This presentation highlights water services in the Caribbean, opportunities for growth, options and sources for financing water investments, and the role of CDB. Delivered by Dr. Justin Ram, Director, Economics Department, CDB at the 12th High Level Forum of Caribbean Ministers Responsible for Water in Trinidad and Tobago on October 25-27, 2016.

1. CLIMATE PROOFING THE
WATER SECTOR:
INVESTMENT AND
FINANCING
Dr. Justin Ram
Director, Economics Department
October 25-27, 2016
Trinidad and Tobago
12th High Level Forum (HLF 12) of
Caribbean Ministers Responsible for Water

2. Outline
• Macro-economic environment
• Global importance of water
• Caribbean context
• The economics of water
• Next steps
• Opportunity for growth
– Water-Jobs Nexus
• Financing water investments
• The role of CDB

3. Average growth of 1.5 % over the past 5
years; high fiscal deficits and growing debt
(domestic)
4.2
3.5
3.3 3.4
3.1 3.1
6.3
5.3
4.9
4.6
4.0
4.2
4.9
3.2
3.0
1.3
-0.1
-0.5
1.5
0.9
1.6
2.2
1.4 1.4
2011 2012 2013 2014 2015 2016
GDP Growth
World Emerging Markets and Developing Economies
Latin America and the Caribbean BMCs
Source: WEO, October 2016

4. Average growth of 1.5 % over the past 5
years; high fiscal deficits and growing debt
(Domestic)
0
20
40
60
80
100
120
140
Antigua
and
Barbuda
Bahamas Barbados Belize Dominica Grenada Guyana Haiti Jamaica St. Kitts
and Nevis
St. Lucia St. Vincent
and the
Grenadines
Suriname Trinidad
and
Tobago
Debt to GDP
(General Government Gross Debt)
2015 2016
Source: WEO, October 2016

5. Importance of water

6. The importance of water to the global
economy
Source: Stefan Uhlenbrook, WWAP, UNESCO

7. 3 out of 4 jobs that make up the entire
global workforce are water dependent
WATER-DEPENDENT JOBS
Source: Stefan Uhlenbrook, WWAP, UNESCO

8. Investing in Water –
High Economic Returns
Source: Stefan Uhlenbrook, WWAP, UNESCO

9. Tariff Structure
• Low tariff
• Subsidised by
Government
State Enterprises
• Rigid labour contracts
(unions)
• Low productivity
• Focus on operations and
maintenance not strategic
planning
Poor Infrastructure
• High inefficiency
• High NRW
• High demand
• Not treated as an
economic good
Factors affecting the level and quality of
water services in the Caribbean

10. An average of 47.5 MLD is consumed (exc. T&T)
On average 92% of the population has access to water
0
20
40
60
80
100
120
Water Coverage
% of Population

11. 3
16
102
145
45
19
19
45
43
34
4
137
20
90
27
1,025
11
Anguilla
Antigua and Barbuda
Bahamas
Barbados
Belize
British Virgin Islands
Cayman Islands
Dominica
Grenada
Guyana
Monsterrat
Jamaica
St. Kitts and Nevis
St. Lucia
St. Vincent & the Grenadines
Trinidad and Tobago
Turks and Caicos
0 100 200 300 400 500 600 700 800 900 1000
Water Consumption (MLD)
An Average of 47.5 MLD is Consumed (Exc. T&T)
on Average 92% of the Population has Access to Water

12. 0 10 20 30 40 50 60 70 80
NRW %
Turks and Caicos Trinidad and Tobago St. Vincent & the Grenadines St. Lucia St. Kitts and Nevis
Monsterrat Jamaica Guyana Grenada Dominica
Cayman Islands BVI Belize Barbados Bahamas
Antigua and Barbuda Anguilla
NRW averages 40-50 percent of water
generated; Average tariff of USD1.6 per cubic
meter

13. 3.67
1.7
2.64
1.24
1.82
2.64
2.5
0.4
0.78
0.14
0.66
0.98
0.63
0.37
0.15 0.27
6.6
0
1
2
3
4
5
6
7
Tariff US$/ m³
NRW averages 40-50 percent of water
generated; Average tariff of USD1.6 per cubic
meter

14. Economics of Water
Priority areas in water management for
investment that will boost the Caribbean’s
resilience to climate risks include:
Augmenting / identifying alternative water
resources
Treating and using wastewater as a
resource
Protecting and restoring watersheds
Flood risk management
Strengthening water infrastructure and
networks
Improving water use efficiency

15. How does the Caribbean compare –
Performance characteristics for public water
utilities, 2002
BMC Avg. 6,502,58
7
45.6 1.4 9.6 2.2 89.7 87.1 1.5

16. Water sector indicators: Caribbean

17. High water consumption – (90% above
industry standard) agriculture, tourism and
industrial production
0
100
200
300
400
500
600
700
800
Trinidad Dominica Monsterrat BVI St. Lucia Grenada Barbados
Water Consumption l/p/c/d
Rural Standard Urban Standard

