Stockholm, August 22, 2008 ─IFC
Executive Vice President and CEO Lars Thunell said today an opportunity
is emerging for the public and private sectors to collaborate on solutions
to the world’s critical water and sanitation challenges.
Speaking at the conclusion of the 2008 World Water Week conference, Thunell
said governments and businesses worldwide now see a strong economic incentive
to work “as partners” to ensure a sustainable supply of clean water.
Partnerships between the public and private sectors could help prevent
the specter of a “food, fuel, and water crisis in an increasingly
populated world,” he said.
Providing clean water and sanitation services is not only a business opportunity
but also an opportunity to improve lives. Thunell said businesses have
begun to recognize the possibilities. Investors see an opportunity in the
$450 billion global water sector: stocks in that sector are performing
strongly worldwide. Private firms also regard water supply as a business
risk and are tackling it as an integral part of their risk-management strategy.
“I believe the moment is right,” Thunell said. “We can avert a crisis
–as partners, working together.” He said IFC, a member of the World Bank
Group, will do its part by investing in companies that pursue opportunities
in water conservation and quality, and by fostering public-private partnerships
in the water sector.
Below are key excerpts from Thunell’s remarks:
“Action is crucial because much is at stake, and time is running out.
Five thousand boys and girls under age 5 die every day around the world
from diseases spread by dirty water and inadequate sanitation. This morning,
more than a billion people woke up without clean water to drink.”
“I believe we are at a tipping point …The specter is of a food, fuel,
and water crisis in an increasingly populated world facing climate
change. It means the private and public sectors have a shared interest
in working together to solve the world’s water and sanitation challenges.”
“In an increasingly urbanized world, water conservation involves both
demand and supply-side management. Between 40 percent and 70 percent of
water distributed by city networks in emerging markets is lost to leakages
and theft. Reduce the losses by 20 percent in Jakarta, and some 800,000
people can have reliable access to drinking water.”
“Now that companies are seeing water as a business risk, they are making
comprehensive water strategies an integral part of risk management. They
are going to governments and asking, ‘How can we be part of the solution?’
This is what gives me confidence.”
A full text of Thunell’s prepared remarks is provided below:
IFC Executive Vice President and CEO Lars H. Thunell Speech at World Water
Week, Stockholm, Sweden
August 22, 2008
Embargoed until August 22, 11:00 a.m. local Stockholm time
Check Against Delivery
Good morning, Madam Minister, Honorable Colleagues, Ladies, and Gentlemen.
Thank you for your introduction, Professor Lundqvist. I would
also like to thank the Stockholm International Water Institute for giving
me the opportunity to speak at World Water Week and to address such a distinguished
I understand that this has been a week rich with exchanges of ideas and
debate: how to protect health and ecosystems; how to cooperate for equitable
and responsible allocation of water; the role of business and the private
sector; the challenges of climate change and the opportunities for action.
I want to acknowledge the leadership of SIWI. You have created
a tremendous platform for action, beyond this conference hall.
Action is crucial because much is at stake, and time is running out.
Five thousand boys and girls under age 5 die every day around the world
from diseases spread by dirty water and inadequate sanitation. This
morning, more than a billion people woke up without clean water to drink.
And more than two and a half billion men, women, and children lacked
the dignity and safety of a proper toilet facility. Ecosystems, our
security, and economic growth are at risk. For instance, a new World Bank
study found that the economic costs of poor hygiene and sanitation reached
2.3 percent of Indonesia’s GDP in 2006. The scarcity of water poses
a threat to the food supply, just when the agricultural sector is stepping
up production in response to riots over food prices, growing hunger, and
Unless we take action, water will be the next global crisis, emerging from
the shadow of climate change and today’s food and fuel crises.
We are on a dangerous path. Water itself is at risk because we tend
to overuse it. Water efficiency practices are still limited in agriculture
and industry, which represent 90 percent of total fresh water use. Climate
change is making water supplies more unpredictable, with serious consequences
for agriculture. People and fresh water are often not in the same
place—the Amazon has 15 percent of the earth’s fresh water, yet only
1 percent of its population.
