Sector Wide Institutional Issues

Neither good irrigation technology nor adequate price incentives, nor the combination of them, is sufficient to ensure satisfactory performance of irrigation systems. The institutional context is at least as important, if not more so. The institutional aspect refers both to how irrigation systems are managed, at different levels and also to the process over time by which those systems are developed and implemented. It is the human dimension of the system: the way that the various actors are grouped into joint entities, the ways they work

145. R. R. Hearne and K. W. Easter, 1995, p. 41. For useful case studies in how water rights markets function in Brazil, Spain and the USA, see Manuel Marino and Karin E. Kemper (Eds), Institutional Frameworks in Successful Water Markets, World Bank Technical Paper No. 427, The World Bank, Washington DC, USA, 1999.

146. 'Experience shows that it is essential to explain to users and other affected groups the advantages of formal property rights to water. A well designed information campaign can overcome the opposition to reform by powerful vested interests' (M. Thobani, 1997, p. 173).

together (or fail to), the roles both individuals and entities play, and the objectives they pursue:

Establishing an institutional structure for allocating water is a fundamental role of social policy for any nation. The choice of structure is ultimately a compromise between the physical nature of the resource, human reactions to policies and competing social objectives. Not surprisingly, different cultures make tradeoffs based on the relative importance of their particular objectives. Countries try various means to balance economic efficiency (obtaining the highest value of output from a given resource base) and fairness (assuring equal treatment). Individual freedom, equity, popular participation, local control and orderly conflict resolution are other important objectives which societies must juggle when choosing a structure for water allocation.147

In the final analysis, an institutional structure is effective to the degree that it establishes clear and appropriate roles for all of the concerned individuals and groups and motivates them to play those roles well. Motivation may require incentives but above all it requires a belief in the correctness and legitimacy of their roles, and of the roles of the other institutions involved in water management. The importance of inspiring a belief that institutions and procedures are essentially well grounded and fair can hardly be overstated. Hence, the FAO's reference to 'human reactions' in the above quotation.

Individuals are motivated to work together for common ends by what is called good governance. This applies to irrigation management as much as in any field. 'Improvement in irrigation performance depends on good government, or governance. .. . There are four main elements of governance which can be considered at the national or the local level: the legitimacy of government; its accountability; its competence; and its respect for human rights and the rule of law'.148

The institutional context is so basic that it now is given priority in planning for irrigation, both at the project level and at the sector level. If measures to strengthen institutional capacity are not incorporated in project design from the beginning, institutional reform considerations will be shunted aside as project managers become involved in day-to-day concerns. Equally, there is a consensus that the first priority within an irrigation sector should be to strengthen its institutional capacity, which may include changing institutional forms in the directions of greater decentralization and devolution of ownership of systems as well as the institution of participatory mechanisms for water planning and management.

There is agreement that strengthening institutional capacities requires wide participation at all levels of decision making and at all stages in the process, including in policy formulation and project design: '. . . the process of water policy formulation, assessment and appraisal needs to include more open groups that are representative of political, technical, managerial and (most important) water user associations. These policy groups would be consulted before policy selection and then provide feedback and adjustment in the light of experience. .. . The goal is to identify a broader range of water policy options, to have less "policy by crisis" management and more resilience in the face of outside pressures'.149

Two fundamental reasons argue for broadening the participation in formulation of water policy and in development of irrigation systems, one related to societal objectives or values and the other related to practical concerns. They are promoting fairness and improving the quality of policies and projects. Those whose interests are affected are likely to have valuable insights regarding the functioning of both policies and projects and how they should be designed. In addition, their participation in project design and management will strengthen their commitment to making the system work well.

There is an additional reason which is very important in a practical sense: making the policies and irrigation systems as robust as possible in the face of evolving circumstances and unex-

Good governance is crucial to the functioning of irrigation systems in the following ways:

Legitimacy. When a new project is planned, are those living in the area consulted about the design of the scheme? Are there recognized representative groups of farmers, including women? Are the office holders elected and accountable to the members? Do these groups participate in decisions that affect them?. . .

Accountability. Are the financial plans of the irrigation scheme made public and arrangements made to explain them to farmers? Are there performance criteria with audit arrangements to ensure that officials adhere to the rules and, if they fail to perform satisfactorily, call them to account? Are officials responsive?

