Chapter 1 _part_3__e&f_instruments


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Chapter 1 _part_3__e&f_instruments

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