House of Commons - International Development

Select Committee on International Development Written Evidence

Memorandum submitted by the Department for International Development (DFID)

SCALING-UP WATER AND SANITATION SERVICES AND WATER RESOURCES MANAGEMENT

EXECUTIVE SUMMARY

1. The world is on-track to meet the millennium development goal (MDG) for water, but it is well off-track for sanitation globally, and well off-track for both in sub-Saharan Africa. 1.1 billion and 2.6 billion people still lack access to safe water and basic sanitation respectively. The rate of progress is slowing down with recent increases in development assistance yet to make an impact.

2. Water and sanitation is important to DFID not just because of the hardship its absence imposes on poor people, especially women. It also plays a central role in meeting the other MDG targets: in particular, water related diseases are a leading cause of death in children, and because time spent fetching water is time not spent at school. Delivering more and better water and sanitation services to poor people will allow more girls to go to school, and more women to be able to work.

3. The context of our work on water and sanitation is changing. Climate change increases the importance of tackling water resources management and ensuring the sustainability of supplies. The poorest countries are highly vulnerable to climate variability through floods or droughts. Water security is central to sustainable growth—water or services provided by the environment underpin almost all types of economic activity from farming to manufacturing, energy production and transport. Developing countries, particularly in Africa have not yet invested enough. While the service delivery challenge is still predominately rural, rapid urbanisation is creating growing and unique challenges in providing services to poor urban dwellers.

4. Is the response of governments, donors and the international community adequate? No. Despite the urgent needs and human consequences of failure, the system as a whole—from local to international level—is beset by institutional and market failures.

— The "international architecture" is characterised by poor co-ordination between donors and too many players (often with overlapping responsibilities), and a lack of sector profile and political pressure. Finance is too often linked to projects without addressing serious policy deficiencies and without paying adequate attention to sanitation.

— Among developing country governments the importance of water and sanitation, consistently reported in local poverty assessments, is typically not reflected in government priorities. This is because of the economic and political weakness of those who do not have access—the poor.

— Problems at the national level are often echoed or even amplified within local government.

5. Water and sanitation is a top priority for DFID. This is reflected in the White Paper Eliminating world poverty: making governance work for the poor. This recognises water and sanitation as one of four essential public services required to make progress on the MDGs. We have pledged to double water and sanitation funding to Africa to £95 million a year by 2007-08 and then more than double it again to £200 million a year by 2010-11. We will focus our efforts on countries that are most off-track to meet the water and sanitation targets.

6. This memorandum gives detailed examples of how we work on water and sanitation (section 2):

— through the bilateral programme: which includes support to governments, government agencies, non-executive arms of government and civil society;

— supporting humanitarian responses to emergencies or conflict;

— through funding others including the multilaterals—World Bank, Regional Development Banks, UN and European Community, as well as sector-specific players at international level;

— through funding strategic research to ensure that we learn the lessons from past experience and explore innovative approaches;

— cross-Whitehall working to support other Government departments in the delivery of their international objectives is the final main aspect of DFID's work.

7. DFID takes an integrated approach to the sector, so programmes usually include elements of water supply, sanitation and water resources management. On sanitation specifically, DFID focuses on the provision of access to basic sanitation generally in rural areas and informal settlements. Work relating to water resources management is broad: country and regional level programmes cover specific issues ranging from irrigation and water for food to transboundary river management, growth strategies and, increasingly, climate change adaptation. We have committed to ensuring that gender inequality is addressed more systematically in our programming.

8. Our support for private sector participation in water supply services has been small in financial terms: around 95% of bilateral expenditure on water and sanitation service provision is through governments, not-for profit or humanitarian agencies. Our support to civil society has the primary goal of helping poor communities demand better services. This is part of our broader aim across sectors to help governments make national plans reflect the priorities of the poor.

9. A core objective for DFID is to lever our impact in the water and sanitation sector by influencing other donors to do more. A major part of our policy and country work is strengthening the collective donor response. The memorandum sets out how we support the scaling-up of work in this sector in the World Bank, the Africa Development Bank, the Asian Development Bank, the UN (including UN Water, UNICEF and the WHO/UNICEF Joint Monitoring Programme), the European Commission, and various other international organisations designed to raise the political profile of issues in the sector including the Global Water Partnership, International Programme for Technology and Research in Irrigation and Drainage, Building Partnerships for Development and IUCN Water for Nature Initiative.

10. We also work closely with civil society and provide financial support to a number of international and local NGOs. Civil society has a central role to play in advocacy and capacity building to hold governments in the North and South to account, and to ensure that the voices of poor people are heard and acted upon.

11. Effective cross-Whitehall working is essential to achieving our goals. For example, DFID works closely with the FCO on conflict over water resources, and with DEFRA on follow up to the World Summit on Sustainable Development in Johannesburg (2002).

12. DFID's priorities moving forward are therefore two-fold. First, we will continue to rapidly scale-up our country programme work in this sector, particularly in Africa. The pipeline of projects and programmes suggests we are on track to meet our ambitious White Paper spending targets on water and sanitation. Second, we will seek to galvanise action by the international community to achieve the water and sanitation MDG targets. To make faster progress the international community needs stronger political leadership to overcome overlapping mandates; to be held to account more regularly and publicly; to give the right incentives to developing countries so that they develop water and sanitation action plans; and to support national efforts with the right level of long-term financing.

13. For developing countries, the challenge is to give water and sanitation the priority it deserves. In particular, as Asia and Africa urbanise, there will be a huge need for investment in water supply and sewerage systems in growing towns and cities.

1. WHAT IS THE PROBLEM?

1.1 Analysis of challenges

1.1.1 Progress on water supply and sanitation provision is too slow

1. 1.1 billion and 2.6 billion people still lack access to safe water and basic sanitation respectively. These numbers have not changed since they were last measured in 2004.[2] Although the water MDG target is still on track, the rate of progress is slowing down, so that roughly a one third increase of the effort seen over the past 15 years is now required to meet the target. A doubling in effort is required to reach the MDG sanitation target which remains drastically off-track. At the same time, existing infrastructure must be maintained. The problem is greater in sub-Saharan Africa where both targets are off-track (Figure 1). Currently the challenge is predominantly rural, because more than 84% of the unserved for water supply and 75% for sanitation live in rural areas. However, the number of people living in informal settlements is set to increase as urbanisation continues apace so that urban coverage will become a major challenge for governments. Already 998 million or one-third of the world's total urban population are classed as slum dwellers (72% of the urban population in Africa).[3]

2. Access to safe water and basic sanitation underpins the achievement of nearly all the MDGs. DFID's third White Paper (2006) Eliminating world poverty: making governance work for the poor stresses the importance and inter-linkage of four essential public services: education; health; water and sanitation, and social protection. Water-related diseases such as schistosomiasis, guinea worm, river blindness, and diarrhoea are a leading cause of death in children in developing countries, claiming lives of 5,000 children every day.[4] When safe water is close to home, children can go to school rather than spend time fetching it. This in turn leads to better health and employment prospects. A girl who has been educated is more likely to delay child birth and get her children immunised. This investment in people's skills, health and security boosts economic growth and increases incomes. This is underlined by statistics which show that investments in water and sanitation generate returns of up to US$11 for every US$1 invested.[5]

3. The sanitation MDG target remains one of the most off-track and progress on this is particularly needed. This is significant because the provision of basic sanitation (when combined with hygiene promotion through public health programmes) is linked more strongly than water supply to critical health outcomes, including the survival of children under five.

4. In contrast to water supply, sanitation is less an institutional issue than a domestic one. Technical challenges are usually small, with the major focus being on raising demand and changing behaviours. However, demand for sanitation is often not expressed by poor people because of cultural taboos, its personal nature and a lack of understanding of its central importance in reducing water-related diseases. Institutions do have a role to promote uptake, set standards and regulations—so the lack of an institutional home in government often constrains progress and leads to an unco-ordinated response.

