poor rely. The
information necessary to inform decision-making is not easily available and the economic
implications of water constraints are not widely appreciated55.
41. Water scarcity makes headline news but physical availability is not the only factor determining
levels of water insecurity. Countries rich in water resources can still experience water stress. In
many countries with good water endowments, water insecurity is caused by poor governance and
under-investment in approaches to harness the productive and manage the destructive potential of
water. The UN Human Development Report concluded that “the scarcity at the heart of the global
water crisis is rooted in poverty, inequality, and unequal power relationships as well as flawed
water management policies, not in physical availability”56
42. The political economy matters. To deliver improved water security it decision-makers need to
53
Water Management, Water Security and Climate Change Adaptation: Early Impacts and Essential Responses. Global Water
Partnership, 2009
54
GWP 2007 Effective Water Governance GWP Stockholm
55
Independent Evaluation Group 2010 Water and Development – an evaluation of World Bank Support 1997 to 2007 IEG
Washington DC
56
UNDP 2006 Human Development Report “Beyond scarcity: power, poverty and the global water crisis” UNDP New York
16
be aware of and respond to the implications of under-valuing water resources and failing to invest
in water security. The UN Human development Report of 2006 was explicit in calling for focus
upon influencing the political economy of water resources in order to deliver water security at
national and household levels. The World Bank’s Independent Evaluation Group concluded that
water resource debates need to be placed more firmly in the context of economic development
and include calculation of economic benefits to increase countries’ understanding of the economic
importance of water57. Increased economic analysis will support politicians, Government decision
makers, donors and the private sector to understand the trade-offs when making decisions about
whether to invest in water security or not58.
43. Key building blocks for water security: information, institutions and infrastructure. The lack
of access to adequate and safe drinking water and food and energy security is not necessarily tied
to the availability of water itself but rather to low adaptive capacity, lack of effective development
strategies, lack of regional and sub-regional institutional frameworks, inadequate infrastructure and
economic and financial constraints including resources for operation and maintenance.59
44. Better information and data to support evidence-based policy and investment planning.
Improved incorporation of information about current climate variability into water-related
management would assist adaptation to longer-term climate change impacts60. Several gaps in
knowledge exist. Observational data and data access are prerequisites for adaptive management,
yet many observational networks are shrinking. Information about the water related impacts of
climate change is inadequate – especially with respect to water quality, aquatic ecosystems and
groundwater– including their socio-economic dimensions such as equity of access and household
incomes when water is scarce.
45. Stronger institutional frameworks. In many developing countries the enabling conditions for
successful water management are weak or non-existent. Water management largely occurs
through national water institutions and the institutional arrangements and capacity at a national
(and sub-national) level are a key determinant of effective water management61. Effective,
integrated, water resource management involves a broad range of stakeholders, including different
central government agencies and departments; state, regional and local governments; national
agencies and corporations; regional bodies; NGOs; community-based organizations; private
companies; service providers (public and private); and specific interest groups including farmers,
women, indigenous peoples.
46. Water governance in many countries needs to be reformed. Water policies need to place quantity
and quality issues on an equal footing and need to be integrated with policies that have an impact
on water availability and use, primarily agriculture, energy and land use62. Reforms need to
increase transparency in decisions regarding water resource allocation between competing
interest groups. In addition many subsidies promote unsustainable water use and need evaluation
to determine which could be phased out without impacting upon the poor and marginalised.
47. Investing in water infrastructure is critical to delivering water security and increased
climate resilience. Water storage facilities in particular counter the unpredictability caused by
erratic rainfall63. This includes infrastructure for water storage, drinking water and sanitation,
irrigation, flood defences and ecosystem management. For instance water storage provides the
Independent Evaluation Group 2010 Water and Development – an evaluation of World Bank Support 1997 to 2007 IEG
Washington DC
58
Independent Evaluation Group 2010 Water and Development – an evaluation of World Bank Support 1997 to 2007 IEG
Washington DC
59
http://www.ens-newswire.com/ens/apr2012/2012-04-18-01.html
60
Bates, B.C., Z.W. Kundzewicz, S. Wu and J.P. Palutikof, Eds. 2008, Climate Change and Water. Technical Paper of the
Intergovernmental Panel on Climate Change, IPCC Secretariat, Geneva.
61
UN Water 2012 Status Report on Integrated Water Resources Management and Water Efficiency UN-Water, 2008
62
OECD Environmental Outlook to 2050 page 210 OECD, Paris
63 SIWI 2006 Making Water a Part of Economic Development SIWI, Stockholm
57
17
scope, at a range of scales, to store water for electricity generation, irrigation, domestic and
industrial supply and to mitigate the risk of floods and droughts. Indicators for storage capacity
demonstrate the vastly different capacity of countries – the USA stores about 6000 cubic metres of
water per person whilst for Ethiopia the figure is 4326. Per capita storage capacity is often used as
a proxy indicator for water security.
48. In Africa less than 5% of irrigable cultivated land is irrigated and only approximately 7% of
hydropower potential is developed64. Irrigation in Asia on the other hand is well developed and
has reduced poverty and expanded the economy of many countries although with significant
environmental impacts in some instances. In India it is estimated that farmers in irrigated areas
experience average poverty rates of 25% compared with 70% in non-irrigated districts.
49. To reduce poverty and to adapt to climate change, water infrastructure - based on a solid enabling
environment - is essential65. Building hydraulic infrastructure is necessary but it is not sufficient.
Balanced and sequential interventions are needed so that the enabling environment (governance,
institutional frameworks and human capacity) is in place to attract and use effectively the huge
investments needed for infrastructure construction and maintenance.66 “Natural infrastructure”
such as wetlands must be adequately valued and taken account of in system design. Lessons
from earlier infrastructure development must be heeded in order to avoid wastage of scarce
finance, indebtedness and asset deterioration, as well as environmental damage.67 This includes
a need to develop infrastructure at appropriate scale, acknowledging that in some contexts smaller
scale infrastructure and improved land and water management practices will be more appropriate.
Where large scale water infrastructure is appropriate effective social and environmental
safeguards are essential to protect the poor and vulnerable and the environment.
50. A significant investment deficit exists with regard to water infrastructure. The 2011 report of
the Africa Progress Panel, headed by Kofi Annan, on ‘Barriers and Drivers to Economic Growth’
identified the continuing widespread infrastructure deficit as a structural barrier to growth68. It is
estimated that low and middle income countries need to make investments of US$103 billion a
year to make to meet investment needs for water, sanitation and wastewater treatment.69 In low
income countries an estimated $72 billion annual investment in WSS is required to just reach MDG
targets. For Africa to reach the MDGs for WSS it is $22 billion over the next 10 years – and to
meet irrigation plans it is another $22 billion over the next 50 years70.
51. Countries need support that takes account of the massive investment deficit that exists so that
development goes hand in hand with building climate resilience71. Judicious action now and a ‘no
regrets’ approach can help developing countries to avoid having to retrofit and adapt to climate
change in the future. Achieving water security lies at the heart of this twin approach of resilience
and development.
52. The barriers to investment in water security include gaps in knowledge and evidence, weak and
uncertain policy and regulatory environments, trade and investment barriers, lack of political
awareness and commitment to tackle complex water security challenges including articulating
coherent demand, institutional capacity and fragmentation and a failure to address long term
operational and maintenance costs and responsibilities as well as weak financing arrangements72.
64
World Bank 2012 Costs of Water Infrastructure presented to WWF4 in Marseille
OECD, Natural Resources and Pro-poor Growth: the economics and politics, 2008
66
Water Financing and Governance. Global Water Partnership, 2008
67
GWP TEC 2009 IWRM in Practice: Better Water Management for Development, editors Roberto Lenton and Mike Müller.
Earthscan, London
68
http://portal.worldwaterforum5.org/wwf5/enus/worldregions/Africa/Consultation%20Library/Preparatory%20meeting%20reports%20and%20declarations/Outcomes%20Statem
ent%20-%20Dakar%20final%20EN.pdf
69
Yepes (2008) in Rodriguez 2012
70
Rodriguez, D. 2012 Draft Report on Investment in the Water Sector for World Water Forum 2012, Marseille
71
World Bank (2010). World Development Report 2010: Development and Climate Change
72
Grey, D & Sadoff C 2007 Sink or Swim? Water security for growth and development. Water Policy Vol 9 No 6 pp 545–571
65
18
53. Formulating a successful water management system is a multidisciplinary process involving
technical, economical, legal, institutional, political and social actors, balancing water use for
production e.g. agriculture with protection of water resources. Perry73 identifies a number of
measures essential for effective water management :-
Understand the availability of the resource (data, hydrology, geo-hydrology, ecology)
Define principles of resource allocation and use in terms of volumes and priorities among users
(politics and national development priorities).
Assign rights and implementing principles (legal and institutional frameworks)
Develop necessary institutions to manage resources at all levels (management – including
charging mechanisms)
Develop systems and infrastructure to deliver the defined services (investment in infrastructure).
WHAT THE WATER SECURITY PROGRAMME WILL DO
The Water Security Programme will deliver enhanced water security which supports climate
resilient growth and development. The programme will emphasise increasing investment in the
information, institutions and infrastructure necessary to deliver improved water resources
management and services.
Theory Of Change For The Water Security Programme
54. To deliver the Water Security Programme’s Outcome the theory of change sets out the logic for
the programme below. This is based upon the evidence drawn from the strategic case. Figure 2
below - Theory of Change illustrates the process.
F
i
g
u
r
e
2
W
a
t
e
r
73
S
e
c
u
r
i
t
Water pricing:
y some important definitions and assumptions.
Perry, 2003
Occasional Paper No 59 SOAS Water Issues Study
Group School of Oriental and African Studies/King’s College London University of London Aug 2003
P
r
o
g
r
a
19
Figure 2 Water Security Programme
Theory of Change
Knowledge, Evidence &
Tools
Investment mobilisation
Water Security integrated in
plans & Programmes with
associated investment
strategies
Knowledge management
& tools on WRM &
services for climate
resilient supports evidence
based policy &
programmes.
Strong results focused
management systems
promote real time learning &
knowledge exchange to
promote replication & scale
up
WRM Awareness &
Commitment
Increased awareness &
support for climate
resilience through
water security
OUTCOME:
Increased
investment in the
information,
institutions and
infrastructure
required to deliver
water security.
IMPACT:
Enhanced water
security supports
climate resilient
growth and
development
Stronger Institutions
Strengthened Institutional
frameworks to deliver
improved water security
Changing Political & Institutional Commitment for Water Security
Commitment to achieve water security increases leading to its integration in international, regional (including trans boundary) & national
policies & projects over time from:
Limited & Short Term Planning
WRM Integrated In All
Plans/Projects
Shift from water resources managed in a silo with water under-valued and risks managed through disaster responses to water security integrated in
regional, national and local development planning as a cornerstone of delivering growth, prosperity, reduced vulnerability and poverty reduction.
20
55. The Theory of Change proposes that addressing key market failures and barriers to investment
in water security will support improved management of water resources for growth and
development and that this, in turn, will contribute towards increased climate resilience. It is
proposed to focus upon four inter-connected outputs as set out below. It is not anticipated that
one institution alone will deliver against each but rather that a number of stakeholders will
contribute towards delivering different components of these outputs.
56. Output 1 - Better Knowledge and Evidence:
There are significant data and evidence gaps with regard to climate and hydro-geological data
which weaken policy formulation and investment planning. There is a need for strengthened
collation of existing knowledge, and the generation and management of new evidence,
analysis, modelling & tools, and its dissemination across stakeholders to support uptake of
water security and climate resilience in development planning, policy making and investment
from local to trans-boundary scale. Knowledge and evidence should be developed to help
policy and decision-makers to deal with uncertainty, understand trade-offs and support
informed investment choices. This should also facilitate innovative knowledge management
and application including the sharing and transfer of knowledge products and tools emphasising
south-south capacity and cooperation as well as proactive data sharing between key institutions
including development banks. Knowledge products and tools linking water security and key
land, food and energy security agendas will be essential, going beyond the conceptual waterfood-energy-climate nexus, to quantify synergies and conflicts. Tools should support effective
monitoring of climate adaptation/ water security frameworks.
Examples of recent activities which could be replicated include:-
-
hydro-climatic modelling to analyse potential co-benefits of water use in energy planning in
Africa;
mapping ground water to develop irrigation systems to increase agricultural productivity in
Africa and South Asia;
analysis and guidance on the potential of Results-Based Financing (RBF) for irrigation,
hydropower and environmental services;
modelling future climate change scenarios to attract funding for urban drainage systems in
Latin America that will reduce risks associated with flash floods.
economic feasibility study for an integrated urban water management system with localised
wastewater treatment and water collection in Nairobi drawing on experiences from Latin
America and Central Asia.
a water resources assessment for the Darfur region of Sudan
57. Output 2 - Increased political and institutional commitment:
This output will emphasise engaging a broader set of actors in making policy and investment
decisions around water security in order to tackle the investment deficit in water security. It is
based upon evidence identifying a number of political and institutional barriers which create
disincentives to invest in water security. These include the complexity of water resources
management, paucity of data and uncertainty regarding climate and hydrological models,
insufficient economic analysis to support decision-making including balancing trade-offs and the
often long pay-back periods for investments. It will focus upon developing awareness, capacity
and commitment amongst politicians and decision makers to invest in water – not just in the
water sector e.g. water supply and sanitation but in related sectors such as energy and
agriculture. Non-water specialists will be supported to make the link between water and key
drivers of the economy such as energy, agriculture and health.
Stakeholders will be supported with tools to aid informed decision-making including valuation of
water resources, scenario planning and skills in balancing trade-offs. Increased economic
analysis will support politicians, Government decision makers, donors and the private sector to
21
understand the trade-offs when making decisions about whether to invest in water security or
not74. A key challenge will be supporting decisions around water allocation criteria including the
role of markets for efficient allocation between sectors which take into account issues of equity
and sustainability. This output will tackle key concerns regarding the accountability of
government and service providers to their constituents and clients. Another challenge will be
how to promote WRM investment decisions whose results are often indirect, cumulative and
span wide spatial and temporal horizons. This output will also contribute towards influencing
global policy debates such as how water security fits into the post-2015 development landscape
and the role of water security as a driver of growth, prosperity and poverty reduction.
Examples of recent activities which could be replicated include:- economic analysis and scenario planning of options for investments in water management to
promote political agreements on trans boundary water management;
- working with AMCOW to integrate water security in African Union objectives and work plans;
- deploying remote sensing technology to increase efficiency and equity in water allocation
systems in China;
- analytical work to assess the economic and biodiversity impacts of investments to restore and
protect mangroves and wetland habitats in India;
- implementing water efficient irrigation systems in the MENA region;
- analytical work to design optimal municipal water management systems in Yan’an Province in
China to improve water security for one million people
58. Output 3 - Institutional strengthening:
Weak and ineffective institutions are a key barrier to delivering water security. This output will
focus upon strengthening institutional frameworks and capacity so that they deliver effective
water security policy, investment planning and service delivery. It will cover the “rules of the
game” from legislation, regulations & enforcement, policy and plan making, at local through to
regional and global level.
It includes building capacity of relevant institutions across
government, private sector, civil society and regional/global bodies with direct & indirect water
remit. It will also work with informal institutions such as community groups.
Examples of
recent activities which could be replicated include:- working with Government and the private sector in Bangladesh safeguarding 40,000 jobs by
developing policy frameworks and regulation in the textile sector to promote green growth
including improved water quality through reduced industrial pollution and watershed
management;
- facilitating south-south partnerships for knowledge and investment transfer including one
where Morocco’s largest utility is investing in innovative small scale sewerage system design
and management approaches learnt from Brazil;
- public expenditure reviews for Ministries of Agriculture and Water in Central Asia to support
trans boundary food and water security programmes;
- building capacity across key institutions in 20 municipalities in Mozambique to reduce the risk
of floods for 2 million urban residents.
59. Output 4 – Investment mobilisation: This output will support the integration of water security
into development plans, policies and projects and strengthen investment planning and
prioritisation tools including innovative financing to mobilise resources such as results based
mechanisms. It will demonstrate viable climate resilient water security pathways through
adaptation interventions. Emphasis will be upon mobilising investment from across a range of
stakeholders including Government, private sector and donors. Examples of recent results
which could be replicated include:Independent Evaluation Group 2010 Water and Development – an evaluation of World Bank Support 1997 to 2007 IEG Washington
DC
74
22
- working with Government and donors in Zambia to integrate water security into the national
development plan with a fully costed water resources investment strategy;
- working with stakeholders to reduce land degradation to protect water resources for over
600,000 people in Nigeria to increase food security; and
- supporting to the Government of the Dominican Republic to strengthen its emergency
response systems to prepare for flooding and other natural disasters.
60. Our current approach to tackling water security. The UK is already addressing a number of
critical issues affecting the delivery of improved water security. These include support for :- 60 million people to access clean water, sanitation and hygiene by 2015;
- the Southern Africa Development Community to implement its trans boundary rivers
programme to benefit up to 95 million people though improved water resources
management and nine million people through improved flood protection;
- promoting regional cooperation on the Himalayan Rivers to address the challenges of
development and climate change through the South Asia Water Governance Programme;
- the Nile Basin Initiative to promote co-operation between nine member states and
contributing to improvements in the lives and well-being of the 232 million people living
within the Nile Catchment.
61. These programmes address critical issues affecting the delivery of improved water security.
However there is a need to promote more systematic action to address water security including
through key global and regional mechanisms which are currently lacking. These include the
development of global and regional knowledge and evidence to support increased political and
financial investment in water security, improved analytical work which brings together cutting
edge climate and hydrological science with socio-economic analysis to deliver evidenced based
policy, systematic consideration of the impact of climate change upon water resources
management and delivery of water services by governments, donors and the private sector;
and improved south-south knowledge transfer and lesson learning. The Water Security
Programme will provide a global platform addressing these gaps and demonstrate through
implementation at regional or country level that addressing them makes sound economic, social
and environmental sense.
Key Assumptions Under-Pinning The Theory Of Change
62. Given the uncertainty around climate change projections it is assumed that by providing
evidence including valuation of water resources, increased use of economic analysis, risk
assessment and understanding trade-offs, a focus upon low regrets options will prove more
attractive to decision-makers by demonstrating the social and economic benefits today as well
as the longer term adaptation benefits of investment in water security.
63. Rates of return might be different for public investment based on water as a public service
and private sector looking for returns on financial investment. Innovative mechanisms to attract
both public and private finance will be required.
64. The case for engaging the private sector in delivering adaptation is made by Stern and the
IPCC. It is assumed that the private sector will step into provide a proportion of this finance but
the barriers to make this happen need to be effectively identified and resolved. To attract
private sector investment, it will be important to create an enabling environment where the
costs (including risks) and benefits of investment are transparent and secure. In doing this the
role of donors such as DFID and intermediaries should be clearly defined i.e. honest brokers,
developing public goods such as evidence which stimulates private sector investment.
23
Delivering the Water Security Programme – The Three Windows
65. In order to deliver results set out in the Theory of Change the programme will be
implemented through three funding windows which will collectively address critical gaps
and market failures which currently restrict investment in water security. The three windows are
interconnected and success in one is dependent upon success in the others. The Governance
and Enabling Environment Window will support the development of knowledge and global
policy and dialogue which set the frameworks for influencing regional and national investment
on WRM; the Analytics and Investment Window will provide the analytical and financial capacity
to deliver this investment at river basin and country level; and the Innovation and Partnerships
Window will promote partnerships to mobilise currently untapped private sector investment
potential.
A key component of the programme will be the interface between the three windows through
collaboration and partnerships designed to strengthen results and the potential for replication
and scale up. Cross-window collaboration will be assessed in the programme’s results.
Window 1
Governance
& enabling
environment
Increased
investment
in water
security
Window 2
Analytics &
investment
Window 3
Innovation
&
Partnerships
66. Window 1: Governance and Enabling Environment: This window will support a) high quality
and ground-breaking research, knowledge and analytical work to influence global policy and b)
work with governments and other players at regional and national level to deliver integrated
water resource management planning with associated investment strategies to benefit poor
people.
67. This will include producing authoritative and influential evidence and analysis, convening and
working with stakeholders and decision makers to assess the options and trade-offs to deliver
water security, taking “water out of the water box” so that water resource dimensions are built
into food and energy provision and climate resilience, supporting the consideration of water
security in key development and growth agendas such as the post-2015 development
framework and the strategies and business plans of Governments, the private sector and
donors.
Achieving this will be done by working with partners with strong and influential
reputation, ensuring capacity and credibility to convene key decision-makers and stakeholders
and ability to turn policy into practical investment strategies. This includes working with global
bodies such as UN institutions, the World Economic Form and multilateral developments banks;
regional bodies such as the African Union and Regional Economic Communities and, at
24
national level, Governments, civil society and the private sector.
68. Window 2: Analytics and Investment: This window will deliver high quality analytical work
and capacity building at programme level to facilitate investment in water security at scale.
Where Window 1 will create an enabling environment for investment in improved water security,
this window will facilitate and deliver investment to improve water resources management at
scale. The emphasis will be upon robust analytical work e.g. modelling or economic analysis
making a convincing case for integrating water resources management across a range of
investments ranging from water supply and sanitation, agriculture, energy and broader growth
strategies.
69. Window 3: Innovation and Partnership: Institutional analysis identified a number of
“emerging players” in the private sector addressing water security in new dynamic and
innovative ways. This window will provide support to establish partnerships and promote joint
ventures between the private sector and government and civil society players to address
shared water threats. DFID funds would support analytical work including risk and economic
analysis, scenario planning and the development of joint plans and investment strategies, to
mobilise increased investment for WRM. A competitive funding element may be included within
this window.
70. Initial discussions with a number of large private sector institutions indicate interest in
addressing water insecurity risks in some form of partnership with DFID.
Links to Other HMG/DFID Strategic Priorities
71. DFID’s Business Plan sets out six key pillars to help achieve international development
objectives. Two of the six are action to improve the lives of girls and women and tackling
climate change. The Water Security Programme will deliver water services which directly
benefit women and girls and will contribute significantly towards meeting UK commitments
made under the Cancun Adaptation Framework agreed as part of the United Nations
Framework Convention on Climate Change. The programme will help to deliver against a key
ICF objective to “help poor countries to manage their water resources” including developing
global frameworks for water security, cooperation between neighbouring countries over shared
water resources and country level initiatives to improve water security through water storage or
irrigation. Investment in water resources management is one of 7 priority sectors for ICF work
on adaptation identified in the DECC/Defra/DFID International Climate Fund Implementation
Plan 2011/12-2014/15.
72. The Water Security Programme complements other ICF programmes currently under
design/approved by providing a coherent global framework to delivering water security in which
regional and national programmes fit including the South Asia Water Governance Programme,
Urban Climate Change Resilience Programme, support to SADC for regional water
management and the Adaptation for Smallholder Agriculture Programme. This programme has
been designed to maximise opportunities for synergy and to avoid duplication of activities.
Under the ICF monitoring and evaluation framework joint evaluation across all ICF water
resources programmes is proposed offering scope to draw out key lessons on scaling up
adaptation programmes and how to leverage investment in water security. The Programme
will also complement other DFID supported programmes including the Nile Basin Initiative,
Cooperation on International Waters in Africa, the Climate and Development Knowledge
Network, the Global Program on Output Based Aid, the World Bank’s Wealth Accounting and
Valuation of Ecosystem Services programme and Research and Evaluation Department’s
Water Security Research Programme.
25
B. IMPACT AND OUTCOME THAT WE EXPECT TO ACHIEVE
73. The impact of the Water Security Programme will be that enhanced water security supports
climate resilient growth and development.
74. The key outcome will be increased investment in water security.
The programme will lead to integration of water security and climate change issues within key
policy, planning and programmatic interventions and, critically, link these to investment
strategies involving public and private, formal and informal stakeholders.
75. Results achieved through the Water Security Programme and attributable to DFID will
include:








