Assessing the Long-Term Outlook for Current Business Models in the Construction and Provision of Water Infrastructure and Services

Published: November 21, 2006
Authors: Meena Palaniappan, Heather Cooley, Peter Gleick, Gary Wolff
Pages: 65

The water sector faces serious challenges. The failure to meet basic human needs for water; difficulties in meeting the financial requirements for maintaining, extending, and upgrading both new and aging water systems; new regulatory requirements for water quality; increasing water scarcity; competition for limited capital, and global climate change will continue to affect the development of the water sector. In addition, the water objectives of the Millennium Development Goals add impetus to efforts in developing countries and the Big 5 economies (BRICS)1 to halve the proportion of people without access to safe drinking water and sanitation. As existing water infrastructure hits the century-old mark, the developed OECD countries are also facing immediate needs to replace and upgrade infrastructure, respond to new water quality regulations, and ensure the security of water supplies in response to climate change, pollution, and growing populations. For all water systems, the main focus is on the best ways to finance and implement improvements in operation and maintenance of systems.

Existing business models have been changing in key ways to respond to these challenges in the water sector. Public models are responding to competition from private actors by instituting efficiency through re-engineering their operations and services. Private sector models are also changing the nature and role of their investments.

Beyond these challenges already affecting current business models, there are 6 key drivers and opportunities that will further interact and shape the water sector for the decades to come. These drivers will affect both the public and the private spheres creating the need for new synergies, new partnership formats and even new actors in the water sector. Future business models will have to assimilate certain fundamental characteristics to face the challenges and seize the new opportunities in the water and wastewater sectors.

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This paper was authored by the Pacific Institute for the Organization for Economic Cooperation and Development (OECD). The Institute presented the report to the OECD in November, 2006.

1. Big 5 economies are Brazil, Russia, India, China, and South Africa