Competence. Can the professional staff prepare accurate budgets and effectively deliver services such as timely canal maintenance? Are there arrangements for training them or replacing them with competent officers if they fall short of their duties?

Rule of law. Is there a clear legal framework to .. . prevent overpumping of the aquifers? Is it enforced? Can pollution by industry or by saline water from upstream drainage projects be regulated? Are illegal extractions by farmers at the head of canals monitored and offenders charged by legal processes that are fair, timely, objective and without discrimination . . . ?

pected changes - the resilience factor referred to by the FAO. If systems and their regulatory frameworks are developed in part by water users and others who are affected by them, i.e. if they have legitimacy as described above, then the participants will strive to make them function well and to adapt them, as necessary, to unforeseen changes in circumstances. Thus, the institutional context has a direct bearing on the sustainability of irrigation schemes.

In practical terms, Vermillion and Sagardoy have summarized the case for irrigation management transfer (IMT) to user groups in the following way:

Efforts by governments to finance and manage irrigation systems, and to collect water fees from farmers, have generally not been very successful. Under-financing and mis-management of irrigation systems has led to rapid deterioration of infrastructure, shrinking service areas, inequitable water distribution and low agricultural productivity. Generally, governments hope that IMT will reduce the cost burden of irrigation on the government and will increase the productivity and profitability of irrigated agriculture enough to compensate for any irrigation cost increases to farmers.150

The other side of the coin of promoting participation and seeking consensus is decentralization, including within government structures themselves. The intrinsic value of this approach was expressed by the World Bank in its policy paper on water resources management:

Because of their limited financial and administrative resources, governments need to be selective in the responsibilities they assume for water resources. The principle is that nothing should be done at a higher level of government that can be done satisfactorily at a lower level. Thus, where local or private capabilities exist and where an appropriate regulatory system can be established, the Bank will support central government efforts to decentralize responsibilities to local governments and to transfer service delivery functions to the private sector, to financially autonomous corporations, and to community organizations such as water user associations.151

Some of the possible types of specific reforms to improve the autonomy and accountability of public irrigation agencies and increase farmer

150. D. L. Vermillion and Juan A. Sagardoy, 1999.

151. The World Bank, 1993, p. 15 [emphasis added]; see also The World Bank, 1994, p. 23.

involvement in decision making include the following options:

Possible reforms include shifting from a line department to a semi-independent or public utility mode, applying financial viability criteria to irrigation agencies, franchising rights to operate publicly constructed irrigation facilities, and strengthening accountability mechanisms such as providing for farmer oversight of operating agencies. Many of these reforms can be seen as introducing quasi-market incentives into the management of public irrigation systems.152

In a similar spirit, the World Bank's policy paper on water resources management emphasizes the importance of financial autonomy of irrigation agencies, along with a clear decision that financial shortfalls will not be made up by the central government:

The lessons of experience suggest that an important principle in restructuring public service agencies is their conversion into financially autonomous entities, with effective authority to charge and collect fees and with freedom to manage without political inference. Such entities need to work under a hard budget constraint that enhances incentives for efficiency and revenue generation. Of greatest importance, the hard budget constraint unlocks incentives to collect fees and to provide services that consumers and farmers want.153

At the same time that emphasis is being placed on greater autonomy of irrigation institutions and decentralization of decision making, the capacity of government institutions themselves needs to be improved in most cases. The FAO has pointed out that, in addition to the well-known

'market failures'154 that characterize a resource such as water, 'government failures' are fairly widespread, in part for the following reasons:

'Products' are hard to define. The outputs of non-market activities are difficult to define in practice. .. . Flood control or amenity benefits of water storage reservoirs are examples. The internal goals ... of a public water agency as well as the agency's public aims provide the motivations... for individual performance. Examples of counterproductive internal goals include budget maximization, expensive and inappropriate 'technical-fix' solutions and the outright non-performance of duties. In addition, agencies may adopt high-tech solutions, or 'technical quality', as goals in themselves. . . . Finally, irrigation agency personnel may be persuaded, by gifts or other inducements, to violate operating rules for a favored few.155

Under optimal circumstances, public management of irrigation systems can perform well but those cases are the exceptions, as observed by Ruth Meinzen-Dick et al.:

Examples of irrigation systems that are performing well, for example, in Malaysia, demonstrate that good performance under State management is possible.. . . Many irrigation projects have been based on introducing technological innovations to improve system efficiency. .. . Yet without proper management such innovations fail to deliver the desired irrigation services. . . .

