House of Commons - International Development

Select Committee on International Development Written Evidence

Memorandum submitted by WaterAid

EXECUTIVE SUMMARY

THE CRISIS

The global crisis in water and sanitation is not driven by water scarcity. It is fundamentally a crisis driven by inequality and poverty. It is a crisis that is killing as many as 6,000 children a day—this is the equivalent of 20 jumbo jets filled with children lost everyday to an entirely preventable public health crisis. The WHO estimates that as much as 90% of the fatalities attributable to water related diseases are children. But as well as a crisis that impacts on the most vulnerable members of communities in the developing world, it is a crisis where the burden falls most heavily on women. It is girl children that are denied an education because they are tasked with hours of water fetching labour. It is girl children that frequently drop out of school when they reach menstrual age because of inadequate sanitation facilities. When they grow up, women's livelihoods are constrained by water fetching labour—in some instances for several hours a day. And it is women that look after the children that are ill and dying from diarrhoeal disease. 1.2 billion of our fellow humans face and struggle with this crisis every day.

PRIORITISED BY THE POOR BUT NEGLECTED BY GOVERNMENTS AND DONORS

Given the immediacy and scale of impact of the water and sanitation crisis, it is no surprise that the poor almost always put access to water and sanitation services within the top three, if not their first, priority. It should be a cause for alarm that the donor community and recipient governments alike do not respond with anything like the same concern. The data from UN agencies and from WaterAid's own analysis in 16 aid recipient countries shows that spending on the sector is stagnant in terms of the absolute volume of expenditure, but also that it is actually falling in terms of the relative increases in aid spending and particularly in relation to the finance available spending on health and education.

There are many plausible explanations for the marginalisation of the sector by donors and recipient governments. One of these is that the sector is more complex than health and education and is more vulnerable to failure as a result of interruptions in finance and policy implementation. It is also possible that because the impact of a lack of access to water and adequate sanitation falls mostly on women and that because the influence of poorer women on policy-making processes is so marginal that their priorities rarely are reflected in policy priorities. Government responsiveness is further hampered by the chaotic nature of the sector—multiple actors, poor co-ordination and weak government capacity. But whatever the drivers for the sector's continuing marginalisation, the key to reversing this is generating the necessary political will behind the sector.

The UK's House of Commons International Development Select Committee Inquiry on water and sanitation is an opportune moment to take stock of the UK Government's policy approach to the sector and to assess and promote the policy paths and leadership necessary to turn around the parlous condition of this vital development area.

The bulk of WaterAid's submission is addressed at the most pressing issues in the sector as it affects, principally Low-Income Countries. This Executive Summary draws out only a few of the key recommendations contained in the following sections. Most of these highlighted in this section are those recommendations aimed at the IDSC's principal interlocutor—DFID. But this submission recognises that this is a multi-dimensional sector and that all stakeholders at international, national and local levels have a role to play in turning around an overshadowed sector that is of central importance to the world's poor.

HOW DFID COULD MAKE A DIFFERENCE

DFID is due to set out its new policy framework for the sector in its new Target Strategy Paper. This is a welcome opportunity to rethink the interface between the aid system and the water and sanitation sector.

In a sector that is characterised by a chaotic range of international agencies (the UN has 23 agencies claiming a mandate on water and sanitation but there is no agency within the international system with single responsibility for producing annual reports and holding governments to account) there is an urgent need for coherence, focus, authority and accountability. WaterAid believes that the international system urgently needs a single cohering framework that confers responsibilities and duties on the range of donors. We recommend that:

3 Ones

WaterAid believes that the incentive for aid recipient countries to produce and operationalise a 3 Ones framework would be the promise of donors to fulfil the principle behind their commitment made at the 2002 Kananaskis G8 Summit that:

No country plan should fail to achieve the MDGs through lack of finance

THE PRINCIPLES FOR TURNING AROUND THE SECTOR

The policy actions required for turning around the sector are multiple and need the engagement of a multiplicity of stakeholders. There are, however, a number of clear guiding principles that underpin durable reform. These are:

Accountability

Building an accountable and responsive public service is helped where the aid system, recipient governments and local level delivery agencies aim to include the poor, and particularly women, in the policy design, implementation and monitoring process. WaterAid's experience in Country Programmes has demonstrated that citizen-led accountability mechanisms can help set up services that are equitable and non-discriminatory in the targeting of service delivery systems. Through processes of community-led mapping and inclusive decision-making, communities can own planning systems and are better able to hold service-providers to account for poor performance.

Transparency

If the aid agenda is also an empowerment agenda, it follows that information about the sector—its duty-holders, the terms, volume and purposes of public finance for the sector—needs to be made available in forms that are accessible to intended beneficiaries. Donors can help in this effort by encouraging the inclusion of domestic stakeholders in Sector Review, Consultative Group and Coordination meetings.

Water and Sanitation as an essential public service

DFID's 2006 White Paper Making Governance Work for the Poor marks an important first official recognition in the UK that the water and sanitation sector amounts to an essential public service alongside health and education. This recognition can be built on when senior members of the UK Government attempt to build a UK and international narrative around international development priorities by including water and sanitation alongside health and education. DFID itself can clearly establish the linkages between the three sectors by reporting and establishing cross-references to water and sanitation in the programming and progress reports in health and education at country and international levels.

These essential services are the responsibility of governments to coordinate, provide, finance, and regulate because by their nature, access or lack of access to them impact not just on individuals and individual households, but on society, economic development and poverty reduction as a whole.

DFID's engagement

The Department faces the challenge of a rising budget for the sector, but managed by a reduction in the numbers of officials managing the funds. In the recent past, there have been instances where recipient governments' sector plans have benefited from discrete DFID interventions. WaterAid believes that the benefits of the Department's nuanced approach is not replicable, at least in the short term, by the multilateral agencies that will, increasingly, be responsible for disbursing DFID's growing aid budgets. WaterAid has come across some recent concrete examples where DFID's withdrawal from the sector has produced negative results. The Department needs to seriously address the mismatch between its senior level political commitment to the sector and some of its country offices withdrawing financial and personnel support.

Subsidiarity

DFID needs to develop a procurement policy around its Technical Assistance support for the sector and an engagement with the policy-making process that helps build national "policy communities" capable of diagnosing systemic bottlenecks and identifying and implementing the remedial policies.

In summary, the guiding principle behind DFID's and the donor community's engagement with the sector can be distilled as a commitment to the promise that:

All Country Plans, will be fully funded, owned and delivered locally

SUMMARY OF OTHER KEY RECOMMENDATIONS FOR DFID

Make meeting the water and sanitation MDGs a departmental priority.

Reverse the withdrawal of personnel with expertise in water and sanitation from country programmes.

— Strengthen the linkages between health, education and water and sanitation.

Target resources aimed at capacity building at the local level,

Increase scrutiny of multilateral aid

Rebalance policy and financial support to strengthen publicly run utilities to deliver pro-poor services.

