Download Economic and Financial Instruments for IWRM

Economic and Financial
Instruments for IWRM
Introduction to IWRM
Part 3: Introducing Economic and
Finance Instruments
Goal and objectives of the session
 To introduce the importance of economic
and financial instruments in IWRM
 To introduce the requirements for
implementing IWRM
Outline presentation
 Basic definitions of economics and finance
 Importance of economic instruments and
examples
 Importance of financial instruments and
examples
 Introduce the requirements for
implementing IWRM
Introduction: Basic definition of Economics
 The allocation of scarce resources among
alternative uses.
 It focuses on the efficiency of the
allocation and distribution of assets and
income.
Economics and IWRM
Economic instruments are
rationing rules or
incentives which
influence the allocation
and distribution of water
or water-related assets
and incomes.
Examples of economic instruments
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Water tariffs;
Abstraction charges;
Water subsidies; and
Water taxes
Economic instruments are evaluated using the
criteria of:
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Efficiency;
Equity;
Environmental sustainability;
Administrative feasibility; and
Political acceptability.
What is Finance?
Specific decisions taken by
organisations or firms
(public or private) to
maximise short or long run
returns to their assets and
investments.
Categories of financial instruments:
 Charges for use or benefits (water tariff);
 National or local government grants, soft
loans and guarantees (payments from
national, state or municipal budgets);
 External grants and concessional loans;
 Philanthropic agencies (NGOs);
 Commercial loans and equity (IFI loans,
bonds etc.)
Importance of Use of Economic and Financial
Instruments in IWRM
 Water is becoming scarcer.
Need to ration use;
 Vulnerability of the
environment. Need to charge
for pollution;
 Need for finance for water
infrastructure provision,
upgrading or expansion.
Implementing IWRM
Several roadblocks to
implementing IWRM
 Sectoral interests;
 Professional insecurities;
 Socio-cultural myths;
 Politics
Approaches to Breaking Barriers
Barriers to implementing IWRM require an
incremental approach to:
 Negotiating differences;
 Cross-sectoral integration;
 Instituting reforms.
Negotiating differences
Conflicts and insecurities among
professionals working in various sectors
in adopting and implementing
alternative water resources management
approach calls for:
 Negotiating win-win solutions;
 Platforms for different stakeholders to
have a voice and collaborate;
 Takes time and patience.
Cross-sectoral integration
 Various perspectives and interests of
different water users across sectors must
be integrated to successfully implement
IWRM;
 Formal mechanisms for commitment to
integration needed;
 Informal attempts have failed.
Reforms
 Existing institutional and legal frameworks not sufficiently
responsive to demands and requirements for preparing &
implementing IWRM plans.
 Reforms needed in all phases of the IWRM planning process
and implementation of the IWRM plans.
 Reforms needed to finance implementation of IWRM plans.
 Interactive process that takes several years of planning,
creating enabling environment capacity building.
Implementing IWRM
CHANGES ARE MADE TO SEEK
Economic
Efficiency
Social Equity
TO REACH
SUSTAINABILITY
Environmental
Sustainability
Think about it
 Having gone through the basic principles of
IWRM you will probably be able to assess
the situation in your own country when it
comes to implementation of IWRM.
Questions
 What is the evidence of commitment to
integrated water resources management in
your country?
 Are economic and financial instruments
being used in water resources management
in your country. Give examples where
possible.
End
Next chapters will go deeper into water
management issues, forces causing them
and the role of economic and financial
instruments in creating an enabling
environment for water management.