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Chapter 1 _part_3__e&f_instruments


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  • 1. Economic and Financial Instruments for IWRM Introduction to IWRM Part 3: Introducing Economic and Finance Instruments
  • 2. Goal and objectives of the session
    • To introduce the importance of economic and financial instruments in IWRM
    • To introduce the requirements for implementing IWRM
  • 3. 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
  • 4. 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.
  • 5. Economics and IWRM
    • Economic instruments are rationing rules or incentives which influence the allocation and distribution of water or water-related assets and incomes.
  • 6. Examples of economic instruments
    • Water tariffs;
    • Abstraction charges;
    • Water subsidies; and
    • Water taxes
  • 7. Economic instruments are evaluated using the criteria of:
    • Efficiency;
    • Equity;
    • Environmental sustainability;
    • Administrative feasibility; and
    • Political acceptability.
  • 8. 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.
  • 9. 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.)
  • 10. 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.
  • 11. Implementing IWRM
    • Several roadblocks to implementing IWRM
    • Sectoral interests;
    • Professional insecurities;
    • Socio-cultural myths;
    • Politics
  • 12. Approaches to Breaking Barriers
    • Barriers to implementing IWRM require an incremental approach to:
    • Negotiating differences;
    • Cross-sectoral integration;
    • Instituting reforms.
  • 13. 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.
  • 14. 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.
  • 15. 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.
  • 16. Implementing IWRM Economic Efficiency CHANGES ARE MADE TO SEEK Environmental Sustainability Social Equity TO REACH SUSTAINABILITY
  • 17. 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.
  • 18. 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.
  • 19. 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.