Water availability and management are crucial for economic growth, food security, public health and trade throughout Asia. Harnessing water’s productive potential and mitigating its destructive force remain key priorities to achieving better social and economic development in Asia.
Asia is home to more than 4.5 billion people and 60 percent of the total global population. The United Nations (UN) projects that Asia’s population might grow by another 750 million people over the next 30 years, reaching more than five billion by 2050. As Asia’s population rises, so does the demand for water, putting great pressure on the region’s already strained resources. In addition, rapid urbanization, industrial and economic growth make Asia’s water challenges more urgent than ever.
At least half a billion people in the region currently face water shortages. More than a billion do not have access to drinking water supply and sanitation services. As the region’s population and urbanization rate increase, demand for water will continue to grow. Many service providers are already struggling to keep up with supplying basic services. For example, access to piped water supply is declining in many urban areas. In addition, Asia is also facing climate change-induced water challenges that are as diverse as the region’s physical geography. Asia’s mountain systems are a global warming hotspot and warmer temperatures are feared to trigger glacial melt and lesser water predictability that could impact water, energy, and food security of over 1.9 billion people. Meanwhile, Asia’s low-lying coastal areas are under threat of sea-level rise. Over the past few years, the negative impacts of climate change have been felt across the region with more frequent extreme weather events and intense natural disasters. These issues require large investments in adaptation measures in water supply, sanitation, and irrigation infrastructures.
AIIB recognizes the urgency and importance of investing in Asia’s water infrastructure today to build a better tomorrow. AIIB’s Water Sector Strategy reflects the Bank’s commitment to ensuring the availability and sustainable management of water and sanitation for all, in line with the Sustainable Development Goals (SDGs), especially SDG 6: to ensure the availability and sustainable management of water and sanitation for all.
The Bank also appreciates the need to consider that not all water challenges can be solved with infrastructure alone nor through better management alone—some balance is necessary. This is why AIIB’s water sector investment is focused on three main categories—improving access to water services, increasing the availability and quality of water through improved resource management and improving resilience to the impact of water related disasters. The Bank’s investment in the water sector is guided by four principles: promoting sustainable infrastructure, integrated resource management, mobilizing private capital and efficiencies and adopting innovative technology.
Since the Bank was established in 2016, AIIB has approved 15 water projects in eight countries totaling an investment of USD3.9 billion in areas such as flood management, modernization of irrigation systems and improvement of water supply and sanitation systems. At the end of 2022, water projects accounted for 10 percent of the Bank’s total regular financing in terms of project number, and 16 percent in terms of financing amount.
In 2022, AIIB approved two major projects: the Bukhara Region Water Supply and Sewerage Project, Phase II in Uzbekistan and the Second Dam Rehabilitation and Improvement Project in India.
For the Bukhara project, AIIB partnered with the Government of Uzbekistan and provided USD248-million in financing to help provide access to safely managed water and sanitation services and strengthen the operational performance of the water utility in the Bukhara Region. The project is designed to improve the efficiency of water use, enhance water environment and public health safety and promote sustainable water management and is expected to benefit 1.2 million residents in the Bukhara region.
The second project, which AIIB is cofinancing with the World Bank, focuses on upgrading and modernizing dam operation and maintenance of selected dams in participating states in India and strengthening dam safety management.
AIIB maintains a diversified water portfolio, which reflects the growing diversity of needs and client demand, partially resulting from the impact of climate change on water scarcity and increasing incidence of water-related disasters. While water supply sanitation and wastewater treatment (SSWT) continue to represent the largest client needs and demands, water disaster resilience, irrigation and drainage; and water resources management are also now represented. For example, AIIB is supporting flood risk management projects in the Philippines, West Bengal, India, and Henan, China and irrigation projects in both Indonesia and India. It is helping to improve water and sewerage services delivery through rehabilitation and upgrading of critical water infrastructure in Karachi, Pakistan, Egypt, India, and several areas in Bangladesh.
The total number of people benefitting from improved water supply and sanitation services, irrigation and drainage infrastructure, protection from water-related disasters reached 51.9 million, up by more than 10 percent compared to last year.
Figure: Highlights of AIIB’s Impact in the Water Sector, 2016-2022
AIIB is committed to implementing Paris alignment in the water sector projects, as part of its broader goal to align its operations with the Paris Agreement by July 1, 2023. AIIB is also targeting at least a 50 percent share of climate finance in actual financing approvals by 2025. While most of AIIB’s water sub-sectors are already considered as automatically Paris-aligned by the joint multilateral development banks (MDB) framework, AIIB will continue to integrate climate mitigation and adaptation measures into project design to ensure the projects are Paris-aligned, while also scaling up the climate finance percentage of water-related projects.
Aside from financing projects in the water sector, AIIB’s Water Sector Strategy also involves developing strategic partnerships with key development and knowledge players influencing policy dialogue and reform. The Bank is keen to play a more active role in supporting the policy dialogue and investment process to encourage positive reform in the region’s water sector.
AIIB’s work is aligned with the agenda and expected outcomes of the upcoming second UN 2023 Water Conference which will be held on March 22-24, 2023 in New York. This is the first time this event is being held in 46 years. Under the theme of 2023 World Water Day (March 22) ‘Accelerating Change’, one of the expected outcomes is the launch of the Water Action Agenda. As a development partner and Asia’s climate partner, AIIB stands ready to support its Members on their work on water security and climate action around the world. In 2023 and beyond, AIIB will continue to explore opportunities to expand its work in ensuring access to water and sanitation in the region and build the Infrastructure for Tomorrow.
Related reads:
- Water from Air: Climate Resilience with Lightsmith by Thomas Walenta
- What AIIB Can Learn From India’s Water Sector by Girish Chadha
- Investing in Asia's Water Sector Infrastructure by David Ginting
