A global concern

The governance of water spills across agencies, public and private sectors and national boundaries, which makes it difficult to manage and monitor. Water resources management involves safeguarding the sustainability and fair distribution of water resources, but can be corrupted due to bribery and capture by powerful elites. As competition for water increases as a result of population growth, changing dietary habits, increasing dependence on water intensive industries and climate change, the risk of corruption becomes greater and the amounts of money involved more lucrative; a lethal combination that is expected to hit the poor hardest.

The Report shows that a fundamental issue is the impact of corruption on drinking water and sanitation. The stakes are high and the poor pay with their health. It is estimated that in developing countries, 80 percent of health problems can be linked to inadequate water and sanitation. Corruption risks can be found at all stages of water delivery, from policy design and contracting to the billing of customers. A study in South Asia in 2001-2 claims contractors often form cartels or pay bribes to win contracts, raising the cost of a sustainable water connection by 25 to 45 percent (J.Davis, World Development Journal, 2004). In Guatemala more than 15 percent of respondents in a national household survey in 2006 reported paying bribes for a water connection or reconnection (Acción Ciudadana, 2006).

Corruption in irrigation seriously undermines attempts to address the global food crisis. Irrigated land accounts for 70 percent of water consumption and produces 40 percent of the world’s food. The Report explains that irrigation systems are difficult to monitor and are easily captured by the larger more powerful users. This results in larger users reaping disproportionate subsidies and taking more than their fair share of the water, to the disadvantage of smaller farmers. This is clearly illustrated in Mexico, where the largest 20 percent of farmers take more than 70 percent of irrigation subsidies (UNDP Human Development Report 2006).

With currently one sixth of the world’s electricity coming from hydropower, producing power from water is central to the debate around sustainable energy. As such, hydropower encourages massive investment (US $50-60 billion, €32-38 billion, each year in the coming decades, according to International Energy Agency's "World Energy Outlook 2006") in highly complex, bespoke projects that are particularly vulnerable to corrupt practices. The Report details how dams often involve the displacement and resettlement of local communities with up to 80 million people displaced in recent decades because of them. Resettlement funds can also be highly prone to corruption risks. For example, the corruption in the resettlement programme for China’s Three Gorges Dam, which began in 1994, led to the reported misappropriation of US $36.4 million (€23 million) in resettlement funds for Hubei Province and Chongqing Municipality for the years 2004 and 2005 alone (National Audit Office, China Daily, 2007). The effects of such misappropriation on the intended recipients are clear. In 2006, residents of the Hubei Province protested to the local government at receiving only US $700 (€443) of the promised US $5,000 (€3,200) in settlement fees for having their land expropriated (Chinese Sociology and Anthropology, 1999).

Recommendations for reform

Although one size never fits all in fighting corruption, the Global Corruption Report shows that taking action against corruption in the water sector is both timely and feasible. Key recommendations of the report include:

Establish transparency and participation as guiding principles for all aspects of water governance: From transparent budgeting and participatory policy-making to public mapping of water pollution, public audits of projects and access to contract terms and performance reports, transparency and participation strengthen integrity in water governance, but need to be adopted globally.

Strengthen regulatory oversight: Government and the public sector continue to play the most prominent role in water governance and should establish effective regulatory oversight, whether for the environment, water and sanitation, agriculture or energy. Institutional reform and capacity-building are essential to bring oversight in water up to the standards already achieved in other sectors.

Ensure fair competition and accountable implementation of water projects: All stakeholders have a role to play. Contracts should incorporate anti-corruption measures. Governments and contractors can enter into agreements for fair public procurement. Lenders and donors must strengthen anti-bribery provisions in their due diligence requirements.

TI work around the world to counter corruption in the water sector

In 2006, Transparency International, together with the International Water and Sanitation Centre, Stockholm International Water Institute, Swedish Water House and the Water and Sanitation Programme, founded the Water Integrity Network (WIN) to fight corruption in all parts of the water sector. Hosted at TI’s International Secretariat, the WIN is today a growing network of organisations and individuals around the world that promotes anti-corruption activities and coalition-building at the local, regional and global levels. The Global Corruption Report 2008 benefitted from expert input and financial support from the WIN.

In 2003, Transparencia por Colombia assisted the Colombian Sanitary and Environmental Engineering Association (ACODAL) to find a remedy to corruption in the procurement of water pipes: it was estimated that in order to secure the contract, a competing company would have to pay an additional 12% of the contract's value (A.Balcázar, presentation at World Water Week, 2005). Following negotiations, eleven of ACODAL’s affiliated companies signed an Anti-corruption Sectoral Agreement. Based on TI’s Business Principles for Countering Bribery, the agreement included specific measures for dealing with inter alia bribery, whistleblowing, facilitation payments and political contributions. In addition, an Ethics Committee was established in order to resolve issues in the event of disagreements. By 2006, the impact was clear as the prices of winning bids had dropped significantly.

In 2005, TI India sampled 14,405 respondents from 151 cities and 360 villages, and found that water was one of the public services seen to be most associated with corruption. The study reported that the most commonly perceived malpractices were in the supply of water tankers, meter installations, bill payments and the connection or restoration of water supplies. Of the respondents who had visited the water supply department, more than half considered that there was corruption in the department; almost 40 percent considered that corruption in the department had increased and nearly 25 percent claimed to have used alternative means such as bribery or influence to get work done.

In 2007, TI Pakistan was made an independent observer by the World Bank in the Sindh Province Water Improvement Project, which aims to improve the efficiency and effectiveness of irrigation water distribution. The chapter is responsible for monitoring the tender process and ensuring and certifying compliance with the tendering rules.