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This article was written by Joel Kolker and originally published by Global Water Intelligence on 5 August 2024. Link to original article. 

"This summer I retired after a 40+ year career of helping to finance and build infrastructure across more than 40 countries on six continents. The focus has always been to deliver critical infrastructure to people and communities who did not have access to basic services, like clean water and sanitation. And while I’ve been part of much larger efforts to leverage billions of dollars to provide these vital resources, the gap in terms of service levels has only grown. For example, a quarter of the world’s population still doesn’t have access to safely managed water and half of us do not have an adequate place to go to the toilet in the morning. In fact, 90% of the wastewater in the global South still goes untreated into our waterways. The problem is real, and growing, and climate change is only going to add more challenges to the water sector.

So, what went wrong, why have we failed, and what must change so the next generation of development professionals can do better? Obviously, that is a complex question but here are a few initial observations:

Financial innovation, guarantees, and the private sector are not magic wands

Billions of dollars of private sector money have been invested in water infrastructure in the global north, but very little has been invested in the south. That’s not due to a lack of effort or financial engineering. Rather, it is primarily because service providers are not financially viable. All the guarantees in the world will not make unrealistic projects creditworthy and, in too many instances, credit enhancements are used to hide or understate real issues impacting bankability. Until more water providers in the global South are efficient, and governance arrangements are respected and implemented with integrity, the private sector will remain reluctant to invest in water infrastructure in emerging markets. Just as importantly, these two constraints also negatively impact public investment as well. 

Stop making unrealistic promises and get back to fundamentals

One of the most frustrating parts of my career has been watching development organizations make unrealistic statements about how many billions of dollars they are going to help raise from the private sector to address the water and sanitation deficit. Admittedly I have been part of this process and, while the intentions may be genuine, the results are minimal compared to the need. All of us involved in the sector, from providers to policy makers to financiers, need to be clear and transparent about how we are going to help water providers become: 1) more technically and financially viable and creditworthy; and 2) create clear, transparent, and enforceable governance and regulatory regimes. Only when these foundational critical steps are in place will we be able to start raising the private capital to support water and sanitation investments that are so desperately needed. 

Unrealistic promises gain traction due to poor leadership and short-termism

How did we get in this cycle of grand promises with minimal results? One challenge is that many of the key players in government, the donor community and non-governmental organisations are often in place for relatively short terms. Too often they make promises about the millions of dollars that can be leveraged when they have no clear or realistic path to deliver these vital resources. To advance their careers these officials make unrealistic commitments knowing that they will rarely be held accountable for long-term outcomes. Sadly, this focus on raising private capital actually undermines efforts to make water service providers more efficient, more viable, more creditworthy, and ultimately more bankable.

We know what to do; stop delaying and focus

For the last decade there has been a growing recognition that the water providers in the south need to become more laser focused on more efficient service, with better regulation and governance. While there have been a lot of nodding heads, and rarely any pushback to this message, there also has not been a concerted effort to improve water operations or governance. Bilateral donors mostly continue to work in silos; demand for Multi-lateral Development Bank resources focuses on infrastructure rather than capacity or vital technical assistance; and governments are not willing to make the tough decisions to improve efficiency and push for better governance, regulation and accountability. What we desperately need is more focus, much better coordination, and funding specifically targeted to achieve efficiency gains and improve governance by supporting technical assistance, training and better leadership.

If I appear frustrated, it is because I am. We know what we need to do to achieve the goal of universal access to water and sanitation. Other sectors, including the energy sector, have made great strides and shown a way forward. Money itself is not the problem; rather it is how we spend and use those limited resources. Finally, more than additional funds solely focused on infrastructure, we need to reprioritize our collective efforts to improve technical and financial efficiency and our governance and administrative arrangement so water providers can achieve creditworthiness. Only when we achieve creditworthiness will water service providers be able to tap the private capital that has long been promised."

Joel Kolker is a water finance expert with over 40 years’ experience at the World Bank and other international organisations. He can be reached at joelkolker47@gmail.com.