Invest resources in raising the political profile of sanitation at the international level

Use resources innovatively to strengthen in-country systems:

GENDER ASPECTS OF WATER AND SANITATION

1. BACKGROUND

1.1 Women are most affected by lack of sanitation and safe water. Women are the ones who bear the burden of carrying water for up to five hours a day. They also bear the brunt of poor health and the security risks that arise when they are forced to go out at night to defecate in private. One of DFID's key priorities is to improve gender equality (Millennium Development Goal 3), and the Department has focused its efforts in particular on target 4—the elimination of gender disparity in primary and secondary education. DFID has identified investments in basic education for girls and women as having positive impacts on the wider society by boosting family incomes, reducing fertility rates and contributing to better health and nutrition. However, DFID has not given sufficient consideration to the impact of water fetching labour and the precedence it is given in household priorities over school attendance and that this burden falls overwhelmingly on girl children. This paper argues that improving gender equality, improving women's livelihoods, the education and life chances of girl children and the health of families is critically dependent on making progress in water supply and sanitation. Any departmental strategy to address gender imbalance in developing countries must properly consider and address these linkages.

2. HOW THE LACK OF WATER IMPACTS ON HEALTH, EDUCATION AND LIVELIHOODS

2.1 There needs to be increased focus on how women's economic and domestic activities are affected by infrastructure or its absence. In most societies women have primary responsibility for household water supply and sanitation. They require water for drinking, food production and preparation, personal and family hygiene, washing, cleaning and caring for the sick. They also require access to water for productive uses—evidence shows that women are responsible for half of the world's food production, and in most developing countries women produce 60-80% of the food[63].

2.2 Securing enough water to meet family needs has a direct bearing on women's health and their access to education and employment. A recent report[64] presents evidence that hauling heavy loads over long distances can lead to physical damage to the back and neck. It also documents the risk of physical assault and rape and the dangers of navigating unsafe waterholes.

2.3 Fetching water takes time—an estimated 700 hours per person per year in Ghana[65] which keeps girls out of school and limits the economic productivity of women. Globally, more than one in five girls of primary school age are not in school. This is in part attributable to a lack of clean water available at community level. Girls, like their mothers, must often walk miles to fetch the daily water supply.

2.4 Girls who have reached menstrual age may also be deterred from school by inadequate sanitation in public places. Simple measures, such as providing schools with water and latrines, and promoting hygiene education in the classroom, can enable girls to get an education, especially after they reach puberty, and reduce health-related risks for all. WaterAid Bangladesh found that a school sanitation project with separate facilities for boys and girls helped boost girls' school attendance 11% per year, on average, from 1992 to 1999.

2.5 Time savings also have a considerable impact on women's livelihoods. WaterAid has documented the case of Zeini Batti, from Ethiopia, widow and family breadwinner, describing the economic benefits of having water close to home: "In the past, I used to devote five hours a day to fetch water. Since 1995 (when the water point was built), life has somehow become easy. I now have more time, and can do other activities like basket-weaving and making utensils. I now save a minimum of Birr 21-22 (£2) each year."[66]

2.6 The World Health Organisation estimates that 40 billion working hours are spent carrying water each year in Africa[67]. If the average one hour per day saved by each household member can be used to generate some income, the saved time is worth a staggering US$ 63 billion[68].

2.7 WaterAid believes that the inadequate prioritisation of the water and sanitation sector by many low-income country governments is a function of the lack of voice and power of women in political society. While the poor, and women in particular, consistently put access to water and adequate sanitation as one of their top three—and frequently first—development priorities, the sector still lags behind other sectors prioritised by both donors and recipients.

2.8 In Nigeria, although women account for about 50% of the population, they are extremely marginalised at the formal political level. For example, after the 1999 General elections, men held 347 seats in the House of Representatives, while women held only 13. In the senate, there were 106 male Senators against three female Senators. Among the executive, there were only six female Ministers against 46 men. There was no single female governor out of 36. This situation is also reflected at the local government level. Even in communities where water committees are set up with participation, women's impact on decision making is limited. Family responsibilities, including the burden of water fetching labour, and other cultural issues constrain most of them from active participation.

3. PARTICIPATION OF WOMEN IN THE PROGRAMME CYCLE

3.1 "The bore-hole in my village is so heavy that women and children find it difficult to use".[69] At the formal employment level, water engineers and other related professions are dominated by men. In community water activities, it is men that are trained to site and manage community hand pumps, wells and other water sources. In irrigation, farming men still control the resources because they dominate access to land entitlements and its resources. Although women have the main responsibility for water provision, they are often overlooked in the planning and implementation of infrastructure development and water projects.

3.2 Research carried out by WaterAid Nigeria[70] found that because women are involved in the informal sector and domestic activities they do not have time to participate in decision making processes. Decision making at both household and national level is dominated by men. Very few decisions at the household can be taken by women, even when it concerns participating in their own groups or household welfare or the use of their income. According to the Federal Ministry for Health in Nigeria, men make 57% of all decisions on health-related issues at the household level even though women are, by and large, held responsible for providing care and support for sick family members.

3.3 National development plans, including Poverty Reduction Strategy Papers (PRSPs) and sectoral plans, often fail to reflect the priorities or the needs of women. It is often assumed that proposed development interventions will automatically benefit women and the poor and that community leaders reflect their needs. However, the marginalisation of the sector in many national development plans set against the evidence of prioritisation by the poor suggests that there is a need for deliberate policy actions to provide opportunities to better articulate the interests of the poor in the policy-making process. In South Africa, for instance, gender equality is enshrined in the Constitution, and the water and sanitation policy sets quotas for participation of women in water management issues. However, a study funded by the Water Research Commission[71] revealed that the 30% quota for women's participation in water policy-making did not guarantee meaningful participation because women were reluctant to voice their opinions in mixed groups due to cultural constraints and lack of information on the range of policy options.

3.4 Women's presence is critical to the sustainability of water and sanitation initiatives, particularly in technical and managerial roles, to ensure they contribute to decision-making processes. Ensuring women gain access to information about project plans and resource allocations is also essential. DFID should set aside funds for the training and capacity building for women to engage in the water sector.

3.5 Empowerment of women does not happen over night. However WaterAid and partners have recognised the importance of pushing for change, rather than accepting the status quo ante. One way of doing this is to encourage communities to share decision-making roles, including women as chair, secretary and/or treasurer of committees. Best practice in community development, particularly using Participatory Rapid Appraisal techniques, suggest that building in a gender dimension at the outset of the analysis and decision-making processes can bring more sustainable outcomes.

3.6 Finally, DFID has a role to play in encouraging national governments and sector stakeholders to monitor and evaluate the provision of water and sanitation to the most vulnerable groups, and to ensure that women and men benefit equally from projects. This requires the strengthening of data collection in order that information on access rates and level of use among men and women is produced in a disaggregated and accessible way.

KEY RECOMMENDATIONS TO DFID

— Ensure that the next departmental strategy on gender equality and reporting on the Department's contribution to achieving gender equity in primary school enrolments addresses access to water supply and sanitation.

— Through DFID's participation in Sector Review and in any Poverty Reduction Strategy meetings promote the participation of the genuine representatives of poor urban and rural women's groups to strengthen the voice of women in the policy design process.

— DFID's direct funding and procurement of local technical assistance should have seek to redress the under-representation in the water and sanitation profession. This might include DFID's allocable aid supporting programmes for training women in technical and managerial careers in the water and sanitation sector and enable women and girls to acquire access to information about programme planning and resource allocation.

— Support recipient governments' efforts to ensure that the overall national sanitation framework is gender sensitive and cross-cuts other departments including Education in order to promote hygiene education in school curricula and separate sanitation facilities for boys and girls.

