100UNIVERSITIES COUNCIL ON WATER RESOURCESJOURNAL OF CONTEMPORARY WATER RESEARCH & EDUCATIONISSUE 135, PAGES 100-106, DECEMBER 2006From Value to Finance: Making IWRM WorkBen Lamoree <strong>and</strong> Frank van SteenbergenArcadis EuroconsultThe discussion on Integrated <strong>Water</strong>Resource Management (IWRM) has beenvery rich on institutional change (basinorganizations, apex water bodies, legal reform)<strong>and</strong> on process management (multi-stakeholderprocesses, consultation <strong>and</strong> participation), but attentionto the financial dimension <strong>of</strong> IWRM has been lessdeveloped.The gist <strong>of</strong> IWRM is that in water managementthere are many different functions to be managedsimultaneously. Through investment <strong>and</strong> managementinterventions, values are created (or destroyed)in connection to these functions: productivity values,amenity values, property values, environmentalconservation values, <strong>and</strong> more. The challenge inIWRM is to, at a minimum, balance these differentfunctions <strong>and</strong> values, yet preferably to optimizethem. This paper further argues that these differentvalues need to be captured <strong>and</strong>, when possible,help finance the management <strong>of</strong> water resourcesystems in an integrated way. We present this asan improvement <strong>of</strong> the principle <strong>of</strong> “water as aneconomic good.” The economic good argumenthas, in our view, <strong>of</strong>ten led to reductionist strategies,focusing on recovering the financial cost <strong>of</strong> wateronly <strong>and</strong> not maximizing <strong>and</strong> recovering the valuesassociated with the many functions <strong>of</strong> water.This paper first clarifies some definitions <strong>and</strong>then discusses how to capture values <strong>and</strong> turnthem into financial contributions to IWRM usingillustrations from several parts <strong>of</strong> the world. Thepaper then comments on the principle <strong>of</strong> water asan economic good, long considered as the financialunderpinning <strong>of</strong> IWRM. We look particularly atwater pricing for dem<strong>and</strong> management, closelyassociated with the theory <strong>of</strong> water as an economicgood. It argues that a broader financial strategy,based on balancing, improving, <strong>and</strong> capitalizingon increased values related to water management,is more promising in funding IWRM <strong>and</strong> makingit work. Finally, some institutional aspects <strong>of</strong> thisapproach are explored.Functions <strong>and</strong> ValuesThe concept <strong>of</strong> functions describes the goods<strong>and</strong> services the natural resource system providesor performs. There is almost always a wide range<strong>of</strong> functions associated with any given resourcesystem (Abdel Dayem et al. 2004). Table 1, forinstance, is a list <strong>of</strong> functions associated withirrigated areas. Other lists can be produced forother natural resource systems.Values is the concept through which societalpreferences, perceptions, <strong>and</strong> interests with regardto functions provided by natural resources areexpressed. These values are social, economic,financial <strong>and</strong> (temporal <strong>and</strong> spatial) ecologicalvalues. Values should not be seen separate fromstakeholders. They are not general <strong>and</strong> abstract,but they are always values to stakeholders. Thesemay be farmers, property owners, industries, localtowns, livestock owners, fishermen, <strong>and</strong> so forth<strong>and</strong>, in many cases, the public at large.The point <strong>of</strong> such lists is that there is usuallya large number <strong>of</strong> functions, many <strong>of</strong> which inpractice are overlooked in resource management,if only because the organizations that arepractically managing the resource have a limitedagenda <strong>and</strong> m<strong>and</strong>ate. In the management process,important opportunities to create value for variousstakeholders are missed.Quite typically the many functions in irrigationUCOWRJOURNAL OF CONTEMPORARY WATER RESEARCH & EDUCATION
