The Global Water Challenge:

Poverty, Growth & International Relations

David Grey, Sr. Water AdvisorClaudia Sadoff, Lead Economist

The World Bank

Global Issues Seminar SeriesJanuary 25, 2006

A blue planet: ….but

The world’s water resources

Glaciers, Snow & permafrost 1.725%

Ground water 0.075%

Lakes, swamps & rivers 0.025%

Oceans 97.5%

3

3 Messages: Global Water & the Future

2. Without major water investments, many poor economies cannot grow

3. Without ‘riparian’ cooperation, water will increasingly breed conflict

1. The world’s water resources are under rapidly growing pressure

4

Growing water scarcity(1995-2075)

SEI - Criticality index (Source: WaterGAP)

5

Per capita water availability

0

2

4

6

8

10

12

14

16

1960 1990 2025

Africa

Asia

MEast & NAfrica

Tho u

s an d

m3

World

6

Water Resources Management

Water supply & sanitation

Irrigation & drainage Energy

Environ-mental

services

Infrastructure for Infrastructure for management of floods management of floods

and droughts, and droughts, multipurpose storage, multipurpose storage,

water quality and water quality and source protectionsource protection

Institutional Institutional frameworkframework

Management Management instrumentsinstruments

Political economy of Political economy of water managementwater management

Other uses including

industry and navigation

Water Resources – Many Uses, Many Users

…

7

Physical, economic water scarcity..& freedom8

3 Messages: Global Water & the Future

3. Without ‘riparian’ cooperation, water will increasingly breed conflict

2. Without major water investments, many poor economies cannot grow

1. The world’s water resources are under rapidly growing pressure

9

Climate Variability & GrowthClimate Variability & Growth

Risk of recurrent Risk of recurrent droughtdrought

Natural legacy: Natural legacy: extreme climate variabilityextreme climate variability

10/97 – 2/98 Flood Infrastructure Damage $2.39 b10/98 –5/00 Drought Crop loss $0.24 b

Livestock loss $0.14 bReduction in hydropower $0.64 bReduced industrial prod. $1.39 bTOTAL $2.41 b $2.39 b

10/97 – 05/00 Cost of Climate Variability $4.8 b

Approx (annual) GDP ($9 b/yr) $22 bImpact as % GDP/annum 22%

Kenya: variability & shock

10

-80

-60

-40

-20

0

20

40

60

80

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

year

perc

enta

ge

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

rainfall variation around the meanGDP growth

-80

-60

-40

-20

0

20

40

60

80

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

year

perc

enta

ge

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

rainfall variation around the meanGDP growth

Rainfall & GDP growth: Ethiopia 1982-2000

-10.0

-5.0

0.0

5.0

10.0

15.0

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

YearsRe

al G

DP g

row

th (%

)

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

Varia

bilit

y in

Rai

nfal

l (M

eter

)

Real GDP grow th (%)

Variability in Rainfall (Meter)

Rainfall & GDP growth: Zimbabwe 1978-1993

Economy-wide impacts

11

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

GDP Grow th rate Ag GDP Non-Ag GDP

Annu

al R

ates

Smoothed

Drought

Variability

38%decline in avg. projected GDP growth rate when historical levels of variability are assumed

40% decline in Ag GDP

34% decline in non-Ag GDP

BaselineScenario

Ethiopia – Impacts of historical levels of variability on projected GDP growth/economic performance

Hydrological variability slows growth rates 38%

12

Water storage in m3/cap

43746

1,287 1,406

2,4863,255

4,729

6,150

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Eth

iopi

a

Sou

thA

frica

Thai

land

Laos

Chi

na

Bra

zil

Aus

tralia

Nor

thA

mer

ica

Water storage and the poverty trap

Water availability versus storage

0

200

400

600

800

1000

0 1,000 2,000 3,000 4,000 5,000

storage/ capita (m3)

with

draw

al/ c

apita

(m3)

Ethiopia

S. Africa

Spain Australia

• Stable pop. & GDP, raising Ethiopia’s storage to South Africa (12% of USA) ~ 6 X GDP

• Or 5% of GDP for over 100 yrs

13

184

85 21

126

55 38 29

204

114

581

900

430

2108

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Cam

eroo

n

Nig

eria

Eth

iopi

a

Ken

ya

Tanz

ania

Uga

nda

Bur

kina

Fas

o

Gha

na

Sen

egal

Alg

eria

Egy

pt

Mor

occo

Wor

ld A

vera

ge

Elec

con

sum

ptio

n (k

Wh/

yr)/C

apita (United States consumption - 11994 kWh/yr/capita)

500 kWh/capita-year minimum consumption for reasonable quality of lifeThe electricity

gap

Africa

EuropeN America

S AmericaAsia (incl.