18.6 million people benefiting from improved and sustainable access to water
services e.g. irrigation, drainage, flood protection and clean water and sanitation
through integration of WRM into World Bank programmes.
107 million people benefiting from improved water governance e.g. through river
basin planning and management;
£1.7 billion of investment contributes to climate resilience through improved
integration of water resources management and water services into World Bank
programmes;
10 national development plans and policies approved which integrate water
security for climate resilience with associated investment strategies.
Six nations with early warning systems operationalized to reduce vulnerability to
flooding.
10 national development plans and policies with enhanced integration of water
security and climate change and associated investment strategies.
Seven water based ecosystem services valuations completed.
180,000 hectares brought under enhanced biodiversity protection.
76. The consequences of DFID not intervening: Consultations with donors have revealed that
several are partly basing their likely future support for GWP and WPP upon confirmation of
DFID support to these institutions. As a consequence DFID contribution will leverage other
donor investment. In particular donors noted the value that they believe DFID brings in terms of
intellectual rigour to programme design and delivery, its strong focus upon results and M&E and
emphasis upon climate change and improved outcomes for the poor. GWP and WPP are
central to global policy debate about water security. Engagement with GWP and WPP allows
DFID to shape and influence this debate. DFID engagement with GWP and WPP through
business case preparation has allowed considerable scope to influence institutional reform
within these institutions. For GWP this has focused upon developing a solid results framework
and strengthening M&E and for WPP this has focused upon building water into wider Bank
operations around energy, food and nutrition security and green growth and in focusing upon
the institutionalisation of WRM across World Bank operations and development of an exit
strategy. Not intervening would prevent continued dialogue to ensure that these institutional
reforms are fully implemented.
How Will The Water Security Programme Deliver These Results?
77. An institutional analysis (Annex 3) including application of Multilateral Aid Review criteria to the
preferred institutions (see paragraphs134 to 138) and an economic appraisal (next section) were
undertaken to determine the most effective and efficient manner to deliver results for each of the
three Programme windows. A summary of the proposed delivery mechanism for each window is
provided below.
26
Governance and Enabling Environment Window
78. The institutional analysis identified two feasible options for delivering the Governance and
Enabling Environment Window – support for the Global Water Partnership (GWP) or for UN
Water and/or UNDP’s Water Governance Facility and Capacity Development Network (CapNet).
Detailed appraisal and institutional analysis (see Annexes 2 and 3) identified GWP as the
preferred institution to deliver this window in terms of potential to deliver results and value for
money.
79. GWP is an Inter-Governmental Organisation. GWP focuses primarily on building water
knowledge and institutions that promote investment in water resources management. Its
worldwide network of Partners provides a unique structure and forum for knowledge sharing,
institutional and policy development for improved management of water resources.
80. It comprises a network of partners comprising 13 regional and 80 country water partnerships. It
is supported by the GWP Organisation which coordinates the network, leads development of
knowledge products and convenes key stakeholders for global and regional policy dialogue on
water security. Total membership comprises some 2,600 institutions. This gives it authority and
capacity in many regions to convene key stakeholders and advocate for enhanced water
security.
Its Strategic Plan 2009-13 sets out its vision for delivering water security through its
network and the strategy for 2014-19 is in development. Its network of Partners provides a
unique structure and forum for improving the knowledge sharing, capacity building, advocacy,
institutional and policy development required for the improved management of water resources.
81. GWP was established in 1996 by the World Bank, UNDP and SIDA. Since 2002 it has operated
as an independent Inter-Governmental Organisation with its headquarters in Stockholm. Core
funding since 2002 has been approximately £57 million, funding for specific projects £14 million
and funds raised locally by regional partnerships £11 million. DFID contributions since its
establishment have been £15 million. GWP is recognised as the institution which defined the
concept and approach to Integrated Water Resources Management (IWRM) and its high level
Technical Committee comprises thought leaders in the field of water security. Its regional and
country partnerships have evolved organically into the most extensive global network of water
resources experts with significant capacity to influence debates at global, regional and national
level.
82. Strategic guidance on critical issues such as climate change and the water-land-energy nexus
are provided by the GWP Technical Committee (TEC). The TEC guides policy makers with
authoritative analysis on emerging issues, drawing on the cutting edge knowledge of world
experts and provides high quality, peer-reviewed and evidence-based information and
background material for water resource practitioners at all levels. The TEC also provides advice
and support, and facilitates sharing of knowledge and experiences at regional and country levels.
Current work on the economics of water security will inform and strengthen the evidence base on
VfM and cost effectiveness in water security programmes. GWP’s reputation and authority mean
that it is well placed to influence strategic development processes such as the post-2015
development framework.
Results from recent GWP Work
83. In the past two years, GWP work on IWRM has led to the development of water financing
strategies in eight countries in Sub Saharan Africa. Its work on water investment planning in Mali
led to commitments of Euros 20 million from donors for water security investments. GWP has
played a key role in promoting the widely debated “water-food-energy nexus”. GWP has also
worked with the African Union to develop a strategy for integrating WRM across AU policy and
strategies.
84. GWP, through its 5 Regional Water Partnerships in Africa, has developed a well-articulated and
27
regionally-owned (pan-African) programme of activities and results - the Water, Climate and
Development Programme in Africa (WACDEP). This is a flagship programme of AMCOW – the
African Ministers Council on Water. WACDEP is aligned to GWP’s Strategy and will deliver
results to help achieve water security through increased resilience to climatic variability in Africa;
this will set the stage for investments related to water management and development
programmes and projects (information, institutions and infrastructure) resulting in economic
growth and human security. By 2016 the WACDEP Africa programme will benefit some 25
million people through improved water governance systems.
85. GWP plans to scale-up approaches similar to the Africa WACDEP in other GWP regions in the
period 2012 to 2019. Scale up will initially focus upon the Caribbean, South and South East
Asia and Central America – regions where considerable ground-work has already been. These
programmes will deliver similar tangible results, consistent also with the results framework with
an emphasis upon pilots that develop robust evidence for policy and plan making and which can
be replicated and scaled up. At a global level the scale up will strengthen the Programme on
Flood Management and the inception of the new Integrated Drought Management Programme,
both implemented in partnership with the World Meteorological Association.
86. DFID’s Country Prioritisation and Vulnerability assessment which underpinned the Adaptation
Thematic Paper submitted to the ICF identified a number of countries identified as being
extremely vulnerable to climate change and which were ICF priorities. An extensive number of
these are where GWP has established networks which can scale up in delivery – or where
(particularly in Africa), GWP has shown very strong results – e.g. Zambia and Mali. The varying
levels of development and different contexts across the GWP regions offer huge opportunities for
cross-regional, North-South and South-South learning and exchange of lessons on climate
change adaptation.
87. Evaluation of GWP has highlighted its significant convening power to promote water security at a
range of geographic scales and its ability to facilitate dialogue between stakeholders. GWP is
moving towards a results based framework with increased emphasis upon climate change and
energy and food security. Measures to strengthen its results framework and M&E capacity are
well advanced.
88. What key activities will GWP implement? DFID core support will contribute towards GWP
results targets to :-
-
-
-
Generate and share high quality research, knowledge and analytical work to influence global
and regional policy and investment planning including agendas such as the Post 2015
development agenda;
Provide financial and technical support for its network of Regional and Country Water
Partnerships and its global Action network of 2700 partner organisations;
Scale up the Water Climate & Development Programme (WACDEP) benefiting 25m poor people
in Africa through support to AMCOW, the African Union and Regional Economic Communities to
develop climate resilient policies and investment and financing strategies for WRM across transboundary waters and shared aquifers;
Develop and implement Climate Resilience programmes similar to WACDEP Africa in the
Caribbean, South and South East Asia, Central Asia, Central and South America;
Scale up the Global Flood and Drought Resilience Programme with the World Meteorological
Organisation to strengthen the science and policy frameworks for implementing early warning
systems to reduce the vulnerability of poor people to climatic extremes; and
support country monitoring and reporting on Integrated Water Resources Management.
89. Reform in GWP: Institutional analysis of GWP (see Institutional Analysis and Appraisal annexes
for details) identified the need for it to develop a coherent results framework (until recently GWP
reporting has been based solely on outcome mapping) and increased capacity in project
28
management and monitoring and evaluation (M&E) in order to deliver improved results and
demonstrate that this represents value for money. During 2011-12, through the design of this
programme, DFID provided a limited amount of technical support to assist GWP to develop such
capacity. The Results Framework is now being introduced as a core part of GWP planning and
strategy work. GWP has committed to strengthen its overall M&E capacity focusing upon results
and value for money using quantitative and qualitative indicators to measure progress and target
resources. The Water Security Programme will build upon this and support transformation in
GWP particularly around its systems and capacity to deliver and monitor results and impact for
poor people.
The programme Log frame requires GWP to fully implement the results
framework, develop core project management and M&E capacity and to work in partnership and
cooperation with multilateral development banks, particularly the World Bank through WPP.
Analytics and Investment Window
90. The institutional analysis and appraisal (see Annexes 2 and 3) identified two feasible options for
delivering the Analytics and Investment Window - support for the World Bank Water Partnership
Programme (WPP) or Regional Development Banks’ (AfDB /AsDB) water programmes.
Appraisal identified WPP as the preferred institution to deliver this window in terms of results
delivery and value for money.
91. WPP is a multi-donor trust fund administered by the World Bank which provides technical
assistance to deliver high quality analytical work and capacity building to support the integration
of WRM into the design and delivery of Bank lending across all sectors. WPP supports
programmes by delivering “upstream” analytical work for policies, strategies and plans and/or
“downstream” direct support to lending to deliver improved water security. Activities, often at
trans boundary level include water resources assessments, hydrological and climate modeling,
application of remote sensing, institutional strengthening around policy and regulation and
capacity building, public expenditure reviews, investment planning and mobilization.
92. WPP does not replace ordinary Bank functions but provides additional services which improve
the quality of design and implementation of Bank programmes. It strengthens Bank activities
by ensuring that water resources are integrated in projects that would not otherwise have done
so. This is particularly the case for projects in the agriculture and energy sectors, and for
ensuring that water resources management (WRM) is managed within the context of climate
change and green growth. This innovative (often trans boundary) work is unlikely to be
undertaken as part of normal World Bank core costs because Governments receiving grants
and loans perceive WRM and trans boundary work to involve higher risks and because of the
challenges of getting them to co-fund work at regional level.
93. WPP was established in 2009, with the support of Denmark, the Netherlands and UK. At the
time WRM was often ignored in World Bank programming and WPP was established to
integrate WRM more systematically in Bank operations. In its first phase (2009-12) it has
proved effective in delivering technical assistance to mainstream WRM in water supply and
sanitation and some agriculture and energy programmes. The second phase (2012-16) will
consolidate upon the foundations laid in the first phase and deliver at greater scale, influencing
Bank lending with a target of $15 bn. It will focus upon integrating WRM across food, energy
and economic growth work and support the systematic mainstreaming of WRM in Bank
Operations including through institutional policies and procedures. Regarding the latter DFID
has signalled its intent to see WPP develop an exit strategy i.e. a point where WRM is
managed systematically across Bank Operations without the need for a trust fund.
94. The WPP aims to improve World Bank projects and technical assistance, focusing resources
on the priority needs of the Bank’s regions and client countries. This is accomplished by
fostering innovation and analytical work and by enhancing the quality of Bank water and nonwater related projects and lending through on-demand, expert support and applied global
29
knowledge. It also helps to support and strengthen water policy and institutions in developing
countries. The WPP is a demand-driven programme – responding to requests from World Bank
Task Team Leaders for support to address WRM issues and improve the quality of design of
programmes that they are managing. WPP currently supports WRM activities in 62 countries.
Results from recent WPP work
95. During Phase 1 (2009-11) WPP provided technical assistance and inputs to integrate WRM into
214 programmes in 62 countries with some 52 million beneficiaries at a cost of US$19.2 million.
This ensured that complex, often transboundary, WRM issues were built into World Bank
projects where otherwise they would not have been. These projects represent Bank lending of
US$11.5 billion (US$19.2 billion when total project costs are included). Over the first phase
each dollar of WPP spend influenced $710 of Bank lending and $1,240 of total project costs.
96. WPP provided support to 19 projects in Africa with an average loan value of $131 million ($2.4
billion in total). In South Asia WPP provided WRM inputs to 14 projects with average loan
values of $265 million ($3.7bn).
97. Examples of work supported include:;
- A study to identify options for flood protection and climate change adaptation for the
Sundarbans in Bangladesh and West Bengal, India – an area with extremely high ecological
value that is also home to about 4.1 million of the most impoverished and vulnerable people
in India. (disbursements $ 197,072)
- Promotion of adaptive management of groundwater and review of community groundwater
management plans and vulnerability maps was used to develop pilot infrastructure projects
to improve resilience in seven communities, benefitting 100,000 families (disbursements
$82,675);
- Mitigating land degradation to protect water resources for 680,000 people in Nigeria
(disbursements $18,170);
- Improved water resources management secured more reliable water access for 16,000
people in Ethiopia (disbursements $96,229); and
- Knowledge products on cleaner production measures in the textile industry in Bangladesh,
describing eight best practices to save water, energy and chemicals in the textile industry in
Bangladesh, were discussed with multinational company partners, aimed at incorporation of
Bangladesh cleaner production lessons into global environmental supply chain
guidelines.(disbursements $120,000)
98. For example WPP modelling work in Mozambique led to the development of infrastructure and
flood early warning systems benefitting 2 million urban residents, and ground water modelling in
the SADC region led to pilot infrastructure projects benefitting 100,000 families across the
Limpopo river basin. In Bangladesh, WPP worked with Government and private sector to
promote water and resource efficiency across the textile sector helping to promote green
growth and secure jobs and in Nigeria supported innovative land management programmes to
reduce land degradation and protect water resources for 680,000 people. It has led pioneering
work on the application of remote sensing to support accurate and equitable water allocation
systems in East Asia.
99. In 2011 WPP was one of eleven Bank Programmes to win a Vice Presidential Team Award for
“responsiveness to clients, innovation, demonstrating development impact and demonstrating
high value added to regional results”.
Lessons from WPP Phase 1
100. Lessons from the first phase of WPP show that it has been able to drive change in the
Bank’s strategic, policy and project work – through 214 activities influencing Bank investments
totalling US$11.5 billion. The first phase provided more than $4 million toward activities that
promote new research, policies and planning for climate change adaptation and mitigation in
30
water resources management in developing countries, contributed to the dialogue on food
security through research on wastewater use in agriculture and piloted a transformative WRM
approach, Integrated Urban Water Management, in three Bank Regions. Lessons from the first
phase however indicate that WPP should provide greater focus upon the energy and agriculture
sectors, strengthen outreach and partnerships and develop stronger monitoring and evaluation
capacity.
101. What key activities will WPP implement? DFID core support will allow WPP Phase 2
(2012-16) to deliver around three objectives : i) sponsorship and mainstreaming of water
resources management and development across Bank lending, ii) the enhancement of the
quality, effectiveness and equity of water service delivery through the expansion and
improvement of social and productive water services and iii) integration of water services and
management in Bank “green growth” programmes. In the second phase it plans to ensure that
WRM is integrated within a larger share of Bank lending with a target of $15 billion ($25 billion
total project value) by 2016. This will be through WPP inputs to an estimated 150 World Bank
projects across 70 countries of which 40 are LIC/fragiles states. These will benefit up to 100
million people. Total current estimated budget for WPP phase 2 will be £40.2 million. The Bank
projects themselves will benefit:- 30m people with improved irrigation and drainage services,
- 35m through flood protection and water resources management, and
- 35m through sustainable water supply and sanitation.
102. The WPP management team will ensure that all funded activities are developed based on
the WPP results framework which sets out specific targets and indicators to measure the
programme’s contribution to poverty reduction through improved WRM and service delivery. At
least 30% of WPP funds spent will be in Africa and 50% of beneficiaries in projects supported
by WPP must focus on the most vulnerable populations of women and girls. Specific outputs
and targets which will determine how WPP funds are targeted include:
-
Amount of Bank lending influenced and additional funding leveraged through WPP activities
$15 bn of World Bank investments influence
$25 bn of total project value influenced

