The Challenge

Increasing water scarcity is one of the globe’s greatest challenges. As local demand for water rises above supply in many regions, the effective governance of available water resources will be key to achieving water security, fairly allocating water resources and settling related disputes.

Sound governance will also be essential for the attainment of the Sustainable Development Goals (SDGs).

Cooperation on internationally shared water resources is also critical, especially in water-scarce regions where the upstream and downstream impacts of consumption and pollution are magnified.

As water resources management is about coping with variability, land use changes combined with climate change has made it much more dynamic, imposing added challenges in terms of more rapid, more intense and randomly frequent changes. Water adaptation to climate change is critical to safe-guard progress made in water for economic growth, energy, and poverty reduction; for food and fibre; nature; and people.

Poor resource management, corruption, inappropriate institutional arrangements, bureaucratic inertia, insufficient human capacity and shortages of finances for investments also undermine the effective governance of water in many places around the world. These are also the challenges to be addressed by governance reforms.

Today, 780 million people still lack access to improved sources of drinking water and another 2.5 billion lack basic sanitation. Access to these services matter greatly to people’s lives and determine possibilities for attaining personal goals and the health of the community, particularly among young children.

When river flows, ecosystems and groundwater tables are altered and polluted they affect the conditions for producing water and sanitation services, and the possibilities for producing crops and other economic uses of water. This affects people living both up and downstream to the extent that they form part of the same social, economic and political system. In reality, the way water is allocated leads to greater benefits for some groups or individuals while others lose out. Yet, the benefits of a more socially equitable and economically efficient water allocation and use accrue to society beyond the specific groups sharing a water source.

The allocation of water is often determined by factors and actors outside what is usually defined as the water sector. Hence, agriculture, trade, energy, environmental and industrialization policies greatly affect water allocation and use. Yet, none are within the control of those working strictly on water issues however. That many factors are beyond the control of any one actor lies at the very heart of the governance challenge.

Improved governance lowers transaction costs and significantly strengthens the water infrastructure investment environment, helping to ensure investments are used correctly and efficiently. Financing the actual reforms is a significant obstacle however.

While the water sector is underfinanced in many countries, most of these governments have not been able to raise adequate funds – whether through taxation or the application of water tariffs. There is therefore a need to adequately reflect the use of water and other natural resources in national income accounts and put in place policies and institutional frameworks that can correct market failures and the economic and social under-valuation of water resources. Government plays an important role in providing incentives to facilitate this.

External support agencies also have an important role to play by way of ensuring a requisite balance between the financing of reforms and the financing of investment into physical infrastructure.


Dr. Håkan Tropp

Programme Director
Phone: +46 8 121 360 40