Growing demand is outpacing supply. The world’s population is forecast
to be 9 billion by 2050; more than 60 percent will be living in mega cities.
Since water consumption goes up where there is development and improved
lifestyles, we can expect even greater demands on fresh water. The
most water intensive sector, agriculture, is expanding. Industrialization
and energy production are further driving demand.
Competing pressures from municipalities, agriculture, and industry are
raising complex questions about who gets to have water and how it is used.
There are political and social obstacles to getting water allocation
right. We also lack the incentives for optimal water allocations
where water is priced below the cost at source and at the tap. Without
this basic market mechanism, water projects will struggle to attract investors
and waste will continue.
If we are not careful, our societies could end up with a quandary of food
versus drinking water versus electricity—and even conflict. Some
aspects of this challenge are playing out in Central Asia, where I was
last week. Upstream Kyrgyzstan relies on hydropower to generate electricity,
and it releases more water from its reservoirs during the winter to meet
peak demand. By contrast, downstream Uzbekistan requires a uniform supply
of water to maintain crops. Without it, food prices are skyrocketing
and cotton farmers are going out of business. Such situations are creating
serious tensions in the region. That people froze to death last year during
the coldest winter in Tajikistan in 50 years is a grim reminder—places
such as Central Asia need regional solutions to trans-border water and
energy issues. The World Bank Group and other multilateral organizations
can help with such complex matters, which brings me to the opportunity
of this moment.
I believe we are at a tipping point. The growing awareness of the effects
of high fuel and food prices on economic growth—combined with water scarcity—raises
a specter. The specter is a food, fuel, and water crisis in
an increasingly populated world facing climate change. Businesses see the
risk—and this new mindset is a significant opportunity. It means
the private and public sectors have a shared interest in working together
to solve the world’s water and sanitation challenges. I want to
talk about what I believe is an enormous opportunity to turn things around.
And I want to talk about the possibilities that IFC is pursuing with our
clients, as part of the World Bank Group that fosters sustainable private
sector development in emerging markets.
It is going to take action by private sector firms, governments, multilateral
organizations, and individuals. First consider the private sector.
Water issues are leading companies to focus on a variety of risks:
the cost of water, community and regulatory pressures, supply chain interruptions,
and competitive demand for water from other firms and municipalities. Agriculture
in particular has a big role to play in conservation. For example,
Cyprus, Israel, and Jordan use efficient technologies for 55 percent and
90 percent of their total irrigated areas. While the use of efficient
technologies for farming in India, China, and the United States is less
than 1 percent. In Uzbekistan, at least 30 percent of water is wasted
due to faulty irrigation. Second, the use of treated wastewater
to irrigate farm land is practiced in Latin America and the Caribbean,
in Africa, and extensively in Israel. This approach should be adopted
elsewhere. Third, farmers should make a shift toward water efficient
crops wherever possible. Governments must resist the political temptation
to encourage the raising of inefficient crops.
Smart regulations and the need to cut costs have prompted water-intensive
companies to achieve greater water efficiencies in developed countries.
In emerging markets there is scope to do much more. Sharing and adopting
regulatory approaches that work across the world is critical. Partnering
with companies experienced in water efficient technologies should be a
priority. Governments must also do their part to encourage conservation
through sensible regulation.
In an increasingly urbanized world, water conservation involves both demand
and supply side management. Between 40 percent and 70 percent of
water distributed by city networks in emerging markets is lost to leakages
and theft. Reduce the losses by 20 percent in Jakarta and some 800,000
people can have reliable access to drinking water. It is another
opportunity for governments. The mispricing of water’s value is
one of the biggest challenges to developing water and sanitation services
for poor and low-income communities. Reasonable tariff reform is
essential to ensure cost recovery on water projects. More broadly,
reform of the power, irrigation, as well as water supply sectors benefits
the poor. The World Bank and other multilateral organizations are
playing a strong role in helping governments improve water resource management
and infrastructure, for example through municipal bonds. Increasingly,
large industrial companies are water service providers and see this as
their role in the future. Mining, manufacturing, metals – these
firms can be harnessed as part of the solution.
I want to take a moment to acknowledge the leadership of the United Nations.
