To ask the Minister of State, Department for International Development what estimate he has made of the contribution which can be expected from the (a) international private sector and (b) domestic private sectors towards the costs of delivering the millennium development goals on water and sanitation in sub-Saharan Africa and South Asia. [123648]
DFID is currently engaged in the EU Water Initiative and leads on the Finance Component that focuses on improving the sustainable financing of water supply and sanitation services that will benefit the poor. Extensive research is being undertaken as part of this work to estimate the financial challenge facing the water sector at a global and regional level. The issues are also being addressed as part of the UN Millennium Project by the Task Force on Water and Sanitation.The water sector is funded by a variety of sources, including:
- User charges and household and community investments;
- Domestic public financing;
- Private sector investment from either international or local operators;
- Official development assistance (ODA) loans and grants; and
- Donations from the local and international non-profit sector.
A study undertaken by WaterAid in 2002 estimated current global spending on water and sanitation in the region of USD 30 billion, with the majority (approximately 70 per cent.) being provided by the domestic public sector. Private sector flows accounted for some 10 per cent. of global spending of which 7 per cent. came from the international private sector and 3 per cent. from the domestic private sector. External aid flows accounted for the remainder (approximately 20 per cent.) of spending.
Meeting the water supply and sanitation targets within the Millennium Development Goals is estimated to require an additional US$9 billion to US$30 billion per year.
The World Bank Private Participation in Infrastructure (PPI) database maintained by the World Bank includes information on infrastructure projects that include private sector investment and is the most comprehensive single source of data on private sector flows available. The PPI records initial investments rather than ongoing operational expenses.
Around 3 per cent. of Investment in infrastructure projects with private sector participation between 1990 and 2001 was in Sub-Saharan Africa. Around 28 per cent. was in East Asia and the Pacific region. Globally in the period 1990 to 2001, water and sanitation has accounted for only around 5 per cent. of investment in infrastructure projects with private sector participation. Figures from the PPI database indicate that global investment in water and sewerage projects with private sector participation has fallen from some US$6.9 billion in 1999 to around US$2.2 billion in 2001.
Private capital flows to the water sector have been mostly directed to Latin America and South-East Asia, as they are considered more stable in macro-economic terms than other regions such as Sub-Saharan Africa. Private sector participation in the water and sanitation sector has remained at very low levels and is showing no sign of increase because of the perception of high risks and limited revenue potential affecting the sector.
DFID is supporting a range of initiatives to encourage private sector involvement for improving access to water and sanitation, while seeking to ensure that services are provided at an affordable price to the poor.