An analysis of trends and scenarios in the Water, Sanitation and Hygiene sector compiled by IRC International Water and Sanitation Centre

1. Scanning the 2020 horizon An analysis of trends and scenarios in the Water, Sanitation and Hygiene sector SWA Seminar - Stockholm World Water Week Room T6 Tuesday, August 23, 2011 – 14:00-17:30 Erma Uytewaal (IRC) IRC- International Water and Sanitation Center

3. • Presentation is based on IRC occasional paper 45 • Trends analysis and scenario building; tools for understanding the future • IRC planning cycle and use of trends analysis and scenario building IRC- International Water and Sanitation Center Background

5. It seems quite certain that ... • Economic growth and improvements in human development continue across much of the developing world • However, growth will continue at differentiated levels between regions, countries and within countries • An important part of the world’s population will continue to live in extreme poverty, mostly located in rural areas of South Asia and Sub-Saharan Africa, and in populous, middle-income countries. IRC- International Water and Sanitation Center Economic and social development will continue at different levels between regions and countries

6. Economic and social development will continue at different levels between regions and countries In Africa: • High levels of economic growth in many countries • Most countries will remain low-income with low levels of access to WASH services. In Asia and Latin America: • Most countries will consolidate themselves as middle-income countries • Important pockets of poverty and growing gaps between the rich and poor • A huge challenge of providing access to services to the underprivileged sections of the population, particularly with respect to sanitation services • Rapid levels of urbanisation will bring complicating factors of water scarcity and contamination from disposal of wastewater.

7. • The 10 countries with highest level of economic growth over last decade were all in Africa and Asia • Even with continuous growth many countries in Africa will continue to remain extremely poor • ¾ of worlds poor live now in populous middle income countries • Africa ( and particularly Sub –Sahara Africa) is the continent with the highest percentage of poor people • South Asia has the largest population suffering from extreme poverty IRC- International Water and Sanitation Center Economic and social development will continue at different levels between regions and countries

8. • Majority of the total population living in poverty will continue to live in rural areas • Exceptional economic growth in East Asia and the Pacific has been accompanied by raising income gaps. IRC- International Water and Sanitation Center Economic and social development will continue at different levels between regions and countries Where do the poor ( living on less than US$1.25/day) live (2005)? Source: Chen and Ravallion (2008). Rural share of population living on less than US$1.25/day Source: IFAD (2010).

9. • 2008 - first year in which most people lived in cities • South Asia and Sub-Saharan Africa still have a larger rural population than urban • Cities as places of inclusion and participation but also of exclusion and marginalisation IRC- International Water and Sanitation Center It seems quite certain that... The trend towards urbanisation continues with more people living in urban areas than in rural areas.

10. • There is an increased recognition that the urban-rural divide is not so clear cut, with various settlement types in between, and changes in the nature of rural areas. This leads to a further differentiation in WASH challenges. IRC- International Water and Sanitation Center Towards a better representation of urban and rural Source: World Bank (2009). The simplified area economy and a more realistic representation Urbanisation does not only happen in large cities, but also in towns and secondary cities

11. • Over last few years stagnation in democratisation processes • Corruption remains pervasive in many developing countries IRC- International Water and Sanitation Center Less certain are the trends that relate to political stability and governance... Percentage of Free, Partly Free and Not Free countries Source: Freedom House (2010). Trends in governance and stability are complex and unpredictable, with a huge potential for impact on the WASH sector.

12. In the next decade we expect a similar number of countries to be plagued by political instability or civil strife. It is fairly certain that some countries will democratise; others will see setbacks – the details of where and how these might happen are highly uncertain, and are typically the result of unforeseeable and unpredictable events. Democratisation, or setbacks in governance, can have important effects on the WASH sector in the affected countries: • Changes in donor funding; • Political will; •Quality of management of the sector. IRC- International Water and Sanitation Center

13. Few comprehensive overviews are available of financing flows to the WASH sector and of the required costs to meet the MDGs. It is difficult to assess whether current investments are adequate to meet the MDG targets (or other national targets). Most estimates, however, show high levels of underinvestment. IRC- International Water and Sanitation Center Trends in the financing of WASH services are also very uncertain

14. Still limited insight into the size of these funding streams and their component parts: • few comprehensive reports are available • country reports on expenditures often difficult to compare Most assessments indicate that present funding levels are well below what is needed: • 8.0 US million/year (AMCOW) • US$ 9.34 billion/year for Africa (Briceño - Garmendia) • funding levels are less then 50% below what is needed (GLAAS) IRC- International Water and Sanitation Center

15. Domestic investments: relative importance of public investments may grow Development Aid: increasing percentage of aid goes to least developed countries; LDC ‘s dependence on ODA for capital costs remains Other sources: private investments by households is high, non- traditional donors support to WASH is limited to resource rich countries IRC- International Water and Sanitation Center Trends in the financing of WASH services are also very uncertain Sources of investment for capital and operation and maintenance expenditure in Africa ($ billions annually) Source: Foster and Briceño-Garmendia (2010)