The UN has been absolutely instrumental in keeping water at the top
of the global development agenda and advancing the progress on water-related
goals. The Secretary General’s eloquent warnings of the connections
between water, climate change, population growth, and conflict are being
heard in the right places.
IFC is committed to doing our part to avert a crisis, working with the
private sector while the World Bank focuses on policy issues and the public
sector. Let us take the issue of access. We believe that providing
clean water and sanitation services is a real business opportunity. It
is also an opportunity to improve people’s health and liberate them from
the drudgery of fetching water. Spending on infrastructure in emerging
markets is expected to reach around $180 billion during the next 20 to
25 years. This level of investment will need to come from both private
and public sources.
IFC’s goal is to develop a pipeline of ‘bankable’ projects in poor countries
and regions that are well structured and attractive to private capital.
As one part of this, we have also launched a $100 million fund to
provide risk capital for early stage development of infrastructure projects
in the poorest countries, mostly in Sub-Saharan Africa. We are also
working with public and private partners to introduce performance based
innovative grants that address market failures and bring services to people
who otherwise would have no access.
We are fostering public-private partnerships through project design and
development and training, as well as innovative financing solutions. The
number of successful public-private partnerships is growing. One
example is Manila Water in the Philippines. The government—using
IFC’s advisory services—privatized a state-owned water and sewage utility.
The benefits to neighborhoods have been significant. The number
of households in Manila with water connections has risen to a million,
of which 98 percent have a 24-hour water supply. This is life-changing.
Equally important, the new set up has resulted in a significant reduction
in water losses, keeping the system sustainable for more customers in the
future. I am glad that in time IFC was able to provide Manila Water
with financing to support the company’s growth.
Beyond access, IFC invests in companies that are pursuing opportunities
in water conservation, efficiency, and quality. In China, we are
an equity investor in a company that provides turnkey waste water treatment
solutions to municipalities and industry. In India, we are financing
Jain Irrigation, the country’s largest provider of micro-irrigation systems.
Jain’s clients are increasing their water efficiency by as much
as 95 percent. The technology can be as simple as a gravity drip
system of a 20 liter bucket and irrigation tape designed for small-scale
The opportunities are without limits, and not just in emerging markets.
The developed economies also have a responsibility to conserve. Consider
that the average American uses about 380 liters of water a day and the
average European about half that amount. This compares to an average
15 liters per capita in developing economies. Imagine what we could
accomplish if water efficiency became second nature to citizens of Los
Angeles and Stockholm.
So will the world act? I am optimistic that we will, and this conference
has been an important step in the right direction. There is growing
recognition that water is a finite resource, it is essential to every sector,
and therefore entire economies could be at risk.
It is a new opportunity: to bring together the public and private sectors
to work on integrated solutions to manage competing demands. The
debate is shifting. Instead of ‘should the private sector be involved
in water?’ the question is ‘how can we work together for sensible and
fair solutions?’ Now that companies are seeing water as a business risk,
they are making comprehensive water strategies an integral part of risk
management. They are going to governments and asking, ‘how can we
be part of the solution?’ This is what gives me confidence.
We also see strong economic incentives for the private sector. Equities
in the water sector have financially outperformed the industrial average
globally. The sector is worth about $450 billion worldwide. This
is a considerable market opportunity for private capital and innovative
companies, especially in poorer countries that are the future sources of
economic growth for the world.
Water will be a key challenge to humanity’s welfare and security over
the coming decades—along with energy, climate change, and food. It
will require all stakeholders in water—public and private—to work together
to balance competing demands on a finite resource to create opportunities
for sustainable development. I believe the moment is right. We
can avert a crisis—as partners, working together. Thank you.
IFC, a member of the World Bank Group, fosters sustainable economic growth
in developing countries by financing private sector investment, mobilizing
private capital in local and international financial markets, and providing
advisory and risk mitigation services to businesses and governments. IFC’s
vision is that poor people should have the opportunity to escape poverty
and improve their lives. In FY07, IFC committed $8.2 billion and mobilized
an additional $3.9 billion through syndications and structured finance
for 299 investments in 69 developing countries. IFC also provided advisory
services in 97 countries. For more information, visit www.ifc.org.