Decentralizing water resource management : economic incentives, accountability, and assurance

Private sector involvement and user participation in water resource management are not new, say the authors. They give examples that demonstrate how willing users and the private sector are able to improve water use and play a larger role in water resources management. User participation and private sector involvement, if properly structured, can provide the incentives needed to stabilize and improve the efficiency of irrigation and water supply systems. They can add flexibility, transparency, and accountability and can reduce the state's administrative and financial burden. A 1989 World Bank review of 21 impact evaluations of irrigation projects, for example, found cost recovery to be excellent in those projects in which water management and operations and maintenance had been entrusted to water users. Greater private sector and user participation can effectively increase user responsibility for managing and financing water projects while freeing governments to focus on broader water resource management concerns. The authors provide examples of decentralized water management in developing country water supply and irrigation systems. Governments should: more actively regulate private sector exploitation of groundwater, especially for irrigation; take measures to encourage price competition among private suppliers of water for both domestic and agricultural uses; and play an active role in organizing water user associations, especially for irrigation and rural water supply systems, and in giving them technical assistance. As numerous examples highlight, such activities should be designed to reduce the transaction costs of organizing and to establish a sense of assurance and accountability within the water user community. Once this is done, the community can deal with problems associated with excludability and unwillingness to pay.