regulations. One result of this evasion was a considerable number of avoidable fatalities in the 1999 earthquake in which 11,000 people died.

# **<u>Box 1: Estimating The Health Impacts of Corruption in Water</u>**

<mark>A survey of evidence of corruption in Water provision in South Asia in 2001-2 suggested that contractors frequently paid bribes to win contracts worth between one and 6 percent of contract values, followed by kickbacks during construction of between 6-11 percent of the contract value, as well as forming ‘sanctioned’ cartels that raised prices by fifteen to 20 percent. In addition, the survey reported that kickbacks went in part to cover low quality work, in which materials worth between 3 and 5 percent of the contract value were not supplied (Davis, 2003). Assuming an economic impact of each dollar of such missing materials of between $3-4 in terms of shorter life and limited capacity, this suggests an economic cost equal to 9-20% of already inflated contract prices. These two forms of corruption together may have raised the price of a sustainable water connection by 25 to 45 percent.</mark> <mark>What is the economic and social cost of this corruption? An analysis of household survey data for 43 developing countries suggested that increased access to water had a significant impact on child mortality, for example. Each additional percentage point of household access to water was associated with reduced under-five mortality by one death for every two thousand children born (Liepziger et. al., 2003). Best practice prices for a household water connection are around $400 (Fay and Yepes, 2003). If this price is raised by 45 percent to $580 because of corruption, fewer households can be connected.</mark> <mark>Given a cost of $400 per household connection, each $1m investment in low income country piped water projects might save nineteen children a year who would otherwise die from water-related disease.</mark><sup>9</sup> <mark>At a cost of $580 per connection, $1m in water investments might save only 13 children each year. Over twenty years, additional costs imposed by corruption would mean that an additional 113 children die before the age of five for each $1m invested in water projects. One recent estimate suggested that low income countries could invest $29 billion in water projects over the ten-year period 2000-2010 (Fay and Yepes, 2003). If all of this investment took place in a low-corruption environment, this might lower the global toll of child deaths by over 540,000 each year, compared to 375,000 children if all of the investment took place in a higher-corruption environment.</mark> <mark>This is a very partial accounting of the impact of corruption in the sector. Limited household access to water has impacts beyond increased childhood mortality –it increases illness and death amongst older children and adults as well. This has follow-on effects in terms of educational outcomes and income generation. Corruption and weak governance also lowers overall sector investment –not least by deterring private finance of rollout. And limited access is only one impact of corruption, which also increases the cost and reduces the quality of water provision. Nonetheless, even as a partial and approximate indication of the impact of weak governance in the sector, the access and child mortality calculation suggests that corruption in water is a matter of life and death.</mark> Failed governance can lead to the construction of the wrong infrastructure, poor construction and quality of provision, insufficient maintenance and high levels of thefts and losses, then. This can dramatically reduce economic returns not just to individual projects but to the entire infrastructure stock, and lead to lower levels and less efficient provision of infrastructure provision –a result that has been empirically illustrated in a number of studies (Estache and Kouassi, 2002, Kaufmann et. al. 2005, Castalia, 2004, Bo and Rossi, 2006). Box 2 discusses the example of corruption in Jakarta’s water supply system.

9 Based on an average household size of five people and a crude birth rate of 30 per 1000 people (the average for low income countries). The exact estimates are 18.75 and 12.93 deaths averted, respectively.

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