China)

0%

20%

40%

60%

80%

100%

Hydropower potential tapped

14

The Water Supply & Sanitation

Gap

175

235

175

40 350

275

175

190

152

175

178

36

350

368

188

0100200300400500600700800900

1000Po

pula

tion

(mill

ion)

Rural2000

Urban2000

Total2000

Rural2015

Urban2015

Total2015

Water Supply Coverage in Africa

Served 2000 Added 2000-2015 Not Served

Africa’s MDG Challenge

15

Irrigation can lift rural poor out of poverty

Inco

me

per

capi

ta

Average income levels & irrigation intensity in India 16

FT, June 18, 2001: Rain in India…

"Every one of my budgets was largely a gamble on rain.“ Finance Minister of Government of India 17

World Bank Lending f or Water over Past Three Years

0%

2%

4%

6%

8%

10%

FY02 FY03 FY04

% o

f all

Bank

lend

ing

Irrigation Serv Irrigation WR Urban WSS ServUrban WSS WR Rural WSS Serv Rural WSS WRHydropow er Serv Hydropow er WR WR St/Alone Components

World Bank Water Sector Strategy & Infrastructure Action Plan: scaling up

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Discussion

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3 Messages: Global Water & the Future

3. Without ‘riparian’ cooperation, water will increasingly breed conflict

2. Without major water investments, many poor economies cannot grow

1. The world’s water resources are under rapidly growing pressure

20

                                                                                                 

           

260 international basins: +/- tensions: longstanding, always,

growing with demand“Fierce competition for fresh water may

well become a source of conflict & wars in the future.” Kofi Annan, March 2001

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Africa’s historical legacy: numerous international rivers

• 60+ international rivers

• many countries per basin

• many basins per country

• weak capacity

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...all cases can be rational. The

choice among them will depend

upon perceptions of their relative

benefits.

1 2

Case 1

1 2

3

Case 2

1 2

3

Case 3

Country 1’s preferred agenda

Country 2’s preferred agenda

Cooperative agenda 3

Why would riparian states cooperate? - converging national agendas

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Unilateral Action

Coordination

•Communication and notification

•Information sharing

•Regional assessments

Collaboration

•Identify, negotiate & implement sets of national investments that capture cooperative gains

•Adapt national plans to mitigate regional costs

•Adapt national plans to capture regional gains

Joint Action

•Joint project assessment and design

•Joint ownership

•Joint institutions

•Joint investment

Cooperation ContinuumDispute Integration

A Cooperation Continuum

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Benefits of Cooperation: changing perceptionsThe Challenges The Opportunities

Limited water resour. management: degraded watersheds, wetlands, biodiversity, & water quality.

Improved water quality, riverflow characteristics, soil conservation, biodiversity

Type 1:

Increasing Benefits

To the river

Sub-optimal water resources development

Improved hydropower & agricultural production, flood-drought management, environmental conservation & water quality

Type 2:

Increasing Benefits

From the river

Tense (+/-) regional relations & political economy impacts

Policy shift to cooperation & development, from dispute; from food & energy self-sufficiency to security; reduced conflict risk & military expenditure (+/-)

Type 3:

Reducing Costs

Because of the river

Regional fragmentation

Integration of regional infrastructure, markets & trade

Type 4:

Increasing Benefits

Beyond the the river 25

India

Pakistan

The Indus

Eugene Black was asked about the most significant events during his presidency. He talked about his involvement in the Middle East, in connection with the Aswan Dam and the Suez Canal. " and I was also very much involved in India and Pakistan, the Indus River dispute. I was trying to get the Indian government and the Pakistani government together …. That took a very long time [1952 to 1960].”

The Bank’s World, May 1988

The Aswan High Dam

Development Diplomacy & the World Bank

“Those were the two most important things … when I was at the Bank”Eugene BlackPresident of the World Bank (1942-62)

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10 countries: Burundi, D.R. Congo, Egypt, (Eritrea), Ethiopia, Kenya, Rwanda, Sudan, Tanzania, Uganda300 m people (600m 2025)Extreme:

poverty: 4 of 10 poorestclimate variabilitylandscape vulnerability

Very limited infrastructure….Yet major opportunities:

The Bankas facilitor: 1997-2003as partnership coordinatoras investor: 2004 ->

Nile Basin Initiative

27

Nile:“Cooperation replaces conflict”

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3 Conclusions: Actions and Consequences

3. Without ‘riparian’ cooperation, water will increasingly breed conflict

Riparian cooperation can catalyze growth, economic integration & peace

1. The world’s water resources are under rapidly growing pressure

Solutions can be found – although costs will be high (‘economic scarcity’)

2. Without major water investments, many poor economies cannot grow

De-linking rain from the economy is a condition for growth, poverty eradication

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Rivers are political systems….

• Management of rivers is political; management of international rivers is very political…

• Rivals… dwellers on opposite banks of a river• The Chinese got it right long ago:

riverriver

++

++ dykedyke

==

Political Political orderorder

==

30