-
Physical and natural assets protected
1m hectares under enhanced biodiversity protection
7 ecosystem valuations undertaken
12 bn m3 increase in water storage capacity
2 m hectares with improved drainage or irrigation services

-
People benefiting from projects supported by WPP
30m people with improved irrigation and drainage services,
35m through flood protection and water resources management, and
35m through sustainable water supply and sanitation.

-
Development of plans and strategies to promote WRM and service delivery
10 national policies or plans that incorporate WRM and services
15 plans and investment strategies incorporating water endorsed
$150 m budget allocated against investment strategies for implementation

-
Capacity enhancement for WRM and service delivery
8 early warning systems installed
20 operational water user associations created/strengthened
33 government agencies with strengthened capacity
31
103.
-
-
-
-
WPP Phase 2 pipeline activities for early implementation include:
Sudan – critical water resources assessment for the Darfur region to ensure sustainable
access to water. Cost $1.5 million over 2 years. Expected to benefit the population of
Darfur - 6 million people.
Zambezi River Basin – risk based analysis on the resilience of water related investment s in
the Zambezi Basin to hydrologic variability and climate change. Cost $1.3 million.
Estimated to indirectly benefit 32 million people living in the Zambezi Basin..
Middle East and North Africa – analytical work to identify mechanisms to improve water
productivity and efficiency and increase food security in strategic river basins.
Ethiopia – Ground water assessment and associated implementation of pilot action
research projects to test approaches to conjunctive use of surface and ground waters,
techniques for ground water recharge and integrated groundwater and watershed
management.
WPP will also develop guidance and lesson learning based upon country and regional
activities. For instance it will draw upon experiences in integrated urban water management
across regions to guide and influence integration of water security in Bank urban
programmes. WPP will also develop global initiatives such as remote sensing and disaster
risk management including analytical frameworks and tools and lessons learned from pilot
activities.
104. Reform in WPP: These lessons are being addressed as a condition of DFID support
including development of tools, indicators, guidance and Operational Policies to systematically
mainstream WRM across Bank operations. These are included as indicators in the log frame
against which positive performance will be required to, enable future disbursements from DFID.
The Innovation and Partnerships Window
105. Support of up to £7m will be earmarked for developing a programme to promote
partnerships with the private sector to demonstrate how private finance can be mobilised to
increase investment in WRM. This Strategic Case approved in 2011 set out the need to work
with the private sector on WRM. In developing the full business case it has become clear that
there is a clear rationale for developing a third window to specifically promote private sector
investment in the coalitions, information, institutions and infrastructure required to deliver WRM.
We are seeking endorsement to proceed to detailed design and appraisal of the Innovation and
Partnerships Window which will complement the Governance and Analytics Windows.
Detailed design will be complete in the first quarter 2013 at which point the business case will
be submitted for approval.
106. Partnerships would bring the private sector into joint ventures with government and
communities to address shared water threats. DFID funds will support risk and economic
analysis, hydro-climatic modelling and scenario planning leading to the development of joint
plans and investment strategies to mobilise increased investment for WRM.
107. Recent work by the GIZ Water Futures Partnership pilot programme demonstrates what can
be achieved. A partnership between GIZ, SAB Miller Ltd and Polokwane municipality in South
Africa resulted in a commitment to establish joint investment in a municipal water treatment
facility.
This will secure long term water services for both the local population and the
company at a lower unit cost than if the municipality and SAB Miller had proceeded
independently.
108. A range of options for engagement with the private sector will be assessed across a range
of initiatives including the IFC led Water Resources Group, scaling up of the GIZ led Water
Futures Partnership, other donor or private sector programmes, establishing partnerships
directly with specific companies and a challenge or other competitive fund. Initial discussions
with key private sector players indicate their interest in working with DFID to develop
32
partnerships around water security.
Key Issues Cutting Across The Three Windows
109. Links between the windows. Delivering increased investment in water security will require
strong progress in each of the three windows and require effective inter-connection between
them. Delivery institutions will be expected to develop good working partnerships. For instance
GWP has a comparative advantage in advocating for policy reform, improved governance in the
water and climate change arenas and catalysing investment frameworks and WPP provides the
technical and financial capacity to implement such reform and investment through World Bank
programmes. The Innovation and Partnerships Window will address the massive investment
deficit in water security (an estimated $72 bn each year in low income countries in order to
meet MDG water and sanitation targets) by promoting partnerships with the private sector to
demonstrate how private finance can be mobilised to increase investment in WRM. Whilst
WPP can support climate modelling and develop scenarios for government action on
adaptation, GWP has the convening power to bring together all relevant stakeholders, through
country networks, to garner consensus on the outcomes of the analysis. The GWP toolbox is
also a potential dissemination platform for sharing outputs of WPP-funded activities to a global
audience.
110. Real time learning requires that programmes learn not just from intermittent evaluation
processes but from on-going learning processes linked to effective programme and project
management. In implementing the programme partners will be expected to demonstrate that
the generation of lessons and evidence from activities in each of the outputs is incorporated
into approaches to networks, knowledge development and knowledge communication as well
as all implementation components. This will require a more innovative and proactive approach
to link action learning (evidence from projects and activities) to a formal process of reflective
learning that enables feedback into operational planning and strategic decision-making.
111. Learning how to scale up and manage uncertainty. Critical to delivering replication and
scale up is the need to systematically learn lessons regarding what works and what does not,
document and disseminate these lessons and apply them in future programmes. The ability to
manage uncertainty and package relevant information for policy-makers, investors and
programme implementers is also critical, including providing appropriate evidence for
government, donor or private sector investment processes. The difficulty of incomplete and
probabilistic data needs to be addressed to facilitate approaches to ‘no regrets’ investment in
infrastructure, systems and capacity development. Institutions cannot wait for ‘hard’ evidence
but must institute ‘robust reflective learning that enables clear judgements on approaches which
are likely to give ‘net gains’ when compared to alternatives and the business as usual
approach.
112. Women and girls are the group most likely to suffer as a result of water insecurity. They
are also the group who stand to gain most from, measures to improve water resources
management. Studies indicate that failure to address gender issues in water programmes can
significantly limit both their impact and sustainability75,76. The Water Security Programme will
require all institutions which receive support to build in robust management systems including
through M&E to ensure that gender is fully integrated within programme design, implementation
and evaluation.
113. Environmental and Social Safeguards. Investments in water security arising through the
Programme, particularly in infrastructure, could potentially have significant negative
environmental impacts. All investments and projects will be subject to an environmental
75
Ivens, S. (2008) Does increased water access empower women? in Development (2008) 51 pp 63-67 Society for International
Development
76
IDS 2011 Children and Disasters Report for the Children in a Changing Climate Research Programme, IDS Brighton
33
assessment that fully complies with and implements internationally accepted levels of social
and environmental safeguards to ensure sustainable and equitable outcomes.
114. A balanced approach to water infrastructure choices which takes social and
environmental issues into account: Water resources adaptation may take both “hard” i.e. dam
construction and “soft” i.e. flood early warning systems. Options appraisal is contextual but it is
assumed that a range of approaches including investment natural infrastructure e.g. Wetlands
protection to maintain ecosystem services will be actively explored.
115. The political economy is a key barrier to increased investment in water security today –
covering capital, capacity and soft system development - and must be addressed across the
programme if water security is to be strengthened in developing countries. Multiple factors
influence decisions on whether to make investments in water or not. The programme will
support engagement with, and incentivisation of, key decision-makers including politicians,
government institutions, private sector, civil society groups and donors to act upon a climate
resilience agenda. However this will need to recognise and tackle the incentives and
disincentives for decision makers to address near future let alone remoter future water and
climate objectives.
116. Evidence on what works and what does not on climate adaptation is patchy. Delivering
climate resilient water resources adaptation at scale may require more innovative and potentially
higher risk strategies. It is assumed that effective monitoring and evaluation systems including
“real-time learning” will encourage a sensible level of risk taking and manage it, ensuring that
lesson learning and transfer from bother success and failure are built in. The Programme will
promote south-south learning with a results indicator to measure performance.
APPRAISAL CASE - This is a summary version and the full appraisal is available in Annex 2
WHAT ARE THE FEASIBLE OPTIONS THAT ADDRESS THE NEED SET OUT IN THE STRATEGIC
CASE?
A.
FEASIBLE OPTIONS
117. This section sets out the feasible options that address the market failures set out in the
Strategic case. The options are rated against their ability to deliver across the four n programme
outputs:
 Knowledge and Evidence
 Political Commitment
 Institutional Strengthening
 Investment mobilisation
They are compared against a baseline counterfactual (of what level and quality of water sector
investment would have happened in the absence of DFID’s contribution). A full version of the
appraisal case is attached as an annex to the main business case.
118. Institutional options screening
Firstly, an institutional analysis and screening process was undertaken by consultants Atkins (see
Annex 3) to identify the most suitable institutions to deliver programme outputs. An initial review
identified a large number of institutions working on WRM. This long list was screened in order to
identify those institutions which support the development of enabling environments and/or promote
investments for water security at global, regional and national scales. The short list comprised:-
34











Global Water Partnership
Water Partnership Programme
South Asia Consortium for Interdisciplinary Water Resources Studies (SaciWATERs)
Water Resources Group
Water Futures Partnership
African Development Bank
Asian Development Bank
International Union for Conservation of Nature (IUCN)
World Wildlife Fund
UN Water
UNDP (CapNet)
119.
The institutions in this short list were assessed based on a set of criteria describing approach
to water resources management and organisational performance. The criteria were based on
specific requirements relating to delivery of water resources management outcomes, success
criteria included in DFID’s strategic business plan, and in particular the wider criteria included in
the Multilateral Aid Review. Criteria based on the latter included the emphasis on delivering
results, M&E and learning, value for money, transparency and accountability, and capacity to
facilitate lesson learning and scale up. For the Governance and Analytics windows the scope to
work with academic institutions and think tanks was explored but no institution was able to offer
global breadth across the whole water security agenda.
120. Based on the review, the two strongest options were identified for each of the funding channels
for further appraisal.
 Window 1. Governance and enabling environment: GWP (1a) and UN Water/UNDP (1b) were
identified as the strongest potential partners for the development of global governance
structures, capacity building and communication.

Window 2. Analytics and investment: WPP (2a) and the Regional Development Banks (2b)
(AfDB, ADB) were identified as having the greatest potential to leverage investment and apply
enabled knowledge into water project planning and development

