Speech by H.R.H. the Prince of Orange at the 5th World Water Forum, High Level Panel on Finance

Your Excellencies, honored guests, ladies and gentlemen,

The financial crisis has turned the world upside down. Many people are worried about their own future, the future of their country, the future of the financial system. Everyone is anxious to know what will happen next. I am anxious too, but also what effect the financial crisis will have on the economies of the developing countries.

Ladies and gentlemen, you all know that investments and access to capital are prerequisites for development, and so we must find a way of keeping things going. We cannot lose ground on the progress that has been made. Today, the main focus of most governments is the economic crisis. Rightly so! But this afternoon I would like to draw a parallel to the other crisis that is affecting 40% of the world population, the 40% of our poorest fellow citizens. We cannot allow the developing countries to slide further away. The current financial crisis, coming on top of the various food and energy crises, makes these poor people extra vulnerable.

Ladies and gentlemen, it is precisely because of the financial crisis that I am also concerned about the world's poorest people. How hard will they be hit? Achieving the Millennium Development Goals is already proving difficult. We need to work even harder to fulfil our promise. Will the world simply give up because it is harder now? I say, no, we must not give up. History has learnt that financial markets will come back even though it may be difficult to keep the ship afloat in such turbulent times. Consequently, as the theme of this Forum stresses, we must bridge and close the divide between our commitments and actions, between rich and poor and between those who enjoy safe sanitation and those who do not.

It is important that the commitment to achieving the MDGs by 2015 is reconfirmed at the highest political level. We need to make concrete agreements about contributions to specific goals while linking them to aid volumes. Sadly, only a few countries actually meet their commitments of spending.

Today I would like to elaborate a bit more on that other crisis that has been raging for many years now - a water and sanitation crisis. Though less well known, it is as threatening as the financial crisis. The solution is available as long as we can generate the political will to act. As Chairman of the United Nations Secretary-General's Advisory Board for Water and Sanitation, access to a sustainable source of acceptable quality drinking water and improved sanitation is the Millennium Development Goal target that has my undivided attention.

The MDG mid-term review took place in New York in late September 2008. The conclusion was that progress is being made towards achieving the MDGs. The good news is that we are on track to achieve the drinking water target worldwide. Sadly, however, progress on the sanitation target is still lagging far behind. At the MDG mid-term review, donor countries pledged 2.2 billion dollars to provide water and sanitation. With that amount we can help 30 million people.

Of course I am happy with this extra financial injection. But still more money is needed. In times of scarcity, when resources are limited, we inevitably have to set priorities. As I see it, in efforts to achieve the MDGs, preference should be given to those that are critical for achieving the others. We know that water and proper sanitation have direct effects on health, education, food production and poverty alleviation, but also are directly correlated to economic development. So how do we expect to achieve the MDGs without decent water supplies and sanitation? The answer is, ladies and gentlemen, we can't. We need far more money. We need to increase and/or leverage the investment.

I call upon financial experts and Ministers of Finance and Water, to help us develop appropriate investment plans, financial instruments and local capital markets to facilitate further investment in the water and sanitation sector.

In times of economic downturn, it is easy to cut back on essential services and to defer maintenance on essential service facilities. We also tend to look for investments that yield a higher return at a minimum risk. I would argue that such an investment opportunity does exist. Investing in water and sanitation pays off. I am sure you are familiar with WHO's estimate that every dollar invested in water and sanitation contributes to at least five other MDGs and generates nine dollars' worth of productive activity.

Ladies and gentlemen, what are the costs that we are talking about to achieve the MDG on water and sanitation? In 2008, WSP-World Bank and WHO estimated that roughly 360 billion is required to meet the MDG targets on water and sanitation. This number includes maintaining and replacing existing infrastructure and extending coverage. This is a staggering figure but it is just a small percentage of the unimaginable amount of capital that has evaporated on Wall Street alone since the economic melt down. I remember from my Physics class that evaporation can be liquefied by cooling, at least as far as it concerns my field of activities, water!

Since I am speaking here to you, I have focused so far on the vast sums of money needed to provide access to water and sanitation. If we take a collective decision to provide water and sanitation, the money will follow. The problem is largely one of priorities and political will. This is the challenge I am working on in my capacity as Chair of UNSGAB.

Fortunately, words are being translated into action. At the insistence of the African Ministers responsible for water and sanitation, we managed to persuade the African Union to discuss water supply and sanitation for the first time in its history at last July's Sharm el Sheikh summit and subsequently have all heads of state and government adopt the Sharm el Sheikh declaration unanimously. Nice words on paper is what you are probably thinking now, but with these nice words on paper the responsible ministries will be able to secure funding in their home countries and effectively implement new projects.

Ladies and gentlemen, it is clear that central governments can no longer provide 100% of the finance to build the water and sanitation facilities needed. Traditionally many countries supported the construction of such facilities on a grant or if you will, free money basis. In doing so they also solicited from donor organizations technical and sometimes financial assistance in the form of loans at the sovereign level.

This approach has become more difficult with the current scarcity in both in-country budgets and equity contributions for donor organizations.

What is more, where free money or low interest loans from donors passed down to sub-sovereign municipal entities, the facilities did not have the administrative and management personnel needed for proper maintenance and so many fell into disrepair.

It is abundantly clear that there is a need for more in-depth analysis of developing countries' legal, administrative and policy frameworks. This will enable them to work with world leaders on new frameworks within which sub-national municipal entities can start financing and managing their own water and wastewater systems. Tied in with this is the absolute need to develop a debt market for infrastructure in local currency. These are tasks of Herculean proportions. But they are absolutely critical in order to dovetail with the policy changes that world leaders are embracing in response to the need for increased, improved and in some cases new water and sanitation services to meet the Goals by 2015.

UNSGAB is highly supportive of developing local currency-based debt markets for countries to finance their water and sanitation system needs to meet the MDG targets. We have also entered into dialogue and cooperative working arrangements with International Financial Institutions, like the Islamic Development Bank, Interamerican Development Bank, Asian Development Bank, African Development Bank and the World Bank, and have agreed to work with them to develop better models and financial tools to leverage their financial resources to support water and sanitation in local currency markets.

All of this is needed at a time when the world financial markets are experiencing significant stress. It is neither realistic nor feasible for local governments to meet water and sanitation capital needs by borrowing on the international debt markets. In fact, it would be highly costly and, in today's market, virtually impossible. Rather than fold our tents and throw up our hands, the challenge is for all of us to work together and become more innovative and creative. We must encourage individual countries to develop their debt markets, change their policies towards the local authorities' responsibilities and provide them with the legal and administrative tools and training to develop, finance and manage their own infrastructure.

In relation to this I would like to reinforce the importance of Official Development Assistance for the development of local debt markets. Targeted ODA can function as a catalyst and will allow extra time for local debt markets to mature. It is again critical that OECD and other rich countries meet their agreed target of spending. It is of the greatest importance that the effectiveness of ODA will be enhanced!

Ladies and gentlemen,

To sum up: we all agree that the current financial crisis is unprecedented in our life times and calls for strong, collective measures to secure our economies and safeguard our social systems. However, the unanimous commitment made by world leaders in 2000 to fighting world poverty and achieving the millennium development goal targets by 2015 still needs to be followed up seriously and given the highest priority.

Lessons from the not so distant past have taught us that investing in social and physical infrastructure like water supply and sanitation will help to reduce poverty, and at the same time create employment and strengthen our economies.

Only together can we help make this happen to fulfill our mandate to help meet the basic water and sanitation needs of all the people in the world and to bridge the divide between the "haves and have-nots."

Thank you!!!