WATER AND SANITATION SERVICE DELIVERY

1. BACKGROUND

1.1 The delivery of water and sanitation services is dependent on the efficient and effective performance of highly vulnerable and complex systems of administration, finance and hardware and energy infrastructures. The sector is all too often susceptible to systemic and chronic failure if any one of these interdependent parts underperforms or fails. In essence, the critical factor for determining whether water and sanitation services successfully reaches or works for the poor is governance.

1.2 This section highlights some of the key governance challenges faced by the sector in low-income countries and fragile states in particular and it suggests areas where DFID and donor policy can act to strengthen governance in the sector.

2. GOVERNANCE CHALLENGES TO WATER AND SANITATION SERVICE DELIVERY

2.1 Researchers, sector practitioners and NGOs working in the water and sanitation in low-income countries point to a set of common deficits. These constraints include:

— a lack of trained personnel, and remuneration levels that are inadequate for the recruitment and retention of qualified staff, particularly in sub-Saharan Africa;

— the lack of sufficient and predictable and stable finances for water and sanitation infrastructure projects from national allocations and un-coordinated donor-assisted infrastructure projects that frequently override local capacity;

— the lack of trained personnel and managerial leadership for planning and for the integration of financial, hardware and administrative systems both within and between local and central government offices;

— the inadequacy of routine monitoring systems and capacity and the poor use of available administrative data for planning;

— and, it is no surprise that these daunting supply-side deficits are matched by impoverished communities lacking the energy and drive to demand change.

2.2 These findings are consistent with the evidence identified by DFID as critical to turning round the sector.

Action Plan 2004

Meeting the Water and Sanitation Millennium Development Goal 2005,

"diagnosis of water-poverty-economy linkages"

"re-examine the political-economy dimensions of water sector reform to identify appropriate drivers of change and support reform processes accordingly"

2.3 While DFID and other donors are aware of the deficits at the level of local government agencies it is hard to point to any remedial policy responses.

3. TURNING AROUND WATER AND SANITATION SERVICE DELIVERY AT THE LOCAL LEVEL

3.1 WaterAid's own experience of working with local authorities in building their capacity to deliver water and sanitation services suggests some best practices that form an integrated set of policy actions. These must include:

— an initial mapping of current coverage that identifies shortfalls in service coverage in terms of the geographic areas and population groups excluded;

— the initial survey should also include some assessment of current capacity to deliver services by available contractors and personnel, and the costs and feasibility of differing technological options;

— the facilitation of local government authorities to understand the relevance and potential value of national or international poverty objectives, such as PRSPs or Millennium Development Goals (MDGs), in terms of local level policy and planning requirements;

— the facilitation of local sector practitioners, government personnel and local communities in a water dialogue that identifies local level goals and areas for priority investments;

— building skills for supervising contractors and investing in adequate and appropriate monitoring of progress;

— facilitating the shared lesson-learning and problem-solving of local government water authorities across districts, regions or states;

— the adequate remuneration of key personnel and staff to build the capacity needed to coordinate the initial planning phases and to build sector-wide plans at the local level.

4. BUILDING UP DEMAND FOR PRO-POOR REFORM

4.1 While water and sanitation services frequently come first in the priorities of the poor, governments (and donors) rarely respond with a complementary prioritisation. There is a need for a concerted focus of civil society and consumer group demands for access to this essential service to have impact on the policies and resource allocation by central government.[72] The marginalisation of the poor can be reversed by the building of alliances between policy communities, representatives of the poor and consumer groups. This process can be assisted by:

— Donors funding of civil society organisations and national platforms organised around increasing access to water and sanitation.

— Donors funding and building of sectoral policy communities, by procuring technical assistance from local think-tanks and academic institutions, to develop sets of in-country analysis necessary for successful sector reform proposals.

— Facilitate and convene multi-stakeholder dialogues as the main sector policy-making platform to plan and review sector reforms, performance and improvements in the quality of service delivery.

4.2 The broad aim of these strategic funding interventions is to create or strengthen existing systems of accountability. The idea would be to develop multi-stakeholder fora that would oversee and help drive the reform process.

5. HOW DONORS SHOULD BE RESPONDING

5.1 Donor conditionalities and programmes frequently push a policy of decentralisation. But decentralisation reforms have too often over-reached the capacity of local government agencies to absorb and implement programmes. In effect, decentralisation reforms have often contributed to, or left, "phantom local structures" particularly in rural and peri-urban areas in Africa. Too often they are coping with few personnel and no plans, resources, leadership or hardware for service delivery.

5.2 As DFID's own policy analysis has recognised the point at which the water and sanitation sector is weakest is at local government level. There are instances where the reduction of DFID's Country Programme presence in the sector has been the reverse of what is required[73]. Donors could target resources at the local level either through a Water Governance Fund or through hypothecating a percentage share of all project and programme finance to supporting local level capacity development.

5.3 But there are also a number of examples, in Bangladesh for instance, of best practice or principles where pro-poor reform of local level service delivery has has some success. Donor policy in the sector needs to be recast along these lines.

5.4 These instances of pro-poor reforms include some of the following:

— Services that are accountable, transparent and responsive;

— The convening of multi-stakeholder fora at national and local levels to plan, implement and monitor sector developments;

— Ensuring the predictability of aid flows, committed by DFID in the Paris Declaration on Aid Effectiveness, but also some accountability of the donors to the poor where decisions to invest or withdraw from the sector are made accountable to them through public announcements of decisions to local media, parliamentarians and civil society groups with some transparency around the key triggers for engagement and withdrawal.

6. CENTRAL GOVERNMENT SUPPORT, POLITICAL WILL AND PLANS

6.1 While the greatest need for sustained increases in resources and for a strengthened policy focus is at the local level, the experience of successful pro-poor reforms, for instance in Uganda and Bangladesh, suggests that a critical determinant to substantially improved service delivery is the political will and drive behind the sector on the part of national leaderships.

6.2 Too few aid recipient countries have a credible and costed national development plan in water that is supervised, supported and driven with the necessary political support from the centre. One model for establishing a sector-wide framework with the necessary "follow through" with implementation is the Three Ones plan associated with the campaign against the spread of HIV-AIDS.

6.3 In essence, what is required is a commitment from donors to make up for any financing gaps in the sector for countries that have developed three component parts to their country plans. These parts, or the 3 Ones include:

One Country Plan

One Coordinating Body

One Monitoring and Evaluation system

6.4 The broad point to make here is that the incentive for delivery on the part of the recipients is for donors to establish the principle—consistent with their undertakings in the G8 Kananaskis Summit 2002—that "no country, committed to good governance, poverty reduction and ... reform will fail to achieve the MDGs through lack of finance".

KEY RECOMMENDATIONS

Local Authorities should:

— facilitate the mapping of the geographic areas and population groups excluded from service provision;

— survey current capacity to deliver services by available contractors and personnel, and the costs and feasibility of differing technological options;

— adjust local goals and target-setting with those implicit in national PRSPs or MDGs and build plans for service delivery with intended beneficiaries;

— build "policy communities" of local officials and politicians, academics, the equivalent of consumer groups and sector practitioners responsible for monitoring implementation and diagnosing sector delivery bottlenecks;

— facilitate the shared lesson-learning and problem-solving of local government water authorities across districts, regions or states.

Central Governments should:

3 Ones

— ensure the adequate remuneration of key personnel and staff at national and local level to build the capacity needed to coordinate the initial planning phases and to build sector-wide plans at the local level;

— establish a national multi-stakeholder forum that includes consumer groups, trades unions, sector practitioners, donors and officials.