Window 3. Innovation and Partnerships: Two potential routes to encourage private sector
partnerships for investment in WRM – direct funding (3a) and a challenge fund (3b) - were
identified. Full appraisal will be conducted for this window in the first quarter of 2013.
For each of the funding channels, the options were appraised against each other to identify which
offered the most substantial potential benefits. The benefits of each option are compared against a
business as usual (do nothing) scenario. This represents the counterfactual and assumes that no
additional DFID funding is forthcoming, and that the institutions are funded to levels represented
existing donor contributions.
B. Assessing the strength of the evidence base for each feasible option
121. Governance and Enabling Environment
GWP has a long track record of global advocacy for good water governance. Its work on water
and climate change is currently weighted towards sub-Saharan Africa but it plans to scale up
similar activities in other regions. Its use of M&E metrics is evolving. The evidence base is
therefore rated as medium. UNDP/UN Water: UNDP has an established role as coordinating and
project management body although analysis indicated limited large scale experience implementing
WRM. UN Water is a global convenor of political discussion for the sector. The evidence base is
rated as limited-medium.
35
122. Analytics and Investment
WPP has a well-established track record in mainstreaming analysis into investment, and has
developed robust M&E frameworks to monitor impacts and leverage. The evidence base is rated
as medium-strong. The Regional Development Banks (ADB, AfDB) do manage their own water
programmes, but are less focussed on delivering analysis, and are more limited in terms of their
water security investment scope. The evidence base is rated as limited-medium.
123. Innovation and Partnerships
There is a limited evidence base for supporting new entrants into the water sector. The evidence
base is therefore rated as limited. DFID has a substantial body of experience to indicate that the
use of challenge funds can be successful to encourage competent players, although this has been
less prevalent in the water sector. The evidence base is rated as medium
In the table below the quality of evidence for each option is rated as either Strong, Medium or Limited.
Option
1a GWP
1b. UNDP, UN Water
2a. WPP
2b. Regional Development Banks
3a. Direct Funding
3b. Challenge Fund
Evidence rating
Medium
Limited-Medium
Medium-Strong
Limited-Medium
Limited
Medium
What is the likely climate change and environment impact (positive & negative) for each
feasible option?
124. A climate and environment appraisal was undertaken for risks, impacts and opportunities for
the different options. A summary of this appraisal is given in Table 1.
Table 1
Summary of climate and environment appraisal of different options
Climate change and environment category
Option
Risks and impacts
Opportunities
1a GWP
B
A
1b. UNDP, UN Water
B
A
2a. WPP
B
A
2b. Regional Development Banks
B
A
3a. Direct Funding
B
A
3b. Challenge Fund
B
A
No project
A
C
Key : A = high potential risk / opportunity, B= medium / manageable potential risk / opportunity; C = low or no potential risk
/ opportunity
Opportunities
125. The overall objective of the Water Security Programme is to support increased water security
to make poor people more resilient to the impacts of climate change and through improved water
resources management facilitate economic and social development. Observations and climate
projections indicate a significant vulnerability of water resources to the effects of climate change,
with impacts upon human and environmental systems.
Changes include more variable
precipitation patterns, more intense rainfall events, reduced snow cover, glacial melting and
changes in soil moisture content.
126. Risks of both flooding from heavy precipitation events and drought are likely to increase.
Higher surface water temperatures and extreme events are expected to impact upon water quality
36
and increase water pollution from sediment, nutrients, organic carbon, pathogens, pesticides and
salt. This will result in a decrease of freshwater availability for human use and ecosystems. In
particular, changes in water quality and quantity will affect food availability. Climate change is also
likely to negatively impact upon the operation of existing water infrastructure, such as hydro-power
systems, flood defences, drainage, irrigation, domestic and water transport systems.
127. Climate-induced reduction in water availability is likely to exacerbate other stresses, such as
population growth, land use change, and urbanisation. This programme responds to the need for
water management practices to meet the existing development and adaptation deficit, as well as to
cope with the additional impacts of climate change. Much water infrastructure is long lived and has
to be robust against a range of uncertain future climate and hydrological scenarios. A primary
objective of the programme is to work with partners to ensure that climate information and planning
is mainstreamed into programme design, and that investments are resilient to both current and
projected climate change and environmental stresses.
128. A risk in many water, agriculture and energy programmes is that infrastructure is designed
without a clear understanding of changing water availability under climate change, or where the
provision of water to one sector or community may result in a deficit for another (for example
upstream irrigation or hydropower). Both GWP and WPP are seeking to mainstream climate
resilience through low regrets options in their programming to avoid such unintended
consequences.
129. The programme is designed to help address these challenges and therefore all options, except
no project, provide significant opportunities to strengthen environmental management, increase
resilience to climate change and contribute towards reduced emissions of greenhouse gases. The
“no project” option will not present any opportunities, and carries a risk of these environmental and
climate change issues not being addressed.
130. There are, in addition, a range of social-economic benefits arising from better sanitation, water
management and more efficient water use, including improved agricultural yields, improved health
outcomes, and higher returns from more robust eco-system based services. Improved water
management may also in turn result in lower greenhouse gas emissions, through greater capacity
for hydro-power provided these do not lead to wider negative impacts on the environment.
Risks
131. GWP and WPP activities will increase the levels of investment in water security including,
potentially, water infrastructure development. Such developments carry risks of negative climate
and environmental impacts. For major schemes these would be classified as category A but given
the focus of the Water Security Programme the overall risk is considered to be category B. In
addition all investments and policies will be subject to environmental screening, and projects with
potential significant impacts will be subject to a full environmental impact assessment following
international safeguards standards. Further the programme will expect partners to build capacity
of relevant stakeholders at a range of scales – local and community level as well as larger scale –
on environmental impact assessment.
132. In the design, construction and operation of any water related infrastructure the programme
should promote and help develop the use of low carbon technologies, and to help reduce
greenhouse gas emissions.
133. There is also a risk that investments may focus on “hard” infrastructure options rather on “soft”
options including better soil and water conservation practices on farms, and institutional aspects of
water management and land tenure and property rights issues on the access and use of water.
Were this to happen options which have no negative impacts on the environment may be missed,
and moreover have positive social and environment impacts and opportunities not achieved.
37
134. All the options, except “no project”, have a risk of increasing resource and energy use from
increased travel, office activities and other project activities. While meetings and workshops will be
essential to the delivery of the programme it will be important for implementing organisations to
reduce their energy use and work towards zero carbon policies.
135. Actions that should be taken to reduce and mitigate the risks and maximise the opportunities of
the Water Security Programme are detailed in the Climate and Environment Assurance Note.
C. What are the costs and benefits of each feasible option?
136. For the purposes of the economic appraisal, each potential partnership has been assessed as
a stand-alone package from a cost-benefit analysis. A full overview of the assumptions for each
option is set out in the economic appraisal annex. The costs of the programme reflect DFID
funding contribution to each potential programme option.
137. The monetised benefits represent the socio-economic impacts that may be derived from a
broad range of water sector interventions. The impacts represent both the productive value of
water as well as the avoided destructive costs of its poor management. These include the avoided
losses from less frequent and severe drought and flood, and economic benefits from better
agriculture, eco-systems management and hydropower production. They also include benefits
arising from the improved provision of water and sanitation services (WSS) such as health. Some
of the benefits identified are more easily monetised than others. The benefits also include the
impact of improved upstream WRM governance at a national or institutional level, which is
assumed to have an impact on the quality of downstream investment planning and the ability to
mobilise finance.
138. In countries where seasonal and spatial variability in rainfall is compounded by a high degree
of unpredictability the contribution that effective water management can make to avoiding water
shocks – whether floods or droughts – can be very significant. Conversely where water resources
are poorly managed the consequences for the economy can be devastating. For example, in 2006
the World Bank estimated that hydrological variability was likely to cost the Ethiopian economy
38% of its future projected growth rate and cause a 25% increase in poverty rates.77
139. Broader water resources management provides direct productive benefits to water users, such
as farmers, energy generation and industrial facilities, as well as households. For economic
sectors, direct benefits often take the form of increased economic production, but reduction in risks
is also an important benefit. Another type of direct benefit is that of biodiversity conservation and
ecosystem protection. The benefits provided by water infrastructure projects have long been
recognised. Dikes, levees and floodgates help to protect population centres from flood risks.
Reservoirs and canals make possible to supply water to urban areas and agricultural lands.
Wastewater treatment plants help to protect water quality in rivers and lakes.
77
World Bank 2006 Ethiopia: Managing water resources to maximize sustainable growth
38
Table 2. Examples of benefits and beneficiaries of improved WRM
Source (OECD)
140. For example, a 2012 World Bank report assessed the costs and benefits of multi-purpose
water storage infrastructure in Nepal for the wider Ganges basin. The net economic value of this
potential hydropower is estimated at some US$5 billion annually, quite significant relative to
Nepal’s 2009 gross domestic product (GDP) of $12.6 billion. The report also found that for the
most part, the potential economic trade-offs between competing uses (hydropower, irrigation, flood
control and ecological objectives) were small as the operation of dams would be similar for each of
the outcomes (storing peak flows to achieve steady dry season release), and the capacity of dams
to control downstream flooding was limited. The economic value of water storage derives primarily
from hydropower, due to low agricultural productivity and the uncertainty associated with valuing
ecosystem services dependent on adequate river flow rates.
141. From an eco-systems perspective, The Economics of Ecosystems and Biodiversity (TEEB)
found that the high end cost of inland wetland restoration is 33,000 USD/hectare. An average
scenario for annual benefits is about 14,200 USD/hectare yet the net present value of benefits over
40 years is 171,300 USD/hectare. This is an internal rate of return of 12% with a benefit/cost ratio
of 5 to 4. For lakes and rivers the same scenario gives a rate of return of 27% and a benefit/cost
ratio of 15.5:1
39
Table 3: Benefit Cost Ratios for Ecosystem restoration
Source TEEB 200978
142. WRM also generates indirect benefits, for example the reduced costs of other productive inputs
(such as agricultural commodities) and transport services faced by industrial producers. Another
example is the reduced costs of consumer products (whether agricultural or industrial) bought by
households. The macroeconomic impacts via those second-round impacts may well be the main
indirect benefits provided by sound water resources management, but a limited evidence base
exists.
143. The evidence base for the costs and benefits of Water and sanitation services (WSS) is more
substantial. WSS may generate substantial benefits for human health, the economy as a whole
and the environment. Access to clean drinking water and sanitation reduces health risks and freesup time for education and other productive activities, as well as increases the productivity of the
labour force. Safe wastewater disposal helps to improve the quality of surface waters with benefits
for the environment (e.g. functioning of ecosystems; biodiversity), as well as for economic sectors
that depend on water as a resource (e.g. fishing, agriculture, tourism). Such benefits usually
outstrip the costs of service provision and provide a strong basis for investing in the sector.
144. For the purposes of this appraisal, the analysis draws upon a range of economic assessments
of current and historic WRM type interventions (as set out in the full appraisal annex). The
evidence indicates that successful projects deliver a range of positive benefit-cost ratios
from 2:1 up to in excess of 100:1.
145. For example, the WHO has calculated the Benefit Cost Ratios for provision of water and
sanitation services by 2015, as set out below, incorporating both health and time saving benefits.
See Table 3 below.
Table 4. Benefit Cost Ratios for Water and Sanitation by 2015 (WHO)
Ambition
Halving the proportion of people without access to improved
water sources by 2015
Halving the proportion of people without access to improved
water sources and improved sanitation by 2015
Universal access to improved water and sanitation services by
2015
Universal access to improved water and improved sanitation
and water disinfected at the point of use by 2015
Universal access to a regulated piped water supply and sewage
connection by 2015
Benefits (US$m)
18 143
Benefit Cost Ratio
9
84 400
8
262 879
10
344 106
12
555 901
4
TEEB – The Economics of Ecosystems and Biodiversity for National and International Policy Makers. 2009. Chapter 9:
Investing in ecological infrastructure. Available at:
