Policy Paper: Water Management in Egypt

This paper was prepared by Alban Thomas, under the supervision of Alternative Policy Solutions research team, led by Dr. Samer Atallah, Associate Professor at the Department of Economics at AUC.

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Executive Summary

The Arab Republic of Egypt is facing major challenges regarding water resource management, with growing needs of a more urbanized population and the dependence on external water supply from the Nile River implying a deepening gap between water demand and supply. Two National Water Resources Plans (NWRP) for 2017 and 2037 have been proposed for sustainable water management at the national level, under demographic and economic scenarios. According to NWRP2017, a major challenge for Egypt is to move toward an adaptive strategy, in order to close the gap between depleting water resources and increasing water demands. Such challenge implies identifying not only the best pathway to sustainable water management, but also a way of introducing more efficient ways of financing water infrastructure.

The purpose of this policy paper is to present a general evidence based policy framework to accompany such plans. While special attention is paid to affordability and implementation issues, the performance of such policy instruments is explored according to the economic literature regarding criteria such as cost-effectiveness, monitoring, and the speed of policy implementation. A discussion of the assessment of NWRP measures is proposed, together with a road map for gradually implement ing policies based on economic (market-based), regulatory, or participatory measures. The report focuses on demand oriented policies suggested in the NWRP2037.

The main lesson from this analysis is that adaptation to water scarcity is a lengthy process. It requires improving an enabling environment for integrated water resource management, promoting significant changes in water user behavior, and investing in long-term water-related infrastructures. An optimal timing of policy implementation is essential to avoid policy failure through, for example, lack of awareness and lack of public acceptability of policy measures. In this regard, earmarking economic instruments such as water quotas and tariffs to actual improvements in access to adequate levels and quality of freshwater is recommended.

The paper proposes a policy framework for sustainable water management including agricultural usage, non-agricultural usage, and general propositions. For agricultural usage, the paper proposes adopting an efficient quota (permit) system where quotas are allocated according to the economic valuation of crops. For non-agricultural usage, the paper proposes an increased water pricing for industrial and residential usage. It also proposes earmarking revenues from water pricing for water infrastructure projects. Additionally, the paper proposes a cross subsidization mechanism where higher brackets of water consumption subsidize the connection fee and fixed part of the tariff. The paper acknowledges that there is a need to communicate to the general public the challenges of water scarcity facing the country. The adoption of economic instruments for water management is contingent on such communication campaign.