aweitz presentation

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Knowledge Sharing -

Economics:

The Role of Economics in Sanitation

Advocacy and Priority Setting

Almud Weitz, Regional Team Leader, WSP-EAP

ADB-DMC Sanitation Dialogue, 4 March 2009

The views expressed in this paper/presentation are the views of the author and do not necessarily reflect theviews or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they

represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility

for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.



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Economics of Sanitation Initiative (ESI)

Lead by WSP-EAP, extending to other regions

Supported by several donor agencies, incl. ADB

Aim: to compile and generate socio-economic evidence

for improved sanitation advocacy and policy making Two phases:

(1) Sanitation economic impact study: 2006-2007/8

(2) Sanitation options cost-benefit study: 2008-2010



3

ESI Phase 1

Purpose: to measure the financial andeconomic impacts of poor sanitation

Modeling using available secondary data

At national and sub-national level

By age, gender and rural-urban

Focus on

Poor excreta management and hygiene athousehold level

Major impacts or impacts which help make thecase for sanitation: health, water,environment, tourism, and other welfare (timeloss, intangibles)



SELECTED

RESULTS



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Data sources

Statistics (scaled up for underreporting)

National surveys (DHS)

Other national studies (unit costs)

Economic impacts

Health care

Health-related productivity

Premature death

1 - Health Impacts

Infection

Malnutrition

Decreased dietary intake

Malabsorption

↑ catabolism,

nutrient disposal

Nutrient sequestration

Impaired immune function

Impaired barrier protection

Infection

Malnutrition

Decreased dietary intake

Malabsorption

↑ catabolism,

nutrient disposal

Nutrient sequestration

Impaired immune function

Impaired barrier protection

Cam Indo Laos Phil Viet

Diarrhealdisease √ √ √ √ √

Trachoma √ √

Scabies √ √ √ √

Helminthes √ √

Hepatitis A, E √ √ √

Diseases √ √ √ √ √

related tomalnutrition

Diseases measured in this study



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1 - Health Costs

0.0

5.0

10.0

15.0

20.0

25.0

Cambodia Indonesia Lao PDR Philippines Vietnam

Health care

Productivity

Mortality

Total



8

Selected water impacts measured in this study

Data sources

Type of HH water source (JMP)

Water quality indicators(ministries, water providers)

Other national studies (e.g.discharge) and own estimates

(e.g. unit costs)

2 - Water Impacts

Cam Indo. Laos Phil Viet

Drinking water √ √ √ √ √

Other household uses √ √ √ √

Freshwater fish √ √ √ √

Marine fish

Economic impacts

Water costs paid by households toaccess clean water or treat water for

drinking and other uses

Estimated fish losses due to lowdissolved oxygen, partially caused by

sewage discharge to water bodies



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2a - Drinking Water

Closest water sources (often)not safe to drink untreated

Purchase or home treatment

Polluted water costs more totreat

Annual US$ 5 per capita

Costs can be averted

by using low costtreatment options and

reducing water

pollution

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cambodia Indonesia Lao PDR Philippines Vietnam

% h

o u s e h o l d s t r e

a t i n g w a t e r

0.0 10.0 20.0 30.0 40.0 50.0

Piped

Vendor

Boiled

Bottled

Cost per cubic meter (US$)



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In households, water is usedfor cooking, washing and

cleaning, personal hygiene,gardening and for ritual uses

2b - Other Domestic Water Uses

Expensive measuresoften taken due to

polluted water sources Households travel to

haul cleaner water, orthey use polluted water

Simple water protection measures

can lead to cost savings



11

2c - Water and Fish Production

Fish infected with pathogens

Antibiotics limit damage but are

costly and polluting Freshwater fish affected by low

dissolved oxygen (from highBOD): US$ 173 million/year

Marine / coastal fish and coralreefs also affected

0 1 2 3 4 5

Deli (IND)

Air benkulu (IND)

Ciliwung (IND)

Citarum (IND)

Brantas (IND)

Marilao (PHL)

Meycauayan (PHL)

San Juan (PHL)

Pasig (PHL)

Hong (VTN)

Day (VTN)

Thai Vai (VTN)

Tonle Sap (CAM)

Dissolved Oxygen (mg/l)



