Water without frontiers: improved management of transboundary water resources

Over 40 per cent of the world’s population share water basins and aquifers (a rock-based source of groundwater) with neighbouring states. Can the management of transboundary water resources foster poverty reduction, sustainable environmental protection and political stability? Has the international community a role to play as a third party mediator between wary states? How could development assistance to water management become more effective?

A report from the Overseas Development Institute (ODI) assesses the current state of financing of transboundary water management. Describing the potential to learn from emerging innovatory approaches to transboundary water co-ordination, it calls for much greater engagement by donors and multilateral institutions in building trust, enhancing the capacity of newly-formed regional institutions and facilitating the entry of private sector investment and expertise.

To date, financing for transboundary management has been limited and dispersed. Of the estimated US $80 billion spent annually on water and sanitation in developing countries, a mere US $350 million is allocated to transboundary water resources. The Asian Development Bank’s prioritisation of joint requests from riparians (countries in shared river basins) is a rare exception to a funding regime which continues to focus on funding within national borders. Private sector engagement is minimal.

ODI describes the processes involved in developing coherent transboundary institutional arrangements. Inter-riparian engagement cannot proceed without political goodwill and staged confidence-building measures leading to joint data collection, planning, investment and monitoring. The costs of establishing effective transboundary institutions are relatively modest – US $2 million in the case of the Mekong River.

Four options – and the constraints which impede them – are identified for financing transboundary water resource management:

• Trust funds or endowments could build confidence, reduce donor control and smooth out funding fluctuations that arise when organisations are dependent on annually allocated resources.
• Revolving funds could promote investments with such transboundary externalities as water treatment, conservation and pollution-avoidance techniques: however, potential sources of funding from pollution costs, licensing and water charges are currently blocked by lack of international taxation mechanisms.
• Provision of risk financing for large private sector investments could provide political risk insurance against restrictions on repatriating profits, nationalisation, uncertainty in trans-boundary contracts involving sale of hydropower across frontiers and civil disorder.
• Inter-riparian financing from public funds: Europe has successful examples of how joint management teams can precisely define costs, benefits, taxation mechanisms and responsibilities.

ODI argues that if institutions are to mature from intergovernmental committees to full river basin management organisations it will be necessary to:

• leverage new sources of finance to expand the range of regional investments
• build and strengthen enabling environments in which financial co-operation over transboundary management becomes a possibility – the Nile Basin Initiative fostered by the World Bank – can serve as a model
• realise that creating the right regulatory and incentive framework invariably requires time and patience
• develop much better co-ordination between major financial and institutional stakeholders, UN agencies and initiatives such as the Global Water Partnership and the Global Environment Facility
• generate political will to develop an International Shared Waters Facility to set out standards and generic tools for data management, dispute resolution, financing and taxation.

Source(s):
‘Financing transboundary water management’, Water Policy Brief No 2, Water Policy Programme, Overseas Development Institute, by Alan Nicol, Frank van Steenbergen and Dirk Willem te Velde, July 2002 Full document.

Funded by: Swedish Ministry of Foreign Affairs

id21 Research Highlight: 15 August 2003

Further Information:
Water Policy Programme
Overseas Development Institute
111 Westminster Bridge Road
London SE1 7JD
UK

Tel: +44 (0)20 7922 0300
Fax: +44 (0)20 7922 0399
Contact the contributor: a.nicol@odi.org.uk

Contact the contributor: fvansteenbergen@compuserve.com

Contact the contributor: d.tevelde@odi.org.uk

Water Policy Programme, ODI, UK

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