http://www.teebweb.org/LinkClick.aspx?fileticket=9NUqttjb3bo%3d&tabid=1019&language=en-US
78
40
146.
Similar studies for WRM, eco-system services and agriculture were reviewed. The benefits
of water infrastructure are site-specific, depending on the service provided (i.e. water supply, flood
protection, water quality protection), the population size or economic activity affected, and the
alternative options available to ensure equivalent services. These ratios also reflect the number of
benefits assessed. For the purposes of the appraisal, a conservative benefit cost ratio of
3.5:1 is assumed. Actual benefits may be significantly higher.
147.
There are, in addition, a number of non-monetised benefits relating to improved international
governance, cooperation and knowledge sharing on water sector issues. The value of better
information, improved planning, or more effective processes for negotiating and enforcing solutions
is generally difficult to quantify. Analysis undertaken by GWP79 indicates that such benefits can
result in significant impacts (both in terms of the quality and quantity of investment at a national or
sector level). Recent work by Tilmant and Kinzelback80 indicates that more efficient and equitable
utilization of water resources, based on improved coordination and cooperation among water
users, sectors and riparian countries, is key to meeting the challenges of increased demand and
climate-related variability. The economic costs of non-cooperation in the Zambezi River basin may
reach US$ 350 million/annum (representing 10% of the annual benefits derived from the system).
GWP estimates81 that value added from improved institutional governance frameworks lie between
15-25% depending upon the prevailing level of institutional development and water stress at a
national level. For the purposes of this appraisal, this benefit is captured by providing an uplift to
the downstream investment benefits within the range identified. The risks of non-cooperation are
also recognised by incorporating a project failure rate of between 5-10%.
148. Option 0. Business as Usual: Do Nothing:
The ‘Do Nothing Scenario assumes that no DFID funding is forthcoming, and that the individual
programmes are funded to prevailing levels of donor contribution. The Do Nothing scenario is
therefore bounded by the activities of the individual partner institutions, rather than wider investment
flows into water sector development. This scenario forms the counterfactual against which other
options are appraised. The level of downstream monetised benefits reflects the envisaged
programme budgets minus DFID funds and those funds that DFID might be assumed to help
catalyse where such funds are not yet secured (both core and regional programme co-funding).
For option 3 (direct funding and challenge funds for new entrants), it is assumed that only a small
percentage (10%) of downstream activities would otherwise be enabled through other sources.
Table 4 sets out the assumptions.
Table 5. Baseline Assumptions: Do Nothing
Weighting of downstream
impacts vs. DFID funded
scenario (based on funding)
1a. GWP
55%
1b. UNDP/UN Water
55%
2a. WPP
50%
2b. Regional Development Bank
50%
3a/b. Challenge Fund/Direct Funding
10%
Baseline socioeconomic benefits
(£m)
883
576
30,265
6,191
24
149. Option 1. Governance & enabling environment: Global Water Partnership (1a) is
compared against UNDP/UN Water (1b)
A contribution of £9m over 3 years (2012-15) is envisaged. GWP is estimated to provide greater
benefits with a BCR of 1.94:1. GWP is expected to leverage or influence up to £423m of
79 Reyes, J (2011), Value creation chain and attribution in the water sector. GWP Concept Paper 2011 (Draft)
80
Tilmant, A. and W. Kinzelbach (2012), The cost of non-cooperation in international river basins, Water Resources, 48, W01503,
doi:10.1029/2011WR011034
81 Reyes, J (2011), Value creation chain and attribution in the water sector. GWP Concept Paper 2011 (Draft)
41
downstream water investments and to deliver additional socio-economic benefits of £723m above
the baseline of which £18m are DFID-attributable.
Table 6. Governance and enabling environment: Costs and benefits
Additional Benefits/Impacts
GWP
DFID Contri bution
DFID Donor Levera ge (Progra mme Level )
GBP (£)
Donor Levera ge Ra tio
£9,000,000
UN/UNDP
£9,000,000
£33,000,000
£23,100,000
3.7
2.6
Regi ona l Progra mma tic Funds Levera ged (Total )
GBP (£)
£37,800,000
£41,649,750
Inves tment funds l evera ged a nd/or i nfl uenced (Total )
GBP (£)
£542,745,000
£385,200,000
Soci o-economi c benefi ts (a ddi tiona l a bove Ba s el i ne)
GBP (£)
£2,057,274,923
£589,702,680
Total DFID Attributable Benefits GBP (£)
BCR
£18,850,713
2.09
£15,176,583
1.69
Central Scenario
150. Option 2. Analytics and investment: WPP (2a) is compared against Regional
Development Banks ( 2b)
A contribution of £12m over 3 years (2012-15) is envisaged. WPP is estimated to provide the greater
benefits with a BCR of 2.4:1. WPP is expected to leverage or influence up to £15 bn of downstream
water investments and to deliver socio-economic benefits of £30bn of which £28m are DFIDattributable.
Table 7. Analytics and Investment : Costs and benefits
WPP
DFID Contri bution
DFID Donor Levera ge (Progra mme Level )
GBP (£)
Donor Levera ge Ra tio
RDB
£12,000,000
£12,000,000
£28,000,000
£19,600,000
2.3
1.63
Regi ona l Progra mma tic Funds Levera ged (Total )
GBP (£)
£10,932,000
£8,342,400
Inves tment funds l evera ged a nd/or i nfl uenced (Total )
GBP (£)
£38,663,720,930
£8,793,067,442
Soci o-economi c benefi ts (a ddi tiona l a bove Ba s el i ne)
GBP (£)
£73,920,201,453
£15,130,121,234
Total DFID Attributable Benefits GBP (£)
BCR
£28,284,993
2.36
£22,620,078
1.89
Central Scenario
151. Option 3 Innovation and Partnerships: Direct funding (3a) is analysed against a
challenge fund (3b)
A contribution of £7m over 3 years (2012-15) is envisaged. Both options are assumed to provide
similar benefits with a BCR of 2.6:1. The partnerships funding stream is expected to leverage or
influence up to £63m of downstream water investments and to deliver additional socio-economic
42
benefits above baseline of £212m of which £18m are DFID-attributable.
Table 8. Innovation and Partnerships : Costs and benefits
New Entrants/
Challenge Fund
£
7,000,000
DFID Contri bution
DFID Donor Levera ge (Progra mme Level )
GBP (£)
0
Donor Levera ge Ra tio
0.00
Regi ona l Progra mma tic Funds Levera ged (Total )
GBP (£)
£12,600,000
Inves tment funds l evera ged a nd/or i nfl uenced (Total )
GBP (£)
£63,000,000
Soci o-economi c benefi ts (a ddi tiona l a bove Ba s el i ne)
GBP (£)
£212,093,438
Total DFID Attributable Benefits GBP (£)
BCR
£18,127,644
2.59
Central Scenario
152.
The preferred option for each of the funding windows is therefore as follows:
- Governance and Enabling Environment: GWP
- Analytics and Investment: WPP
- Innovation and Partnerships: Combined direct funding/challenge fund
Table 9. Overview of cost benefit analysis for combined Water Security Programme
Option 3
GWP+WPP+Innovation
£28,000,000
DFID Contri bution
DFID Donor Levera ge (Progra mme Level )
GBP (£)
Donor Levera ge Ra tio
£52,000,000
1.86
Regi ona l Progra mma tic Funds Levera ged (Total )
GBP (£)
£53,106,660
Inves tment funds l evera ged a nd/or i nfl uenced (Total )
GBP (£)
£16,316,958,000
Soci o-economi c benefi ts (a ddi tiona l a bove Ba s el i ne)
GBP (£)
£31,200,251,062
Total DFID Attributable Benefits GBP (£)
BCR
£64,224,012
2.29
Central Scenario
The preferred option package (GWP+WPP+ combined direct funding /challenge fund for innovation
and partnerships) leverages or influences a potential £16bn of global water investments over the
project lifetime and delivering total additional programme benefits of £31bn of which £64 m are DFID
attributable with a BCR of 2.3:1
43
Applying a MAR style analysis to preferred options
153. The criteria used in the Multilateral Aid Review82 were applied to both GWP and WPP to
determine their appropriateness for DFID financial support. This drew upon consultations with the
organisations, review of recent independent evaluations, DFID Project Completion Reports and
analysis of their strategies/work plans and results. A summary is provided below and full details are
available in the Institutional Analysis (Annex 3 – Appendix C).
154. WPP: Analysis concluded that WPP is a strongly performing programme delivering significant
results and with considerable influence in terms of World Bank programming and analytical work of
wider relevance to international development. It has a strong reputation and has largely fulfilled its
challenging objectives set for Phase 1 2009-12. It maintains a focus upon poor countries but does
also work in middle income countries from which lessons are drawn and applied widely. It is results
focused, delivers good value for money and has effective monitoring and evaluation systems. The
analysis concluded however that the programme could focus more on partnerships to extend the
influence of WPP analytical work and could emphasise WRM in non-water sector programmes more
strongly. WPP has helped to mainstream WRM in a considerable number of World Bank programmes
where its inputs were requested. The challenge however lies in mainstreaming WRM systematically
across all Bank Operations.
155. The MAR analysis for WPP is that it is highly likely to deliver significant results delivering strong
value for money. The Water Security Programme results framework contains challenging targets to
measure results delivery and a number of indicators designed specifically to tackle key institutional
reforms including development of WRM core sector indicators, sector guidance and reformed
Operational Policies. Attainment of key milestones will be triggers for disbursement.
156. GWP - GWP scored well in terms of its poverty focus and emphasis upon countries largely
corresponding to DFID and ICF priority countries. GWP has good governance systems with clear
financial management systems and a high degree of transparency and accountability. It rated
particularly highly on its focus upon partnerships – a key strength and the quality of its knowledge
products and ability to convene stakeholders and influence policy at a range of global, regional and
national scales. An independent evaluation in 2010 concluded that GWP is highly regarded as a
leading authority on water security with a good track record of delivering results in terms of setting
frameworks and enabling environments for improved water security. GWP was however critiqued for
setting overly ambitious goals and lacking a sufficiently robust results based framework. As a result of
the evaluation GWP is addressing 8 distinct areas for improvement including developing a results
framework, fund raising and communications. GWP is currently designing a results based framework
for roll-out during 2012-13 which will more effectively ensure and articulate results delivery.
Associated with this will be increased capacity in project management and M&E. The Water Security
Programme log frame sets out a focus upon results delivery for GWP with requirements for delivery of
improved results based performance and capacity included as indicators.
157. The conclusion of the MAR style analysis is that GWP has a key role to play in delivering
improved water security but that to do so requires institutional reform focused upon developing and
implementing a results based delivery framework. These reforms are already under-way and log
frame indicators will monitor progress. Attainment of key milestones will be triggers for disbursement.
Assessment is that there is strong likelihood of positive change making GWP good value for money.
Uncertainty and Sensitivity Analysis
158. The economic appraisal is subject to a significant amount of uncertainty relating to the ability of
the programme to improve upstream governance (quality), and to increase downstream investment
(quantity). There issues include:
The availability and quality of hydrological and climate information at local level that might
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DFID (March 2011) - Multilateral Aid Review - Ensuring maximum value for money for UK aid through multilateral organisations
44
-
support smart investment (e.g. underdeveloped Hydromet services) and result in lower than
expected benefits or avoided costs.
A prevailing environment of non-cooperation within the water sector that might undermine
sector development and project implementation.
The challenge of translating improved governance into more effective project planning and
delivery on the ground.
The ability to leverage additional downstream investment to expand current levels of
expenditure on water provision and management.
159. Further sensitivity analysis has therefore been undertaken for the preferred option on a range
of parameters that reflect the above risks:
Pro-rata contribution only (0% catalytic DFID donor fundraising effect).
Low investment leverage (30% of central leverage scenario).
Low BCR Proxy Assumptions (75% of central scenario BCR assumptions).
Low Project Success Rate (80% of central scenario project success rate).
Low Gross Value Added (50% of central scenario project impact).
160. As shown in Table 10, under all of these scenarios, the options still return a positive economic
internal rate of return, and the benefits continue to outweigh the costs.
Table 10. Sensitivity of BCR to key parameters
Sens i tivi ty 1: No ca tal ytic donor effect (pro-ra ta a ttri bution)
Total DFID Attributable Benefits
BCR
Sens i tivi ty 2. Low Inves tment Levera ge
Total DFID Attributable Benefits
BCR
Sens i tivi ty 3. Low BCR As s umptions
Total DFID Attributable Benefits
BCR
Sens i tivi ty 4. Low project s ucces s ra te
Total DFID Attributable Benefits
BCR
Sens i tivi ty 5. Low Gros s Va l ue Added
Total DFID Attributable Benefits
BCR
GBP (£)
£54,506,864
1.95
GBP (£)
£54,315,517
1.94
GBP (£)
£48,826,088
1.74
GBP (£)
£52,081,160
1.86
GBP (£)
£59,886,611
2.14
Further analysis has been undertaken on critical assumptions to assess the break-even point at which
point the benefits no longer outweigh the costs. BCR proxy assumptions for individual projects
undertaken would have to be reduced to approximately 1.5:1 before the project would fail to deliver
positive returns. This is substantially below the levels indicated by the evidence base, which tend to
indicate benefit cost ratios in excess of 3 for WaSH projects and higher for WRM interventions. From
a project success perspective, more than 50% of downstream investments would have to fail to be
implemented successfully before the programme would cease to deliver economic returns. This is
also considered highly unlikely.
D. What measures can be used to assess Value for Money for the intervention?
161. Value for money has been a key consideration in programme design and option appraisal.
From an economy perspective, the institutional analysis has incorporated an assessment of
programme management and administration costs among potential partners, and sought partnerships
that both minimise central costs, and maximise regional programme research and programme
expenditure. From an efficiency and effectiveness perspective, a number of indicators are being used
45
to assess the ability of the programme to deliver the required outcomes and impacts. These include:
Value of investment leveraged or influenced at project, plan and policy level for climate
resilience through WRM and water services

