Water Scarcity Could Impact West Asian Credit Ratings

• by Manipadma Jena (nairobi, kenya)
• Thursday, June 09, 2016
• Inter Press Service

Families travel in search of water. Credit: Irfan Ahmed/IPSOnly 4 out of 12 countries in West Asia remain above the water scarcity limit of 1,000 cubic metres per person per year, the minimum limit viable for human population, the assessment warns.

"Water shortage potentially could have more impact on sovereign credit ratings than natural catastrophes as water scarcity conditions are slow onset impacting larger societies," Moritz Kraemer, Managing Director of S&P Global Ratings told IPS adding, "water scarcity, migration and conflict has yet not been factored into the Environmental Risk Integration in Sovereign Credit Analysis (ERISC) but certainly we need to."

The ERISC aims to help financial institutions to integrate environmental risks in their overall risk assessments and investment decisions by identifying and quantifying how they can affect countries' economic performance and thereby their cost of credit in the sovereign debt market.

The analysis premise is that sovereign credit risk can be materially affected by environmental risks such as climate change, water scarcity, ecosystem degradation and deforestation.

"So far we do not have sufficient liquid data on the potential economic implications of water shortage or change in rainfall patterns to be able to simulate numerically what the outcome would be, but we know countries with big water problems will have repercussions well beyond their boundaries, triggering migratory movements to start with. Europe is an example," Kraemer said.

West Asia has a significant geopolitical location linking three continents Asia, Europe and Africa.

"Jordan in 2013 was the world's fourth most water-scarce country but within just two years by 2015, it's status deteriorated to second place, when hundreds of thousands Syrian and Yemen refugees migrated into Jordan," Carl Bruch, legal expert on armed conflict and the environment, climate change, and water rights at Washington DC-based Environmental Law Institute (ELI) told IPS, illustrating impacts of migration on a natural resources and economy.

"Many of the economies with water problems that we have rated such as Jordan and Morocco have low credit ratings already, so part of their vulnerability has already been baked in like, though not explicitly. Still more research needs to be done," Kraemer told IPS on the sidelines of the second UN Environment Assembly (UNEA) in Nairobi where world's environment ministers gathered to take action on the 2030 agenda for sustainable development last week of May.

Political, social coupling with environmental issues trigger migration and conflict

"There is a tight coupling between political and social issues around displacement, but why people ultimately decide to move is often due to environmental problems, increasingly now due to water scarcity recurring very much in West Asia," Jacqueline McGlade, UNEP's chief scientist and Director of early warning and assessment division, told IPS.

Land degradation, desertification and scarcity of renewable water resources are currently Western Asia region's most critical challenges as rolling conflicts damage environment and human health denting the region's ability to produce enough food to meet the growing population's needs especially in the Mashriq sub-region ( includes Iraq, Jordan, Lebanon, the Occupied Palestinian Territories , Syria; and Yemen of West Asia), according to GEO-6 which offers a policy vision and good governance outlook over the next 25 years.

Increasing water demand resulting in diminishing per-person availability, West Asia now faces deteriorating water quality because of groundwater overexploitation, seawater intrusion, depletion and salinization of aquifers, and rising pumping costs. The region has already surpassed its natural capacity to meet its own food and water demand.

Water, land resource degradation and conflict in a vicious cycle

While peace, security and environment are the region's topmost priority, the vicious cycle of land degradation leading to, and resulting from conflict, can prevent people from returning home and normalizing life (and economy), Daria Mokhnacheva , migration, environment and climate change specialist at International Organisation for Migration (IOM) told IPS.

"The majority of refugees from conflicts in Iraq will not be able to return home to normalize life even if they want to, without clearance of mines and unexploded ordnance planted in what used to be their farms. Clearing of mines and can take decades," Mokhnacheva said.

Moreover although Iraq has the largest area of available farmland in the region, it suffers the most from soil salinity and wind erosion; 97 percent of its total area is arid, desertification affects 39 per cent of the country's surface area with an additional 54 per cent under threat according to GEO-6.

"Traditional farmers and herders can lag in temporary camps for years and these if based in water-scarce or drought-prone areas, may drive multiple displacements. Migration to urban areas destroys their lifestyles, customs and livelihoods completely, increasing vulnerability. Camped long-term, girls and women become traffickers' targets and girls as young as nine years of age are forced into marriage to reduce household's pressure on food," she said.

Early identification of water scarcity and migration hotspots critical for conflict prevention

"We have evidence from West Asia that the transition from the rural to the urban starts to sow the seeds of displacement which ultimately can lead to conflict," McGlade said.

"So the real issue for environmental governance is can we detect early enough the conditions under which either food or water security is likely to fail, can we identify these ‘hotspots' to take preventive action so that people do not leave the lands that already supports them," she said.

"We are already seeing three million people from Syria and Yemen on the move towards the borders of Jordan. Could this exodus have been prevented?" she added.

"We need to integrate migration and environmental research with that of social vulnerability to identify hotspots early," Mokhnacheva of IOM said, adding, "We also need to improve very local evidence to inform migration policies that can respond to actual need."

Poor governance of natural resource also responsible for conflict

"Poor governance is a deep-rooted problem we have picked up throughout GEO-6 assessments. The other fundamental cues for resource conflict are lack of access and inequality. Conflict can arise from multiplicity of lack of access, whether to justice or to resources themselves," McGlade said.

"Climate change causes stress on societies but these impacts by themselves do not necessarily indicate water wars in future. How the government institutions, civil society and international community respond to that stress and address the different interests, greatly influences whether a country will cope or whether it will degrade into tensions, disputes and ultimately into conflict," Bruch said.

"For instance, both Lebanon and Syria experienced precipitation changes that stressed their respective economies. Why then did Syria alone plunge into conflict?" Bruch added.

"Unfortunately there is no legal framework to pin institutional responsibility for forced migration," said Mokhnacheva.

Good governance implies that issues such as conflict resolution, food, water and energy are examined in a holistic framework," said Achim Steiner, Executive Director of UNEP.

"The Gulf countries can invest around water scarcity, creating artificial, energy-intensive, expensive water but most countries including those in West Asia or the Sahel and Burkina Faso have very little resilience, economic or environmental," Kraemer said.

Environmental governance could be the key to a nation's access to international credit and investment in the near future, experts said.

© Inter Press Service (2016) — All Rights ReservedOriginal source: Inter Press Service