Donors should:

— improve coordination and harmonisation around domestically designed and owned national sector development plans;

— support and align their support behind a national framework or Action Plan;

Monterrey Consensus

— target resources aimed at capacity building at the local level, either through setting a percentage of programme funding to be set aside for longer term strengthening of local level capacity, or through the setting up of Water Governance Funds based in recipient countries tasked with diagnosing systemic bottlenecks at local level and targeting resources until systems are sufficiently robust to be fully integrated into functioning national financing, planning, energy and administrative systems;

— cultivate in-country policy communities and alliances by developing a procurement policy for Technical Assistance where institutions within recipient countries are the primary beneficiaries and by donors facilitating or bringing a serious commitment to multi-stakeholder dialogues and planning fora within the policy design, monitoring and implementation process;

— support the setting up and alignment of donor aid behind one Country Plan, one Coordinating Body and one Monitoring and Evaluation system.

FINANCING AND AID INSTRUMENTS FOR WATER AND SANITATION

1. BACKGROUND

1.1 The UN Millennium Development Goal on environmental sustainability includes two targets for the water supply and sanitation sector, to halve by 2015 the proportions of people without access to safe water and sanitation. Meeting these targets requires 300,000 new connections to water and 450,000 new connections to sanitation services every day until 2015[74]. Current investment will need to double in order to meet the targets, from some $15 billion per annum to $30 billion[75].

1.2 The message is clear. Governments, donors and consumers need to commit more resources to water and sanitation. The current failure to invest brings with it a terrible human cost but also an economic burden for developing countries. Water related sickness drains already stretched health services and undermines other development spending—for example on education. WHO estimates that 5.6 billion working days and 443 million school days would be gained annually if there was universal access to water and sanitation. In total, the status quo is costing developing countries $84 billion a year[76].

1.3 Governments of developing countries are not giving priority to water and sanitation in national budgets. WaterAid's research[77] shows that where scarce resources do reach the sector, they are often poorly targeted and ineffective. The very poorest people are often excluded from project benefits; investment priorities may be skewed against poor areas and against low-cost appropriate technologies; schemes may prove unsustainable in either financial or managerial respects. Tackling these issues is complicated by the failure of many donors to support and participate in sector wide coordination. Greater coordination and transparency regarding investments is key to improving the performance of the sector and ensuring equity of access to services.

2. PRIORITISATION OF WATER AND SANITATION

2.1 DFID policy documents recognise that investment in water and sanitation can enhance the prospects of achieving the other MDG targets, especially those related to primary healthcare and education. And yet, water and sanitation continue to receive a small share of DFID's allocable aid.

2.2 DFID has reported that overall expenditure (bilateral and multilateral combined) in the water sector between 2004-05 was £200 million.[78] This represents just 5% of the total expenditure that year. The White Paper on Governance announced plans to double annual bilateral spending in Africa to £95 million by 2007-08 and to £200 million by 2010-11. The pledged increase is welcome but the overall spend will be relatively modest when compared to the £1 billion annual spend pledged for education.

2.3 There is a pressing need to update policy frameworks and link these closely to practice in country programmes. The 2005-08 Public Service Agreement (PSA), which underpins the departmental strategy and defines performance objectives, does not include a sub-target for Water Supply and Sanitation (WSS). Including a performance target for water supply and sanitation in the next PSA would clarify the focus of DFID's strategy for the sector.

2.4 The objectives of the current target strategy, produced in 2001, also need to be revised. A new strategy should be based on strong analysis at country level of the blockages to service provision. These blockages include lack of financial resources—a key constraint in Africa—but also ineffective and poorly targeted resources. The strategy should be underpinned by DFID's own principles for aid effectiveness[79] and by commitments made in the 2005 Paris Declaration.[80]

2.5 Water is not always given appropriate emphasis in DFID country programmes. In 2003, the National Audit Office (NAO) reviewed the extent of DFID's involvement in 20 countries with lowest levels of water access and found that there was "little correlation between country spend and countries with the greatest water need"[81]. The design of country strategies is built around poverty reduction strategies, and yet this can be problematic when PRSPs have not had sufficient participatory inputs from, or respond to, the needs of the poor. WaterAid has found that poor people consistently name water and sanitation as a top priority in participatory poverty assessments.[82] DFID needs to consider how to address such gaps and inconsistencies when country budgets are decided for 2008-11.

3. FOCUS AND DELIVERY OF BI-LATERAL ASSISTANCE

3.1 According to the Atkins report[83], almost one third of DFID's 2003-04 bilateral expenditure for the water sector went to Iraq. The report also pointed to a downwards trend in bilateral water expenditure in Africa, despite the fact that this is a region where there is minimal progress towards the MDG targets. In fact, if current trends continue, sub-Saharan Africa will end up with 47 million more un-served in 2015 than in 2004[84]. As the Department seeks to re-focus its aid, it is essential that need rather than political expediency underpin spending priorities.

3.2 Budget support is one of DFID's increasingly favoured forms of aid delivery. The UK provides 32% of its bilateral aid to Africa in this form. A recent OECD/DAC evaluation[85] of this mechanism shows the impact of budget support on the delivery of basic services. On the plus side, budget support can lead to increased expenditure on PRSP priority sectors and an expansion of access to basic services. Budget Support can also strengthen central government ownership and control over a larger pool of resources for development. Although this is a positive development, it has led, in some cases to a disempowerment of local government. The OECD report found that although expenditure for basic services had increased as a result of budget support, the quality of basic services at local level had deteriorated. Ensuring that aid delivery mechanisms enhance the capacity of local government, who bear the responsibility for service delivery, is a key concern for the water sector.

3.3 DFID's Water Action Plan 2004 says that solving the lack of incentives and prioritisation of water and sanitation by local authorities "is the real prize". In order to maximise the impact of its aid, DFID must ensure that strengthening the capacity of local government level delivery systems is a key priority. At the moment decentralization policy is often overreaching capacity. DFID needs to develop innovative new programmes that target the most chronic capacity constraints at local government level in order to reverse some of the deep weaknesses at this important delivery point in the sector.

3.4 Delivering aid in ways that enhance recipient government accountability towards citizens is a considerable challenge. A recent NGO evaluation of Budget Support[86] has found that it has frequently strengthened the upward accountability to donors. National parliaments and civil society are often unable to track spending because of insufficient transparency and a dearth of disaggregated budgetary information. In many cases, dialogue around resource allocation is conducted behind closed doors by a small group of key policy makers and donor representatives. In those countries where DFID gives budget support, there should be a complementary strategy to strengthen local civil society to scrutinise budgets and policies and better articulate demand for water and sanitation services.

Given that in many of the countries where DFID works, water is not a focal sector, it would be strategic to use limited resources to further coordination between government, Water Supply and Sanitation donors and service providers. Resources could be wisely invested in the development of sector-wide plans and investment programmes developed through the creation of multi-stakeholder water fora. The Department can build upon the success of its experience in Uganda by promoting secondments of advisory staff within government water ministries or finance ministries. DFID staff could thus facilitate prioritisation of Water Supply and Sanitation in national plans and catalyse investment by governments and donors. DFID could also use its resources to support research into policy options which would provide better evidence for recipient government decision making, for example in urban reform programmes.