Number of people benefiting directly from improved access to water resources services e.g.
water supply and sanitation, irrigation, drainage and flood protection.

Number of people benefiting indirectly e.g. through river basin planning and management

Number of approved policies, plans and projects with associated investment strategies which
integrate water security for climate change
E. Summary Value for Money Statement for the preferred option
162. The combined Water Security Programme is expected to deliver a BCR of 2.3:1. This is based
on a set of conservative assumptions, including the following:
 That more than 50% of downstream projects supported would likely be implemented under
business as usual (although potentially more slowly and to a lower standard). These benefits are
not included;
 That the 3 funding channels may support the same downstream investment. Up to 20% of
potential cross financing has therefore been excluded to avoid double counting;
 That not all downstream projects will be realised: A downstream project failure rate of between 510% has been assumed with no benefits being realised from these investments
 That BCRs may not meet the expected values set out in the literature. BCRs have therefore
been set conservatively at 3.5:1 for the central scenario.
COMMERCIAL CASE
Direct procurement
A. Clearly state the procurement/commercial requirements for intervention
163. There are no direct procurement/commercial requirements for delivery of Window 1 on
Governance and Enabling Environment nor Window 2 on Analytics and Investment. Window 3 on
Innovation and Partnerships is under design and likely to combine direct funding to institutions and,
possibly, a competitive fund.
164. A challenge fund would have procurement requirements. This might involve procurement of an
agent to manage the challenge fund and make sub-grants. Identification and selection of a contractor
would be done in accordance with DFID’s Procurement Guidelines in close collaboration with PRG.
Thereafter the facilitator may be involved in making calls for proposals against pre-determined criteria.
165. Direct funding under the Third Window to existing institutions would have no procurement or
commercial requirements.
B. How does the intervention design use competition to drive commercial advantage for DFID?
166. Selection of management agents for any competitive element of the Third Window will be
competitive. Immediately after approval of the Business Case DFID would develop Terms of
Reference and prepare to issue invitations to tender. Potential managing agents will need to provide
fully costed technical proposals to be assessed against the following evaluation criteria amongst
others:

Technical merits of the proposed approach and ability to contribute to the objectives set out in
46
the Water Security Programme business case;

Proven ability to administer and manage challenge funds;

Capacity to implement and maintain procurement and financial management processes for
delivering the challenge fund.

