16 modifications, a draft water law based on the experience of other countries. A vigorous information campaign and debate can then help ensure that the final design and implementation of the legal framework is done in a transparent and participatory manner. Explaining draft versions of the law with a willingness to accommodate reaction is critical to success. Farmers and other water users have to be made aware that their concerns and objections have been considered and dealt with. The process can also help identify and mobilize groups that stand to benefit the most from the proposed legislation.

_51._ Second, there is a need to establish effective institutions to draft the regulations and to implement the law efficiently and fairly. This requires ensuring that the water user associations and public institutions, such as water registries, water councils and watershed authorities, are able to carry out their responsibilities and that sufficient budgetary resources are devoted for their effective functioning. It may be useful to contract for technical assistance to draft the regulations and to strengthen water user associations at this stage. In addition, it is important to ensure that staff of the public institutions are capable, that they fully understand and support the new legislation, and that they are perceived to be honest and unbiased. Given the role of public institutions in the initial allocation of water rights and in the subsequent operation of the water market, poorly trained or corrupt employees could prevent the market for water rights from ever developing or functioning effectively.

52. There are several issues related to the initial allocation of tradable water rights. For existing users, it is suggested that water rights be granted without charge in recognition of the fact that some farmers have already paid for their rights implicitly in the purchase price of their land and that the government is unlikely to recover the capital costs of its investment in infrastructure. For new and unallocated water rights, it is important that they be sold via auctions carried out in an open and transparent manner and that a minimum reservation price be established prior to the auction. Information on prices and volumes should be made publicly available, and minimal costs charged to enter the auction. In particular, care needs to be taken that the poor are well-informed regarding the need to register their rights and the procedures for doing so. The advantages that the poor can enjoy from secure property rights can only come if they receive the rights to begin with. In addition to water user associations, the public media needs to be extensively used to ensure water rights registration. There is also a need to clarify that where there are large quantities of non-consumptive rights (hydropower, for example), they do not prejudice consumptive rights. This may require specifying the volumes that will be released each month of the year (based on historic use of consumptive rights holders) and ensuring that any consumptive rights between the intake and discharge points are respected.

53. Where functioning water user associations exist, the actual allocation should be a two-step process: water rights should be first assigned to the water user associations based on past usage and then assigned to the individual users by the associations according to guidelines issued by a Water Council. The titles to water are registered only at the individual level and not at the user association level. The two-step method has two advantages over direct assignmen **t** o individuals. First, it is easier for the water user