The rapid pace and scale of urbanization represents a considerable challenge for water resources management, the delivery of essential water and sanitation services and environmental protection. To help meet these challenges there is a need to adopt an integrated water resources management (IWRM) approach which explicitly recognises the complex sets of interdependency relationships which exist within and between human and environmental systems. This need arises because of the negative externalities created by the uncoordinated use of water and land resources and by the uncoordinated provision of interdependent basic services; the opportunity costs of employing scarce water, land and capital for low value purposes; and the cost savings which can occur by widening the range of provision or management options. An IWRM approach when applied in an urban context cannot simply consider matters within the built up area itself. It must recognise intersectoral competition for resources (physical, social and financial), the role of the urban sector in meeting national developmental priorities, and negative impacts of urban provision practices on other parts of the economy. IWRM does not imply the creation a vast bureaucracy attempting to coordinate everything, rather it involves the creation of an institutional framework within which water relevant roles and functions are performed at an appropriate spatial scale and which helps ensure that decision makers have incentives to take the social costs of their actions into account. There is evidence to suggest that in some countries decentralised urban water services have the advantages of allowing more demand responsive provision, greater accountability, and technical flexibility without significant losses of economies of scale and scope. However, such decentralized systems have to operate within a strong strategic and regulatory framework. Moreover, institutions to promote coordination and cooperation between sectoral actors and across jurisdictional boundaries will need to be put in place. In developing the strategic framework within which different sectoral and spatial actors operate it is important to consider the policy tools available at different levels of government and governance. Furthermore an instrument (or policy mix) will need to be developed, not only to meet different policy goals, but also to ensure that local or sectoral actors do not operate in narrowly self interested ways. There are relatively few urban management tools which are automatically compatible with the efficiency, equity and environmental sustainability objectives of IWRM. Implementation practice is crucial
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