Value for money – in terms of effectiveness and efficiency as well as economy
167. DFID has considerable experience in using challenge funds to deliver results including use of
competitive bids to select managing agents and generate commercial advantage for DFID. Design for
the Third Window will consider whether any existing challenge funds offer a framework into which the
programme can link, thus reducing costs further.
C. How do we expect the market place will respond to this opportunity?
168. Initial informal discussions indicate considerable interest in the opportunity to bid for funds to
promote innovation and private sector partnerships. Potential managing agents could be drawn from
private sector providers including via DFID resource centres, non-governmental organisation,
universities/academic institutions, and others – possibly including consortia of some or all such actors.
The Senior Water Resource Adviser in DFID’s Climate & Environment Department will continue to
manage networks and encourage interest in opportunities under the Third Window.
D. What are the key cost elements that affect overall price? How is value added and how will
we measure and improve this?
169. Proposals to act as Delivery Agent for the Third Window will be judged against the value for
money criteria of economy, efficiency, effectiveness. A focus will be placed on the following items
amongst others:
170. Economy – fees, daily rates, overheads etc. and unit costs of specific inputs;
Efficiency – number of days and/or staff required to deliver outputs, inclusion of recommendations that
would improve the delivery of outputs or reduce fiduciary risks etc.;
Effectiveness – elements of the proposals that would improve the overall impact of local technical
capacity or introducing better management practices into the sector as a whole.
171. Reducing the management fees charged by the entities, and administrative costs such as
reimbursement of expenses and travel costs. The same downward pressure on costs will be built into
sub-grants handled by the Managing Agent.
E. What is the intended Procurement Process to support contract award?
172. DFID will undertake the procurement for identifying and selecting a Managing Agent for the
Third Window on Innovation and Partnerships. CED will fully consult with PrG in advance of
undertaking procurement and at all stages of the process.
173. The Managing Agent would be responsible for delivery of the challenge fund element of the
Third Window and will be accountable for ensuring value for money of sub-grants. An initial contract
is expected to last until March 2015 with the possibility of extension depending on arrangements for
the ICF and subject to independent review of overall performance of both the Third Window and the
programme as a whole. The DFID lead adviser and project officer will draw up TORs and
advertisement following guidance for contracts above EU thresholds which will be let by PrG.
174. The Managing Agent will report on progress every six months to the DFID Project Officer and
Lead Adviser. The Managing Agent will also work closely with DFID to advertise any calls for
proposals under the Third Window on the DFID website and establish panels to review proposals.
47
F. How will contract & supplier performance be managed through the life of the intervention?
The Water Security Programme management team based in CED, comprising A1 Senior Water
Resources Adviser, A2 Water Resources Adviser and B1 Programme Manager will manage and
monitor the overall programme including contracting and supplier performance. This will be done
working closely with PrG.
Indirect procurement
Why is the proposed funding arrangement the right one for this intervention, with this
development partner?
175.
Appraisal of options identified GWP and WPP respectively as the organisations best placed
respectively in terms of results and value for money to deliver the outputs required under Window 1 in
relation to Governance & Enabling Environment, and Window 2 on Analytics & Investment. The
proposed contributions in each case will build on established processes from previous DFID funding,
supplemented by work in recent months to improve the focus on results.
GWP has overhead costs of 9% which reflect well against other similar organisations. It maintains
value for money by maintaining per diems at 85% of UN levels, enforcing economy class travel for all
flights less than 9 hours and economy-plus for longer flights. Its Technical Committee – leading
global experts are compensated at Euros 400/day and senior advisers compensated at Euros
600/day or less Its Stockholm administrative costs are kept low through part payment by the Swedish
Government.
WPP programme management costs for 2009-11 were 8.3% of total grant amount. In 2010 the
Independent Evaluation Group reviewed 17 World Bank global programmes and found an average
administrative cost of 18%. Internal evaluation of programmes in the Sustainable Development
Network found average administration costs of programmes at 14.3%. WPP management costs
therefore compare favourably with similar programmes. WPP follows standard World Bank travel and
procurement policies.
DFID resources will not support World Bank core costs or administration. In all cases WPP funds will
support activities that would not be included in normal World Bank design requirements. For instance
social and environmental appraisal would not be funded by WPP as these should come from existing
design funds.
A. Value for money through procurement
176. Delivering programme goals through use of multilateral institutions is an effective way to
achieve value for money. The reach and efficiency of delivery based upon existing programme
structures of both GWP and WPP would be difficult to replicate to achieve the results desired around
governance and enabling environments and analytics and investment.
177. Procurement and funding arrangements managed by GWP and WPP will take place under the
procurement procedures established by each organisation. The DFID Project Officer and Lead
Adviser will review approaches at regular intervals and in close coordination with PrG. These
procedures have been reviewed as part of project preparation and it is anticipated that WPP and GWP
will be subject to review under the next Multi-lateral Review at which point further assessment of
delivering reduced costs may be explored.
178. WPP procurement adheres to World Bank procurement processes which are recognised as
being amongst the most stringent used by any development agency. The WPP team includes
dedicated finance and procurement specialists with extensive knowledge of, and experience with,
Bank grants and loans and provide financial and management support through the life cycle of each
WPP activity, from inception through implementation, ensuring compliance at every level with donor
48
requirements and Bank policies and procedures.
179. GWP has a dedicated finance team with clear guidelines and procedures for financial
management and procurement which are adhered to in all programmes and activities. These are
independently audited to verify compliance.
FINANCIAL CASE
A. What are the costs, how are they profiled and how will you ensure accurate forecasting?
180. Costs : The total costs of the Water Security Programme will be £28 million over three years
2012/13 to 2014/15 in grant financing as set out below:a) Governance and Enabling Environment Window : Global Water Partnership programme
(£9million)
b) Analytics and Investment Window : Water Partnership Programme (£12 million)
c) Innovation and Partnerships Window (£7 million) – to be designed in detail November 2012February 2013 and submitted for approval. This will include approximately £450,000 for
evaluation, cross programme lesson learning and follow up to stimulate replication and scale up.
These costs reflect an assessment of the funds required to enable the relevant institutions to scale up
their water security and climate change work whilst also reflecting their absorptive capacity.
How much support should we provide to GWP and WPP?
181. The financial support proposed for GWP (£9m) and WPP (£12m) represents an assessment of
the sums which will allow both institutions to significantly scale up their operations whilst also
reflecting their absorptive capacity and the need to minimise UK burden share as much as possible.
182. For GWP this will provide core support to allow global knowledge and policy development and
support to its regional and country programmes to build WRM into regional and national policies and
investments strategies in 16 countries at estimated cost of £28.7 million (2013-16). It will also allow
scale up of its Climate Resilience Programme in Africa and replication in 7 other regions benefiting
approximately 9 million people through improved water resources planning and service delivery at
estimated cost of £21.4 million 2013-16. GWP will also develop its joint flood and drought modelling
programmes with the World Meteorological Organisation, its Climate Resilient Deltas programme and
support for country monitoring and reporting on Integrated WRM at estimated cost of £3.1 million and
The DFID contribution which represents a maximum 27% burden share is critical to allowing the scale
up of Water and Climate Resilience Programmes. Without DFID contribution their replication will be
prevented.
183. For WPP this will allow it to influence up to US$15 billion of World Bank spend by providing
technical assistance to integrate WRM into at least 200 projects between 2012-16 at a cost of
approximately £40 million. One third of spend will be in Africa. This will benefit up to 100 million
people benefiting from projects supported by WPP through access to water supply and sanitation,
irrigation and drainage services and flood protection. DFID will be able to deliver significant results in
terms of improving the sustainable access of water services to poor people through WPP. A £12
million contribution represents the best balance between maximising results and WPP capacity to
deliver in the two years of its four year programme.
184. For the Innovation and Partnerships Window a full appraisal will be undertaken once preferred
delivery agents or mechanisms are identified. The maximum contribution would be £7 million.
49
185. Forecasting: DFID expects to disburse expenditure as set out in the table below. The budget
is based upon projected activities set out in strategic plans by GWP and WPP but will be revisited
during annual reviews.
Table 11 Water Security Programme Budget (£ millions)
Year 1: 2012/13
Year 2: 2013/14
Year 3 : 2014/15
Total
GWP
1.5
3.2
4.3
9.0
WPP
3.0
5 .0
4.0
12.0
Innovation and
Partnerships
1.5
2.75
2.75
7.0
Total
6 .0
10.95
11.05
28.0
186.
The Programme Manager will ensure accurate forecasting through developing a strong
working relationship with GWP and WPP, enabling effective engagement on programme issues
including financial management issues.
All delivery institutions will submit quarterly financial
statements and a more detailed annual financial and narrative progress report which will also include
an assessment of risks associated with delivery. These reports will clearly indicate realistic projection
of spend for the current financial year broken down by quarter on all major budget category lines.
DFID will require that delivery institutions advise DFID in advance of any unexpected potential
significant changes in forecasts.
187. The Programme Manager will rigorously reconcile these forecasts against (i) relevant data on
Aries; (ii) work plans and budget; (iii) previous quarterly reports; and (iv) previous disbursements and
past spending trend. Any discrepancies will be quickly raised with implementers and necessary
changes to forecasts will be agreed. The Lead Adviser will also be consulted on all financial issues
identified as well as any changes to forecasts on Aries that need to be made.
Burden Share
188. The current forecast maximum burden share for UK Government support 2012-15 will be 27%
for GWP and 29% for WPP. This burden share reflects the major leadership role that the UK
government is taking on promoting climate change in international development through the ICF. It
also represents the “upper limit” of burden share with both institutions in negotiations with other
donors regarding additional funding which, if successful, will bring the UK burden share down.
189. The original concept note approved by the ICF board in 2011 provided for support of up to
£16M for GWP and £12M for WPP over 2012-2015. At the time these represented UK burden shares
of 48% for GWP and 35% for WPP. DFID has negotiated strongly with both institutions in order to
reduce UK burden share. This has successfully reduced levels of UK burden share. During
programme implementation burden share will fall further as the programme proceeds and as donors
on different cycles are able to contribute.
190. Since negotiations began with WPP in 2011, the UK has maintained pressure on WPP to
attract additional financial support. WPP has been successful in securing Australian commitments of
£6.4m 2012-15. This has reduced UK burden share to 29%. Further, negotiations are in progress for
increased commitments from the Australian and Dutch governments. These will increase their
combined contributions by an additional £6.8 m bringing UK burden share for WPP down to 25%
when approved.
191.
For GWP, the proposed UK financial contribution was reduced significantly from £16m to £9m
50
to reflect absorptive capacity and to reduce unacceptable burden share. UK burden share to GWP is
currently 27%. Additionally, in 2011, GWP regional and country offices raised finance locally valued at
£1.8 million (none from DFID country offices) and significant “in kind” contributions estimated to be £2
million per annum - when these additional revenues are factored in the UK burden share for GWP falls
to just under 24%.
192. The intention of DFID to provide financial support to both GWP and WPP has proved
instrumental in encouraging other donors to support these institutions. We will push strongly for both
GWP and WPP to continue to attract additional financial sources.
193. In this instance a higher burden share reflects the UK’s commitment to drive forward promotion
of climate resilience as part of international development. Both GWP and WPP are fully aware that if
the UK considers any further support after 2015, it will be based on the premise that the UK would
expect to bear a significantly smaller burden share.
194. It should be noted that disbursements in the final year of the programme will be linked to
delivery of results set out in the log frame.
Table 12 Donor Contributions to GWP Calendar Years 2012 to 2015
Contributions
(millions £) by donor
Year 1
Year 2
Year 3
Year 4
2012
2013
2014
2015
Total
Austria
0.40
0.40
0.24
0.40
1.44
Denmark (WACDEP)
0.16
0.88
0.88
0.72
2.64
Denmark
0.43
0.43
0.43
0.43
1.73
France
Secondment
Secondment
Secondment
Secondment
0
Germany
0.32
0.32
0.32
0.32
1.28
Netherlands
1.52
1.20
1.20
1.20
5.12
Norway
0.41
0
0
0
0.41
Sweden MoF (rent and
taxes)
0.36
0.38
0.39
0.41
1.54
Sweden SIDA
1.34
1.34
1.34
1.34
5.38
Switzerland
0.86
0.28
0.28
0.28
1.7
Switzerland
(designated)
0.03
0.03
0.03
0.03
0.12
UK – DFID*
0.75
3.15
4.025
1.075
9.0 (27.4%)
Other
0.01
0.01
0.01
0.01
0.04
EC ANBO
0.08
1.2
1.12
-
2.4
EUWI FWG
0.01
-
-
-
0.01
Total
6.69
9.62
10.27
6.22
32.80
*DFID contributions adapted to feed into GWP financial year (1 Jan to 31 Dec)
51
Table 13 Donor Contributions to WPP Calendar Years 2012 to 2015
Contributions
(million £)
Year 1
Year 2
Year 3
Year 4
2012
2013
2014
2015
Total
Donor
Netherlands - DGIS
3.2
3.2
3.2
3.2
12.80
* Denmark DANIDA
1.3
1.3
1.3
1.3
5.2
* Australia AUSAID
1.6
1.6
1.6
1.6
6.40
UK – DFID
1.5
4.5
4.5
1.5
12.0 (29.8%)
Total
7.6
10.6
11.9
10.1
40.20
*Donors have indicated likely contributions. Final decision by these institutions is partially dependent upon confirmation of
DFID contributions and approval by relevant decision-makers.
B. How will it be funded: capital/programme/admin?
This programme will be 100% programme resources from the ICF budget. Achievement of the outputs
is expected to generate significant investment by others in infrastructure and other capital items.
C. How will funds be paid out?
195. DFID will a separate agree a Memorandum of Understanding (MoU)/Agreement with both
GWP and WPP to manage finances, administration and expected results.
196. DFID will disburse funds to GWP and WPP against an agreed payment schedule. The WPP
will use the grant to implement the objectives and activities set out in the WPP Phase II Proposal
Document and in accordance with this Business Case and the results framework. GWP will use the
grant to implement the objectives as set out in their Strategy and in accordance with this Business
Case and the results framework. Payments to both institutions will be made on a six monthly basis on
receipt of a request for funds against agreed strategic work programmes, and subject to annual