4. MULTILATERAL CHANNELS

4.1 DFID is increasingly channeling water and sanitation financing through Multilateral Institutions (MIs), including the World Bank and the Regional Development Banks. In 2003-04 it is estimated that £76 million, 35% of DFID financing for water and sanitation was channeled through MIs, up from £45 million in 1999-2000[87]. The actual figure is probably higher as DFID funding of specific multilateral projects is classified as bilateral support and the Atkins report appears to underestimate the proportion of MI spending on water and sanitation (for example, the report gives a "water factor" for ADB as 4% when ADB's water policy claims 19% of lending for water sector[88]).

4.2 Given DFID plans to increase sector expenditure and pressures to reduce staffing levels, it is likely that the proportion and level of financing channeled through MIs will continue to rise in the future. Much of MI financing is in the form of loans. Given the bankruptcy and indebtedness of most urban public utilities in low-income countries, DFID needs to reconsider whether it is advisable that financing urban Water Supply and Sanitation investments in these countries is done through loans or through grants. Given the concerns outlined below, DFID needs to start to conduct analysis of the effectiveness of MI projects.

4.3 Many MI water and sanitation projects do not benefit the poorest and most vulnerable. Recent research by WaterAid shows that Asian Development Bank projects, resulted in unsatisfactory outcomes for the poorest[89]. The research found that despite overall increases in services levels, the poor were excluded from these benefits due to mechanisms adopted for project design, implementation and monitoring and evaluation. The research also concluded that the institutional capacity to sustain management and operations of water infrastructure is not addressed.

4.4 Multilateral organisations lend to the poorest countries at concessional interest rates. However, the study by WaterAid and research institutes in Nepal, Bangladesh and India, found that concessional loans for water and sanitation projects are on-lent by central governments to lower tiers of governments, and to communities, at increasing rates of interest[90]. This concessional funding finally reaches end borrowers with interest rates of between 8 and 14% per annum. These rates are far from concessional. DFID should work with the MIs to review practices of on-lending and introduce policies to ensure that this practice does not result in unaffordable services and increasing debt burdens at various levels.

4.5 Given the significant level of financial support provided to MIs for water and sanitation, DFID does not have adequate oversight of or influence over MI sector policies, programmes and projects. This means that MI projects can result in outcomes that are contrary to DFID policies. DFID can improve these projects by making wider use of Trust Funds in all projects to support poverty and social impact analysis prior to project implementation, mapping of the poor, and design of strategies for serving all poor and vulnerable groups. DFID should also consider placing more DFID staff with skills in pro-poor policy and service delivery in MIs. Engagement of country programme staff in project activities should be stronger. Finally, the replenishment rounds of MIs provide DFID an opportunity to push for pro-poor changes in project design, implementation and evaluation procedures and to make additional resources dependent upon improvements in these areas.

5. EU WATER INITIATIVE

5.1 DFID is leading a review of the EU Water Initiative (EUWI). General trends show that water and sanitation are receiving a declining share of European aid[91]. Allocable aid has fallen from 5.4% in 2000 to 4.1% in 2004. Most of this aid is directed towards middle income countries, with a mere 29% of resources going to Sub-Saharan Africa despite the fact that this is the region most off-track towards meeting the MDG targets. EU donor funding is often uncoordinated and results in inequitable coverage as well as undermining government administrative capacity. The EUWI was promoted as Europe's contribution to the achievement of the water and sanitation MDG targets. Unfortunately, the initiative has made little progress since it was launched in 2002[92]. DFID has a role to play in advocating through EUWI for an improvement in the quality, quantity and targeting of EU aid.

5.2 Two key aims of the EU Water Initiative were to reinforce political commitment to the sector and to improve national water governance by way of multi-stakeholder "country dialogues". However, the commitment of Member States has been weak and as a result the country dialogues have failed to get off the ground in all but a couple of countries. AMCOW members, civil society and member states have raised serious concerns about EUWI's performance. The DFID-led review must re-focus the initiative in order to meet its original objectives.

5.3 A key component of EUWI is the Africa Working Group. DFID should take a lead in shaping the strategy for this group. The Africa Working Group (AWG) must seek to improve information flows on EU Water Supply and Sanitation aid volumes and targets, gaps and overlaps, with a view to ensuring that countries in Africa that are off-track their MDG targets receive priority funding. The AWG can be tied more closely to political processes through an annual report to the European Council on EU commitments to the water sector. In addition to financial commitments, this would include commitments to increase advisory capacity, develop local expertise and strengthen local accountability.

5.4 At the country level, EU Member States need to give more robust support to sector coordination by funding the participatory development of national plans and the production of investment and performance reports. The lack of funding so far has been a prime cause of the failure of the country dialogues. DFID should ensure that the current review of EUWI considers how sector wide approaches can be enhanced by EU financing rather than undermined by it.

6. PRIVATE SECTOR INVOLVEMENT IN WATER AND SANITATION

6.1 Over the last five years, DFID has exerted much effort to establish financing facilities to encourage private sector involvement in Water Supply and Sanitation and other infrastructure in developing countries and to cover private sector risks[93]. This flies in the face of evidence that the international private sector is not interested in investing Water Supply and Sanitation infrastructure, especially in the countries with most need. DFID needs to review the outcomes and effectiveness of these donor facilities at the very least.

6.2 Reform of public water and sanitation services so that everyone has sustainable and affordable access, is key to progress towards the MDG targets. WaterAid is against the imposition by donors of policy conditions on governments that force them to privatise services or to bring in the private sector as part of reform efforts. There is a coherent body of evidence that suggests reform efforts work best after national governments have examined all their options for delivering safe water, ensuring that whatever service is chosen, the poorest citizens will benefit. Citizens should be consulted and participate in the deliberation of these options to ensure that the best option on how to reform services is taken.

6.3 Although DFID no longer officially makes its bilateral aid conditional on Private Sector Participation (PSP), the department continues to support the International Financial Institutions to do so. The World Bank, the IMF and the Regional Development Banks continue to impose conditions on developing countries to privatise systems without appropriate debate and discussion of the options at the national level. The one-size fits all approach they promote may not be appropriate to specific countries' needs or consider governments' capacities to regulate. As a result, access to services for the poor and vulnerable could diminish as prices rise beyond what is affordable.

6.4 DFID has placed too much emphasis on promoting private sector management of public utilities often in the face of widespread public opposition and government resistance. The department still has to recognise the need to rebalance policy and financial support in the light of experiences of successful public utilities and of failing public utilities that have been successfully turned around and remained public. More scope exists for DFID to use its assistance to enable public utilities to support each other, share knowledge and learn from each other's successes (in particular through public-public partnerships).

7. TRANSPARENCY AND REPORTING

7.1 DFID systems for recording water-related expenditure are weak. With an ever increasing proportion of DFID sector aid being channeled through other organisations, especially multilateral institutions, more information must be made available on how much is being spent by these organisations, whether this spending is in line with DFID central policies, and what the results are for the poor. The WaterAid study on the Asian Development Bank found that monitoring and evaluation systems did not provide the information required to know if projects were benefiting the poor. DFID also needs to develop methodologies to monitor how much budget support is spent in the sector. It is not sufficient to assume that recipient governments will spend the same proportion of budget support on water as the percentage originally set out in PRSPs.