5. Lack of access to water and sanitation affects women and girls disproportionately. They bear most of the responsibility for collecting water for their families, often walking long distances every day over many hours. This has a detrimental effect on their health, education and economic capacity. Women also bear the burden of caring for sick family members, including the millions afflicted daily with water-borne diseases. Lack of access to adequate sanitation also has a disproportionate effect on women and girls, affecting personal security and dignity and dramatically reducing attendance of girls at school.[6] Delivering more and better water and sanitation services to poor people will allow more girls to go to school, and more women to engage in productive work.

6. Financial resources as well as strong institutions with a clear mandate and agreed roles and responsibilities are required to achieve results. Infrastructure is essential for increasing access to safe water and basic sanitation. In general, this is provided by government investment through development programmes, supported by loans from International Finance Institutions and multilaterals. Often demand for services by households is not matched by a willingness to engage in, or to pay for, operation and maintenance of the infrastructure. This is often because the costs are not fully explained and communities are asked to make decisions based on information often biased towards the options that the providers prefer to supply. When a truly demand-led approach is adopted the potential is much greater for operation and maintenance cost recovery.

PUBLIC, PRIVATE AND CIVIL SOCIETY SERVICE PROVIDERS

7. The public sector is responsible for the vast bulk of service delivery in developing countries. Examples of good performing public utilities are found in China, Tunisia, South Africa, Uganda, Brazil and Bangladesh. In Bangladesh, for example, the government awarded the publicly-operated employee's union the contract to run the water system in a district of Dhaka. The co-operative achieved substantial improvements in customer service, billing, fee-collection and cutting water loss. It out-performed private sector rivals and also the existing public utility, which was bureaucratic and suffering from inertia. Too often public utility companies have run large deficits and struggled to provide regular supplies to those with existing access let alone extend services. Networked access (often at low, subsidised cost) overwhelmingly benefits the less poor. In Mombassa, for example, only 25% of the population are supplied water by the public sector. Across sub-Saharan Africa, the figure is about 40% in urban areas.

8. Although experience has been mixed, in places the private sector has also been part of the solution. The private sector includes international companies, regional and national companies, and small water enterprises that operate informally outside of the utility. Limited transfers of responsibility to the private sector (eg service contracts and management contracts) are widespread in Africa (eg Durban in South Africa and Senegal). Domestic private firms, often small and/or informal, deliver water and sanitation services to tens of millions of poor people. The urban poor often rely mainly on the informal private sector. This is true of 95% of residents in informal settlements in Khartoum for instance. Vendors often provide a reasonable service; but costs are high (with prices often 5 to 10 times higher than those paid by richer users, who are connected to water supply networks).[7]

9. Debate about the role of the private sector has focussed on large-scale international private sector participation and as a result has become ideologically polarised. In the event, even after fifteen years of encouragement, international companies account for only 5% of water and sanitation services in developing countries and tend only to be involved in urban networked systems. Failures have been well documented, such as at Cochabamba in Bolivia and lessons must be learned from these. The real issue for donors is not public-versus-private infrastructure provision, but too little infrastructure provision; since a peak in 1997, infrastructure investments have dropped by half, and private investors remain cautious with regard to emerging markets. DFID's policy is clear and pragmatic, supporting what partner governments themselves want and focussing on what works in each specific case.

10. NGOs frequently act as service providers, particularly in humanitarian situations, but civil society also has a primary role in advocacy and capacity building. Although civil society could play a stronger role in holding government to account for its responsibilities and ensuring that the voices of the poorest are heard and acted upon, local NGOs are often unwilling to compromise their service delivery function by engaging in this type of advocacy role. International NGOs by contrast have been effective advocates. Civil society is broader than NGOs and also includes trade unions, business associations, co-operatives, employers' associations, some academic bodies, faith groups, trade associations, recreational groups and think tanks, all with different roles in mobilising communities, research and policy development or service delivery.

1.1.2 Water resources management is largely unaddressed

11. In contrast to the provision of health and education services, water and sanitation services are dependant on the availability and quality of a natural resource. The challenges of sustainably managing water resources have been largely unaddressed. One-third of people live in countries where the lack of sufficient water is already threatening economic growth and food security, as well as the basic livelihoods and survival strategies of poor people. This water scarcity is projected to rise to two-thirds by 2025 as demand for water increases with population growth and development.[8]

12. Recognising these challenges the international community agreed to a target at the World Summit on Sustainable Development (WSSD) in 2002, for all countries to have integrated water resources management plans (IWRM) by 2005. IWRM is designed to promote the co-ordinated development and management of water, land and related resources, and so maximise the resulting economic and social welfare in an equitable manner, without compromising the sustainability of vital ecosystems. The concept is to some extent an ideal, and both progress and implementation have been poor at the national level. A survey of 95 countries published earlier this year[9] by the Global Water Partnership found that only 20% of countries have plans in place and 26% have made little progress at all. Actually implementing these plans will be another challenge altogether. Hence there is a significant problem with national level planning and co-ordinated implementation.

13. Fundamental to IWRM is the decision process around allocation of water between sectors, because this affects the structure of economies, patterns of development and growth (with associated gender and equity issues), as well as the environment. Regulation of resources such as abstraction of water and discharge of effluents is rarely applied even when the legislation exists.

14. Quantity, quality and management of water resources are critical to economic growth and development because water or services provided by the environment underpin almost all types of economic activity from farming to manufacturing, energy production and transport. The reliance of many countries on agricultural based growth, together with the increased demands of industry and rapid urbanisation, are changing patterns of water demand. In Asia rapid growth is, in some cases, being undermined by increasing consumption of natural resources. Against these challenges and the more immediate returns of improved services and industrial development, the importance of environmental sustainability and protecting the services that ecosystems provide is often neglected by governments. The problem will get worse as climate change alters patterns of water availability and quality worldwide.

15. The economic performance of most countries in Africa is closely linked to water security and rainfall. For example, Ethiopia is so sensitive to hydrological variability that even a single drought event within a twelve year period (the historical average is every three to five years) will diminish average economic growth rates across the entire 12-year period by 10%. Climatic and hydrological variability are at the heart of the challenge of achieving basic water security. Floods or droughts often have dramatic social and economic impacts. Uncertainties around climatic catastrophes result in risk-averse behaviour and provide strong disincentives to investment, further undermining growth in all years.[10]

16. Irrigation accounts for 70-90% of water consumption in developing countries, and improving water productivity can be effective for improving food security, nutrition, and rural livelihoods. Conversely, in much of Africa where agriculture is rain-fed, water resources management is fundamental to achieving food security and rural livelihoods. Just 3.7% of arable land in sub-Saharan Africa is irrigated (compared to 26% for India and 44% for China). The Commission for Africa recommended that "Africa must double the area of arable land under irrigation by 2015. Donors should support this, initially focussing on funding a 50% increase by 2010, with an emphasis on small scale irrigation". There are clear implications for the need to manage increasingly scarce resources and improve the efficiency of water use in agriculture.

17. Most industrial countries have invested heavily in both water infrastructure and institutions to deal with climatic variability and achieve water security. Developing countries, particularly in Africa have invested little—Africa has developed only 7% of its hydropower potential, compared with a figure of over 70% for Europe. Without water security and adequate investment sustainable growth cannot be achieved. Infrastructure investment in Asia is somewhat better, but total investment needs are even higher in absolute terms. For further discussion on finance see paragraphs 21-23 below.

