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Clean water needs clean governance

Eight years ago Transparency International (TI) and the Water Integrity Network (WIN) published the Global Corruption Report 2008: Corruption in the Water Sector, capturing the scale of corruption in the sector and setting out what needed to be done to build integrity. The report helped to build awareness and momentum, though resistance persists in many places.

What has changed since 2008?

Today, there is a growing recognition of the need for good governance and for measures to combat corruption to improve sector performance. The UN Sustainable Development Goals (SDGs) include the need for participation, accountability and transparency. The Organization for Economic Co-operation and Development (OECD) Principles on Water Governance highlight integrity, transparency, accountability and participation (TAP) principles and the need to combat corruption as crucial elements for better water management.  Integrity sessions feature prominently in the annual World Water Week in Stockholm. The term ‘water integrity’ challenges those with a leadership role to adopt and promote the positive values that promote delivery.

This Global Outlook shows how integrity is vital to the ability of governments, institutions, companies and citizens to protect water and to use it with equity.  It underlines how institutional fragmentation makes the water sector vulnerable to inefficiencies, mismanagement and corruption.

It demonstrates the need to improve transparency within governments, companies, the private sector and NGOs. Above all, it delivers a warning to the sector about the power of corruption to undermine good governance, resources and services. The main victims of corruption are the poor and powerless: women, children and the landless. However, in the end, corruption and a lack of integrity are harmful for all: both the victims of corruption and those who are corrupt.
Ultimately, when resources are wasted and the environment is damaged, everybody loses. There is no evidence that corruption has declined since 2008. Indeed, repeated scandals inside and outside the sector suggest that it is as prevalent as ever.

Although there are no reliable estimates of total losses, illustrating the need for better research and data, every 10 per cent of investment that is lost to corruption implies annual losses to the sector in excess of US$ 75 billion; some guesstimates put potential losses many times higher.

This Global Outlook highlights numerous instances of what is called ‘grand corruption’, which leaches money out of development and which takes place both within public institutions and in interactions with the private sector.  In Benin, € 4 million of Dutch funding vanished from the Ministry of Water in 2015.  In Malawi, a reformed public financial management (PFM) system was misused to divert US$ 55 million from public funds to the private accounts of officials.

In California, a member of the State Senate in 2015 declared a system of permits that allowed oil companies to discharge wastewater into underground aquifers to be corrupt.

A major area of concern is in the planning and construction of infrastructure, much of which is vitally needed to provide water services, irrigation and hydropower for millions of people.  However, small- and large-scale projects alike require careful scrutiny in their planning and delivery.
In some cases data has been misused to justify the construction of prestige projects that never achieve their aims or value for money.  In other cases communities displaced by large-scale dams have been cheated out of their compensation. In a project in Pakistan, it is estimated that 80 per cent of compensation went to bogus owners.
Petty corruption – in which people pay bribes to officials or take water illegally – is a misnomer, as small thefts can add up to major fraud.  The Nairobi City Water and Sewerage Company in Kenya loses 40 per cent of its supply to theft and leaks while poor residents are forced to buy water from vendors at ten to 25 times the price they would pay the water utility. In South Africa, eThekwini Metropolitan Municipality in KwaZulu-Natal lost more than a third of its water in one year because of illegal connections and vandalism, costing US$ 44 million.

Action taken once fraud is discovered often comes too late to prevent losses and public mistrust.

The Water Integrity Global Outlook 2016 demonstrates that we now know what the issues are in relation to corruption in the water sector.  These need to be addressed systematically, politically, professionally – and urgently. The time has come to act.  We must no longer allow corruption to flourish and integrity to be undermined.

A global mandate for water integrity

The human rights to water and sanitation are far from being met: in 2015 there were some 663 million people without access to an improved drinking water source, and in the least developed countries only 37 per cent of the population had access to improved sanitation.
Yet the vast majority of countries have no comprehensive system for tracking funding to water and sanitation – and fewer than half know how well services are reaching the poor.  In 2015 the United Nations adopted ambitious Sustainable Development Goals for 2030.
The outcome document adopted by the UN General Assembly cites inequality, corruption, poor governance and illicit financial flows as factors that give rise to violence, insecurity and injustice. Only a well-functioning and corruption-free water sector will be able to overcome the enormous challenge ahead.

There are steps in the right direction.  In June 2015 the OECD Ministerial Council ratified a set of principles on water governance with the potential to address corruption and improve performance, endorsed by public, private and non-profit organizations. They include measures to broaden participation, increase accountability and improve transparency.

The UN Secretary General and the UN Global Compact have established a CEO Water Mandate to assist private companies with water sustainability policies to commit to ‘transparency and disclosure in order to hold themselves accountable’.   By December 2015 the mandate had been endorsed by 144 companies worldwide.

Clearly, though, much more needs to be done.

How policies and laws can support water integrity

Properly defined and enforced policies, laws, guidelines, rules, rights and duties can reduce corruption, ensure credibility and give people the security to call upon their rights.  However, legislations can be influenced by powerful groups. This can occur through political capture by politicians and influential groups within government or, for example, when international companies with money and influence are able to seize water and land rights, overriding customary laws that protect communities.
This report showcases the gaps that allow corruption to flourish: those between policy and implementation. These can be partly bridged by collaboration between the water sector, anticorruption groups, the private sector, public finance institutions and the judiciary.
One example is the legal protection for whistleblowers supported by TI's Advocacy and Legal Advice Centres (ALACs), which operate in 50 countries. Many citizen organizations are engaged in holding service providers and authorities to account.  However, enforcement mechanisms need to be strengthened for legislation to make a difference in people’s lives.

Financing the water sector

There is no part of the financing system – public or private – that is immune from corruption and that does not suffer from integrity failures.

Common examples include bribery and collusion in procurement, fraudulent expenditure and reporting or the bias towards large investments even when these are not cost-effective or when smaller-scale or mixed solutions would provide better benefits for local communities.

Institutional fragmentation makes it impossible to track how financing needs are met, while complex funding arrangements make the water sector especially vulnerable.  Within countries, subsectors are managed across different ministries and regulated in different ways. The public financial management system is frequently weak.  National supreme audit institutions (SAIs) can and must play a powerful role in holding public sector institutions to account and dealing with frauds such as double-counting or ‘ghost’ projects.

SAIs need to engage with civil society to gain traction and protect themselves from political pressure. Budget execution reports from finance ministries should be made public and monitored by independent oversight bodies. State-owned enterprises (SOEs) require special attention, as they are soft targets for political interference and corruption.
Excerpted from the Executive Summary of Water Integrity Global Outlook 2016.
Download the full report at (WaterIntegrityNetwork.net).