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Investment Sought for Armenia’s Water Sector Development

By Rich Bowden:

Yerevan, Armenia: As a by product of an economy still struggling to cope with the effects of its transition from a centrally-planned to a privately run system, Armenia’s dilapidated water infrastructure is in need of both an increase in investment and a concerted period of time to develop to an acceptable level, according to a recent report released by the PA Consulting Group.

The study “Financing Armenia’s Water Sector Development” outlines the deficiencies of the country’s water infrastructure particularly in rural areas where around 40 percent of the population have no access to drinking water in their households, requiring they collect water supply from from community taps or, where no such source exists, rely on wells, springs, or other sources.

The health costs where such water sources are contaminated, and the added expense to water utilities due to leakage from poorly-maintained water pipes were also important factors resulting from the deteriorating infrastructure, said the study.

“Pipe degradation causes 55-60% of water loss compared to 10-40% in most developed economies. The World Health Organization estimates that annually, 9983 million hours are lost to performing water duties such as collection and 14.8 million days of school are missed due to diarrhoeal illnesses in a number of East European countries including Armenia,” the authors stated.

Clean water remains scarce in Armenia despite a relative abundance of the resource. Water flows from the tap only a few hours a day even in the capital Yerevan and the fear of water contamination is very real, said a recent article published on the U.S. Army website.

However Armenia is looking to improve its delivery of water resources, writing a water “roadmap” into its laws which, based on the United Nations’ Millennium Development Goals set in 2000, seeks to halve the number of people in the country who currently lack access to safe drinking water and adequate sanitation.

The Government has sought commitments from international finance institutions such as The World Bank, the German Development Bank (GTZ), the European Bank for Reconstruction and Development (EBRD) and USAID, to help assist Armenia with a number of development projects worth over EUR130 million, said the PA Consulting Group report.

However the study said further funding would be necessary to fund infrastructure upgrades.

“Estimating the cost of development of the water and wastewater sector in Armenia is difficult but it is clear that massive further increases in funding are required,” said the authors.

“Most experts agree that an increase from the current level of 0.7% to 1.8%-2.7% of GDP (based on 2008 figures) is required. To date, funds for development have been raised in a number of ways, in addition to, increased customer charges, including loans or grants from [international finance institutions] IFIs and the subsidizing of private water utilities.”

“The government of Armenia (GOAM) has committed itself to continued funding of the water sector, but, with the intention of providing declining amounts in years to come. Furthermore, additional financing from customers poses a problem as customers’ are willing to pay higher tariffs for water supply, but see less value in developing much needed wastewater collection and treatment infrastructure,” it added.

The report predicted future finance for water infrastructure development would originate from three areas: IFI funding, guaranteed bonds issued by the Republic of Armenia and seed capital also provided by the state.

The United States Government’s USAID Armenia has described improvement in the country’s water sector through a sustainable integrated water resources management system, but admits more needs to be done to improve services, particularly to rural areas.

It cites a number of achievements in conjunction with the Armenian Government including the setting up of a water code, basin water monitoring organizations and Environmental Monitoring Center to regulate the quality of water, air and land resources.

USAID describes its future goals as consolidating on achievements in water and sanitation, assisting the Government in following through with reforms in the water sector.

The Armenian Government for its part has recently announced a raft of new water and sanitation projects in the country, according to Prime Minister Tigran Sargsyan in an address to lawmakers earlier this month.

Using the model of other Eastern European countries, the PA Consulting report says the group has been assisting international finance institutions to “…study and chart a roadmap leading to the development of a long-term sustainable financing mechanism for the water and sanitation sector.”

Previously published by OOSKAnews

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