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Procedia Economics and Finance 21 (2015) 217 – 223

8th Nordic Conference on Construction Economics and Organization

Social and economic importance of water services in the built

environment: need for more structured thinking
Tapio S. Katkoa,* and Jarmo J. Hukkaa
a
Tampere University of Technology, FI-33100 , Tampere, Finland

Abstract

Community water supply takes priority over other water use purposes worldwide. Investment in water and sanitation systems in
developing economies brings a multitude of economic and social benefits. Water infrastructure systems across the world will
deteriorate unless substantially more rehabilitation is done. This paper presents a structured and hierarchical framework for
sustained water services development consisting of institutions, provision, water infrastructure and production of services that
hopefully create better understanding of how to develop our systems and services as part of the built environment for more
sustained futures.
© 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
© 2015 The Authors. Published by Elsevier B.V.
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Selection and/ peer-review under responsibility of Tampere University of Technology, Department of Civil Engineering.
Selection and/ peer-review under responsibility of Tampere University of Technology, Department of Civil Engineering
Keywords: ageing water infrastructure; institutional development; priorities; production; provision; special features.

1. Introduction

Among the most important and indispensable services of necessity of all communities are water services which
consist of water supply, sanitation and stormwater services. Water also integrates many societal activities, even
serves as a “lubricant” of cooperation between municipalities (Pietilä et al. 2010a). While surface water as a
resource is mainly visible, ground water and many parts of the water infrastructure serving communities are largely
hidden and invisible and, therefore, unfortunately too often also forgotten by decision-makers and even
professionals.

* Corresponding author. Tel.: +358400737407

E-mail address: tapio.katko@tut.fi

2212-5671 © 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Selection and/ peer-review under responsibility of Tampere University of Technology, Department of Civil Engineering
doi:10.1016/S2212-5671(15)00170-7
218 Tapio S. Katko and Jarmo J. Hukka / Procedia Economics and Finance 21 (2015) 217 – 223

Community water supply as the most important water use purpose of our communities plays a fundamental role
in community and societal development. Priorities in water use purposes (WUPs) were studied by Katko and Rajala
(2005) by a two-phase questionnaire in 11 countries/regions on five continents with different water resources and
use, socio-economic and cultural conditions. On average, community water supply was ranked first, nature
conservation second, and hydropower third, but the priorities varied less than originally anticipated. Water supply
for urban and rural areas was ranked first in all countries except in Lithuania where it placed second. Nature
conservation was ranked second – in Mexico it received the lowest ranking (fifth). On average, hydropower was
ranked third – it varied between second and sixth place in national rankings. The study implied that water use
priorities should be taken into account in addition to water quantity and quality. Interestingly enough, this need is
not sufficiently stressed in literature dealing with the highly popular Integrated Water Resources Management
(IWRM), such as the Tool Box developed by GWP (2003). Yet, the legislations of many countries, including
Finland, recognise this priority.
As concerns the wider role of water in development, the International Law Association (2004) pointed out that
water and wastewater services are “vital human needs” of communities. In the global context, some 0.8 billion
people currently lack safe water whereas as many as 2.5 billion are without proper sanitation, and one billion
practice open defecation. Some countries may lose as much as 7 per cent of their GDP due to the lack of sanitation.
Due to poor management and maintenance, the number of people without proper services may actually be even
higher than the above figures suggest.
Human Development Report 2006 stated that “Water and sanitation are among the most powerful preventative
measures available to governments to reduce infectious disease” (UNDP, 2006, 21). According to Briceno-
Garmendia et al. (2008), some 35 per cent of the water supply and sanitation facilities in Africa need rehabilitation.
Furthermore, an estimated 90 per cent of all wastewaters in developing countries are discharged untreated directly
into rivers, lakes or oceans. Besides, every day two million tonnes of industrial and agricultural waste are poured
into the earth´s waters. (Corcoran et al., 2010) It is estimated that some 3.4 million people die every year from a
water-related disease which is equivalent to the population of the entire City of Los Angeles. According to the
World Bank (Anon, 2013), one out of every three people in the world today have no toilet. Economic losses from
lack of access to sanitation amount to an estimated US$260 billion annually, more than the entire gross domestic
product of Chile. (Anon, 2013) The list of consequences is endless.
A UNESCO supported publication (Jiménes-Cisneros et al., 2013) notes that some 520,000 people are affected
by floods yearly, and the amount of people killed in these floods is about 25,000 people per annum. Floods together
with other water-related disasters cost the world economy some 50–60 billion USD per annum. The same source
also noted that due to the lack of safe water supply and sanitation some 6–8 million people die every year from
water-related disasters and diseases. Compared to the impacts of floods, the lack of water supply and sanitation kills
much more people world-wide (over 70 times more). According to the World Health Organisation, each and every
day some 3,900 children die from dirty water or poor hygiene alone (International Decade for Action 2005–2015).
Yet, floods are always in the headlines of newspapers and even science policy papers, whereas the lack of water
supply and sanitation – i.e. water services – is a largely ignored silent, invisible, wide-spread and continuous year-
round catastrophe.
According to Hutton (2012, 35), achieving the water and sanitation related Millennium Development Goals
would provide large economic benefits: EUR 3–34 for each invested euro while the improvement of drinking water
quality would bring in EUR 5–60 for each invested euro. Furthermore, house connections would provide massive
health benefits. Water supply and sanitation have an impact on poverty, food security, water security, health and
many other sustainable development issues. Experts widely agree that investing in WASH pays off, but the
international community still lacks the sense of urgency. (Hukka and Nyangeri, 2014)
Access to safe drinking water, sanitation and hygiene is a key to sustainable development also in the UN’s Post-
2015 Sustainable Development Goals and Targets (UN-Water, 2014). Hukka and Nyangeri (2014) suggest that
achieving a green economy is not possible without ensuring everyone has access to basic water and sanitation
services. Across the world, access to these services has proved to be a critical step in lifting people out of the vicious
cycle of poverty and environmental degradation. Furthermore, the wastewater infrastructure of many fast-growing
cities required to ensure water efficiency is non-existent, inadequate or outdated. Water storage, treatment and
distribution systems are also often poorly maintained. Besides, water losses, due to technical leakage and water
 Tapio S. Katko and Jarmo J. Hukka / Procedia Economics and Finance 21 (2015) 217 – 223 219

