Concessionary Financing Programs for the Water and Sanitation Sector in China

China's water and sanitation sector
faces challenges from rapid urbanization and
industrialization, urban diversification, large investment
needs, water scarcity, water pollution, and ecological
degradation. This policy note addresses 'concessionary
finance.' It is intended to provide a briefing for
Chinese government officials who formulate policies for the
water and sanitation sector. This note is not intended to
provide recommendations on which policies to adopt, but
rather to facilitate understanding of the policy options,
how to choose among them, and where and how various options
have been used in practice. Good water and sanitation
services are essential for economic growth, public health,
and environmental protection. However, these services can be
difficult to finance. When utilities do not have sufficient
capital, they under-invest and this will adversely affect
the quality of services the utilities provide. Many
governments run targeted concessionary financing programs as
a method of helping utilities raise the needed capital.
International experience has shown that well designed
concessionary financing programs can additionally be
employed as incentives to successfully improve utility
efficiency, sector governance, or both. This policy note
draws on successful case studies from concessionary finance
programs in other countries.