18. A further challenge is managing water resources that are shared between countries. About 40% of the world's population lives within the basins of international rivers and over 90% of the world's population lives within the countries that share these basins. As populations and economies grow, and as less contentious national water resources become more fully exploited, an increasing share of the remaining development opportunities will be on international rivers. This can become either a source of tension and possible conflict, or of cooperation and joint regional development. Initiatives to address these issues must come from, and be locally-owned and led, however long-term development and diplomatic support from the international community can assist the process.

19. In the longer term, climate change will have a dramatic impact on water resources, particularly in Africa. Current predications suggest that if temperatures increase towards the higher end of the predicted range, crop yields could fall by up to 20% over the next 50 years.[11] Direct impacts of climate change are likely to include increased incidence of extreme weather events and wider ranges of seasonal river flows. To minimise impact on growth and livelihoods, current infrastructure and future construction design needs to be adapted to cope with these risks, and achieving this flexibility requires innovation and research. In addition, any increase in the incidence of extreme weather events, such as drought, will have a major impact on vulnerable households, which already have trouble coping with existing levels of climatic variability.[12] Changes in water quality are also likely to mean that currently used technologies for water treatment and possibly sanitation technology are no longer effective. This will require significant further investment in research to ensure that new technologies that are affordable are developed and that flexibility can be built into system design.

1.1.3 Significant investment requirements

20. Estimates of the investment required (primarily infrastructure) to achieve the water and sanitation MDGs range widely from $6 billion to $75 billion a year up to 2015, depending on the level of service provided and the degree to which maintenance and infrastructure costs (especially multi-purpose costs for example large hydropower dams, which also provide storage capacity for water supply) are included in the estimate.[13] The most recent estimates from the UN MDG taskforce on water and sanitation put the total global cost for achieving the water and sanitation MDG targets from $51 billion to $102 billion for water supply and from $24 billion to $42 billion for sanitation. On average, this works out at an estimated finance gap of $76 billion for water and $33 billion for sanitation, or for the sector as a whole a total of around $110 billion, or an annual average of around $7 billion.

21. Current financial flows (both public and private) are inadequate to meet the funding gap in the sector. Figure 2 shows global funding in 2000, primarily spent on water and sanitation infrastructure. Around 64% of funding comes from the public sector. For Overseas Development Assistance (ODA), the downward trend observed since the middle of the 1990s has been reversed following a sharp increase in ODA in 2001 (Figure 3).[14] ODA allocations to the sector currently sit at an annual average of $3 billion, half of which is in the form of loans. This amounts to less than half the lowest MDG cost estimate leaving a substantial funding gap.

22. While ODA for water and sanitation in Africa has more than doubled between 1999-2000 and 2003-04 (from $981 million to $2.4 billion), too often donor funds are uncoordinated and spent off-budget. In addition, allocation of ODA is not always guided by need, only 17% of total ODA went to sub-Saharan Africa which has sixteen countries where less than 60% of the population has access to an improved water source.[15]

1.1.4 Monitoring is central to progress

23. Monitoring of progress is vital. The Joint Monitoring Programme (JMP), implemented by UNICEF and WHO, is mandated by the UN General Assembly to report on progress on increasing access to safe water and basic sanitation. DFID has played a leading role supporting the JMP over a number of years and is currently providing a two-year £800,000 grant. DFID is also one of the main donors supporting the Global Water Partnership—the international lead for the UN on coordinating action and monitoring progress for the IWRM MDG Target.

24. DFID also provided support to the initial phase of the UN World Water Assessment Programme. This programme produces the World Water Development Report, which is a bi-annual joint agency review of the state of the world's water resources. It complements the JMP report and GWP surveys by reviewing broader issues of water and environmental status, bringing together a wide range of detailed technical information on the sector.

1.2 Systems analysis

1.1.5 Introduction

25. Despite the urgent needs and human consequences of failure, the system as a whole, from local to international level, is beset by institutional and market failures. Demand for water services among poor people at households and communities is not being met by international, national and local funding and delivery systems. In relation to water resources management, there are worrying trends globally, nationally and locally in the sustainability of resources, exacerbated by climate change and population increase. The reasons why poor people are so badly served arise at all levels of the system.

1.1.6 International architecture is not fit-for-purpose

26. The problems with the international architecture are:

— poor co-ordination between donors with many players at the international level, often with overlapping responsibilities;

— despite being one of the three most off-track MDG targets sanitation, particularly in rural areas, is largely ignored by international agencies, partly because no institution is responsible for increasing access to sanitation;

— too little money coming on stream. More long-term and predictable finance is needed with donors working together better and using national systems in accordance with the Paris Declaration. The role of the international community should be to not only provide the long-term financing to fill the funding gap, but also to tackle the political, institutional and infrastructure blockages to lever domestic and international investment in a regulated environment;

— global reporting on water and sanitation needs to be further strengthened. It still lacks a politically authoritative forum.

1.1.7 National level prioritisation and capacity inadequate

27. Three linked national-level issues go a long way to explaining why poor people in many developing countries are poorly served by water and sanitation services: governments often do not give water and sanitation the priority the sector warrants; service users are economically and politically weak, so that needs are not translated to effective demand and; particular institutional and financial characteristics of the sector.

GOVERNMENTS DO NOT GIVE PRIORITY TO WATER AND SANITATION

28. Poor people, especially women, consistently rank safe and accessible water in their three top priorities. Yet on average, only 1.5% to 3% of national budgets (typically between 0.1% and 0.5% of GDP) is allocated to water and sanitation, and countries rarely prioritise the sector to ensure sufficient funds are available. It is hard to say exactly what the right proportion of national budget allocation is since allocations may reflect large off-budget donor support to the sector, or the structure of the market in terms of public and private roles. However, in low income countries with limited coverage and high levels of poverty, a benchmark for public spending would be around 1% GDP.[16]

29. There has been recent progress, but the evidence shows a systemic failure to translate poor people's demands into action at the policy level. Sanitation, where people's expressed demands are weaker, is given even lower priority than water, despite the evidence that it is important for achieving a range of the MDGs.

30. The lack of priority is reflected in national investment planning, poverty reduction and other national strategies, and budgets. This reflects domestic political realities, but is also because some donors continue to fund water and sanitation projects off-budget, creating incentives for governments to downplay the attention given to these areas.

31. Low as the overall figures of public spending are, in many countries capacity limitations mean that water ministries do not always spend the funds allocated to them. Moreover, what is spent is too often used to upgrade services to a small minority of mostly urban users through new investments, rather than to broaden access. There is a need to link reforms of utilities and capacity building to new investments to ensure that the urban poor benefit from upgraded services.

32. A widespread weakness is insufficient provision for operations and maintenance of existing systems. Although the literature is sparse on sustainable coverage, some estimates suggest that at any given moment, 30%-40% of rural water supply systems in developing countries may be inoperable.[17]

NEEDS ARE NOT TRANSLATED INTO EFFECTIVE DEMAND

33. Underlying this lack of priority is that the real needs of poor people for accessible value-for-money services are not translated into effective political and economic demands on governments and service providers.

34. The role of the state is crucial at several levels. The poorest, especially in rural areas, have particular needs that will not be met by markets alone, unless the state takes an active role in correcting for the widespread market and institutional failures that characterise water and sanitation. Yet many government systems are insufficiently responsive to the needs of poor people, or accountable to them, reflecting widespread political and economic marginalisation.

35. Sanitation, where pressures from citizens for service improvements are especially weak, raises particular issues. People often do not express demand for improvements, creating a classic case in which public resources need to be allocated to raising awareness of the social and economic benefits of improved sanitation, and of changing personal behaviour.

36. Compared with their health and education counterparts, civil society organisations working in water and sanitation tend to be fewer in number, and to give more weight to service provision than to policy advocacy. Lack of access to information and poor transparency in the sector are a further constraint to better advocacy.

