In the current financial crisis, risk-weary investors worry more about keeping their own boats afloat than in pumping money into a sector noted for high upfront costs, long pay back periods and low rates of return.

Water, is as essential to human activity as air. When cities or societies neglect water, they face collapse. The discussions and analyses emerging from the current economic crisis focus on what went wrong, how to stop the downward spiral, and how to create a better society in the future. But one thing is missing in all the talk of short-term stimulus packages and developing “green growth” economies and that is water.

A Check-list for Public Action has been developed by the OECD and its partners to assist governments considering engaging with the private sector in the water sector. It is organised around the OECD Principles for Private Sector Participation in Infrastructures–some 24 principles grouped under five points that highlight sector-specific features, government considerations and available tools and practices:

According to President John F. Kennedy, the person who can solve the water problems of the world should receive two Nobel prizes, one for peace and the other for science. More than four decades after his death, the world is realising the complexity and urgency of the water-related problems facing humanity, and the relevance of his remark.

Letter to the editor: Secretary-General Angel Gurría argues that “advancing on the issue of water will help us move forward on almost all the Millennium Development Goals” (editorial, No. 256, July 2006). We agree, and would like to draw your attention to the Working for Water programme (WfW) in South Africa.

In your article “Virtual solution” (No. 254, March 2006), you write that “any effective policy to encourage efficient use of scarce water resources must be based on pricing.” As you explain, increasing the price of water to better reflect its scarcity would cause low-value, water-intensive crops to become uncompetitive in water-scarce countries, and their imports more attractive. There is no disputing this logic, but any water policy prescription must be based on more than pricing and consider factors other than simply water scarcity if it is to be effective and adopted by governments.

Every Thursday at noon the Tribunal de las aguas (water court) meets outside the cathedral in the city of Valencia along Spain’s Mediterranean coast. For more than a thousand years, it is believed, the court has ruled on disputes affecting the irrigation of the arable lands known as huertas, which nourish the lemon trees, the oranges and other crops that give this region its distinctive scents and flavours, and for many, livelihoods as well.

A widely held view is that developed countries are water-abundant and farmers need pay little attention to issues like water management or quality. If only that image were true. Rising production of thirsty crops and livestock have brought severe strains on water resources everywhere, including the richest countries.

When world leaders agreed upon the United Nations Millennium Declaration in 2000, and then staged the 2002 World Summit on Sustainable Development, they set themselves some ambitious world poverty reduction goals: the Millennium Development Goals (MDG). One of the MDGs is to “halve, by 2015, the proportion of the people without sustainable access to safe drinking water and basic sanitation”. That goal is turning out to be a more complicated proposition than many expected.

Bordeaux is known everywhere for its fine, if expensive, wines. But what about its drinking water? According to a recent survey of water charges in France by the Federal Union of Consumers, the drink that well-to-do diners discreetly order as “chateau de la pompe” is no longer that cheap in the city of Bordeaux either.

As the ocean covers three quarters of the surface of the earth, little wonder people see it as a possible source of freshwater. That basically means desalinating it to make it at least clean enough for agriculture and even good enough to drink. How does it work? Distillation is the cheap option, responsible for most desalinised water, but a newer filtering process using membranes, called reverse osmosis, now accounts for nearly half the world’s capacity to turn ocean into freshwater.

Three years ago, before the 3rd World Water Forum in Kyoto, we wrote that while the Millennium Development Goal of halving the population without access to safe drinking water by 2015 was feasible, it would be a tall order, particularly against a background in which bilateral development aid from OECD countries had stabilised or fallen. Have matters improved as we move closer to the deadline? There are some encouraging signs, but probably not where it matters most.

Most people know the story of the Dutch boy who saved his country by plugging a leaking dyke with his finger until help arrived. For the Dutch, the story had a happy ending, but millions of people living on the world’s coastlands were not so lucky in the past year. First, the tsunami in December 2004 killed over 180,000 people in southern Asia, devastating coastal communities in Indonesia, Sri Lanka, Thailand and the Maldives.

