Challenges and Opportunities in the Indo-Pacific Water Sector

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In February 2022, the Biden administration released an updated Indo-Pacific Strategy, drawing from the previous administration’s guidance and affirming the United States’ commitment to promoting peace and prosperity in the region. Stretching from the Indian Ocean to the Pacific Islands, this territory is home to roughly half of the world’s population and almost two-thirds of its economy. As such, it will likely drive economic growth in the decades to come. However, with three-quarters of its surface area covered by water, inefficient water and sanitation systems and growing water-related climate risks jeopardize the security and stability of the region. Despite the many recent advancements made in the region’s water sector, approximately 500 million individuals still lack access to basic water supplies in Asia and the Pacific, while 1.14 billion lack access to basic sanitation. This is largely driven by unreliable water, sanitation, and hygiene (WASH) services; a lack of clean drinking water; an increase in pollution; and the devastating impact of climate shocks.

Sanitation continues to be a major water sector challenge in the region. While open defecation has decreased due to WASH interventions, low rates of wastewater treatment and the use of inefficient septic systems stall further progress. In Vietnam, for example, poor wastewater regulation and entrenched corruption has led to roughly 90 percent of the country’s urban wastewater being untreated. The resulting runoff contaminates local groundwater, increasing the risk of disease and lowering the potable water supply. Access to clean drinking water across the Indo-Pacific is further strained by increasing demand from a growing population and a growing agricultural sector to feed it. Water demand in Asia alone is predicted to rise 55 percent by 2030, with 70 percent of the continent’s freshwater consumption going to agricultural production.

Climate change also exacerbates water accessibility. Droughts, floods, and tropical storms plague the Indo-Pacific region and impact local agriculture and infrastructure. Additionally, rising sea levels have created an existential crisis for many Pacific Island nations, such as Micronesia, Tuvalu, and the Marshall Islands, which are now facing the loss of critical land mass. Pacific government officials argue that rising sea levels and extreme weather events are increasingly driving displacement and migration. This mass displacement is likely to have serious implications for regional stability and security. All these issues will only be exacerbated by the weak water infrastructure currently in place.

What Is Being Done?

Assistance from the international community has been instrumental in establishing local frameworks and building infrastructure to address the ongoing water crises. Regional institutions, local governments, and international donors engage actors across the Indo-Pacific in collaborative efforts to develop more resilient water and WASH systems.

The United States is a long-standing partner in the region, contributing just under $2.1 billion in foreign assistance disbursements in FY 2021. As part of the Mekong-U.S. Partnership, which includes cooperative initiatives for managing transboundary water resources, the United States contributed over $3.5 billion in grant assistance between 2009 and 2020 to the five partner countries along the Mekong River watershed: Cambodia, Laos (officially the Lao People’s Democratic Republic), Myanmar, Thailand, and Vietnam. In addition, the U.S. Agency for International Development (USAID) funded the 2013–15 WaterLinks Alliance, which focused on improving access to urban water services through the development of public-private partnerships. As a result, 482,572 individuals experienced improved access to drinking water and 27,700 people had access to improved sanitation facilities across Thailand, Indonesia, and the Philippines. In recent years, the United States has become more active in the region, such as by launching several water initiatives specifically focusing on the Pacific Island countries. Among them is USAID’s Pacific American Fund, a five-year, $35 million grant facility that awards funding to Pacific Island projects that bolster community resilience to climate change and ensure access to WASH services. Up to $6 million from this fund is set to be distributed in a new round of grants in 2023. The United States is also promoting the adoption of clean energy, such as through the Papua New Guinea Electrification Partnership—a joint effort with Australia, Japan, and New Zealand to improve access to electricity—and the Clean EDGE Asia initiative, which has a strategic objective of decarbonizing to “reach a carbon neutral future,” including by supporting the capture of methane emissions from wastewater treatment facilities.

Aside from the United States, the key players working on water sector initiatives in the Indo-Pacific are predominantly developed countries and coalitions in the region. The Australian government, the Japan International Cooperation Agency (JICA), the Asian Development Bank (ADB), and the Association of Southeast Asian Nations (ASEAN) are all actively engaged in a variety of WASH projects and policies in neighboring countries. Most programming in the region has centered around improving water supply services and sanitation infrastructure. ADB projects of this variety reached 20.4 million people in 2021 and provided over $13.7 billion in funding for these projects from 2011 to 2021; JICA’s Clean City Initiative plans to expand water services in over 40 cities by 2030; and through its Water for Women program, Australia has been able to conduct WASH programs in 16 countries across the region with a seven-year budget of about 154.9 million Australian dollars (105 million U.S. dollars). In recent years, there has been a greater focus on improving coordination and developing regional partnerships for knowledge sharing. Both ASEAN and Australia have been active in developing guidelines, strategies, and policies surrounding principled water management. ASEAN regional forums and the ADB’s new Asia and the Pacific Water Resilience Hub play vital roles in promoting knowledge sharing and cooperation on water security.