INSTITUTIONAL AND FINANCIAL CAPABILITIES NEED ATTENTION

37. There are particular institutional and financial features of water and sanitation at national level which complicate an adequate response to the needs. As discussed above these include fragmented responsibilities within government (particularly for water resources management) and lack of an institutional home for sanitation. Positive examples are found, as in Uganda, where the Ministry of Finance provides the necessary coherence. This example also suggests that where sufficient political priority is accorded to the sector, institutional and financial difficulties become more tractable.

38. By comparison with health and education, the sector is typified by little sector-wide and long-term planning and programming, and by a proliferation of donor-funded and off-budget projects. In consequence, investments in the sector have tended to neglect the institutional reforms critical to improving effectiveness.

39. The present inadequacy of funding for the sector, especially for poor people, for sanitation, for operation and maintenance, and in rural areas, has been highlighted previously. An important question is whether this shortfall is largely a reflection of institutional weaknesses, a broader issue of weak political governance, or simply a financing problem. The answer affects the most appropriate response: in the first case, the problem would be resolved through attention to institutions, in the second, where governments are unresponsive to poor people's needs and there is a lack accountability for delivery, broader work on governance would be useful. Alternatively, initiatives to step up the volume of financial flows to the highest priority areas through budgets and donor programmes could be required. In practice, all three are likely to be necessary.

40. Capital requirements in the sector are characterised by the need for new infrastructure, upgrading old infrastructure, and maintaining existing infrastructure. For this purpose, long-term and predictable financing is essential. There is a chronic problem of recurrent cost financing, since revenues are usually insufficient, leading to reduced effectiveness of investments in the sector.

41. Higher levels of financing will need to come through public channels. But the scale of the funding needed to provide quality services for all means that private investment will also be required. But this requires the nature of the enabling environment for private investment to be understood, and appropriate reforms undertaken. Good regulation and legal systems, transparent contracting procedures and public acceptance are essential to make the sector a more attractive investment opportunity and thus ensure sufficient funding flows, both from the national and international private sector.

42. Since services must be delivered locally at community level and in districts, an important task for national governments is to ensure that mechanisms exist to provide the necessary finance and institutional support to third-tier government and to community-level collective action.

1.1.8 The sub-national and local level

43. The problems found at the national level are often echoed or even amplified within local government. Lack of resources is compounded by weak capacity to deliver services and low responsiveness and accountability to poor people. Water and sanitation in rural areas is delivered and managed at the local level where capacity is particularly low. Donors also are typically unable to address local level issues directly.

44. In addition to more effective local government, particularly in relation to sanitation, there is a need for an enabling environment that makes markets work better for poor people.

2. WHAT IS DFID'S RESPONSE?

2.1 Background

45. DFID has increasingly prioritised water and sanitation over the past two years. This is now reflected in the White Paper Eliminating world poverty: making governance work for the poor, which recognises water and sanitation as one of four essential public services required to make progress on the MDGs and commits to significantly scale-up our work in the sector, including by quadrupling our expenditure in Africa to £200 million a year by 2010-11. We will translate these commitments into action over the next few years. This attention has been matched by growing (though not yet sufficient) attention within the international donor system. New commitments suggest that aid to the sector will rise, albeit slowly. The next UN Human Development Report 2006, to be launched in November, will focus on water and sanitation.

46. This section sets out what DFID is doing in water supply and sanitation service delivery and in water resources management. Section 3 sets out DFID's plans for scaling-up including how we will work to galvanise action at the international level.

2.2 How we work

47. DFID uses a variety of aid instruments to meet its PSA targets and this is reflected in the different ways we work in the water and sanitation sector. There are four main approaches:

— through the bilateral programme, including support to governments, government agencies, non-executive arms of government (Parliaments, judiciary, or other institutions which provide checks and balances such as regulators) and civil society;

— humanitarian response to emergencies or conflict;

— through funding other institutions, including the multilaterals (the World Bank, Regional Development Banks, UN and EC) and sector-specific multilateral organisations at the international level;

— through research and policy development.

For each of these approaches, support can be either financial support and/or technical assistance, including from DFID's own advisory staff.

48. The final important aspect of DFID's work is cross-Whitehall working to support other government departments in the delivery of their international objectives.

2.3 Expenditure

49. There are large fluctuations in annual ODA commitments for water, partly explained by the dominant influence of a small number of donors. Japan alone provided 29% of ODA for water in the period 1990 to 2004 (Figure 4). Other large donors include Germany, USA and France. Given that donors like Japan channel a significant proportion of funding through large infrastructure schemes, funding necessarily fluctuates.[18]

50. Since 2002-03 DFID's total bilateral expenditure in the sector has increased significantly, with increased focus on Africa (Figure 5). In the White Paper (2006) Eliminating world poverty: making governance work for the poor, DFID has committed to double funding to Africa to £95 million a year by 2007-08 and then more than double it again to £200 million a year by 2010-11. In meeting this commitment, we will focus our efforts on countries that are most off-track to meet the water and sanitation MDGs, including Ethiopia, Sudan, DRC and Nigeria. The percentage of total water-related DFID expenditure to multilaterals increased to 40% in 2005-06 from 32% in 2001-02.

2.4 DFID's Bilateral Programme

1.1.9 Aid instruments vary depending on context

51. DFID delivers bilateral aid to its partner countries in a number of ways. Financial aid supports governments to deliver their own poverty reduction strategies. When circumstances are appropriate we provide Poverty Reduction Budget Support (PRBS) to support governments directly. This strengthens their own planning and budgeting systems and reinforces government's responsibility to deliver basic services. The dialogue and monitoring processes accompanying PRBS enable us to raise policy issues at a high level, and to discuss and provide support to tackle systemic failures in government systems. Where circumstances are not appropriate for PRBS, we deliver financial aid through other mechanisms. Wherever possible we co-ordinate our assistance with other donors, in line with the Paris Declaration on aid effectiveness, and integrate our support with government's strategy and expenditure in the sector. We do this through the use of sector programmes, sometimes in the form of sector wide approaches (SWAps), which can include sector budget support. We often provide technical assistance alongside financial aid to support governments to analyse constraints, plan appropriate action and implement reforms.

52. DFID takes an integrated approach to the sector, so our bilateral water and sanitation programmes on service delivery usually include elements of water supply, sanitation and water resources management, generally working with and through others. The boxes provide some specific examples of how DFID is supporting governments on service delivery.

53. On sanitation specifically, DFID's focus is on providing access to basic sanitation generally in rural areas, although support to urban utilities sometimes includes elements of sewerage or waste disposal programmes. This focus, integrated as far as possible with water supply delivery and hygiene promotion, ensures that we target the poorest and achieve a greater impact on health and education. The importance of articulating suppressed demand for sanitation, means that NGOs have a particularly important role as partners in increasing sanitation access in both rural and urban areas.

54. Most notably, DFID has led support for development of the Community Led Total Sanitation approach in Bangladesh. This has been highly successful and has been taken up across other parts of Asia and integrated into numerous other programmes. It is now being scaled up (Box 7) and piloted in Africa.

55. DFID research has also highlighted the role of social marketing in creating the broad demand required to scale-up in sanitation.[19] Social marketing uses elements of commercial marketing to encourage and promote behaviour changes that benefit both society and individuals. Sanitation is also a key component of many of our education programmes, for example in Kenya where access to water and sanitation is a key component of our £50 million school infrastructure support to a sector wide approach in education.

56. Densely populated slum areas present particular challenges for service providers due to lack of tenure and low political prioritisation. Urban services and environmental improvements can successfully reach the poor when investments are linked both to upgraded city- wide infrastructure but also to institutional and financial reforms and community based planning, as the evolution of our Indian urban programmes have shown over the past 15 years.