reviews of progress against outputs. In addition, both will provide an annual report/statement of
expenditure detailing actual expenditure to date (committed and spent).
197. The Innovation and Partnerships window is still to be designed but underlying all
considerations with regard to delivery (a challenge fund and direct funding to bilateral or multilateral
organisations) will be the need to ensure that delivery agents have strong management and financial
reporting systems which are robust and regularly audited and that systems and vigilance to prevent
fraud or corruption are strong.
D. What is the assessment of financial risk and fraud?
198. Overall DFID considers the financial risks and risks of fraud on the programme to be low.
Implementing partners selected for Windows 1 and 2 each have sound financial management,
procurement systems and internal/external audit mechanisms in place to mitigate against this risk.
For the third window which will involve direct financing to donor institutions and/or procurement of a
management agent for a challenge fund strict emphasis will be placed in selection of the partners
upon their capacity to manage fiduciary risks and implement anti-corruption measures. In addition
CED will keep track of all audit plans and scrutinise all financial and audit reports. An analysis of risk is
summarised below:
199. GWP Analysis and Mitigation: GWP was the recipient of core funds from DFID until 2011
and has satisfactory corporate institutional financial management, control and procurement systems in
52
place. Independent audit reports concluded that there was sound financial management and
accounting for the last financial year. DFID considers the risk of financial mismanagement or
fraud by GWP to be low. GWP’s Financial Rules and Regulations, and Auditing Procedures are
available upon request.
200. WPP Analysis and Mitigation: WPP was the recipient of core funds between 2009 and 2011
and has provided satisfactory financial management reporting including audited accounts which
demonstrate sound financial management and appropriate protection against fraud. Project financial
accounts are administered according to World Bank standard rules and procedures. In all cases in
which consultants are engaged, the policies and procedures set out under Statement 15 of the World
Bank Administrative Manual (AMS 15.00) are followed, which in substance are identical to the
Consultant Guidelines of the bank. All Work Plan Coordinators, Task Team Leaders (TTLs) of
individual activities, and the members of the WPP Coordination Team are trust fund accredited within
the World Bank and perform their role according to trust fund regulations. WPP follows the Trust Fund
Policy and Handbook of the Bank. DFID considers the risk of financial mismanagement or fraud
by WPP to be low.
201. To ensure that the risk remains low, DFID - CED will monitor GWP and WPP performance
including financial management systems appropriately and audit reports ensuring feedback
mechanisms are in place to follow-up on any issue that may be identified.
202. Innovation and Partnerships - Analysis and Mitigation: The detailed operation and
management of this window has still to be determined but is likely to include direct grant financing e.g.
to a bilateral programme partnering on water security with the private sector and potentially including
grant financing through a challenge fund managed by a managing agent procured with due regard to
their financial management competency and systems to guard against fraud. Through adherence to
procurement guidelines and strong emphasis upon management of fiduciary risk and anti-corruption in
selection of agents and/or partners the risk of financial management or fraud in the Innovation and
Partnerships Window will be low.
E. How will expenditure be monitored, reported, and accounted for?
203. All delivery institutions, including organisations funded through the Third Window, will be
required to submit financial expenditure reports to an agreed timetable along with a narrative report on
progress against the work programmes and budgets. These reports will clearly show detailed
expenditure against approved budget lines. The Programme Manager will rigorously reconcile
expenditure reports against (i) relevant data on Aries; (ii) agreed work programmes and budget; and
previous expenditure reports. Any discrepancies will be quickly raised with implementers and where
required revisions to expenditure reports will be made. By this rigorous reconciliation, DFID will
ensure that no illegitimate or unapproved expenditure will be funded by DFID as well as ensuring that
no further tranches will be made if satisfactory performance is not evidenced by the reports.
Exit strategy
204. During the course of the programme DFID will ensure there will be clear, concise and timely
communication to all institutions on exit strategies. These communications will help all institutions to
predict funding gaps for future years and plan accordingly.
Audit
205. The Programme will be subject to regular internal and annual external audit mechanisms
defined by requirements of standard DFID MoUs and Accountable Grants. GWP, WPP and institutions
supported through the third window will be required to submit annual audited statements for
expenditure in the financial year.
53
MANAGEMENT CASE
A. What are the Management Arrangements for implementing the intervention?
DFID Management Arrangements
206. The Water Security Programme comprises three delivery windows: Governance and Enabling
Environment Window, Analytics and Investment Window and Innovation and Partnerships Window
with each window delivered by a different institution.
207. The Programme will be managed by the CED – Adaptation and Water Resources
Management Team. Staff inputs will require 0.2 FTE from the A1 Water Resources Adviser, 0.4FTE
from the A2 Water Resources Adviser and 0.25 FTE from the B1 Programme Manager. The
desirability of a steering committee for the programme will be determined at programme
commencement and could be formed with representation from DFID (CED/other departments to be
confirmed), GWP, WPP, DECC and/or Defra and possible representation from private sector, donors
and civil society to provide strategic guidance and direction for the programme, linking to other water
security agendas and ensuring maximum leverage of investment and read across into influencing
global, regional and national water security and climate change agendas.
208. The DFID Water Security Programme team will meet regularly (at least quarterly) with the
implementing agent for each delivery window. DFID will participate actively in financial partner
meetings for both GWP and WPP to promote the strategic water security objectives set out in this
business case.
209. Progress against the key results outputs will be subject to oversight by DFID on a six monthly
basis which will form a key determinant for release of funding. Financial reports, compliance and
administrative functions will be managed by the DFID programme manager. The DFID programme
management team will coordinate component reporting as necessary to meet DFID annual review
requirements. Annual Reviews will draw on the cadre 10% contribution of advisors across DFID.
210. The DFID programme management team will work closely with related programmes including
the South Asia Water Governance Programme, Support to SADC for Trans boundary Water
Management, the Nile Basin Initiative and Commission for International Waters in Africa and RED’s
emerging water security research programme. This will ensure that synergies between programmes
are maximised particularly on evaluation and lesson learning.
211. Institutions receiving support under the Water Security Programme are aware that they must
consult fully with the DFID programme management team if they wish to apply for additional funding
to work on water security and climate change from other divisions/departments/ country programmes
in DFID. This is to ensure coherence across DFID programming and to prevent the potential risk of
double funding activities.
GWP Management Arrangements
212. GWP Management Arrangements are comprehensive and available upon request. They are
set out in GWP’s Work plan 2012: “Implementing the GWP Strategy”. In addition DFID sits on
GWP’s Financial Partners Group and alternates with other donors as donor representative on the
GWP Steering Committee (most recently 2010/11) ensuring that DFID interests are fully represented.
WPP Management Arrangements
213. WPP Management Arrangements, Systems and Procedures are set out in Annex 1 of the WPP
Annual Report 2010. DFID will participate in annual WPP financial partners meetings.
Window 3 : Innovation and Partnerships - Management Arrangements
214. If approval for Window 3 is granted the following management arrangements will be assessed
and designed in detail.
54
215. Direct funding to one or more bilateral/multilateral programmes: There are a number of
relatively recently established multilateral and bilateral programmes e.g. the IFC led Water
Resources Group and GIZ led Water Futures Partnership working around water security with the
private sector and emerging players. These programmes are currently developing their strategies
and work programmes which will be evaluated to determine their potential to leverage private sector
investment and at what scale and their capacity to deliver results. Management arrangements for
such support would follow standard DFID procedures for providing financial support to bilateral and
multilateral partners. A key factor in determining whether to support such a programme would be
DFID capacity to influence policy and investment dialogue with private sector players. Support
provided to the GIZ Water Futures Partnership or the IFC Water Resources Group would be
channelled through institutions with strong fiduciary controls and management thus minimising
fiduciary risks.
216. A challenge fund: This would be used to promote leverage of investment for improved water
security. This could be implemented directly by DFID or, most likely, through support to a bilateral or
multilateral programme above. Two options are likely - a fund with competitive calls for proposals or
one with selective and solicited proposals from relevant organisations to support specific themes e.g.
private sector investment in water technology and innovation, scale up of successful water security
pilots.
217. The management arrangements for a challenge fund would draw on DFID’s considerable
expertise in designing and delivering such funds with an emphasis upon results and value for money.
A challenge fund would focus upon a small number of outcome focussed windows based on specific
gaps and/or opportunities such as leveraging private sector investment, application of technology in
water security or scaling up water security initiatives. The intention would be to limit DFID’s
administration liabilities whilst maximising scope for DFID strategic influence around policy and
investment dialogue and quality assurance of key inputs/outputs. It is anticipated that a single
management agent would be contracted to administer and manage a challenge fund, including
responsibility for managing sub-grantees. Such an agent would provide full administration e.g.
financial reporting and procurement and technical support e.g. preparing ToRs in accordance with
DFID financial and procurement guidance. Precise details of the management arrangement options
for this fund would be fully defined in the 3rd window design process to be completed by first quarter
2013.
B. What are the risks and how these will be managed?
Table 14 Water Security Programme Risk Analysis
Risk Category
Risk
probability
Low
Impact
Risk Description
Proposed Mitigation Measures
High
Slow progress in implementing
results framework and strengthened
M&E
B. Sufficient
progress in
“institutionalising
WRM” across
World Bank
operations.
Medium
High
C. Coherence
between different
fund windows,
including 3rd
Window on
Innovation &
Low
Medium
WPP should have an exit strategy working towards a point where
WRM is mainstreamed and a WPP
trust fund is no longer required.
Institutional barriers, including
insufficient high level management
support could make mainstreaming
difficult.
Lack of coherence between the
different windows because of
different implementing agencies,
and particularly the need to define
approaches in the Third Window.
Close liaison with GWP and monitoring.
Satisfactory performance against indicators in log
frame will determine future disbursements.
Scope to use 2013 “Mini-MAR” to raise any
concerns. Liaison with other donors also
promoting a results focus. Withholding financial
allocations if insufficient progress is made.
Close liaison with WPP and monitoring of
progress. Satisfactory performance against
indicators in log frame will determine future
disbursements. Continued DFID pressure to
maintain progress including use of 2013 MiniMAR. Liaison with other donors to maintain
pressure. Withholding financial allocations if
insufficient progress is made.
Indicator in log frame to promote joint
programming & activities.
Strong tendering process for managing agent for
the Third Window, and firm management by Water
Advisers in DFID.
A. Reform in GWP
with regard to
increased focus on
results and M&E
55
Partnerships
D. Leverage of
investments for
water security.
Medium
Medium
Insufficient interest from public
and/or private sector for investment
in water security
E. Maladaptive
outcomes
Low
High
Investments lead to maladaptive
outcomes for poor people.
F. Fraud and
corruption
Low
High
Grants provided by either WPP or
GWP to partners are mismanaged.
Maintain focus on developing high level political
interest and buy in for investment. Strong analysis
of potential investments in terms of economic,
social and environmental cost benefits to influence
decision-makers. Design of a challenge fund in
Window 3 to stimulate investment.
Emphasis in M&E and reporting that all
investments fully assess climate risks and
opportunities and design-out maladaptation.
Adherence by WPP to World Bank Procurement
Guidelines and GWP to its Financial Rules and
Regulations and Auditing Procedures will tackle
fiduciary risk.
Table 15 : Risk Matrix Summary
IMPACT
HIGH
PROBABILITY
MEDIUM
LOW
HIGH
MEDIUM
D.
B.
LOW
C
A.
E. F.
C. What conditions apply (for financial aid only)?
Not applicable, as the programme does not involve financial aid to government.
D. How will progress and results be monitored, measured and evaluated?
218. As part of the third window an Monitoring and Evaluation (M&E) component of up to £450,000
will be set aside to ensure that the overall Water Security Programme has the resources and
capacity to ensure effective lesson learning and scope to facilitate replication and scale up as
appropriate. Evaluations will assess overall programme results and performance and also consider
addressing critical themes potentially including tools and approaches to delivering water security
under climate change uncertainty, replication and scale up, leveraging private sector investment,
women and girls’ access to water resources and south-south cooperation.
219. Monitoring of progress and impact will be done with reference to the log frame, the business
case, agreed work programmes and delivery of key milestones. A key aspect of evaluation will be
analysis of the equity and sustainability of outcomes for water security under climate change
including use of tools including gender analysis and poverty and social impact analysis as
appropriate.
220. Annual reviews, involving all Water Security Programme partners, will take stock of overall
progress against planned results, agree forward strategic priorities and work programmes, identify
key lessons and risks, and consider what changes are needed to maximize the likelihood that long
term outcome indicators are achieved. Annual reviews will also focus upon progress by GWP and
WPP in undertaking key institutional reforms and on maximising synergies between the three funding
windows. Given that WPP and GWP work collectively with other institutions to strengthen water
security delivery evaluation may include “contribution analysis” to determine their roles in contributing
towards higher level outcome and impact.
221. DFID will be but one donor contributing to both GWP and WPP. Both institutions have agreed
that multi-donor evaluation will be both more efficient and effective. DFID supports and will actively
participate in multi-donor evaluations. The M&E Framework is being finalised with programme
partners and will be used to assess the impact and outcomes over the life of the program. This is
56
fully harmonised with the results frameworks of institutions receiving funding to improve reporting
efficiency. M&E will form a core component of the 3rd Window on Innovation and Partnerships and
be a critical issue in determining the delivery institution(s) including in tendering for the service
provide for a challenge fund.
Log frame
Quest No of log frame for this intervention: 3835400
57