Countries have generally entrusted the management of their irrigation systems to government agencies, on the assumption that they will have the capacity and motivation to achieve high performance standards. Heavy State involvement in irrigation has been justified

152. M. W Rosegrant and H. P. Binswanger, 1994, p. 1614.

154. Natural monopolies created by economies of scale in water supply, lack of internalization of externalities by those who make economic decisions concerning water allocation.

based on the public goods characteristics of irrigation, notably the positive and negative externalities, strategic importance, and scale of systems. ... In practice, State agencies cannot be omniscient and omnipotent, particularly in dealing with problems at the local level. Moreover, the private incentives of agency staff are often at odds with official objectives in irrigation management, leading to rent-seeking behavior. The result has been sub-optimal levels of system performance.. . .156

Meinzen-Dick et al. also comment on the difficulty of seeking solutions by administratively raising irrigation fees to adequate levels (a difficulty which is discussed in Section 6.5.3 above), and hence the need to look elsewhere for the means of improving system performance:

.. . simply raising irrigation charges is politically unpopular, and does not provide the necessary incentives for agencies or farmers to improve irrigation system performance. The traditional economic solution of 'getting prices right' has been difficult to implement and of limited use in improving irrigation system performance. .. . Market solutions, such as trad-able property rights, are being explored by policy makers and analysts, but the difficulties of specifying clear and enforceable property rights and the presence of high transactions costs and positive and negative externalities, along with other types of market failures in irrigation systems, have limited the effectiveness of this strategy. Therefore, institutional reforms to reduce costs while improving incentives for better performance of irrigation systems are essential.157

For similar reasons, the World Bank's Middle East and North Africa Regional Office has concluded that 'The weakness of many governmental agencies is a matter for serious concern, and is an issue that cannot be bypassed or avoided. . .. Since there is little evidence that ad hoc institutional change provides a satisfactory basis for effective management, institutional issues need to be tackled in an integrated and coherent manner. . .'.15S

A strategy for improving agency performance in managing irrigation systems must include provision of better training to managers and introduction of mechanisms to make them accountable to the users as well as their bureaucratic superiors. Several different kinds of skills are needed, including planning and supervision in different areas, environmental management and liaison with stakeholders. Another critical element is:

ensuring that agency staff have proper incentives to work with farmers. The strongest and longest-lasting incentives for agency staff to work with WUAs follow from linking budgets to user fees, and staff compensation and rewards to improvement in farmer services.159

A frequent cause of the lack of institutional capacity is the dispersion of authority among many agencies which inhibits the integrated approach planning and policies for water management which was stressed in an earlier section of this chapter. Often there is fragmentation of responsibilities for management of water resources among different sectors and institutions, along with over-reliance on the public sector provision of services.160 Consequently, the FAO has made a call for integration of the insti

159. A. Subramanian, N. V. Jagannathan and R. Meinzen-Dick, 'Executive Summary', in A. Subramanian, N. V. Jagannathan and R. Meinzen-Dick (Eds), 1997, pp. xii-xiii.

tutions charged with developing and implementing water policy, as noted in Section 6.3 above.

An exception to this need for integration is the requirement for a clear separation between the roles of defining water policy and providing (or coordinating the provision of ) water services. Policy responsibilities often have been located in agencies charged with water supply and management, but doing so may create institutional conflicts of interest and at minimum usually leads to a dilution of the effectiveness of one of the functions. Sharma et al. have expressed this point cogently:

An important strategy is to promote separation of the regulatory ('gamekeeper') functions from the supply ('poacher') functions of water supply and wastewater collection and delivery in order to avoid conflicts of interest and ensure compliance. For regulation to be fully successful, good governance is important as are experienced and accountable public sector staff.