The private water sector is larger than many people think, with thousands of businesses working every day, for the most part, to implement government policies. Are those businesses doing enough and how might they do more?

The county of Kent, known romantically as the “Garden of England”, has suffered its worst winter drought since the 1920s. In response, the UK Environment Agency warned in February 2006 that, unless serious water conservation measures were brought in by April, the county could within months witness scenes of people queueing in the streets for water as domestic supplies were being cut off.

In Mexico, 80% of the population lives in relatively dry and hot areas and subterranean resources are being slowly exhausted. Access to water is increasingly becoming an issue in some of the most active and industrialised parts of the country. Yet, says the OECD’s 2004 review of regulatory reform in Mexico, rapid demographic growth and industrial development have increased the overall demand for water.

Should water-scarce countries import water-intensive products and cultivate less water-intensive ones? After all, since all goods contain a certain amount of water in their production, exporting farm produce is rather like exporting water, albeit in virtual form. A thousand litres of water may be needed to produce a kilo of wheat, but five to ten times more is needed for a kilo of meat.

A key Millennium Development Goal agreed at the 2002 Johannesburg summit on sustainable development is to halve the numbers of people in developing countries without access to safe water and basic sanitation. A meeting of the UN Commission on Sustainable Development in April will review progress in achieving these targets.

Putting together a water financing and management strategy requires looking at a range of questions. The most important one is, can we afford it? This is particularly tricky to answer realistically for large environmental projects that require heavy capital investments in public infrastructure and have a long lifespan. To keep to spending targets, decision-makers have to work out how much they have to spend on everything from buying capital and land to maintenance and operation expenditure. Their calculations have to be realistic and multi-annual.

Water is a precious and finite resource and population is on the increase. Rain-fed and irrigated agriculture play a key role in ensuring food security for everybody. Currently 840 million people in the world still go hungry and are chronically undernourished. So will it be possible to feed an additional 2 billion people and manage water consumption in a sustainable way?

When it comes to water, as with most environmental problems, it is easy to overemphasise the failures. To be sure, in the OECD area, there is much room for improvement, from tightening up on human health aspects and pollution to reviewing farming and industrial subsidies. But there are also several successes that are worth learning from.

Civilisation was born with water. Water is indeed the basis of life. Yet mankind has not been wise enough to live with water. Time has come to act, and that is why Japan will be hosting the 3rd World Water Forum and an International Ministerial Conference in the Kyoto region, cradle of Japanese civilization since more than 2,000 years ago.

Anything scarce and in demand commands a price; this is one of the basic principles of economics. Water is scarce in some contexts (drought, degraded quality), so water pricing is increasingly seen as an acceptable instrument of public policy. Water-use charges, pollution charges, tradable permits for water withdrawals or release of specific pollutants, and fines are all market-based approaches that can contribute to making water more accessible, healthier and more sustainable over the long term. For this reason, OECD countries are working toward the goal of “internalising” the full marginal costs (including environment costs) into decisions that affect water use and water quality.

Water-borne pathogens are agents that cause disease. They are a growing international hazard, not to mention a global economic burden. Waterborne pathogens can also kill; the vast majority of preventable deaths occur in children below five years of age, particularly in developing countries.

Halving the population without access to safe drinking water by 2015: achieving this Millennium Development Goal is feasible, but it will not be easy.

To most people, water is a public good, like air. Yet in practice, its proper management and distribution raise inherent challenges of allocation, which is where economic principles can help. Supplying water costs money. Moreover, though a renewable resource, it is fragile and can be spoiled.

The key arguments for private commercial involvement in water are simple: to use the marketplace to boost investment and enhance efficiency at lower public cost. Many cities, particularly in the developing world, urgently need to stop water infrastructure deterioration, promote efficient and sustainable water use, and generate revenue for needed investments. But given the essential nature of water and the need for the public to feel assured about safety and access, how far should private participation be allowed to go?