Economic and Financial Analysis for Water and Peace Projects

Growing Threat of Water Conflicts

Freshwater is crucial for human life on earth, as it supports agriculture, fishery, industrial production, transportation, and the functioning of ecosystems. However, freshwater is a scarce resource, which can create conflicts between countries and communities. The scarcity of clean water is becoming more severe due to rapid population growth, changing consumption patterns, and increasing pollution. These factors are directly impacting peace and stability worldwide.

Swiss Blue Peace

In response to these threats launched Switzerland in 2010, through the Swiss Agency for Development and Cooperation (SDC), the Blue Peace process which endeavors to transform competition over transboundary water resources into constructive collaboration. It does so by supporting cross-border cooperation and national platforms for dialogue on water resources which capacitates countries in using water resources more effectively and reducing tensions between different sectors and user groups.

The Blue Peace approach has two main objectives:

• Reduce or avert conflicts of water.
• Provide opportunities for further cooperation among countries, sectors and communities by using water as entry point to encourage broader dialogue and increase mutual trust.

adelphi Assesses the Economic Benefits of Upcoming Blue Peace Projects

Starting from 2020, any new SDC projects that exceed a certain budget are required to conduct an Economic and Financial Analysis (EFA). The primary purpose of this analysis is to assess a project's efficiency in terms of its net contribution to a country's economic and social welfare. Additionally, it aims to demonstrate the financial return on investment for various project stakeholders. The EFA seeks to answer three critical questions: "Is it worth investing?" (cost-effectiveness and value for money), "Are things being done correctly?" (project economy and efficiency), and "Are the right things being done?" (project relevance and effectiveness).

The Swiss Blue Peace Projects' primary goal is to make a meaningful contribution to peace and security. Therefore, their evaluation needs to focus on outcomes and impacts that aren't easy to measure in monetary terms. To meet SDC's guidelines, such projects must develop an Assessment of Economic Worthiness (AEW) as a minimum standard of EFA. The AEW assesses whether the intervention aims to maximize positive impacts, minimize negative impacts, and enables a primarily qualitative assessment of a project's potential economic and financial outcomes (with quantifications being limited to selected project components).

In this context, adelphi conducts the AEWs of four upcoming Blue Peace projects, which include:

• Blue Peace Middle East
• Blue Peace Central Asia
• Contribution to the Geneva Water Hub
• A new intervention on transboundary groundwater cooperation

adelphi creates a customized and practical AEW model for each project. This model includes a result chain, which outlines the expected project contributions, and an evaluation of the project costs relative to the qualitative and (wherever possible) quantitative benefits. adelphi then summarizes these findings in a report that determines the economic and financial viability of each project. The report also provides recommendations for possible improvements, such as modifications to the monitoring and evaluation framework or alternative project interventions.