European partners such as Germany, the United Kingdom, and the Netherlands have also been working to promote water security in the Indo-Pacific. Both Germany and the United Kingdom have largely used funding mechanisms such as grants and trusts to contribute to ongoing projects and research. The United Kingdom has committed itself to £274 million ($337 million) in continued financial support for climate resilience and water security programs in the region, and Germany recently awarded a $2.8 million grant for research on water management systems in the region. The Netherlands—which has become a global leader in the development of water technology and flood protection systems in response to its own water vulnerabilities—is actively engaged in knowledge-sharing partnerships on delta management, flood control, and wastewater management, as well as water programs in partner countries such as India.

Challenges

Governance

Despite the extensive work being done to address water security in the Indo-Pacific, many barriers remain. One of the biggest challenges is the poor governance of water systems and programs. Although current water investments are often country-specific, water crises typically transcend national borders and boundaries because many countries in the Indo-Pacific region share rivers and aquifers. For example, analysis suggests that poor cooperation among the countries that share the Ganges-Brahmaputra-Meghna basin is costing them $14 billion per year. Therefore, developing solutions related to unregulated groundwater pumping and infrastructure runoff requires transnational cooperation that is effective and avoids duplication of efforts. Without a common framework or cooperative regional approach, water programming will continue to waste international resources and be unsustainable. Initiatives such as the Mekong-U.S. Partnership and the International Union for Conservation of Nature’s Building River Dialogue and Governance (BRIDGE) program are actively engaged in promoting more efficient water governance. The ADB’s Asia and the Pacific Water Resilience Hub similarly provides an online platform for building partnerships to strengthen water security.

Additionally, there is an immense need to focus on the integration of local partners into broader regional programming strategies, including their planning and implementation. Water security is often a greater priority at the local level than at the national level because some areas are more directly affected by water crises; local governments are therefore generally better equipped to identify water security threats and ensure program sustainability than their national counterparts. This is especially prevalent in the Pacific Island countries, where religious, community, and cultural authorities hold many local leadership positions and 50 percent of the land is under customary ownership, necessitating increased cooperation to access water resources. Consequently, without the inclusion of key local actors, such as community leaders and civil society organizations, local buy-in to water programming will remain low, reducing program effectiveness and long-term sustainability. An example to follow is that of the Global Environment Facility, which engages in community-based projects that focus on improving access to WASH services, among other targets, through local capacity building.

Private Sector Participation

The Indo-Pacific region faces a critical funding gap for water programming. A 2021 report by the Organization for Economic Cooperation and Development (OECD) found that most Indo-Pacific countries will need to allocate between 1 and 2 percent of their annual GDP to water supply and sanitation infrastructure to meet their targets under Sustainable Development Goal 6, “Ensure availability and sustainable management of water and sanitation for all.” Significant investment from the private sector can help meet these objectives. Besides financial support, engagement of private companies in water partnerships can help mitigate supply strains. The ADB notes that public-private water partnerships in Manila have been successful in supplying 24-hour water access for approximately 12 million Philippine citizens. And the ADB’s Water Financing Partnership Facility has demonstrated the power of private partners to add value to water sector operations by supporting project development and building capacity. Unfortunately, poor water systems, local governance structures, and risks associated with water project investment disincentivize the private sector from engaging. It is imperative that both local and international businesses are made aware of the potential impact of the current water crisis in the Indo-Pacific so they can identify opportunities for future growth.

It is imperative that both local and international businesses are made aware of the potential impact of the current water crisis in the Indo-Pacific so they can identify opportunities for future growth.

Some programming already exists to incentivize private investment in the water sector. The Australian Water Partnership has been incredibly active in promoting private sector engagement through its support for the Alliance for Water Stewardship, whose Indo-Pacific program engages private sector partners in water resource management and water stewardship. Private academic institutions, such as the Asian Institute of Technology, play a crucial role in developing resilient water technologies but require extensive funding. At present, the German government has committed to investing in the creation of a Global Water and Climate Adaptation Center at the Asian Institute of Technology, which will evaluate the impact of climate change on the hydrological cycle and water management systems.

Public Sector Participation

Along with increased private sector investment, public sector participation will also be crucial to the success of water-related programming in the future. Currently, most public financing and programming prioritizes short-term economic and agricultural growth at the expense of environmental sustainability. For example, runoff from industrial plants and farms, combined with low levels of public investment for improved water infrastructure, damages water sector resiliency and inhibits long-term progress toward water security. Additionally, low public engagement can result in insufficient policy and oversight, allowing for the misuse of water resources and corruption within the sector. Across Asia, unethical wastewater providers dump sewage into local streams and lakes rather than taking them to designated treatment plants, and corrupt local authorities allow these regulation violations to occur in exchange for bribes.

