Sustainable Funding Models for Development Programmes in Transboundary River Basins

Often, the investments made, and funds committed to the water sector fall short of actual financing needs. These financial inadequacies are particularly prevalent in the field of transboundary water (TBW) development initiatives. While 60% of all freshwater flow worldwide occurs in transboundary basins and transboundary aquifers are of vital, yet insufficiently understood importance, funding for TBW is even more limited than funding for the water sector. Most international public financing is diverted into the Water, Sanitation and Hygiene (WASH) sector and most private capital flows into large infrastructure projects at the national level. Transboundary water development initiatives that do not directly relate to investment opportunities in infrastructure face difficulties of attracting investment. The deficiency of commitment of states to allocate scarce financial resources to TBW development is also an obstacle (Raadgever, 2015; UNECE, 2018). Consequently, transboundary water resources are not sufficiently developed and managed. This has led to wasted opportunities for cooperation that could provide benefits to riparian populations and countries. Sometimes, it could even lead to disagreements and conflicts between riparian states over shared resources, ultimately creating additional costs and losses. (INBO and GWP, 2012; GWH, 2017a; Raadgever, 2015; UNECE, 2018). Notwithstanding the importance of the topic, academic and policy-oriented analyses have thus far mostly neglected the question of financing transboundary water development projects and cooperation. The few existing studies usually have a narrow scope and focus on particular financial necessities or financing mechanisms: either with an emphasis on development cooperation (e.g. GIZ 2007; EUWI 2013); or on international private investments and often only cover one basin or region (e.g. SADC, 2010). Conversely, in recent years, the funding of transboundary water management is being realized more and more through the financing of climate change adaptation (World Bank 2018). Owing to the lack of academic literature, this report mainly relies on grey literature and various reports issued by development agencies that implement programmes. Further, the list of sample projects reviewed in Section 2 (i.e. to draw lessons) mostly include non-transboundary water infrastructure projects. This is because of the difficulty of identifying such specific infrastructure projects with funding extensions (or other relevant financial innovations) in the limited amount of time available to prepare this report. Thus, the report tries to complement the limited availability of exemplar transboundary water projects in Section 2 (i.e. projects with history of a transition in their financing models) with a generic discussion of sustainable financing models and sources of financing in Section 4.