Introduction - Decades of controversy

Cost recovery has long been a controversial issue among water supply and sanitation professionals. Throughout the 1980s - the International Drinking Water Supply and Sanitation Decade - there were two competing factions.

One side was led principally by WSS specialists in the World Health Organization and UNICEF, and backed vociferously by numerous developing country professionals and politicians, often from the rural sector. They argued that health and social benefits amply justified the use of public and donor funds to deliver basic water and sanitation services to everyone who did not have them. Part of this faction was ready to concede that funds for operation and maintenance of new systems needed to be generated locally to avoid the facilities from falling into disrepair and disuse. The more hard-line advocates of "water and sanitation for all" argued that until the unserved millions were provided with access to services, they would never be able to afford anything; provision of basic services was, they maintained, a prerequisite for income generation and poverty alleviation, which would bring with it affordability and willingness to pay.

On the other side, whose frontline advocates were economists in the World Bank, it was affordability and willingness to pay that were the prerequisites. Delivering WSS services to those unable or unwilling to meet the costs was a recipe for failure, they maintained. History taught that support from governments and donors would be phased out over the years; without external funding, systems could not be properly maintained, let alone extended to meet the demands of future generations; and communities would not value or respect facilities in which they had no stake. Subsidies could be shown to favour the rich rather than the poor. Anyway, this argument continued, the unserved poor are already paying a high proportion of their incomes either in excessive charges for poor quality water from water vendors, or in lost productivity through time taken by women to collect water from distant sources. Therefore, it went on, they would be willing and able to pay for appropriate low-cost services, if they were shown to be convenient and reliable.

Over the years, there have been many variations on the basic themes, including compromises between the two positions, particularly as the concepts of community management, stakeholder partnerships and participatory planning have evolved into sophisticated ways of achieving sustainability in a variety of fields. In the WSS sector though, arguments have persisted about the "costs" that need to be included in cost recovery strategies and the sources from which "recovery" might be considered to come.

IRC's position on cost recovery is non-ideological and based on one single objective: to increase the numbers of poor men and women that have access to sustainable water and sanitation services. For that reason, this Thematic Overview paper (TOP) focuses on water supply and sanitation services in rural and peri-urban areas of developing countries, where the hundreds of millions of unserved poor people live. The TOP also introduces what we believe is an innovative approach to the issue of financing and cost recovery, by broadening the consideration of costs, benefits and revenue streams and advocating that all the linkages are clearly defined in WSS sector programming, to make the channels of cost recovery evident for the foreseeable future. There are significant challenges for governments, donors, sector agencies and many other stakeholders contributing to the achievement of sustainable WSS services for all. That is what this TOP is about.