7.2 Full disclosure of project information should be available on the DFID website. The 6-monthly update on the Water Action Plan gives some information on country programmes but does not always quantify contributions in financial terms, or make clear the link between programmes and progress in the sector. DFID country offices could usefully invest resources in making Water Supply and Sanitation project information available and accessible to people in developing countries who do not have access to technology. DFID should invest resources in helping pro-poor groups and the poor themselves gain access to planning processes and knowledge of their own entitlements by making information available through local media and in materials and languages accessible to the majority.

KEY RECOMMENDATIONS TO DFID

— Ensure that a target for departmental performance in the sector is included in the next Public Service Agreement. Update other policy frameworks (Target Strategy Paper and Water Action Plan) and set out a clear strategy for the scaling-up of support to the sector in line with White Paper commitments. Ensure that the new strategy has the full buy-in of country programmes and all directorates.

— Ensure that aid is delivered in ways that enhance recipient government accountability towards citizens. Where DFID gives budget support, there should be a complementary strategy to strengthen local civil society to scrutinise budgets and policies and better articulate demand for water and sanitation services.

— Develop innovative funding strategies that target the most chronic capacity constraints at local government level in order to reverse some of the deep weaknesses in service delivery at this level.

— Use limited resources to further coordination between government, Water Supply and Sanitation donors and service providers. Invest in the development of sector-wide plans and investment strategies developed through the creation of multi-stakeholder water dialogues. Promote secondments of advisory staff within government water ministries or finance ministries.

— Carefully consider the balance of the aid portfolio. Increases in multilateral aid should be accompanied by strengthened engagement with multilateral institutions to ensure that the policies and lending practices of these institutions are pro-poor and do not impose policy conditions.

— Develop advocacy towards EU governments for an improvement in the quality, quantity and targeting of bilateral aid to the water sector. Use the current review of EUWI to redefine the initiative as a high-level political space where EU donors as a body hold each other to account for commitments made, and where EU Member States jointly strategise with recipient governments to address obstacles blocking progress towards the MDGs.

— Review the outcomes and effectiveness of donor facilities created to facilitate multinational company involvement in Water Supply and Sanitation infrastructure, whether they lead to improvements in service and are pro-poor.

— Improve systems for reporting water-related expenditure. Strengthen the Update on the Water Action Plan to measure the impact of DFID programmes in developing countries. Develop communication and outreach strategies in-country.

DFID's ORGANISATIONAL CAPACITY FOR SUPPORT TO WATER AND SANITATION

1. BACKGROUND

1.1 DFID's challenge in the future will be to ensure that there is effective capacity to implement its commitments to the Millennium Development Goals in water and sanitation. The challenge is compounded when, though with growing budget (doubling water and sanitation funding to £200 million by 2010 in Africa), there are severe limitations on DFID staff numbers.

1.2 It is becoming evident from WaterAid's policy-influencing role in the countries where we work, that DFID's participation in the sector is contracting[94] and that the loss of the Department's added value is not being replaced, since other bilateral donors are also reducing their Water Supply and Sanitation advisory capacity. This is having negative consequences across the sector. The reality of many donor-recipient country relationships is that recipients will often deploy their overstretched resources and political will behind sectors known to be prioritised by donors. While this is an unsatisfactory dynamic, the urgency of delivering water and sanitation to the poor requires DFID to re-evaluate how it deploys its resources in the sector.

1.3 And yet there are examples when the strategic deployment of DFID staff has had measurable differences to the performance of country's water sector. DFID needs to match the strong rhetoric around the importance attached to the sector at a senior level with actions in its Country Offices. It needs to reverse the withdrawal of personnel from water and sanitation and to build programmes based on the recognition of the value of discrete interventions and visible political support.

1.4 Also, DFID's policy and programming work and the UK Government's rhetoric on development need to recognise the interdependency of health and education on the water and sanitation sector. The UK government and DFID need to develop a strong policy platform based on the recognition that these three essential services are the most tangible winnables of critical value to the poor.

The following sections point to three areas where organisational coherence can be improved.

2. STRONGER LINKS BETWEEN POLICY FORMULATION AND COUNTRY PROGRAMME IMPLEMENTATION

2.1 DFID needs to increase coherence between its political and policy commitments, often made at the centre, and the implementation of country programmes through delegated management. There is evidence that there are difficulties getting the Secretary of State's commitment to water and sanitation translated into programme delivery. It is recognised that budget support modalities means that DFID's funds should follow national priorities; the problems arise when national governments' priorities do not always reflect their own citizens' priorities.

2.2 DFID needs to have an attitude to Budget Support which is positive and engaging, and may on occasions challenge the assumptions behind priorities put forward by national governments. This is not about dictating priorities to national governments; it is about a dialogue as a development partner of national governments.

2.3 DFID's periodic country programme reports on the 2005 Water Action Plan can be a useful tool for this, requiring DFID country offices to report on the water sector and the added value that DFID can bring in each country[95]. DFID should continue to publish these reports and invite wider discussion on them. Informal reports from Ethiopia indicate that the DFID strategy to make key staff placements is showing good progress.

Focus on essential services—health, education and water & sanitation

2.4 WaterAid has recently published a report entitled "In the Public Interest"[96] highlighting the need for an integrated approach to water and sanitation, health and education. The benefits of each of these essential public services can never be fully realised without improvements being made to all.

2.5 DFID and the most senior level of the UK Government need to strengthen the linkages between health, education and water and sanitation in the narrative around the case for aid. And DFID needs to strengthen how its country programme teams approach the delivery of essential public services and increase the recognition of water and sanitation as one of the three essential and interdependent public services alongside health and education.

3. WORKING THROUGH MULTILATERAL AGENCIES[97]

3.1 As DFID's budgets increase and the head counts stays the same or falls, it appears that DFID is providing an increasing proportion of its budget to multilateral agencies like the European Commission, World Bank and regional Development Banks and UN agencies.

3.2 One of the problems noted by NGOs for some time is that the multilateral agencies do not share the same objectives as DFID. For example, DFID aims to achieve 90% of its bilateral aid focused on least developed countries; the DFID target for the European Commission is 70% of spend in least developed countries, whilst their actual achievement hovers around 50%. DFID needs to set multilateral agencies clear targets and boundaries on how and where its share of funding ends up. Similarly, DFID's more progressive stance on conditionality is not matched by the World Bank. WaterAid welcomes moves by DFID to suspend its contributions to multilateral agencies that fail to make sufficient progress on the aid effectiveness agenda. In addition, some investments in water supply and sanitation, particularly in African rural areas, are better financed through grants, rather than loans.

3.3 DFID will need to constantly review and demonstrate how increasing amounts of UK government funds allocated to multilateral organisations complement DFID's commitment to water and sanitation provision.

URBANISATION AND WATER

1. BACKGROUND

1.1 By the time the International Development Committee produces its report in April 2007 more people will be living in cities than rural areas, for the first time in human history. The primary driver of urbanisation[98] is no longer rural-urban migration but internally generated population growth within urban settlements or migration between them.

1.2 Urbanisation has already started to neutralise the impact of previous investments and efforts to meet the Millennium Development Goals[99]. Urban areas in developing countries will house 87% of population growth by 2015[100] and 95% by 2030[101]. Urbanisation in developing countries is increasingly dominated by settlements of less than 500,000 people and in non-regional/district capitals. Less than 15% live in cities over 5 million. The rate of slum formation is almost the same as the rate of urban growth. One in every three people is living in life-threatening slum conditions[102]. The rapidly growing urban poor are, in many cases, worse off than their rural counterparts in terms of health and nutrition.

