March 25, 2003 -- European Bank for Reconstruction and Development water projects have saved the equivalent to water usage by 6 million people just by fixing leaks and managing demand, said EBRD president Jean Lemierre.
Lemierre spoke before the Kyoto Water Forum in Kyoto, Japan. The forum ran from March 16 through 23. He was part of the Water Infrastructure Panel to consider solutions to the global financial needs of the water sector in the 21st century.
Lemierre also met with environmental ministers from central and eastern Europe and the CIS, and he participated in a panel discussion in the Agora of the International House of the Citizen and Water on Friday. His remarks follow.
"Water could become the world's next scarce resource. But often the problem is not of lack of water. It is wastefulness, mismanagement, or pollution of what are often plentiful water resources. And, water can be expensive and unattainable by many people, even if the supply exists.
"It is access and efficient use of water that deserve special attention in post-communist countries where water was once considered virtually free. The planned-economy approach to water leaves a legacy of disrepair, over-consumption, depletion and pollution. These problems can be as severe and debilitating as having no water at all.
"As it set out 12 years ago to foster the transition to strong market economies that are anchored in strong democracies, the EBRD saw sustainable and inclusive delivery of water and water services as a priority. People need water and they need their water resources to be preserved for the future. The inefficiencies, or cost, or inequalities that have deprived some people - sometimes many people - from access to clean, sustainable supplies of water needed to be addressed. Water and sanitation affect health and economic progress. And access to such a basic resource as water is a fundamental democratic right.
"The solutions to water resource management lie in helping the people who distribute and use water to help themselves. Public entities can either work alone to deliver water, or in partnership with private companies by encouraging commercial development that is closely regulated. Either way, the EBRD can provide financing with the dual conditions that investments in water must be sustainable and affordable. That means that tariffs must be set on market principles that will allow infrastructure to be maintained. But people who cannot afford those tariffs must not go without water. The social dimension is as important as the economic test.
"Since water services are primarily municipal, the EBRD has devised particular approaches to helping cities to invest in water services. First, the EBRD works with city financial planners to build credit-worthiness so that cities can raise financing on their own. Then, the EBRD can provide loans to the municipality without requiring a sovereign guarantee. This means that water services can be developed without putting a strain on state budgets. And, because municipalities can often least afford the risk of volatile international exchange rates, the EBRD has developed local currency financing so that towns can safely predict the cost of the loan.
"Today, EBRD water projects have saved the equivalent to water usage by 6 million people just by fixing leaks and managing demand. The additional water from improved treatment, pumping and storage financed by the EBRD provides potable water for the equivalent of 15 million people. Through EBRD financing the waste-water of 12 million people will be treated in accordance with stringent European Union environmental standards, helping rivers and seas to recover from high pollution loads. And the EBRD-financed energy savings from more efficient equipment and lower water use alone could satisfy the annual energy needs of a city of 350,000.
"Wroclaw, Poland is one good example. The EBRD helped the municipal managers of this town astride the Odra River to improve financial management, so that Wroclaw achieved a BBB credit rating that allowed it to raise international financing to improve municipal services. With that, the EBRD became an investment partner in financing the modernisation of the drinking water plant, the sewerage collection network, shoring up a leaking waste dump and constructing a new environmentally safe landfill site that would keep the Odra clean. All this was done without recourse to the constrained resources of the national budget, because no sovereign guarantee was required.
"In Romania, an environmental loan facility to several municipalities will reduce effluents and limit pollution in the Black Sea. Here too, no sovereign guarantee was required once tariff reform was completed and creditworthiness on local authorities improved.
"In Macedonia a loan on-lent to five municipalities brings environmental and public health benefits through improved drinking water and reduced leakages and seepages. Fines to industrial polluters will reduce industrial wastewater discharges into water sources. The project will also improve water sources across borders in Greece and Bulgaria.
"A similar loan to the water utility of the city of Riga in Latvia has improved the water quality of the Daugava River and the environmentally fragile Baltic Sea.
"The international aspects of water are a fundamental part of responsible government, particularly in regions where water is scarce such as Central Asia. The EBRD plans municipal projects in Central Asian cities - such as a loan to Tashkent, Uzbekistan to improve the water distribution system and reform tariffs and bill collection. But international cooperation and harmonised efforts by the international community will be needed to ensure sustained and equitable distribution of water.
"In Slovenia, Croatia and Hungary, the EBRD invested with private companies to finance, construct and operate a wastewater treatment plants. Extensive public consultation helped select the sites and limit the impact of construction and operation for local people and environment.
"And in Russia, the city of St. Petersburg received a loan from the EBRD as well as grants from Scandinavian countries to clean up the hazardous waste disposal site of Krasny Bor, operated by a city agency. The financing addresses the unacceptable health and safety risks of the site until a new, safe facility can be built. And the loan also goes to fund improvements to the regulatory framework and enforcing environmental law. The people of St. Petersburg and the whole surrounding region will benefit.
"Incrementally, from city to city, from central Europe to central Asia, the EBRD has worked to address the problems of inefficient or unequal access to water. As each municipality finds ways to sustainably and efficiently deliver good, reliable supplies of water and water management services to its people, it can offer lessons to many other municipalities around the world to provide their populations with the resource that is the source of life."
About the EBRD
The European Bank for Reconstruction and Development was established in 1991 when communism was crumbling in central and eastern Europe and ex-soviet countries needed support to nurture a new private sector in a democratic environment. Today the EBRD uses the tools of investment to help build market economies and democracies in 27 countries from central Europe to central Asia.
The EBRD is the largest single investor in the region and mobilizes significant foreign direct investment beyond its own financing. It is owned by 60 countries and two intergovernmental institutions. But despite its public sector shareholders, it invests mainly in private enterprises, usually together with commercial partners.
