United Nations Economic Commission for Europe -- Regional Implementation Forum on Sustainable Development

Over the past 2 years, highlighted by the 2002 World Summit on Sustainable Development in Johannesburg, the international community agreed that, among the other keys to sustainable development, the resources for development must come from all sectors of society and that we must work in partnership to achieve our development goals. The United States is committed to doing so and we are approaching water and sanitation issues on three fronts: delivering immediate results; enabling long-term results through innovative financing; and, partnering with developing countries to integrate water in their broader development plans or poverty reduction strategies.

To deliver near-term results, we announced at Johannesburg a $970 million "Water for the Poor" initiative that we expect will provide 50 million additional people with clean water by the end of 2005. We have already obligated more than $440 million toward this effort. In the first three quarters of Fiscal Year 2003, we estimate that more than 16 million people gained access to improved water and/or sanitation services due to our overall water efforts in various parts of Africa, Latin America, and the ECE region. Likewise, our "Safe Water System" partnership is now working in 19 countries to rapidly improve drinking water quality through household treatment.

I'd like to focus my comments, however, on some of the ways we are working to mobilize resources aimed at providing greater water and sanitation services over the long term. As the Secretariat’s background report makes clear, meeting the needs of the 120 million people in Europe who lack access to safe water and adequate sanitation will require private sector financing and, in particular, securing additional resources for municipalities.

Sovereign or development bank lending to national governments cannot alone meet the need for infrastructure investment without exceeding the borrowing abilities of the countries of the region, so other solutions are needed. These solutions involve mobilizing domestic capital from within these countries as well as attracting private sector investments from world markets through mechanisms such as revolving funds. These entail a dedicated fund that lends to local governments and the private sector for water, sanitation, and other infrastructure, with repayments directed back into the revolving fund for re-lending in the future. The U.S. achieved enormous success with our own State Revolving Funds over the last two decades, increasing the quality of drinking water and reducing pollution.

In recent years the U.S. Environmental Protection Agency and the U.S. Agency for International Development have each been working to demonstrate these solutions, which either mobilize domestic capital or attract private sector resources:

Revolving Funds: USEPA worked with the Russian Government to develop a $90 million revolving fund for environmental projects, including water and sanitation, using sequestered loan repayments. As the Ukrainian Government looks to restructure its National Environmental Protection Fund to direct up to $12 million in annual fees and fines into a revolving loan fund for similar projects, we are providing advice from our experience using revolving funds for our domestic environmental needs.

Project Development Facility: In Southeastern Europe, USAID developed an innovative $10 million revolving fund to prepare public infrastructure projects for private sector investment. This fund is called the Balkans Infrastructure Development Facility, or BID Facility, and was modeled on over 10 similar infrastructure development facilities around the world. The United States and the International Finance Corporation, as well as Austria, Italy, Greece, Netherlands, Norway, and Switzerland, have contributed to fund financing. The facility enables the public sector to come to the negotiating table as strong and equal partners to their private sector counterparts.

Pooled Community Resources: In the local province, or Oblast, surrounding Kazakhstan’s capital Almaty, USEPA is partnering with local community groups to create a financially sustainable village-based water program. This is a new model, based on self-imposed tariffs from local “Water Committees.” The tariffs provide for the continuing operation and maintenance of systems, and also create an additional pool to pay for future repairs and replacements. This innovative program connects with grassroots demand for clean water and empowers people to take true ownership of programs and pool their own financial resources.

Partial Credit Guarantees: In Bosnia-Herzegovina, a Sarajevo commercial bank is taking the bold step of offering local community water and sewer companies loans to invest in system improvements, including leak reductions and energy efficiency improvements. USAID provides partial guarantees for these loans through the Development Credit Program, lowering the risk to the bank. This program creates incentives to offer credit to underserved markets and helps the bank attract capital investors. A similar guaranteed-loan program in Bulgaria fully disbursed $11 million for public utility improvements and has had no failures to date, illustrating how innovative programs can mobilize private sector to meet development goals.

Each of these programs taps into a solution to the shortage of finance and each of them illustrates a way in which the countries of the region can bring their own resources or the resources of the private sector to bear on the need for investment in water infrastructure.

These are just some of the things we are doing on water and sanitation in the region. The United States remains committed to bringing these types of solutions into broader use and to seeking innovative solutions to address the region's water and sanitation needs.

Finally, as partnerships are an effective tool for mobilizing resources, we would welcome additional opportunities to work with other governments, civil society, and the private sector to develop ideas that will put domestic capital to work in improving access to water and sanitation.