Making IWRM Work101Table 1: Ecological functions <strong>of</strong> irrigated areas.Agricultural water supplyControlling water table for agriculturalproductionImproving l<strong>and</strong> accessibilityImproving soil chemistryIncreased property values <strong>of</strong> l<strong>and</strong> near waterfrontsLeisure opportunities – water based recreation,golf resortsDomestic water supplyIndustrial water supply<strong>Water</strong> supply to other usersImproved protection against floodsUse <strong>of</strong> canal <strong>and</strong> drain bank for tree cultivationDefense linesSource: van Steenbergen, Cornish <strong>and</strong> Perry (forthcoming).systems, are not managed in a coherent way, ifat all. Irrigation departments will manage watersupply for agriculture mainly <strong>and</strong> in some caseswill involve themselves in drainage <strong>and</strong> floodprotection.It is unusual however for irrigation departmentsas water managers to involve themselves inmanaging water resources for domestic use, eventhough in many irrigated areas the availability<strong>and</strong> quality <strong>of</strong> water for domestic use is a majorfunction <strong>of</strong> the irrigation system. Take the example<strong>of</strong> Thatta <strong>and</strong> Badin Districts in Sindh, Pakistan.These areas at the tail <strong>of</strong> the Indus irrigation systemare entirely dependent on irrigation canal suppliesfor local drinking water, either directly from thecanals or through seepage into small fresh waterpockets on canal banks because ground water inthe area is saline. Even so, the irrigation departmentallows the main canals to be used for the disposalfor untreated effluent upstream from Hyderabadcity <strong>and</strong> a large industrial estate, jeopardizing thewell-being <strong>of</strong> a population <strong>of</strong> 2 million peoplein Thatta <strong>and</strong> Badin. To make matters worse, byallowing very high <strong>and</strong> unnecessary irrigationwater supplies in the peak season into this area,saline water logging is widespread, preventing thecreation <strong>of</strong> buffer storage capacity in the upper soillayers, <strong>and</strong> thus preventing the development <strong>of</strong>more fresh water lenses.While managing irrigation systems for drinkingwater is not common, it is even more unusual forirrigation departments to manage irrigation suppliesUse <strong>of</strong> canal <strong>and</strong> drain banks for transportationBuffering water stockGenerating water for reuseEffluent disposalWashing functionsLivestock water supplyFisheriesNavigation <strong>and</strong> ferryingImproved public healthReduced damage to built up property by controllingsoil moistureReduced incidence <strong>of</strong> water borne vector diseasesthrough environmental sanitationFirefighting resourcesfor fisheries production, for reduced incidence <strong>of</strong>water borne diseases or for amenity functions onthe water front, even when in some cases the lattercould be a major source <strong>of</strong> revenue.This situation described is typical for arid <strong>and</strong>semi-arid countries <strong>and</strong> other areas where irrigationis the main water management intervention inthe natural water system. Due to such a mono-functionalfocus, water management in such areas cannotbe typified as “integrated.” Area-based organizationsare theoretically better equipped to managemultiple functions <strong>and</strong> the values involved.Capturing Values<strong>Water</strong> resource management affects the value<strong>of</strong> the different water-related functions in an area,both positively <strong>and</strong> negatively. The values <strong>of</strong> thesefunctions accrue to different groups <strong>of</strong> stakeholders.These may be general interests (for instanceimproved public health or safety, sustainable groundwater supply, sustained aquatic bio-diversity) orprivate interests (use <strong>of</strong> canal banks for cultivation,use <strong>of</strong> a reservoir for water sports, reducing floodrisk in a given geographical area, using water fromwells or canals). These values are directly relatedto the way water resources are managed as part <strong>of</strong>the development <strong>of</strong> a region. It can therefore beargued that the economic <strong>and</strong> financial values fromthe functions thus created should, at least partly,be captured to recover the cost <strong>of</strong> maintaining <strong>and</strong>further developing the delivery <strong>of</strong> IWRM in anarea.JOURNAL OF CONTEMPORARY WATER RESEARCH & EDUCATIONUCOWR
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