Because government policies and reforms are crucial to establishing an enabling environment for water programming, a realignment of public sector priorities is needed so there can be sustainable partnerships for water management that better account for long-term environmental needs. A strong public sector is also better equipped to form durable international partnerships surrounding water security. For instance, India has developed a long-standing partnership with the Netherlands, co-leading water initiatives and programs such as the Dutch India Water Alliance for Leadership Initiative (DIWALI), the Local Treatment of Urban Sewage Streams for Healthy Reuse (LOTUS-HR), and the Namami Gange Program. India has also worked closely with JICA on a variety of WASH programs, including to reduce non-revenue water consumption, improve sanitation, upgrade water supply infrastructure, and help rejuvenate the Ganges and Yamuna Rivers.

Resilient Infrastructure and Digital Uptake

Rapid urbanization across the Indo-Pacific requires more efficient—and resilient—water and WASH infrastructure. The benefit-cost ratio of investing in such infrastructure is as high as seven to one in the least-developed Indo-Pacific countries, where even a little funding can go a long way. Developing climate-resilient infrastructure will also necessitate the implementation of digital technologies, but digital uptake has not been consistent in the region and many gaps still remain between more- and less-developed countries. As additional technologies and innovations are introduced, Indo-Pacific states will require sufficient financing, access, and human capital to utilize them effectively. This need has been recognized by several institutions, including USAID and the ADB, which have committed to incorporating digital components into their projects and strategies in the Indo-Pacific. As part of its economic framework in the region, the United States plans to help Indo-Pacific states harness technological transformation to aid in their energy and climate transition. The ADB focuses largely on mainstreaming digitization; for example, its Mainstreaming Water Resilience in Asia and the Pacific project includes measures to build capacity in digital and remote-sensing technologies.

Recommendations

Despite these challenges, many opportunities exist to create the conditions necessary for sustainable, far-reaching water programming. Investment in water and sanitation infrastructure—particularly in less-developed countries such as Laos and the Solomon Islands—has been linked to increased income generation and poverty reduction. To effectively promote water security in the Indo-Pacific, international and local actors across all sectors will need to collaborate to take the following actions:

  1. Establish strong governance mechanisms and regional partnerships. The common problems faced will require common solutions and extensive cooperation. Regional coalitions should develop a unified strategy and plan of action to address water-related issues, drawing from the experience and resources of existing partnerships. To improve the transparency and accountability of water sector actors and projects, these coalitions should utilize monitoring and evaluation indicators throughout their programming and establish a strong oversight body to evaluate progress. An example of this is Samoa’s Joint Water Sector Steering Committee.
  2. Prioritize local voices and capacity. Local needs should be incorporated into government initiatives to ensure the sustainability of water programming via local buy-in. This will involve integrating community voices at all project stages through collaboration with local leaders, employment of local laborers, and consideration of local environments. Stakeholders should support initiatives that promote locally developed infrastructure, such as the Coalition for Disaster Resilient Infrastructure’s Infrastructure for Resilient Island States project, and investigate how similar programming might be implemented throughout the region. Additionally, donors should integrate accountability standards that prioritize community engagement into their funding requirements.
  3. Engage global private sector actors. International and local private sector actors are becoming increasingly aware of the impact that water system failures can have on their own value chains. Droughts and flooding continue to impact agricultural and manufacturing industries throughout the Indo-Pacific. Practitioners should capitalize on this by creating better enabling environments for private sector partnerships on water security. This might be done by increasing access to financing and more effectively marketing the investment potential of developing areas such as the Pacific Island countries.
  4. Foster public-private partnerships to streamline water resilience. Private actors should engage with public partners to incorporate water resilience into project development across various sectors. It will be necessary to enforce strict regulations to ensure that future energy and agricultural enterprises remain climate and water conscious. Public actors should also increase investment in resilient water infrastructure to promote long-term sustainability.
  5. Expand upon successful existing programming. As previously noted, many regional organizations and foreign governments have made strides in implementing effective water innovations and frameworks. Water programming in the Indo-Pacific region should capitalize on existing relationships and build new information-sharing networks to pool knowledge, learning from the successes and failures of other states to address local needs more efficiently.

Ensuring the stability and resilience of the water sector will be crucial to promoting security and prosperity in the Indo-Pacific region. The long-standing prioritization of agricultural and economic development has increased the strain on already weak water systems. While the international community is actively engaged in initiatives to address WASH and climate concerns throughout the region, these initiatives remain unable to meet escalating demand. There is a growing need for coordinated and strategic partnerships to approach this issue in a way that promotes long-term sustainability and mainstreams water security across a range of sectors. Successful programming will focus heavily on building resilience through the integration of local communities and innovative technologies, relying on increased investment from both public and private sector partners to accomplish this. The United States and its allies should work to develop and expand projects that can fill existing gaps.

Conor M. Savoy is a senior fellow with the Project on Prosperity and Development at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Thomas Bryja is a program coordinator with the CSIS Project on Prosperity and Development.

This report was made possible by the generous support of the U.S. Agency for International Development.

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Conor M. Savoy

Conor M. Savoy

Former Senior Fellow, Project on Prosperity and Development
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Thomas Bryja
Program Coordinator and Research Assistant, Project on Prosperity and Development