Separating regulation from supply is a first rule of water resources management.. . . However, there is no 'correct' solution for the institutional framework for effective water resources management; solutions evolve in an adaptive way in response to constitutional and cultural settings and to clear policy objectives and political commitment to policy enforcement. .. . Institutional development and reform are a long 'journey' which is generally embarked upon without clear knowledge of the eventual destination. Nevertheless, the separation of regulation functions from those of supply is an important principle. Some countries make water resources management the responsibility of an agriculture ministry, or they have a water ministry also responsible for municipal water supply and wastewater services; both preclude effective water resources management.161

Separation of administrative authority is also necessary for macro and micro allocations of water. The general principle is that macro management must be carried out by an entity different from the sectoral ones (such as those for hydropower, irrigation, municipal water supply, etc.). The case of Spain is illustrative of this principle. Since 1927, water resources management in Spain has been regulated by a central organ but managed by decentralized basin authorities. The centralized organ is the National Water Authority (under the Minister of the Environment) - this is responsible for national water policy and regulations. The basin authorities manage water resources in a holistic, participatory and decentralized manner, with financing shared between users and the State. Their role ends where water is delivered to different classes of users, and there the responsibility of sub-sectoral institutions begins (WUAs, municipalities, etc.).

In developing modes of participatory management which are appropriate for a country's cultural traditions, some countries may find it useful to explore adaptations of the French system of river basin committees that was mentioned previously, although the process of establishing them is not easy. Senegal, for example, has considered adoption of some elements of the French approach in its institutional framework:

[A] Water Resources Planning and Management Service .. . [was] created, responsible for managing and allocating all water resources and for issuing abstraction permits. [A] Water Advisory Board. . . [was] proposed as [a] steering committee for water resources policy making and management, with membership including representatives of consumers' associations, farmers' and livestock breeders' associations, industries, water and forestry associations, rural communities, mayors, the national water supply holding company ... as well as [government agencies].162

In the same vein, 'water parliaments' at the river basin level are being considered in Zimbabwe and South Africa (Sharma et al, 1996, p. 50).

As provided by the [National Water Law of Mexico], the river basin councils have a key role to play in river basin planning and management. . . . At present, there is one functioning river basin council, Lerma-Chapala, which started operating in 1993. In addition, about 20 more basin councils are in various stages of development. Experience has demonstrated that the establishment of functional river basin councils is difficult and time-consuming. Organizing all the different water users into functioning groups that then elect representatives on the councils with adequate communication with both users and government officials has proven to be much more difficult than officials had contemplated. Experience has shown that basins with serious water scarcity and management problems have an easier time establishing councils (From K. E. Kemper and D. Olson, 2000, p. 350).

Sharma et al. have summarized the institutional requirements for adequate management of water resources in the form of awareness, capacity and management. Awareness is a key link in the chain, and frequently it is the weakest link. Different kinds of awareness are needed:

• at the regional, sub-regional and basin level, to create a climate of mutual understanding and knowledge;

• at the national political level, to create commitment;

• at the executive level, as part of building capacity;

• among the public, to create society-wide stewardship.163

Building awareness is not necessarily an expensive undertaking but it requires a well-planned effort and persistence. Sharma and colleagues (1996, p. xx) have cited the 'success-stories in Namibia and Botswana, where water conserva tion has become a national ethic'. As another example of the importance of building awareness, they point out (1996, p. 53) that:

. .. participatory capacity is firmly embedded in the culture of many parts of [Africa] and is a valuable resource. However, building on indigenous skills and cultural traditions can only be successful where there is awareness of the problem and identification of solutions.

The same observation could be made with respect to all other regions of the world.

Building societal awareness and capacity and management skills at all relevant levels of the public service are necessary conditions for making irrigation systems function well, but they are not sufficient. As indicated, the public sector alone cannot do the full job; it faces the inherent limitation of operating in a costly manner, in institutional terms, especially at local levels, and it has great difficulty in gathering all of the relevant kinds of information for local undertakings. Hence, capacity and management skills have to be cultivated among users and elsewhere in the private sector. Subramanian et al. have underscored this requirement:

Policy makers have turned their attention to the potential of using water user groups to plan and manage water infrastructure because of the twin problems of the institutional costs of implementing water distribution rules and of planning and managing water infrastructure with incomplete information. The arguments advanced for supporting water user associations are that water users .. . have far more complete information on local conditions and must therefore be included in the planning and management process. Furthermore, water users also have traditional norms and conventions that often may be far more effective than a top-down water bureaucracy in enforcing contracts among users of tertiary and secondary distribution systems.164

164. A. Subramanian, N. V. Jagannathan and R. Meinzen-Dick, 1997, pp. 5-6.

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