Water resource licensing is increasingly becoming a cornerstone of integrated water resources management (IWRM). Licensing and other allocation mechanisms are important because they determine who gets access to water and provide a means of managing water fairly, efficiently and sustainably. As water grows scarce in an increasing number of countries, there is a significantly greater risk of corruption in the water licensing process. These risks, and their underlying factors, are not well understood. The authors of the report explore the nature of the risk of corruption using a 2007 field study, with Chile and Kazakhstan as case studies.

This study explores this issue in two countries: Kazakhstan, with a state-dominated water sector in the midst of economic and institutional reform, and Chile, which started to liberalize the water sector in 1981 and is seen by many as the model for market-based initiatives. In both countries, where environmental reforms have recently been introduced, water licensing is situated in a dynamic legal-administrative context. This paper examines these aspects and concludes by recommending future preventive measures to increase transparency, integrity and accountability in water resources licensing. In total, 80 interviews were held with water licensors, water licensees and other informants, including NGOs, private sector managers and the press, to explore corruption risks in water licensing. Due to the sensitivity of this topic, some information was provided under guarantee of anonymity.