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6.8

5.8

1.4

0.70.80.6

2.3 2.3

3.2

0.4

0.1 0.30

1

2

3

4

5

6

7

8

Cambodia Indonesia Philippines Vietnam

W a t e

r - r e l a t e d e c o n o

m i c c o s t ( U S $ p

e r c a p i t a )

Drinking water costs Domestic use water costs Fish production losses

2 - Water Impacts

A n n u

a l c o s t U S

$ 2 . 3 b i l

l i o n



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Traveling & queuing time

Time has a value: people prefer

not to waste time unnecessarily

3 - Time Loss Estimated

US$ per capita0 2 4 6

Indonesia

Lao PDR

CambodiaVietnam

Philippines



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High value tourists will notcome here…

…if the drains lead totheir beach

4 - Tourist Revenue Affected

To capture this, the study assumes that improvingsanitation will help increase hotel occupancy rates,

contributing 5% to overall tourist revenue gains



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There are a number of perceived benefits

related to using private, sanitary latrines

0% 20% 40% 60% 80%

Status & prestige

More privacy

Time savings

Improved safety

Improved health

More comfortable

Hygiene/clean

% Urban

% Rural

5 - Intangible Welfare Effects



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Sanitation in institutions also lags behind

Inadequate facilities in

Schools

Work places

Public places

Impacts on

School and work absence

Life decisions

Quality of life of those usingunsanitary latrines or practicingopen defecation, especiallyvulnerable groups – women,children, seniors, handicapped

I m p a

c t s n o t v

a l u e d

6 - Away from the Home



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Poor sanitation affects the widerenvironment and living space

Open defecation

Unemptied septic tanks

Leaking shared and public toilets,

sewers

Leading to

“No go” zones – loss of valuableland, especially in cities

Welfare loss – putrid smells,diseases, poor image

I m p a

c t s n o t v a l u

e d

7 - Environment



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Total Impact

Million US$

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Indonesia Philippines Vietnam Cambodia Lao PDR

Financial Economic



19

Percentage of GDP

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Cambodia Lao PDR Indonesia Philippines Vietnam

Health Water Environment User preferences Tourism



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Per Capita Impact

0

50

100

150

200

250


US$ I$



21

Costs Averted

Million US$

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000


Costs Costs averted



ESI Phase 1

DISSEMINATION



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Reporting

WSP Website

WSP Access

World Bank Water

Anchor Website

2-pagers

Cartoons

WB Newsletter

Long Reports

Short Summaries

Regional/Country



25

Media



ESI Phase 2

EXPECTED

OUTPUTS



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Cost-Benefit & Cost-

Effectiveness Analysis

Standard outputs

include: Benefit-cost ratios (BCR)

Internal rate of return (IRR)

Payback period

Net benefits, net presentvalue (NPV)

Cost-effectiveness ratios(CER) on health outcomes

Benefit and cost analysis(incremental, incidence,time period)

- Are benefits greater than the costs?

- What is the annual rate of return?

- Is sanitation a good public investment?- How soon does a household recover costs?



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Outputs

Costs and benefits of improvedversus unimproved sanitation

Plus: incremental costs andbenefits of moving up the‘sanitation ladder’

Provide practical answers tonational policy questions, such

as sanitation financing or ways ofscaling up sanitation to meetnational targets

Synthesize lessons learned in

regional knowledge productssuch as simple-to-apply modelsfor decision makers to calculateeconomic returns in their setting



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Options under Consideration

Technical options

Majority in rural areas:

dry or wet pit latrines,also EcoSan

Urban areas: septic tank,septage treatment,sewerage

Program options

Subsidy – no subsidy

Community-led totalsanitation



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Costs and Benefits Included

Costs

Investment/recurrent

Hardware/software/labor

On-site/program costs

Household/external agent

Cash payment/in-kind

Household Benefits

Health

Water

Other welfare

Access time

Intangibles

External environment

Output uses

National Benefits

Tourism Business

Water quality



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Sources of Data

Household and community level

Household questionnaire

Community focus group discussion Health facility survey

Physical location and market survey

Water quality measurement survey

Source of benefit data (national level)

Tourism sanitation perceptions survey

Business leaders sanitation perceptions survey Water pollution study

Sanitation program questionnaire



Thank You

www.wsp.org

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