57. While overall responsibility lies with governments, and the bulk of financing and delivery of services is by the public sector, the private sector, in particular the domestic private sector, must be part of any overall solution. However, financially our support for the private sector in water and sanitation service delivery has been limited in practice: approximately 95% of bilateral expenditure on water and sanitation service provision is through governments, not-for profit or humanitarian agencies.[20] Of our 2003-04 bilateral spend on water and sanitation of £131 million, there has only been some £4 million related to international private sector participation in country programmes; in Ghana, Guyana, Palestine, South Africa, Tanzania and Uganda. In four out of these six cases, our support has been in the form of technical assistance to World Bank funded programmes and in all cases has been used to ensure maximum focus on poverty outcomes. DFID does not push privatisation on our partner governments; we have set our conditionality policy out clearly and are committed to working to ensure that others do not use aid to impose such policy options on countries.

58. Work relating to water resources management is very broad. Since international agreement of the target in 2002, integrated water resources management (IWRM) has been the focus of the international policy debate. Sustainable, equitable water resources management is included in our work with partner governments on water sector governance reform and institutional strengthening (Section 2.4.2). In addition, DFID is the largest donor for the Global Water Partnership (GWP), which is supporting national integrated water resources management planning in over 20 countries. At the country level DFID also has a number of programmes working specifically on water management and environmental sustainability (eg. Box 9).

59. At a country and regional level, programmes generally address specific issues ranging from irrigation and water for food to transboundary river management, growth strategies and, increasingly, climate change adaptation. Sustainable and equitable management of water resources is a basic adaptation strategy and the White Paper (2006) Eliminating world poverty: making governance work for the poor commits that the UK to do more in supporting countries to do this.

60. DFID's Agriculture Strategy Growth and poverty reduction: the role of Agriculture identifies improving poor peoples access to land and water as one of eight key areas for action.

61. Many governments are also seeking to harness the expertise and resources of the private sector to improve agricultural productivity. DFID, along with USAID and the Rockefeller Foundation, supports the African Agricultural Technology Foundation (AATF). An NGO, AATF, helps farmers access productivity-enhancing agricultural technologies held by the private sector by facilitating public-private partnerships.

62. Support to countries and processes on transboundary management of internationally shared water resources complements work at national level on water resources management. The focus is to ensure that the benefits derived from international waters are shared equitably by all, including the poorest. DFID support includes the Nile Basin Initiative (Box 12), and a new regional programme in Southern Africa looking at linkages between climate change, livelihoods and transboundary water management. DFID is also engaged with the EU Water Initiative and is carrying out an ongoing study to develop a policy framework from best practice for the Middle East region. This builds on leading research on international water law, funded by DFID. DFID has also been involved extensively in projects on equitable water sharing between Israel and Palestine.

63. Adaptation to climate change requires a better understanding of the implications at a local and regional level. Large middle income "footprint" countries such as India, China and South Africa have significant impacts on their entire regions, and are therefore critical in climate change adaptation and mitigation. DFID, together with DEFRA, is working with these countries through the Sustainable Development Dialogues.

64. Lack of access to water and sanitation disproportionately affects women and girls, access to water and sanitation strongly supports women and girls in securing their rights and achieving their aspirations. Based on evidence of what works, we support work to find and implement solutions, which will benefit women and girls including as pupils, parents or business people (boxes 15 and 16). We have been funding the Gender and Water Alliance which includes 110 organisations representing governments and civil society. The alliance promotes women's and men's equitable access to and management of water by sharing successful experiences across the network and building capacity to ensure women's as well as men's voices are heard in decision making processes.

65. Sustainability is central to DFID work on water resources management, rural development and climate change adaptation programmes and approaches in the water and sanitation sector. This includes financial sustainability for operation and maintenance, as discussed previously and environmental sustainability. DFID supports a mainstreaming approach in policies and programmes through our Environmental Screening Note process, as well as specific activities on environmental management, such as the PEAK programme in Kenya (Box 17).

66. As growth and urbanisation contribute to increasing river and groundwater pollution, protection and monitoring of water quality is critical both to protect ecosystem sustainability and human health. DFID is helping to address these issues through the Joint Monitoring Programme, and has also supported the development of the World Health Organisation drinking water standards and wastewater guidelines. In Bangladesh, DFID has funded an Arsenic Support Programme Unit within the government, which is co-ordinating a cross-departmental programme to address the naturally occurring arsenic problem in tube wells across the country and to help ensure that poor people have access to safe water.

1.1.10 Strengthening governance and institutional capacity

67. Strengthening governance and institutional capacity in the sector is a major comparative advantage for DFID. DFID works with governments to ensure that national plans reflect the priority given to water and sanitation by poor people and tackle poor water management. They also ensure frameworks are developed to ensure services are delivered to the poor and address capacity and wider governance issues. The dialogue and monitoring frameworks used as part of PRBS programmes provide an opportunity to engage in governance and institutional issues. DFID also invests time and money improving harmonisation and other aspects of aid effectiveness—either at the sector level or as part of an overall donor effort to implement the Paris Declaration and increase the use of sector wide approaches.

68. The boxes provide some specific examples of how DFID is supporting governments in achieving better governance and strengthening institutions in the water and sanitation sector.

1.1.11 Civil society

69. DFID regards a strong civil society as essential to effective states—one aspect of which is capability for providing basic services.

70. Work with civil society complements the main focus of DFID's work with developing country governments, to build their capacity and enable them to deliver sustainable public services, pro-poor economic growth and sustainable development. DFID's strategy on working with civil society is set out in recent papers published by the Civil Society Department.[21] In the water and sanitation sector, there are various ways in which DFID works with civil society, funded either directly through country or regional programmes, or through the civil society challenge funds.

71. DFID has Partnership Programme Agreements (PPAs) with 18 civil society organisations covering all aspects of the sector from basic service delivery and humanitarian response to natural resource management and advocacy or voice and accountability issues. The six year PPA (2005-11) with WaterAid (£1.25 million/year) provides the main line of support to DFID on water and sanitation service delivery, as well as voice and accountability issues in the sector. PPAs with Practical Action and Save the Children also address basic services. On natural resources and environmental management, the most directly relevant PPAs are those with World Wildlife Fund and the International Institute for Environment and Development .

72. A newer approach to capacity building of civil society, reflected in the Kyrgyzstan programme (Box 24), is through mainstreaming a multi-stakeholder approach to decision-making processes in country. This is a more sustainable approach than stand alone capacity building programmes and also forces governments to address issues around decision making, transparency and consultation. It encourages all the main civil society groups to take part, rather than just one civil society representative being allowed a seat at the table which is usually allocated to an international NGO.

73. Civil society organisations often best represent the range of interests of poor or marginalised communities. Building their capacity for advocacy to provide voice, challenge power structures and improve accountability is therefore fundamental. DFID's engagement on this is often with international NGOs but sustainability depends on building effective indigenous civil society, either directly or through INGOs in programmes such as WaterAid's Citizen Action Programme (Box 25).

74. DFID funds around 47 civil society programmes or projects on service delivery in response to humanitarian crises, and a further nine in a non-humanitarian context. These projects currently form the majority of DFID's engagement with civil society on water (for example, Boxes 2 to 5).

2.5 Humanitarian Response

75. A Water Sanitation and Hygiene (WASH) "cluster" is one of nine clusters established by the UN in September 2005, to cover critical, under-served gaps in protection and assistance to those affected by conflict or natural disaster.

76. UNICEF is the lead agency for the WASH cluster and DFID has contributed £1 million to support the work on this, which includes improving capacity within the cluster to ensure greater co-ordination, increasing the number of WASH coordinators in the humanitarian system, developing improved WASH standards, and developing a stockpile of standby materials for humanitarian responses. This approach only started to receive funding from donors in mid-2006, so it's too early to evaluate how well it's working. However, initial signs have been encouraging in recent rapid-onset disasters.

