This PowerPoint was presented by WSP Senior Economist, Sophie Hickling, during AfricaSan 3 (Kigali, Rwanda - 2011) under the "Economics of Sanitation for Advocacy and Decision Making" session. This session introduced the Economics of Sanitation Initiative (ESI) aims, rationale, and methods. A panel of experts from government, donors and other sector specialists in Africa commented on the use of ESI results for sanitation financing; the use of media to influence stakeholders; the mechanisms for adopting ESI results into government decision making; and critical assessment and proposed improvement to ESI methods.

1. The Economics of Sanitation Initiative:
An Introduction
Guy Hutton
Senior Economist, Consultant
Water and Sanitation Program

2. ESI in Southeast Asia
Overall Goal: Advocate for
increased investments, and
provide evidence for efficient
planning and implementation of
sustainable sanitation services
 Motivating factors
• Low priority
• Lack of evidence
 Geographical locations
 5 year study
 Household sanitation focus
 Study phasing

3. Study Phases
Phases:
1. Impact Study: Analyze economic impacts
of current sanitation arrangements &
hygiene practices; and estimate potential
gains from improvements
based on analysis of secondary data
2. Options Study: Analyze costs and benefits
of different sanitation options to inform
policies and programs which ones to select
based on primary surveys
Phase 1: Selection of analysis levels
‘Outputs’
– Focus on the National level
– Total cost
– Health damage costs by age
– Cost as % of GDP
– Available water quality data
– Cost per person
– Illustrative case studies, where available

4. Economic Impacts - % of Gross Domestic Product
8
7
6
5
4
3
2
1
0
Cambodia India Lao PDR Indonesia Philippines Vietnam
Tourism User preferences Environment Water Health
Strong inverse relationship between sanitation coverage and economic
impacts across 6 Asian countries.

5. Economic Impacts - % of Gross Domestic Product
International Dollar (ID)* United States Dollar (USD)
220
200
180
160
140
120
100
80
60
40
20
0
Cambodia India Lao PDR Indonesia Philippines Vietnam
Considerably larger costs per capita when taking into account
differences in purchasing power, compared with prices in the USA.

6. Methodological Issues
Or…what do the results really mean?
 Valuation
• What is life worth?
• Poor sanitation’s contribution to water
degradation and its economic consequences
Non-financial Financial
• Valuing tourism development aided by a clean 7,000
environment 6,000
 Economic versus financial cost 5,000
• Financial = direct and impact on cash 4,000
3,000
 Who incurs the cost?
2,000
• Part private cost, part externality
• Variation between country 1,000
0
 Underestimates of damage cost
• Conservative estimates
• Omitted impacts

7. Dissemination

8. www.wsp.org