CAPACITY BUILDING SEMINAR ON THE INCORPORATION OF ECONOMICAL & SOCIAL DIMENSIONS IN IWRMCairo, Egypt10 to 11 March 2010 Financing Water for Agriculture in the Arab region Safwat Abdel-Dayem Secretary General Arab Water Council
To feed a population of more than 9 billion free from hunger, global food production must nearly double by 2050. Water for agriculture needs to increase 60% to feed an additional 2 billion people by 2030, (FAO estimates). it is commonly thought that the annual investment requirements for agricultural water will need to rise from the current levels of (USD bn.) 25-30 to 40 by 2025 (WWC/GWP Framework and Vision,2000).
Why Agriculture is Important? • Vital to pursuing the related goals of: • food security, • growth, • poverty alleviation and • sustainable development • Agriculture provides the primary source of livelihood for 36 percent of the world’s total workforce.
The Role of Irrigation in Development • Food Security (productivity higher than rainfed) • Diversification of crops • Creation of on-farm and off-farm job opportunities • Reduces migration to cities • Accelerate growth
ENVIRONMENT Water 65% of consumption Non point source pollution AGRICULTURE Food Security 17% Cultivated Area 40% of Production IRRIGATION Store, distribute, apply water and dispose waste POVERTYALLEVIATION Increased Rural Income
Cropped Land in Arab States Total = 53.52 m. ha. Rainfed = 39.09 m. ha Irrigated= 14.43 m. ha Source: AOAD Database
Areas Equipped for Irrigation 1 % of the total geographical area Source: AOAD Database
Ratio of Rural to Total Population Average = 0.44
Gross Agri. Product (GAP) as percent of the Gross Domestic Product (GDP), 2007
Type of Investments in Irrigation and Drainage • New Systems • Expansion of existing systems • Modernization • Rehabilitation • Operation and Maintenance (O&M) Recent irrigation and Drainage Projects are modernization and Rehabilitation
Financing Modalities in Irrigation and Drainage public national and international sources Public-Private Partnership (PPP) Private Sector (farmers) Commercial Farmers
1. Public Financing of I&D • Own government Financing • Loans from multilateral or bilateral funding agencies • Cost of Agriculture Water Projects is high and on the rising trend • Lending for I&D declines Source: World bank
2. Public-Private Partnership (PPP)(Transfer Risk to Private Sector) 35 30 25 20 15 10 5 0 Divestiture (asset sale) Build-Operate-Own Build-Operate-Transfer Concession Duration Affermage Lease Management contract Service Contract public private
Divestitures Mixed Company Concessions Private Operating Company plc BOTs Finance CorporatizedMuni. Service Leases/Affermage Public Department Public Management Contracts Private Public Management Unbundling Finance And Management! Looking at Sustainable Hybrid Solutions
Regulatory Arrangements Loan arrangement The World Bank Government Loan withdrawal and Concession Fee payment Regulatory office Tariff Adjustment Service Standards Services Provision Farmers Operator Service Charges
3. Private Financing • Investment provided by farmers in land improvement and on-farm irrigation are difficult to define • It can represent up to 50 percent of the overall investment in irrigation.
Although water is often described as a ‘gift of God’, harnessing and managing it for the wide variety of human and ecological needs entail financial costs. Considering the economic value of water is a requirement for financial sustainability Instruments of financial sustainability includes taxes, cost recovery, cost sharing, and tariffs. Financial Sustainability
Cost of Environmental Degradation Lessons learned
Accounting has not adequately captured the costs of degradation Source: World Bank
Degradation Changes its Faces • Drainage Projects combat soil salinization but ……….. • The drainage effluent pollutes downstream land, water and coastal areas
Long-term Vision Safeguards the Resources against Degradation • Policy of KSA for food security in 1980s triggered large scale irrigation using non-renewable groundwater • Government cut back cereal subsidies, and irrigated acreage is now shrinking at a pace of 1.4 percent per year.
Conclusions • Governments are the main source for financing big and medium size dams and head works and diversion infrastructure. • The public sector is increasingly becoming important partner in construction of irrigation infrastructure • The farmers contributes more than 50 % of all investments in irrigation and drainage.
Conclusions • Financial sustainability requires an encouraging environment founded on appropriate policies and institutional arrangements and efficient regulatory framework. • Accounting for the environmental cost of development should be an essential component in project planning and design.
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