77. In addition, DFID has provided support to improve UNICEF's own emergency response capacities since January 2000, £29.8 million to date. This support includes ensuring that UNICEF has the right level of skilled staff in place to provide the global leadership and skills necessary to take forward its core commitments to children in emergencies, which include ensuring adequate WASH provision.

78. In response to specific humanitarian disasters or crises DFID frequently provides funding to the United Nations, Red Cross Movement and Civil Society for water, sanitation and hygiene. For example, in response to the humanitarian crisis in Lebanon, DFID has committed more than £1.5 million for water, sanitation and hygiene activities to Relief International, Action Against Hunger, MercyCorps, Premie"re Urgence, International Rescue Committee-UK (IRC), UNICEF and the International Committee of the Red Cross (ICRC).

79. DFID funding to emergencies is decided on a comprehensive needs assessment. DFID only funds organisations that adhere to the SPHERE Guidelines, the Humanitarian Charter that lays out universal minimum standards in core areas of humanitarian assistance, including water and sanitation. This ensures quality of assistance to those affected by a disaster and also improves the accountability of the humanitarian system as a whole in a disaster response.

2.6 Multilateral organisations

1.1.12 International Financial Institutions

80. The International Financial Institutions play a lead role in providing development assistance to poor countries. The World Bank and Regional Development Banks (RDBs) spend significantly more than DFID on the water and sanitation sector (Figure 7). Helping to make the MDBs more effective is therefore as—if not more—important than our own bilateral programmes in achieving the water and sanitation MDGs.

81. The World Bank is by far the largest multilateral donor to the sector, providing around 30% of total ODA contribution (14% from IBRD and 16% from IDA). After the World Bank, the EU (ie the EC with member states) is the next largest donor, providing around 8% of total ODA to the sector.

82. Challenge funds are beginning to play an increasingly important role in the sector. The largest existing funds are the EU Water Facility (EUWF) and the African Water Facility (AWF).

WORLD BANK

83. The World Bank's lending portfolio in water supply and sanitation is over US$6 billion. In the past two years, the World Bank approved an average of $1.6 billion per year in new water supply and sanitation lending. The World Bank is by some margin the largest external financier in the sector, as well as the major source for sector knowledge and analysis. However, over half of the Bank's investment is spent in middle income countries (mainly through IBRD) and on urban (85%), rather than rural, water supply and sanitation. The challenge is to use new instruments such as the Sub-National Development Programme and targeted subsidies to extend services, both water supplies and sewerage, to the urban poor.

84. Last year, DFID agreed a record replenishment to IDA 14 of £1.43 billion. In addition, there was a £250 million scaling-up fund, of which £200 million was committed to the Bank's Africa Catalytic Growth Fund, which aims to help Africa make faster progress on meeting the MDGs and complements IDA funding. The bank has forecast that its water and sanitation commitments in Africa through IDA will rise from 40% in IDA 13 to a projected 57% in IDA 14. Spending on water and sanitation in Africa was $1 billion during the period of IDA 13. So far $1.2 billion has been committed to IDA 14 and this will increase as funds become fully committed over the IDA 14 period.

85. DFID also supports a range of multilateral programmes managed or housed by the Bank. These include: the World Bank Water and Sanitation Programme (WSP), which promotes innovative ways to increase delivery of water and sanitation services to the poor; the Groundwater Management Advisory Team (GW-MATE), which is a high-profile initiative providing technical assistance to other bank programmes in country; and the World Bank International Benchmarking Network, which works to establish standards across the sector.

86. Working with the private sector: DFID and the World Bank have led the field in the development of international multidonor Infrastructure Facilities. These aim to improve investment climates by mitigating risks, improving regulatory frameworks and project preparation to provide further options for governments struggling with an underperforming public sector. DFID has contributed around £35 million in 2005-06 to these facilities, of which around £5 million a year is related to work on water and sanitation services,[22] including support to:

— World Bank Water and Sanitation Programme (WSP). Regional Programme looking at leveraging greater financial and technical inputs from the domestic private sector with a particular focus on finding ways to unlock the potential of small and medium service providers;

— Water and Sanitation for the Urban Poor (WSUP) a multi-stakeholder initiative development facility which will develop sustainable water projects in low-income urban and peri-urban communities in developing countries;

— The Community-Led Infrastructure Finance Facility (CLIFF) which promotes partnerships between domestic banks, local government and slum dwellers to increase finance available for slum upgrading. CLIFF is currently being piloted in India and Kenya;

— Global Partnership on Output Based Aid (GPOBA). This pilots new approaches to targeting the poor through performance based subsidies. OBA involves delegating service delivery to a third-party, typically private firms, but also public utilities, NGOs, and community-based organisations under contracts that tie disbursement of the public funding to the services or outputs actually delivered;

— Private Public Infrastructure Advisory Facility (PPIAF). This provides technical assistance to developing countries on strategies and measures to tap the full potential of private involvement in infrastructure including designing and implementing specific policy, regulatory, and institutional reforms;

— Guarantco, a facility that provides partial guarantees for local currency financing of infrastructure projects by private sector infrastructure companies and possibly municipalities in lower-income developing countries.

AFRICAN DEVELOPMENT BANK

87. The African Development Bank's (AfDB) is now increasing activities in the sector and is involved in several key water initiatives: the Rural Water and Sanitation Supply Initiative (RWSSI); African Water Facility (AWF); the New Partnership for Africa's Development (NEPAD) Water and Sanitation Programme; and the Water Partnership Programme. Progress on streamlining and strengthening the bank's work in this area is being assisted by the creation of a new dedicated Water and Sanitation Department.

88. The major Rural Water Supply and Sanitation Initiative (RWSSI) focuses on delivering water and sanitation services to remote rural areas with a target of reaching 32 million rural dwellers by 2015, which would represent an 80% access rate. The total estimated cost is around US$14 billion—a huge investment to be shared between the African Development Bank, other donors, partner governments and beneficiaries. A recent example of African Development Bank involvement in water and regional projects is the African Development Fund's approval in 2005 of a £7.785 million grant to the Southern African Development Community's (SADC) Shared Watercourses Support Project for Buzi, Ruvuma and Save River Basins (in Mozambique, Tanzania and Zimbabwe), with a population of approximately seven million. The project aims to ensure the development of sustainable integrated water resources management and related physical infrastructure development, which contributes to regional integration and poverty reduction.

89. In line with DFID's joint institutional paper for the AfDB, which has been agreed with our constituency partners Germany, the Netherlands and Portugal, we help the bank to reinforce its contribution to infrastructure development and in particular to play a leading role in rural water supply and sanitation and regional infrastructure. To this end, DFID is finalising a flexible package of support for technical assistance to the RWSSI, with the aim of reinforcing the AfDB's contribution to achieving the water and sanitation MDG targets in Africa. DFID also works to promote improved co-ordination between the AfDB and major donors and it supports the AfDB's decentralisation programme.

90. DFID also provides a financial expert to the Africa Water Facility (AWF) for three years. The AWF is a programme of the African Ministers' Council on Water (AMCOW) based primarily on water resources projects and programmes focused on providing support to improve the enabling environment for sustainable national and regional water resources management, to prepare projects and programmes for immediate capital investment, and to provide direct resources for strategic direct investment.

ASIAN DEVELOPMENT BANK

91. The Asian Development Bank's (AsDB) financing in water projects has averaged $790 million a year in the period 1990 to 2005. This ranged from $330 million in 2004 to $1.4 billion in 2005. Under the AsDB Water Financing Programme, which seeks to make water a core investment area, AsDB recently announced a plan to increase its investment in the water sector to over $2 billion annually. Over the long-term, it is expected that the AsDB's Water for All programme will provide access to safe water and improved sanitation for about 200 million people.

