African Water Development Report 2006 - United Nations Economic ...

African Water Development Report 2006as an exploitable and marketable economic goodhas become the hegemonic societal concept, theview in traditional African societies is that waterand natural resources in general are integral elementsof a holistic world. For traditional societies,water is not only of economic and social importance,but also of cultural and spiritual value(ibid). It is therefore necessary to reconcile themodern utilitarian perception of an economicgood with the non-economic values and meanings,including the spiritual dimension.Water as an Economic GoodThe last 10 years of the twentieth century saw anincreased emphasis on the economic aspects ofwater resources use and development. The NewDelhi Statement emphasized the importance ofsound financial practices with respect to drinkingwater supply and sanitation. The DublinStatement further developed this point. The lastof the four Dublin Principles reads: “Water hasan economic value in all its competing uses andshould be recognized as an economic good.”Internationally, this Principle is widely accepted,but what it implies for the price of water is notat all clear. Even, in Dublin, there was considerableconfusion about what this principle meant.Considering water as an economic good relatesto making the right choices about the utilizationof water in the broadest socio-economic context.This is something completely different fromwater pricing. Water pricing has to do with costrecovery and demand management. The onlyrelationship with economics is that the pricecharged should not be higher than the economicvalue. That water is an economic good has everythingto do with setting priorities in view ofthe public interest. Economics is about makingthe right choices, and not about setting the appropriateprice for water, as believed in certaincircles (Borgoyary M., 2002)..The Economic Value of Water“Whoever has some water available has the choicebetween using that water or offering it to the highestbidder among alternative users. If he decides to usethe water himself for whatever activity he is engagedin (household, agriculture, industry, or using the wateras a sink for residuals from production or consumptionactivities), he abstains from an income hecould have earned by selling this water to someoneelse in the community or downstream. This meansthat the user decides that the value of the water tohim is higher than the income foregone. By not sellingthe water, he abstains from an income opportunity;thus the concept opportunity income or opportunitycost.”(ibid).This misinterpretation of “water as an economicgood” led to a serious misunderstanding in thegeneral debate, both at the Dublin Conferenceand at the Earth Summit in Rio de Janeiro.Some people feared that the adoption of thisDublin Principle would lead to economic pricingof water, which would damage the interests ofthe poor and make irrigated agriculture virtuallyunfeasible. As a result, a number of disclaimerswere added to the 4th Dublin Principle, statingthat water is also a “social” good and that watershould be affordable to the poor.What “water as an economic good” implies isthat decisions on the optimum use of water andits allocation to different potential uses should betaken on the basis of the socio-economic tradeoffanalysis that is independent of the ability topay. If a society values environmental, cultural,sustainability and social considerations sufficiently,then it will be giving a high economicimportance to water, even if there is a low abilityto pay. In other words, considering water asan economic good implies that Governmentsshould subsidize those uses of water that have ahigh value but a low ability to pay. On the other278