16. Increase of donor investments in WASH over the past five years, this may now stabilise or even go down: • no significant changes at the global level expected • effect from financial crisis sets in staggered and delayed • more questions are being asked in donor countries about the effectiveness of aid • donors will continue to pursue the aid effectiveness agenda • WASH is a highly aid dependent sector. Fragile states are most vulnerable (70% of WASH investments in low income fragile states is external) IRC- International Water and Sanitation Center Trends in the financing of WASH services are also very uncertain

17. • Little consolidated info available on WASH spending over new investments and recurrent costs • ODA seem to go for large part into new infrastructure (capital expenditure) 64% (WHO) • Needs seem to be much higher (WHO - 74% is needed for recurrent capital maintenance of existing services). . . IRC- International Water and Sanitation Center Trends in the financing of WASH services are also very uncertain Most public funds in the WASH sector are spent on new or upgrading of infrastructure. This is likely to remain as donors and governments prioritise funding towards the construction of new infrastructure to reach the MDGs or other national targets.

18. • New donor entrants • General development trends which eclipse the relative importance of aid • Reduced levels of aid may be off-set by new entrants supporting the WASH sector IRC- International Water and Sanitation Center Trends in the financing of WASH services are also very uncertain The traditional aid landscape will change drastically over the next decade- the exact contours can not be detailed yet

19. • New entrants may well target specific segments of the WASH sector, such as urban utilities and resource-rich countries • The “classic” development aid (including to WASH), concentrates even more on the least developing countries, mainly in Africa • The agenda setting powers of traditional investors in the WASH sector may lose some influence in setting the development agenda • Depending on the patterns of economic growth, fewer countries would be eligible for the type of aid provided by traditional donors. IRC- International Water and Sanitation Center Trends in the financing of WASH services are also very uncertain

20. • Time-frame over which new paradigms or approaches are taken up by sector organisations are in the order of magnitude of a decade or more • One of the important changes that we foresee, and about which we are relatively confident, is that sanitation is becoming more and more a specific area of focus • For a long time it has been neglected, but the realisation that the sanitation MDG will be missed has led a number of organisations to specifically focus on this challenge. There will be an increased demand for approaches, methodologies, concepts on sanitation delivery IRC- International Water and Sanitation Center Changes in issues and approaches in the WASH sector can be predicted with a higher degree of confidence

21. Sustainability of rural supply In water supply, the main backlog in access remains in rural areas. But as that backlog gets addressed, the backlog in maintenance for sustainability of rural water supply services becomes an even greater sector issue. It becomes increasingly clear that the main service delivery model of community management is not enough, and that a broader shift to service delivery approaches is needed. IRC- International Water and Sanitation Center Changes in issues and approaches in the WASH sector can be predicted with a higher degree of confidence

22. • Also, the lack of sustainability in rural water supply services will continue to rise on the sector agenda, particularly in those countries that have managed to reach a relatively high level of coverage • The gap in human resources and organisational capacity, particularly at decentralised level, is another limitation to WASH services delivery, and one that is too big to be fully addressed in the next decade • Another trend that is already underway, and which we foresee will make a positive contribution to the WASH sector, is the development of information and communication technology (ICT) tools for the WASH sector, particularly for monitoring, accountability and impact assessment. IRC- International Water and Sanitation Center

23. • in spite of steady progress in decentralisation gap in capacity in local governments remain huge • gap will remain highest at local government level and in rural areas • more structures and innovative modalities are mainly found in middle income countries but even there gaps remain high IRC- International Water and Sanitation Center Changes in issues and approaches in the WASH sector can be predicted with a higher degree of confidence In terms of governance, the trend to decentralising the responsibility for WASH service delivery to local governments continues. There is still a capacity gap within many local authorities that will require many years to address.

24. IRC- International Water and Sanitation Center Looking into the future: Four scenarios Two steps forward, one step back A rocky ride of political and economic downturn Followed by improvements in governance in a number of countries Bilateral and multilateral aid is reduced Funding for increasing access to WASH services becomes scarcer Increased importance of sound financial management New players in a less stable environment Step-wise improvements in governance, interchanged with set-backs in some countries, with an economic boom for others Traditional aid stays at the same level New entrants; filling gaps but adding to a more disorganised sector Drastic change in the aid landscape

25. IRC- International Water and Sanitation Center Looking into the future: Four scenarios Towards a post-aid WASH sector Political stability combined with economic growth Aid gradually reduces and concentrates on the poorest, most fragile states and pockets of poverty-difficult to achieve a global WASH agenda Middle class increases water demand for food and industrial products Water scarcity becomes a worldwide issue Efficient water resources management remains neglected A multi-polar WASH sector Political stability combined with economic growth New donor countries (non-OECD) investing in neighbouring or resource rich countries (including WASH) Reduced niche role for traditional donors in fragile states and developed countries With many new players financing WASH becomes more chaotic

27. We welcome any contributions or comments on this analysis of trends and scenarios with an ability to achieve greater sustainability in WASH services. Thank you IRC- International Water and Sanitation Center