Investing in Water and Sanitation Produces Substantial Economic Gains

April 18, 2005

Investments in water can be an engine for accelerated economic growth, sustainable development, improved health and reduced poverty. Those are the main messages of a report released by the Stockholm International Water Institute ( SIWI ) at the United Nations in New York in conjunction with the 13th Meeting of the Commission on Sustainable Development (CSD ).


For example, the report finds that poor countries with access to improved water and sanitation services have enjoyed annual average growth of 3.7% of GDP, while those without adequate investment saw their GDP grow at just 0.1% annually.


The report, entitled "Making Water a Part of Economic Development: The Economic Benefits of Improved Water Management and Services", shows how investments in the water sector can generate economic benefits that considerably outweigh costs and contribute to human development. The report was developed jointly by SIWI and the World Health Organization on behalf of the Governments of Norway and Sweden.


The report, along with a companion fact sheet entitled "Driving Development by Investing in Water and Sanitation," stresses the cost of such investments are well within reach of most countries.


The report advances five major arguments in support of increased investment in water and sanitation:


o Improved water supply and sanitation and water resources management boost countries' economic growth and contribute greatly to poverty reduction;


o The economic benefits of improved water supply and - in particular - sanitation far outweigh the investment costs;


o In countries where water storage capacity is improved national economies are more resilient to variability in rainfall and economic growth is boosted ;


o Investing in water is good business - improved water resources management and water supply and sanitation contribute significantly to increased productivity within economic sectors; and


o Meeting investment needs in the water and sanitation sector is within reach of most nations.


Economic benefits ranging from US$3 to US$34 per US dollar invested would be gained in the health, agricultural and industrial sectors if the Millennium Development Goals related to water and sanitation were achieved, the report finds. In some cases, the benefit could be up to US$60 per dollar invested.


Not only do the economic benefits far outweigh the costs, the report finds, investment in improved water and sanitation infrastructure also accelerates economic growth. For example, it is estimated that improved water storage capacity, making Kenya less susceptible to changes in rainfall, could contribute to boosting the country's GDP annual growth rate to 6% - the amount needed in order to start reducing poverty effectively - from its current 2.4% annual growth rate.


Yet, the annual per capita costs of making these investments can be quite small: an estimated US$4-7 in Bangladesh, Cambodia, Ghana, Tanzania and Uganda, for example.


"The world water and sanitation crisis is, in reality, an opportunity from a social and economic perspective," says SIWI Executive Director Anders Berntell. "Yes, solving it would be expensive. But it would save far more than it cost, it would unlock huge potential, and it would transform countless lives.


The report establishes a poverty-focused investment priority list:


1. Improve access to safe water supply and basic sanitation, and hygiene including household water management ( these investments have the highest immediate economic returns );


2. Protect the integrity of aquatic and water-related terrestrial ecosystems; and


3. Invest in water-resource management including, where feasible, hydraulic infrastructures such as dams, irrigation schemes and flood control works.

Source:

Stockholm International Water Institute

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