92. DFID recently approved a joint institutional strategy paper with its constituency partners in the AsDB (Austria, Germany, Luxembourg and Turkey). Its first theme is to jointly support the Bank to achieve better policy and inclusive development outcomes in infrastructure, especially for water and sanitation. We shall be working with the bank, DFID country programmes in Asia and with our constituency colleagues to achieve this objective.

INTER-AMERICAN DEVELOPMENT BANK

93. The Inter-American Development Bank (IDB) has been giving priority to the water and sewerage sector and has substantially increased its support in the past few years. In 2004, IDB spent $62 million (1% of total loans) on water and sanitation. The number increased in 2005 to $340 million (4.8% of total loans). It is currently developing a comprehensive programme to intensify its impact in the sector. This will include setting targets for increased access for poor people, expanding the list of eligible borrowers and an aggressive campaign to promote investment in the sector. It will also enhance its research into new financial tools to serve the sector. In the meantime, linked initiatives such as a new Infrastructure Fund will support the identification and preparation of viable projects in the sector; in addition a commitment to increase lending to sub national entities will enable increased activity in the sector. Finally, it is expected that a current effort to realign the structure and staffing of the IDB will enable the concentration of presently dispersed efforts into a single unit focused on the sector.

CARIBBEAN DEVELOPMENT BANK

94. The Caribbean Development Bank (CDB) recognises that lack of a sustainable access to water is a problem throughout the Caribbean and this is reflected in its targets. The Bank's Basic Needs Trust Fund (BNTF) helps to address this; in 2005 25% of BNTF went to the water sector (US $57 million). For example, in Belize, the BNTF has maintained its support for the development of rural water systems in 26 communities. The use of Poverty Reduction Action Plans to guide the selection of BNTF interventions has resulted in many more funding interventions in disadvantaged communities in favour of human capital developments, including those in water.

1.1.13 UN System

95. The UN is not a major provider of development funds in the water and sanitation sector. UNICEF is the largest player in terms of funds spent in the sector providing $160 million in 2004, half of which was for emergencies. However, the UN plays an important role as a provider of policy advice and in encouraging governments and donors to be mutually accountable.

96. Currently there are 23 UN agencies dealing with water, which results in fragmentation, duplication and excessive competition for resources. In an effort to support broader reform of the UN system, DFID contributes core funding to UN Water, the UN's system-wide inter-agency mechanism for better co-ordination of these agencies.

97. The UN has recognised its need for reform. It has established a high level panel to identify ways to improve UN performance on development, humanitarian assistance and the environment. DFID believes that the reform process should consider centrally-pooled funding so that there is a single plan in each country. There must also be closer collaboration between UN agencies to avoid unnecessary and wasteful competition between them.

98. Interactions with individual UN agencies include:

UNICEF's

WHO/UNICEF

UNESCO

UNDP

Water Supply and Sanitation Collaborative Council

1.1.14 European Union

99. The EU provides collectively (Commission and member states) around €1.4 billion annually for water and sanitation in developing countries. DFID contributes more through the EC's programmes than through any other multilateral, more than £1 billion in 2003-04, of which around 67% was spent in developing countries. In the current 2000-06 Community Budget, water-related activities were allocated the following sums: Eastern Europe and Central Asia €38 million; Asia €35 million; Latin America €95.6 million; the Mediterranean €315 million.[23]

100. In addition, under the EDF 9, approximately €555 million has been allocated to support water and sanitation in 14 ACP countries. The ACP-EU Water Facility, established in 2004, made a further €500 million available to the sector from EDF9 conditional funds. Ninety-seven projects for a total amount of €412 miilion with Water Facility contribution of €230 million have now been selected, and more will follow from a second call for proposals this year. These 97 projects will bring access to water to about 10 million people, and sanitation to about five million people over the next four years. Programming of EC development funding under EDF10 (2008-13) and the 2007-13 budget is currently being finalised.

101. Priorities for proposals to the Water Facility were informed by the EU Water Initiative (EUWI), which is the major EU initiative in the sector. The EUWI was launched at the 2002 Johannesburg World Summit for Sustainable Development. It is a political rather than a financial initiative, which reinforces the political commitment towards action, targeting improved governance as a first priority. As a mechanism for better co-ordination between donors at international and country levels, it aims to increase the efficiency of existing EU assistance and identify innovative ways of unlocking new sources of funding to deliver impacts on the ground.

102. There has been much criticism of the EUWI and the UK has led calls for reforms to improve its effectiveness. In May 2006, member states agreed that the EUWI needs a more defined focus and to give greater priority to delivery. The UK and Germany have prepared a new strategy for this. This aims to ensure countries where the EUWI can add value are prioritised and promotes alignment of donor support behind credible country plans financed through national budget processes. The UK is also leading a review of the EUWI's governance arrangements to improve monitoring and accountability, and providing technical assistance to support enhanced monitoring. The EUWI's Africa Working Group is a priority for our engagement. Work continues both the international level and within the working groups (Box 27), and together with the ongoing reforms we hope there will be renewed political commitment and better, focused implementation on the ground.

103. The European Investment Bank also provides loans for water-related infrastructure projects in developing countries. In 2005, direct loans for capital investment in the water and sanitation sector amounted to €2.11 billion.

1.1.15 Sector-specific international organisations

104. There are a number of international organisations which have been established to raise the political profile of the sector, provide support to developing countries on specific issues, and to encourage lesson-learning and disseminate best practice. DFID provides significant financial support (around £4 million a year) to many of these and is often one of only a handful of donors providing core funding, which leverages significantly higher funding from other donors tied to specific project activities in countries. Examples include:

— Global Water Partnership on implementation of the 2005 integrated water resources management target (currently £1.8 million per year);

— International Programme for Technology and Research in Irrigation and Drainage (£200,00 per year);

— Building Partnerships for Development for support to tri-sector partnerships (around £400,000 per year);

— The Water Dialogues, a multi-sector review of privatisation experiences (around £400,000 per year).

105. As discussed in Section 1.1.2, infrastructure requirements are huge. The Commission for Africa identified the need for an additional US$10 billion per year of developed country funding for infrastructure over the period 2005 to 2010, and a further US$20 billion from 2010 to 2015, although much of this is for energy and transport sectors. In response, DFID, with the World Bank and other partners has established the Africa Infrastructure Consortium (Box 28). DFID is also continuing to work with EU partners on the complementary EU Africa Infrastructure Partnership, to ensure a coherent scaled-up approach to infrastructure in Africa.

106. As the focus on infrastructure increases, it is important that we remember lessons from the past. The UK Government recognises the World Commission on Dams as a framework providing guiding principles and recommendations for socially and environmentally responsible infrastructure.

2.7 Research Development

107. Research remains important in informing the development of evidence- based policy. An external evaluation in 2004 of DFID's Knowledge and Research Programme highlighted the range of evidence and thinking on water that has been produced over the years. Ensuring dissemination and uptake is central to a new water and sanitation research programme currently being developed. The programme will concentrate on finding ways to achieve equitable access to water and sanitation for the poor. Links between researchers and practitioners will be strengthened to get research outputs used. Developing country research organisations will be central to new work. Water governance will be an important component of the equity of access work. DFID leads a water research for development harmonisation programme (ERA-Net) with other EU member states agencies to make all our efforts more effective and efficient. DFID also funds research through others, for example the Consultative Group for International Agricultural Research (CGIAR) Network.

2.8 Cross-Whitehall Working

108. DFID leads the UK's activities to eliminate global poverty but effective cross-Whitehall working is essential for success. The UK has 10 strategic international priorities over the next five to 10 years which underline how closely domestic and international policies are now linked. Promoting sustainable development and poverty reduction underpinned by human rights, democracy, good governance and protection of the environment is a priority for the UK. The UK Government believes that eliminating world poverty is not only morally right, but that it will also create a safer and more prosperous world for everyone. DFID seeks to provide information across the government and represent the development case in domestic policy issues (eg trade and agriculture), as well as supporting other departments delivering the international aspects of their roles.