theft, often exceed 40-60 per cent of total water distribution in many developing countries. Even in Finland, the
strive for strong centralisation of wastewater treatment can be questioned in some cases where sewer leakages have
reached 40 per cent.
Future water and sanitation services will face several challenges in the future: ageing infrastructure and
increasing staff retirement particularly in the North, and deteriorating systems and inadequate service levels and
management skills in the South. In fact, ageing infrastructure is likely to be the biggest challenge worldwide in the
coming decades. This threat has recently been pointed out by studies in Canada (Anon, 2012; Canadian Construction
Association et al., 2012), Finland (Heino, et al., 2011; ROTI, 2013), Norway (RIF, 2011), and the USA (ASCE,
2013; Grayman, et al., 2012). U.S. infrastructure was graded D+ by The American Society of Civil Engineers which
is an indication of the need for quick improvements.
In Finland, the biggest challenge of water services in the coming 20 to 30 years will be ageing infrastructure,
especially deteriorating networks. Other important concerns are vulnerability and risk management, climate change,
lack of human resources, research and education. Futures thinking and strategic development in the sector, on the
other hand, are positive signs. (Heino, et al., 2011)
Considering the priority of community water supply over other water use purposes, the huge challenges of water
and sanitation in developing economies, and the identified threat of deteriorating water infrastructure systems
worldwide, it is clear that we need to consider all possible ways of improving the current situation and find better
solutions for the futures. How can we develop the systems in more structured ways?