18. High water consumption – (90% above
industry standard) agriculture, tourism and
industrial production
0 5 10 15 20 25 30 35
Antigua & Barbuda
Barbados
Belize
Guyana
Jamaica
St. Lucia
St. Vincent
Trinidad & Tobago
% of Crop Land Irrigated by Water

19. Low water productivity;
High operating costs
-1
1
3
5
7
9
11
13
15
Water Productivity (Employees/1000 Connections
Developed Standard Developing Standard

20. Low water productivity;
High operating costs
0
0.5
1
1.5
2
2.5
3
3.5
Working Ratio (<0.70 is prudent)
Industry Average

21. The basic provision of adequate water,
sanitation and hygiene (WASH) services at
home and in the workplace enables a robust
economy by contributing to a healthy and
productive population and workforce, with
benefit-to-cost ratios as high as 7 to 1 for basic
water and sanitation services in developing
countries (OECD, 2011a and 2012a).
Is water a social good or
economic good?
United Nations, 2010 (Res 64/292)

22. Water and gender-equally important for
economic growth
Source: United Nations Water Fact Sheet; UN Water.org; (The) World's Women 2010. Trends and Statistics. UNDESA, 2010

23. Next steps for the Caribbean
Revised Tariff Structures
Investment in Infrastructure
(PPP)
Innovation
Financing
Management of Watersheds
Improving Efficiency
Ensuring the Sustainability of
Water Resources and
Ecosystems
Strategic Planning
Climate Resilient Water
Infrastructure
Training and Human Resource
Development in Water Resource
Management

24. Getting incentives right
• Through Public Water Utilities,
most countries subsidise water,
creating incentives for overuse and
imposing a fiscal burden;
• Subsidies are estimated at approx.
0.6 percent (US$456B) of Global
GDP in 2012 (IMF, 2015);
• Water subsidies are inequitable,
benefiting mostly upper-income
groups in developing countries,
(IMF, 2015)
• Water prices in advanced
economies tend to be at or close to
cost recovery levels (household
and industry); some provide
subsidised water for agriculture,
electricity generation.

25. The case of a bottled water and
willingness to pay
Global water market was valued
at US$170 billion in 2014
Market driven by health
awareness and changing
consumer lifestyles
Demand for clean, hygienic and
flavored water; also portability
Bottled water is one of the
fastest growing industries in the
Caribbean

26. Bottled water vs Tariffs
USD1.03 vs USD0.0003
0.0004
0.0012
0.0003
0.0007
0.0018
0.0001
0.0017
0.0004
0.0008
0.0006
0.0002
0.0026
0.0025
0.0010
0.0000
0.0005
0.0010
0.0015
0.0020
0.0025
0.0030
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
St. Lucia Barbados Trinidad Jamaica Belize Guyana Antigua Dominica Grenada St. Kitts St.
Vincent
Bahamas Cayman Mosterrat
TapWater
BottledWater
Price of Water (US$ per 1 litre)
Bottled Water Tap Water

27. Water pricing reforms
Tariff structures/ metering
100
96
100
95
28
86
36
70
51
100
4
% OF CUSTOMERS WITH METERS

28. Investment in infrastructure development
An estimated US$5.5 billion
investment in Water and Sanitation is
required in the Caribbean
(CDB, 2014)
Water PPP
Experiences in the Caribbean
Country Year
Started
Year
Ended
Result
St. Lucia 2005 &
2008
2009 Failed
Bahamas 2012 On-
going
Positive
Results
The Bahamas
PPP of $83m
(10-Year Contract)
Goal: Reduce Leaks from
The System
Performance-Based
Contract
Daily water loss reduced to
half and $6.5 M in savings
in the first two (2) years

29. Opportunity for growth???
Source: Texas A&M Energy Institute

30. Infrastructural investment =
Multiplier effect on job creation
Source: World Water Assessment Programme (WWAP) & UNESCO, 2016

31. The transition to a greener economy
enhances opportunity for decent jobs
Source: Stefan Uhlenbrook, WWAP, UNESCO

32. The Water-Climate Nexus
food
energy environment
urban
water

33. Climate Finance in the Caribbean
Source: Global Water Partnership Caribbean & Caribbean Community Climate Change Centre (Information Brief 3)

34. 27% of MDB finance allocated to
water and wastewater in 2015
Source: 2015 Joint Report on MDB Climate Finance

35. Financing options
Tariffs, Taxes, Transfers
Government Investment
Donor Funding
Traditional
Sources
Climate Funding W/ Water
Investment
Carbon For Water
Green Bonds
Social Bonds
Innovative
Sources

36. Sources of financing
Source: Assessment of the Water Sector in the Caribbean: Summary Report, Caribbean Development Bank, January 2015

37. The role of CDB
Green Climate Fund
Accreditation;
CALC Funding;
PPP Facility;
Concessional Lending
Leader in
Climate Change
and Water
Resource
Management
Strategic
Priority

38. Thank You