The fact that many investments are huge, and have a long time-horizon, often discourages private capital, and requires large amounts of public investment. In some respects, water is a 'public good' in the sense that it is impractical to exclude users or beneficiaries, and therefore impossible to apply charges for such ill-measurable benefits as improved navigation, flood control, or reduced river pollution. Where this is the case, private investment will not be forthcoming. In both these respects, water is prone to 'market failure', which implies that some public involvement is called for. Ultimately, water is vital to life, and certain water systems are of national strategic importance.
Governments have a responsibility to manage water for the national welfare.
It does, however, mean that appropriate laws, regulations, institutions and incentives should be in place to underwrite the public interest, and that governments stand ready to invest where the market will not. Policy failures' are the public twin of market failures. The management of water is often fragmented between different agencies and parties, leading to conflict, confusion and mutually damaging tactics. Water authorities and service agencies are often overextended and inefficient. They often fail to recover enough funds to cover essential operations, and there is often a growing backlog of unserviced consumers.