2. Aim and methodology

This paper aims at developing and presenting a structured and hierarchical framework for sustained water
services development that includes institutions, provision, water infrastructure and production of services that
hopefully create better understanding of how to develop our systems and services for more sustained futures.
The methodology of the paper is based on the constructive approach – “a procedure for producing innovative
constructions, intended to solve problems faced in the real world and, thereby, to make a contribution to the theory
of the discipline within which it is applied” (Lukka, undated). According to Lukka (1999), the researcher’s empirical
intervention is explicit and strong in a constructive study. Yet, contrary to typical objective oriented research of
minimal empirical obtrusion, having an impact is part of the constructive research method.
This paper is based on long-term cumulative knowledge and findings of the authors from multiple sources since
the early 1980’s: research projects, conferences, seminars, literature, own publications, discussions, interviews of
experts of various projects, and international assignments.
After the introduction and methodology the paper describes some special features of water services, reveals and
demystifies some common beliefs on water services, and thereafter suggests a more structured way of thinking
about water services development as part of the built environment. This presentation is not based on a specific
individual study but is of the review-type based on literature and several studies made by The Capacity
Development in Water and Environmental Services (CADWES, TUT) team formed at Tampere University of
Technology around 2000 headed by the authors.

3. Special Features of Water Services

A summary of the special features of water services’ “ontology” was produced by Pietilä et al. (2010b) based on
the PESTEL (political, economic, socio-cultural, technical, environmental/ecological, and legal) framework.
National administrative traditions and practices are important to understand. There are many basic factors which we
human beings can hardly control such as capital intensiveness (Tomkins and Wharton, 1996), natural monopoly – a
concept first introduced by John Stuart Mill in 1848 (Sharkey, 1982, p. 14), location of water sources, path
dependencies of technology selection (Melosi, 2000, 4; Rajala, 2009), natural and climatic conditions. Yet, people´s
views are important with regard to values and other sociocultural dimensions. Decisions that we make and factors
that we can control include tariffs, ownership, land use and legislation. The importance of the various factors and
decisions of each dimension depends on a wide range of circumstances which may be, for instance, geographical,
climatic, financial, cultural, or religious.
220 Tapio S. Katko and Jarmo J. Hukka / Procedia Economics and Finance 21 (2015) 217 – 223

Although we agree with the statement of the conference that the weight of the past is the main problem in the
RECS sector, we also argue that we also have to have some understanding of the pasts to be able to assess the
presents and the futures. This is especially true as concerns the water services infrastructure which must be assessed
over an exceptionally long time horizon (Kaivo-oja et al., 2004; Katko, 2013). As George Santayana (1863–1952)
reminded: “Those who cannot remember the past are condemned to repeat it. The physical assets built today are in
many cases expected to be still in use a hundred years from now, and once in place, such assets have little alternative
use (Melosi, 2000, 10). In fact, there has been unfortunate ignorance about long term experiences and unwillingness
to learn from lessons, even among external support agencies. It is not uncommon to hear arguments like “we are not
interested in history, we are interested in the futures”. As if they were alternatives. This misconception is mainly due
to the path dependence of water services infrastructure development (Melosi 2000, 4); certain related strategic
decisions have had unavoidable long-term impacts.

4. Common beliefs on water services

The authors have noted that international water policy dialogue and research have been characterised by several
biased or stereotypic assumptions that do not reflect the complicated reality. Too often no distinction is made
between water resources and water services: instead the debate shifts aimlessly from on-site systems to
transboundary water management and vice versa. In addition, very rarely is distinction made between the central,
possible regional, and particularly the local government. Water services are considered, at least by outsiders, no
different from any other businesses despite their special features referred to above. A related belief is that water and
sanitation systems are similar to other infrastructure systems of communities, such as energy, traffic and solid waste.
This is certainly not true although community infrastructure systems are interconnected which should be taken into
account in their planning and management.
Public-private partnerhips – seen merely as long-term operational contracts or concessions – have been promoted
strongly by international agencies for the last few decades. Although they did not prove successful as shown by
Annez, 2006; Bakker, 2010; Castro and Heller (eds. 2009); Hall et al. (2010); Hukka and Katko (2003); PPIAF
(2009), they are still promoted, while many other forms of public-private and public-public cooperation also exist.
Water services have many stakeholders with different interests, which makes the projects challenging and may
lead to failure. Some large-scale water transfer projects and efforts to centralise wastewater treatment plants have
faced strong opposition in Finland. Furthermore, water services are a multi-level system – from on-site to
cooperatives, municipal utilities and various types of supra-municipal arrangements. Yet, the debate too often
concentrates just on one level ignoring the others and their inter-relationships.

