President Ader, Distinguished Heads of State and Government, Water Summit Delegates, Ladies and Gentlemen,
I’m pleased to be here on behalf of the World Bank Group. As you know, water is not only central to the Sustainable Development Goals, but is now central to the commitments that were made under the Paris Climate Accords.
The scarcity and lack of access to water will have huge economic and social costs – spurring migration, and sparking conflict as millions face living with less water. Recognizing these risks, the World Bank has championed this Panel. The world needs leadership at the highest level to ensure that policies and finance promote sustainable use of water.
We are particularly pleased to note that that the Panel is tackling the fundamental issue of how the sector can secure financing to meet these goals. The challenges are substantial – the water supply and sanitation sub-sector is only meeting about a third of the demand, and financing for irrigation and water resource management sub-targets will require even more resources.
I’d like to step back for a moment and take you to a time when I was the Minister of Finance in Brazil. While there were many competing demands for resources, my desire was always to put more money into the water sector. While the demands were great, the payoff in terms of health, the environment and economic development were enormous. However, the one caveat that I always insisted on was that the service providers deliver quality projects and products that were efficient, affordable and well regulated.
Based on this experience, I would like to stress two complementary points:
· First, we need to strengthen service providers from a technical and financial perspective, while ensuring transparency and operational efficiency. Without these efficiencies, we are effectively pouring money down the drain.
· Second, we need to explore ways of leveraging public and concessional financing to mobilize more capital through the domestic commercial markets to help meet the financing gap. Without these additional funds, meeting the water SDG will be extremely difficult.
Strengthening service providers
Related to the first point, quality of services and products within a transparent regulatory framework are absolutely key to attaining the SDG. This is not always an easy task as we know from working closely with our clients to address fundamental issues concerning affordability, revenue, water quality, and infrastructure challenges.
At the same time, a robust regulatory system can ensure affordability and better services for customers. To ensure that these services reach the poorest and are affordable, tariff structures can allow for basic consumption levels. Where user charges cannot cover all costs, taxes can serve as targeted subsidies to meet key objectives or as a general resource to help finance the sector.
Leveraging public funds to attract domestic financial resources
My second point addresses how we deal with concessional and public resources. More specifically, we need to incrementally start the process of using those resources to leverage and blend with commercial finance, and particularly domestic finance. Between 2011 and 2015, water attracted just four percent of private investment in infrastructure and we need to improve the viability of the sector.
Blended finance has worked in places as diverse as Cambodia, Colombia, Jordan, Kenya, Mexico, and South Africa. In Brazil, most utilities, even in poor and water-scarce states, finance operations and nearly all their infrastructure through tariffs and loans. Consider CASAN in Santa Catarina State, a government program that was first supported by the World Bank. It promoted investment, enhanced transparency, and established a regulatory framework. Most significantly, it helped water companies create efficiencies, become creditworthy, and access commercial finance from the capital markets.
It’s worth noting that accessing commercial finance is not just for wealthy or middle income countries. Service providers and households in emerging capital markets, may still tap microfinance, vendor finance, or, in some instances, short-term commercial loans. Commercial finance is, in fact, viable and vital even in less developed markets.
To support these efforts, an array of risk mitigation tools exist including credit guarantees, political risk insurance, and dedicated lines of credit. They are offered by development partners, including the World Bank Group, and by private partners.
Collaboration to achieve the SDGs
In conclusion, we must all redouble our efforts. For our part, the World Bank Group is helping countries achieve these targets sustainably and inclusively. For example:
· At nearly $25 billion, our water portfolio is about 10 percent of World Bank and trust fund disbursements. In the next year, we expect 40 new projects in over 30 countries. With an eye to the SDGs, we plan to scale up efforts in low-income countries through IDA, our fund for the poorest.
· Our lending and technical assistance are helping countries strengthen providers. By 2021, we expect that over half of our programs will be working to improve providers’ financial viability.
· We will also soon launch a facility to help countries prepare bankable water projects and secure commercial lenders for resilient development.
· Finally, with UNICEF, the World Bank Group will host the next Sanitation and Water for All (SWA) High Level Meeting, at our Spring Meetings in April. It will focus on attracting capital to close the financing gap.
I commend the work of the High Level Panel on Water. Your call to action has ignited discussion at the highest level on overcoming the financing challenge. I look forward to more close collaboration as we tackle these critical challenges.