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Water security and economic growth in emerging economies

Water security and economic growth in emerging economies

The objective of the conference "The new politics of water", organized by Chatham House on the 14-15th June 2011 in London, was to address key issues around water security and economic growth in emerging economies. Jennifer Möller-Gulland, Researcher at Ecologic Institute, participated at this conference and highlighted the main discussion topics in the following.

Water security, defined by Grey and Sadoff (2007:1) as "the availability of an acceptable quantity and quality of water for health, livelihoods, ecosystems and production, coupled with an acceptable level of water-related risks to people, environments and economies", is central for successful, sustainable economic growth of nations. However, many of the emerging market economies lack this necessity.

The objective of the conference The New Politics of Water– water security and economic growth in emerging economies, organized by Chatham House on the 14 and 15th June 2011 in London, was to address key issues around water security and economic growth in emerging economies. The sessions covered topics on international and transboundary waters, water and regional development, water security for major emerging economies, innovation as well as finance and investment. Jennifer Möller-Gulland attended this conference which was held under the Chatham House Rule.


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Water insecurity is dominant in many emerging economies and with climate change, will likely increase in the future. China, for example, suffers from a high rainfall variability that can lead to floods and droughts in the same region. Even in places where the hydrological conditions may be favorable, institutional flaws and mismanagement may lead to water insecurity. For example, since 1992 there has been no proper coordination regarding flows from hydropower dams in the Aral Sea catchment - the production of hydropower is prioritized at the cost of the remaining downstream uses, such as agriculture. Part of the problem is identified as the absence of conflict resolution mechanisms due to political tensions and weak economies. Further, institutional fragmentation is prevalent and typical on all levels in water management - e.g the management of the Three Gorges Dam, China, is split between various Ministries which individually set targets for their respective areas, such as navigation, fishing, electricity. In the past two years, water insecurity has additionally been recognized by companies such as Nestle, Coca Cola and SAB Miller, as a fundamental business risk.

Benefit Sharing in Transboundary Basins

While the benefits of regional cooperation in water management are widely known, only few regions have voluntarily engaged in these cooperative agreements, as others managed to “make ends meet” within their own boundaries. The regional cooperation between South Africa and Lesotho has showed that benefit sharing could be built on trust arising from a common political agenda and political cooperation rather than on international law agreements. Misperceptions and non-common knowledge between nations can create political tensions. Perceptions need to be replaced with facts, which again need to be linked to the political discourse. The importance of this can be seen in the evolution of the Nile Basin Initiative (NBI). The increasing knowledge base of all riparian states has started to change the understanding of positions and ignited potential initiatives. A strategic assessment of the contested basins in the region is fundamental to increase the knowledge base. As such the perception that the same amount of water abstracted upstream of the Nile would lack downstream in Egypt was proven wrong. The extraction of 10 BCM upstream of Lake Victoria only results in 0.7BCM less inflow in Aswan High Dam, Egypt.

National Transformation of the Water Sector

Water sector transformation usually fails in its execution, as decision makers are paralyzed by the multitude and magnitude of the questions which need to be answered. "Simplicity drives action". As such, a strategic assessment of water resources is a crucial first step. Based on the methodology of the 2030 Water Resources Group India, Jordan and Mexico undertook a detailed analysis of the water supply and demand gap. To support policy makers, options were identified to fill this gap which were subsequently ranked based on costs and due ability of implementation. Following this assessment the Ministry of Jordan is said to have shifted its thinking from increasing water supplies to demand management as a solution to fill the supply and demand gap. It was stressed that the interdependencies of the water sector with other sectors (eg. the famous water- energy food nexus), necessitates reforms outside of the water sector (i.e. land use, agriculture) to solve water problems.

Businesses, Investments and Innovation


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In many societies, it is not the lack of water, but the costs of delivery to where it is needed which is the problem. Investments in water supply or demand measures lead to a reliable water supply which in turn leads to greater economic productivity. However, there is an apparent lack of innovation in the water sector with less than 2% of all Venture Capital Funds and less than 5% of World Bank projects investing in the water sector. Sovereign Wealth Funds still hesitate in investing in the water sector and have problematic short term investment horizons. It was agreed that government regulations were needed to incentivize investments and make these "water-friendly". Increasingly mismanaged water brings risks to citizens and the private sector –
 Likewise, private companies need to act better in terms of "shared risks – shared responsibilities". In many cases the government does not take responsibility for sustainable water management – companies need to find ways to increase awareness and support governments in their resource management. The engagement of international companies in reducing their supply chain risk and supporting sustainable management practices play a pioneering role for small and medium sized enterprises. For example, the international player Nestle,  has increased its production by 72% while reducing water use by 3% over the past ten years. 90% of the water savings were gained in agriculture due to the application of improved technologies. 

Water management needs to be addressed in a holistic manner, while realizing that at its heart it is fundamentally political. A knowledge base filled with facts rather than perceptions is the foundation of sustainable and politically sound water management strategies.

Keywords: water security, emerging economies, chatham house, politics, water, regional development, transboundary waters, innovation, finance, business, investment, corporate responsibility, hydropower, benefit sharing, water sector transformation,  2030 water resource group, water- energy food nexus, sustainable water management