4 A structured framework for water services development

On the whole, better and more structured approaches based on research and realities will be needed for
institutions, provision, infrastructure and services production as elaborated in Fig. 1. First, we need a sustained
institutional framework like the one suggested by D.C. North, a Nobel Laureate in Economics (North, 1990). He
used the soccer analogy and defined institutions as the “rules of the game” while organisations were the “players”.
New Institutional Economies (NIE, e.g. North, 1990; Ostrom, 2009) call into question many ideas of more classical
schools of thought. According to Rouse (2013) policy, regulation and delivery should also be separated (Rouse,
2013).
Based on a sustained institutional framework, a distinction between service provision and production should be
made, as articulated by Ostrom (1990, 31) and Oakerson (1999). This distinction is a major concern in most
countries where legislation often puts municipalities in charge of providing or arranging the services which are
produced and implemented by utilities. This distinction goes undetected by almost all parties involved and literature
generally uses only the term “provision” without explaining its more accurate meaning.
 Tapio S. Katko and Jarmo J. Hukka / Procedia Economics and Finance 21 (2015) 217 – 223 221

Fig. 1. Proposed hierarchical framework for sustained water services institutions, provision, infrastructure and services
production.

After institutional arrangements and provision responsibilities have been solved, we will need water services
infrastructure through which water utilities can produce actual services to customers and citizens. With regard to the
water infrastructure, it is good to remember that some 80 per cent of the total costs derive from networks whereas
water and wastewater treatment’s share of the total costs is quite small. Yet, almost all interest and research funds
are directed to treatment instead of infrastructure systems and their management. This bias even seems to affect
current university curricula worldwide.
Grigg (1986, p. 3) defined a four level hierarchy of systems based on the natural environment. In it, the physical
infrastructure, including water supply, is the foundation of a city which supports economic systems while the social
system at the top of the hierarchy sets out e.g. the social needs and roles of the ultimate beneficiaries like citizens
and other water users in the community. Grigg (1988, p. 56) also emphasised that the correctness of the assumption
that infrastructure is necessary to support society is seldom disputed as such. Instead, debates are usually about how
much, what kind, where, when and who pays.
As we face a challenge of ageing water systems, it is clear that we need better management, institutional
development and policies – overall governance systems for water services. Thus, current policies and paradigms
must be reconsidered. Since some 90 per cent of water, 95 per cent of sewage, and probably close to 100 per cent of
stormwater systems, are publicly owned (World Bank, undated), we will definitely need different types of public
policy reforms and development.
The evolution and development of water services should actually be assessed over a very long time span, up to
250 years, if necessary: 125 years into the pasts as well as the futures (Katko, 2013, 456-457). In terms of urban
planning, we in the Nordic countries seem to be facing our own challenges as concerns water services. In Finland,
important ground water areas and aquifers have to be continuously safeguarded in spite of positive general
development. Stormwater management and planning of stormwater routes are another challenge. The third one is
related to inter-municipal collaborative planning aimed at realising mutual gains. Since water services are one of the
cornerstones of any community, it is obvious that more active inter-disciplinary collaboration is needed.
Our paper implies that in order to be able to provide and produce sustained water services, we also need proper
institutional arrangements and social innovations in addition to “conventional“ technological and economic
solutions. Technology development should be considered in the wider context of ensuring sustained water services
in the futures. That is also an area in need of further research.
222 Tapio S. Katko and Jarmo J. Hukka / Procedia Economics and Finance 21 (2015) 217 – 223

6. Concluding remarks

We suggest a structured approach based on the following elements for developing sustained water services:
(i) A sustained institutional framework where institutions are the rules of the game and organisations are the
players.
(ii) A distinction between service provision and production which until now has gone undetected by almost all
parties. Legislation often puts municipalities in charge of providing or arranging the services.
(iii) Water services infrastructure and systems built on the above elements that will need more resources for
rehabilitation in the future.
(iv) Sustained water services produced by a variety of utilities.

It appears that in the future the focus will be more on benefits and values than mere costs although economic
realities must always be taken into account. And naturally it is important for the water services sector to try and
make people understand the real value of water services, changing them from invisible to invaluable. When
assessing sustainability, all the political, economic, socio-cultural, technical, environmental/ecological, and legal
dimensions should be considered. In the end of day, water services are vital human needs for community use.

Acknowledgements

Support from the Marcus Wallenberg Foundation for part of the study is acknowledged.

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