1.3 A large number of people without adequate provision for safe water and sanitation live in urban areas. WHO and Unicef report that global water supply coverage rates in urban areas have remained unchanged since 1990, at 95%. This implies that many governments and water supply providers are managing to keep up with urban growth. But this is now threatened by rapid urbanisation over 2005-15. Global access to sanitation in urban areas is, however, projected to increase coverage from 80% in 2004 to only 82% by 2015. In many developing countries, however, the urban Water Supply and Sanitation situation is far worse. In urban Sub-Saharan Africa, for example, as many as 50% of the population do not presently have adequate water supplies, while 60% lack adequate sanitation. It is estimated that almost 500 million persons who require water and sanitation services will be added to urban population in the Sub-Saharan African countries within the next 25 years. There is a need for urgent measures to improve and extend provision in urban areas, for new as well as existing households, if outbreaks of such diseases as cholera are not to become a more regular and frequent occurrence in the continent.

Urban population growth in some regions of the developing world will be accompanied by the rise of urban poverty. The sprawl also has implications for the deterioration of environment—through pollution, increased resource demand, depletion of ground water, and encroachment of forest areas, with consequences for climate change. This also has implications for sourcing fresh water and waste management.

1.4 Donor support to water and sanitation services is generally on the decline[103] and though a higher proportion of this is spent on systems that serve urban populations, because the total aid envelope is shrinking, donor assistance to urban Water Supply and Sanitation systems are also shrinking. DFID's own support for addressing urbanisation challenges and urban water and sanitation has been difficult to monitor under current spending plans, and appears geared towards facilitating international private sector involvement in the running of public utilities.

1.5 The impact of urbanisation on water and sanitation services is discussed further below: impacts on the provision of water and sanitation in urban areas with implications for Service Delivery, Investments and Sanitation and brings with it a need for Participatory Social Audits.

2. CHALLENGES OF SERVICE DELIVERY

2.1 Urbanisation is enlarging the areas and number of people un-served by public water supply utilities. This results in more people, especially the poor who live in urban slums who are forced to buy their water from non-state providers (NSPs), usually at a price that has been estimated to be between 20%-100% higher than that charged by the utility.[104] In Sub-Saharan Africa, it has been estimated that between 30%-60% of the urban population is unconnected to the public water supply system, and are served by NSPs.

2.2 In all developing countries, the public sector carries the primary responsibility for service delivery in urban areas. Public utilities currently serve up to 95% of the population served through piped network systems. Levels of service vary: household connections, yard taps (in compounds serving a small group of households), and community water points (serving larger areas). In many cases, the failure of public utilities to serve the urban poor living in slums and informal settlements is due to city authority laws regarding land tenure, technical and service regulations and city development plans that legally prevents them from serving these areas. Where slum communities are invisible in urban development plans in particular, utility services to these areas do not exist. It is not surprising then that these areas are served by water vendors, in general, operating outside of any regulations or official supervision.

2.3 Public utilities, under government control, have had poor performance records, and are in need of reform[105]. Urban water supply services in the low-income countries and in increasing numbers of middle income countries suffer from intermittent interruptions with increasing frequency and lengthening duration. They fail to serve the poor. Many are bankrupt and saddled with commercial debts, and many fail to meet even their operating and maintenance costs from the income generated. Clearly, these utilities need to turn around their poor performance. The challenge is in understanding the causes of poor performance in order to enable effective reform to happen. Successful reform of public utilities has happened—in Kampala, in Tamil Nadu, in Phnom Penh—and it is important for DFID to learn the lessons and promote these lessons in support of public utility-led reform[106].

2.4 The World Bank[107] has identified a range of desired reforms in public utilities. These include securing the operational and financial autonomy of the public utility from political interference; ensuring a clear performance contract between the utility and the government agency responsible for its control; establishing independent regulation of the public utility, changing culture so that there is attention to "customer care". In addition, experiences especially in Latin America highlight the importance of independent, citizen-led accountability mechanisms (eg, citizen councils scrutinising the investments and performance of the utility in Caracas, Venezuela and Porto Alegre, Brazil; or multi-stakeholder dialogue forums in Recife, Brazil where directions for improvement are deliberated by the utility with relevant civil society groups and consumer representatives).[108]

2.5 Fees for water supply services are important to the operational functioning of public utilities, though should not be considered the only source of financial stability and sustainability for the utility. There are contrasting views on the level of fees to be charged by the utility, and some social movements have argued for free water, or a lifeline tariff to render a basic minimum supply of water free. It must be said that most public utilities operate a subsidy—and this is currently captured in large part by the non-poor who are connected to the water service[109]. There is also research that indicates that even at 3% of income (the threshold commonly used to determine levels of water poverty), water fees are still unaffordable to the poor. The challenge facing public utilities is designing tariffs and subsidies so that people gain access, and price does not become a barrier, and that those who are poor and unable to pay are able to consume water to the required levels for health and hygiene. DFID can do more to support economic and social impact analysis to inform utilities' decisions on tariff structure and design.

2.6 Over the last two decades, the support of donors, including DFID, the World Bank and other IFIs has gone towards promoting private sector control, management of and investment in public utilities. This has diverted attention and resources away from addressing the substantive challenge of reforming public utilities and improving service delivery. DFID has led in the development of several multi-donor financing and advisory facilities for purposes of facilitating international private sector involvement in developing country water utilities. (Please see annex A for a list of initiatives established over last 10 years in support of private sector involvement in infrastructure services, including water and sanitation).

2.7 In fact, private sector investment in water and sanitation was only 5% of all private investments in infrastructure, in the 1990s, during the height of the privatisation era[110]. Water and sanitation is not an attractive investment for the private sector[111]. Private operators funded by the IFIs to manage utilities have become a drain on the available funds. There is now a sufficient body of evidence that casts serious doubt on the capacity of multinational corporations to provide affordable access to water and sanitation in developing countries[112]. In the past decade, private companies have managed to extend water service to just 10 million people, less than 1% of those who need it[113].

2.8 Conversely, NSPs or small scale service providers (SSSPs), both for-profit and not-for-profit (eg, water cooperatives and community-managed schemes) have become the dominant private investors in water supply in developing countries, and the principal providers for the poor in slums and peri-urban settlements. As a DFID study has shown[114], there is inadequate governance and regulation of NSPs that would help to secure the necessary standards of water safety and affordable prices. NSPs are presently treated with disdain and considered illegal in most countries. And yet they provide often the only service available to the urban poor. DFID should support governments to investigate how to tap the potential of the NSPs, and integrate them as part of the urban-wide structure of public service provision related to the utility (eg, as a franchise) or independent of it, and regulate them effectively.

2.9 The ability of governments to deliver on the MDG targets for water and sanitation in urban areas will be determined by the ability of public utilities to reform and improve performance, and the ability of governments to capture the positive potential of NSPs. DFID needs to consider the role it can play in this agenda.