109. The Foreign and Commonwealth Office (FCO) takes forward the government's view of security at the foreign policy level, and the security imperative is also evident in the UK's foreign and international development policies and programmes. The government highlights the importance of sustainable development in conflict prevention and peace-keeping, recognising that environmental scarcity, mismanagement and unequal distribution of natural resources (including water), combined with undemocratic forms of governance, can exacerbate instability and lead to armed conflict. Working collaboratively across-Whitehall, from policy formulation to programme delivery, has resulted in a more strategic and cost-effective approach to conflict reduction.[24]

The 2006 White Paper `Active Diplomacy for a Changing World: the UK international priorities' identifies 10 priorities for the UK foreign policy:

terrorism

drug trafficking

conflict

global economy

science and innovation

energy

sustainable development

human rights

— managing migration and combating illegal immigration;

— delivering high-quality support for British nationals abroad, in normal times and in crises;

UK's Overseas Territories

climate security

110. In 2001, following a series of cross-cutting reviews to improve the UK government's approach and effectiveness of conflict prevention activity across government departments, two Conflict Prevention Pools were created (the Africa Pool and the Global Pool). These brought together the knowledge, skills and resources of the FCO, the Ministry of Defence (MoD) and DFID. Activities undertaken under the Pools seek to harness the expertise available across a wide range of sectors, including development, security reform, public administration, good policing and justice reform. The Pools have helped the partner departments to work more closely together and have increased the impact of their work; combining the security and development aspects of conflict prevention, which must be included in conflict prevention strategies if they are to lead to lasting peace and stability.[25]

111. DFID and DEFRA together with the Netherlands Government have funded an Inventory on Policies and Programmes on Environment and Security. This provides a comparative overview of existing governmental and inter-governmental positions and actions dealing with the relationship between environment, security and sustainable development. Focusing on selected OECD member states, including several EU member states, the report describes the environment and security policies and practices of 13 counties as well as seven international/intergovernmental organisations. DFID, FCO and DEFRA are also working on a programme aimed at building tools and systems to underpin DFID and HMG strategic responses to the medium to long-term impacts of energy security, resource scarcity and climate change on development, stability and security; with a focus on regional development impacts.

112. DEFRA is the lead department for the UK on international commitments from the World Summit on Sustainable Development in Johannesburg (2000), including follow up by the Commission on Sustainable Development (CSD) on issues that interface environment and development. CSD 12-13 focused on water, sanitation and human settlements, and catalysed a process of successful cross-Whitehall working.

113. DEFRA also supports the Partners for Water and Sanitation Programme (PAWS). This is a tri-sector initiative encompassing over 35 Government, civil society and private sector organisations in a partnership that aims to assist developing countries and contribute towards achieving the water and sanitation MDGs by providing sustainable solutions. PAWS seeks to match the skills and expertise of UK partners in the sector to areas of identified need through capacity building projects in four African partner countries (South Africa, Ethiopia, Uganda and Nigeria). PAWS complements partner countries own national and municipal programmes and supports local communities to develop the skills and confidence required to manage their own water affairs and replicate these programmes elsewhere. DEFRA funds a full time PAWS Secretariat, with advisory support provided by DFID, the FCO and the UK Environment Agency.

114. DFID is a partner member in the Partners for Environmental Cooperation in Europe Initiative (PECE). Partners for Environmental Co-operation in Europe brings together UK-based organisations from the public sector, business and civil society who have a shared goal to help protect the environment and promote sustainable development in the countries of Eastern Europe, Caucasus and Central Asia. The initiative is led by DEFRA, with partners including the FCO, the UK Environment Agency, many civil society organisations and private sector partners.

3. VISION AND FUTURE PLANS FOR THE SECTOR

3.1 Stimulating international action to accelerate progress

115. DFID is committed to doing more in water and sanitation,[26] but others must do so too; and we must all work together better. It is clear from the above analysis that DFID must work with many organisations to achieve our objective of meeting the MDGs. This includes the multilateral agencies—particularly the World Bank, Africa and Asia Development Banks and the EC—and major bi-laterals including Germany, Japan and France.

116. We are working with others to develop our vision for the international system. We see four main challenges.

— First, there are too many international agencies, working on water and sanitation, with overlaps rather than gaps and no obvious lead agency. Likewise there have been too many calls for action and new initiatives without real follow up. We need stronger international leadership to overcome these overlapping mandates and fragmented effort.

— Second, we need effective global reporting. Existing monitoring reports are already technically strong and professionally-managed, but we need to move beyond existing efforts. Donors must be regularly and publicly held to account at a single high-profile event that reviews progress and shares ideas.

— Third, donors collectively give mixed signals to developing countries about what they will fund. As a responsible global community we must give the right incentives to developing countries so that they develop their own good-quality long-term national plans, and build their capacity to implement them.

— Fourth, donors must support these national efforts with appropriate long-term financing delivered predictably through national budgets and systems, where possible.

117. We will push hard to make these things happen. We hope to be able to build on the momentum generated by the forthcoming UN Human Development Report, which will focus on water and sanitation this year. We will therefore submit a supplementary Memorandum once this is published in November.

3.2 SCALING-UP DFID'S COUNTRY PROGRAMMES

118. DFID will double support for water and sanitation in Africa to £95 million a year by 2007-08—and more than double funding again to £200 million a year by 2010-11. We will work with those countries most off-track to meet the water and sanitation millennium development goal targets. In doing so, we will continue to build on our work on water resources management, governance and institutional strengthening, gender and work with public, private and civil society service providers. We will respond to the changing environment in which we work, for example through better understanding how climate change affects water resources management and increasing our attention to environmental sustainability.

119. We are on target to meet our expenditure targets and continue to rapidly scale-up water and sanitation work in our country and regional programmes. Progress is reported every six months on the DFID website. Current plans in the pipeline include:

Ethiopia

DRC

Sudan

African Development Bank Rural Water Supply and Sanitation Initiative

Cambodia

Pakistan

Kyrgyzstan

Palestine

Yemen

3.3 Deepening our knowledge

120. DFID's Target Strategy Paper Addressing the water crisis, published in March 2001, set out DFID's overall strategy to enable poor people to lead healthier and more productive lives by helping to increase and sustain their access to adequate water resources, safe drinking water supply and appropriate sanitation.

121. Although much has been learnt about how to improve service delivery of water and sanitation, we need to continue to learn lessons from experience and look in particular at rural service provision. To stimulate international action and support the increased scaling-up in country programmes, DFID has initiated a significant exercise to update our thinking on main policy areas in the sector, including: financing (including decentralisation); governance (including effective demand); voice and accountability; and the impact of long-term trends including climate change on water security and sustainability. This policy work will draw on extensive evidence, including from our own research.

October 2006

2 Meeting the MDG drinking water and sanitation target: the urban and rural challenge of the decade. World Health Organisation and UNICEF 2006. Back

3 Two of the five conditions that define a slum household are access to improved water (sufficient and at an affordable price), and access to sanitation (a private toilet or shared toilet). Back

4 The United Nations World Water Development Report 2. World Water Council, 2006. Back

5 The case for water and sanitation. Water and Sanitation Programme, 2004. Back

6 The education drain. WaterAid, March 2004. Back

7 Private sector participation. WELL, Resource Centre Network for Water, Sanitation and Environmental Health, briefing note, draft 2006. Back

8 Water: A shared responsibility. The UN World Water Development Report 2. UN World Water Assessment Programme. 2006. Back

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