3. SANITATION

3.1 Urbanisation is contributing to a major sanitary crisis in urban areas. And in many low-income countries the dismal state of sanitation in dense urban slum settlements has been the cause of cholera outbreaks. A major challenge for municipal authorities is the lack of attention to urban sanitation. By historical design, water and sanitation are not the direct responsibility of the same government agency—water ministries or the public utilities. Instead, the responsibility for sanitation and environmental sanitation (sanitation in public spaces, waste collection and disposal) is fragmented amongst a number of government agencies and departments. The lack of coordination amongst these various agencies and absence of a clear agency lead is the main institutional cause for the poor attention to sanitation in urban areas. In addition, the areas most in need of sanitation services and improvements are urban slums and illegal settlements—areas where the residents do not have strong access to political influence and where property rights to land are held only by a few. Thus the demand for attention to sanitation in urban areas is often unheard. DFID needs to work with its partner governments and other donors in-country to work towards a coordinated mechanism and an institutional home for planning investments and service delivery in urban sanitation.

3.2 Sanitation requires different strategies that disaggregate beneficiaries and investments. Sanitation solutions are on-site and culture driven. Existing technologies of networked sewerage systems where on-side sanitation systems are linked are expensive, water-dependent and not always appropriate especially in countries that are suffering from water stress and scarcity. Alternative sanitation solutions such as composting toilets (ecological santiation or ecosan) are being tried and are promising. There is still a need, however, to research and develop lower-cost sanitation solutions, waste collection and disposal and waste-water treatment that are affordable for developing countries. Experiences of development NGOs in Karachi, Lahore, Faisalabad in Pakistan in designing low-cost sanitation and sewerage and wastewater treatment, in collaboration with the public utilities in those cities should be better understood, and the lessons promoted[115].

4. INVESTMENTS

4.1 Urbanisation and the propensity to adopt high cost, complex urban water supply systems have increased the fiscal stress on already strained government budgets. This has made providing basic water supply and sanitation services even more difficult. Water Supply and Sanitation is not sufficiently prioritised in government or donor budgets.

4.2 IFIs and donors in the urban water and sanitation sector have frequently prescribed urban sector reform aid and loan packages. But these have come with conditions on the direction that reform should take. Although DFID has recently changed its policy on the conditions attached to its aid, other multilateral donors that it provides money to for investing in water supply and sanitation may still retain policy conditionalities to its loans. DFID should review these arrangements, and where necessary, work to prevent inappropriate policy conditions to be attached to loans. At the same time, DFID needs to support the creation of open policy dialogues between utilities, government, civil society and local NSPs in the cities where it operates, so that the direction of reform of public utilities can be publicly debated, owned and agreed.

4.3 Developing country governments need to structure water and sanitation fees to ensure a minimum daily amount is free or affordable for the poor. Governments need to target subsidies to end the structural inequalities in access to water and sanitation where only the non-poor and rich are benefiting from subsidies, because they are the ones connected to the network. There is a need to subsidise connection fees—making connections free for the poor, investing in widening the coverage of water supply systems, and establishing a subsidized water fee system that is transparent and targeted primarily at poor people. DFID needs to consider how its investments in urban water and sanitation services can help governments to afford these subsidies to the poor, and to assist in ensuring that the subsidies are transparent and targeted.

4.4 There has been an increase in World Bank lending to water and sanitation projects, from US$0.5 billion a year in 2001-02 to US$1.8 billion in 2004-05. This represents 8% of total World Bank lending and is the highest new lending for water projects in a decade. The World Bank remains the highest donor in urban water supply and sanitation. In Asia, the Asian Development Bank has also doubled its investments in the sector, and the greater proportion of this is being spent on urban water supply and sanitation. Given the bankruptcy and indebtedness of most urban public utilities in low-income countries, DFID needs to reconsider whether it is advisable that financing urban Water Supply and Sanitation investments in these countries is done through loans or through grants. At the same time, DFID needs to review whether IFI investments do not exclude the poor from benefiting[116].

5. PUBLICLY ACCOUNTABLE SOCIAL "AUDIT"

5.1 The participation of citizens in pro-poor service delivery has proved valuable for pioneering pro-poor approaches. The establishment of social audit mechanisms in the governance of the water and sanitation sector has enabled effective monitoring of the performance of utilities, including the private sector, and helped to inform choices over further investment options for achieving universal access. There are successful models of "social control mechanisms" in Recife and Port Alegre in Brazil and Caracas, Venezuela.

5.2 There is a need to open up policy reform decision making to stakeholder dialogue and input especially from the urban poor, such as is done in The Water Dialogues[117], a series of national multi-stakeholder dialogues and research processes that assess whether and how the private sector can contribute to achieving sustainable universal water and sanitation services. DFID currently supports the international secretariat of the Water Dialogues. In addition, it needs to consider how it can work with civil society organizations, partner governments, city authorities and public utilities to develop other "social control" mechanisms that have the capacity to hold utilities and the governments that control them, to account for the quality of services and investments to ensure the poor gain access to public services. Around the world, civil society groups are experimenting with report card/citizen action activities to engage with service providers and to push it towards improving services to the poor[118].

KEY RECOMMENDATIONS TO DFID

— Recognize the increasing impact of urbanisation in the delivery of water supply and sanitation in the developing world. In the development of DFID's new water and santiation strategy, it needs to address the issues of public utility reform, the role of NSPs, urban sanitation, and social control or citizen-led accountability mechanisms.

— Develop a programme of work, with recipient governments, to support the reform of publicly-run utilities to deliver pro-poor services. Look to support the promotion of utility-led reforms, and the lessons from well-performing public utilities. Look into supporting partnerships between public utilities for purposes of learning and support for improving performance.

— Assist governments to improve the regulatory environment and to create opportunities for local NSPs to be integrated into the public water and sanitation delivery system.

— Review the applicability of loans as the main source of investments in low-income countries' urban water supply and sanitation services, in light of the bankruptcy and deep indebtedness of public utilities.

— Consider contributing to the provision of subsidies for the poor to ensure their adequate and sustainable access to water supply services.

— Work with partner governments and other donors to address the urban sanitation crisis, including the creation of national sanitation plans and coordination bodies.

— Support civil society and lend political support to establishment of publicly accountable social "audit" mechanisms that can hold both public and private service providers to account, and water dialogues on direction of urban Water Supply and Sanitation reform in countries.

— Support more economic and social impact analysis of urban Water Supply and Sanitation policies.

63 Food and Agricultural organisation (FAO), Gender and Food security in Agriculture (1995) hhtp/www.fao.org/Gender/en/agri-e.htm Back

64 WSSCC, For her it's the big issue. Putting Women at the centre of water supply, sanitation and hygiene. Evidence report (2006). Available at: www.wash-cc.org and www.genderandwater.org Back

65 World Bank, Case study on the Role of Women in Rural Transport (1994). Back

66 WaterAid, Looking Back (2001) Back

67 World Health Organisation, Evaluation of the Costs and Benefits of Water and Sanitation Improvements at the Global Level(2004) http://www.who.int/water-sanitation-health/wsh0404/en/ Back

68 Idem. Back

69 WaterAid Nigeria, Interview in Bauchi State (2005). Back

70 Abantu for Development for WaterAid Nigeria, Water and Sanitation Sector Analysis on Gender in Nigeria (2005). Back

71 Robert Berold for the Water Research Commission, How is Gender Policy Working on the Ground? (2004) http://www.wrc.org.za/publications_other_special.htm Back

72 WaterAid's programmes in West Africa have developed community mapping tools that build sector plans on the community and local authorities' common identification of geographical and population groups excluded from access to services. These plans form the basis of devising targets, allocating finance. Back

73 This is particularly true of DFID's presence in the sector in Nepal-where, in 2006, budgets were significantly reduced and the multi-stakeholder Strategic Alliance it developed with strong support from civil society groups was suspended. Back