The country faces difficulties in reducing gaps in the water sector. There are three particular challenges, as follows:
A scarcity gap for Northwestern Algeria. The country’s northwestern regions face major difficulties meeting needs from local resources. Estimates of groundwater availability (supply) average 2.7 Billions of Cubic Meters (BCM), while extraction (demand) for irrigation and for urban and rural drinking water is estimated at 3 BCM. Helped by subsidies for energy and equipment, farmers have turned to groundwater. Mobilizing additional surface water (potential estimated at 12.3 BCM, with half of it in the eastern part) could be part of the solution. However, past construction of massive “trunk” infrastructure has not been justified by results. Dams have been filling at only 14 percent of total capacity in recent years (El Moujahid, March 2006). Droughts have also pushed water planners and policymakers to shut off the tap for irrigation and reallocate the resource for urban use.
A service delivery gap. Algeria is caught in the vicious cycle of poor maintenance breeding poor service delivery, leading to unwillingness of users to pay more for the service, thus depriving the operator of resources needed to maintain the system. Operators of large-scale water supply and irrigation have a dismal record in meeting service delivery standards, with access relatively high but quality of service rather low. Despite high level of access to some services (urban water supply and sanitation, and irrigation), rural access to potable water and sanitation is poor, and their cost is lagging behind the share of O&M covered by user fees. The low level of coverage is prompting the government to maintain operators under a life support system of subsidization schemes. Finally, the low pricing of water provides no incentives to conserve or efficiently use the scarce resource.
A governance gap. The focus of water planners and policymakers is on hardware such as physical systems, rather than on software such as management and institution-building. This leads to a purely “engineering approach” to the planning of infrastructure and the investment portfolio. Institutional issues, including limited accountability, transparency and user participation, are not resolved. This leads to the most serious problem: the lack of coordination among water institutions. The planning and management of water development takes a top-down centralized approach, primarily driven by large investments. Little attention is paid to integrated management and proper maintenance schemes or to the voices of local stakeholders. In addition, the state plays the dual role of regulator and service provider. Service providers are not accountable to users for their performance. Technical criteria do not drive the investment portfolio. There is limited capacity of water administration in handling large investment budgeted amounts, leading to low budget execution and poor accountability in the publicly financed projects. Even more worrisome, a relaxed budgetary constraint has made the need for reform seem like less of a priority.
How much is clean water, access to sanitation, and good hygiene worth? While the necessary investment costs are relatively well known, the corresponding benefits are harder to quantify. Recent studies (Sarraf 2004) undertaken in the Middle and East and North Africa region have attempted to quantify the benefits, and “costs avoided”, by properly managing water resources, providing safe sanitation, and improving hygiene (Figure 6.3). The costs of inadequate water management can be grouped into three categories—first, the cost on health and well being of the population (for example, premature death and illness from waterborne diseases); second, the cost on production (for example, the decline in agricultural productivity from water salinity, or the decline in fish production); and third, the cost on environmental services (for example, reduced recreational value of lakes, wetlands, and coastal zones). Estimates of the costs to Algerian society resulting from inadequate water management for health-related aspects alone are at about 0.7 percent of GDP (MATE 2002).89
Source: MRE-DEAH (2005a)
With groundwater over-exploited in many areas, water quality is deteriorating and serious environmental problems related to water are a drain on the economy.Current extraction level from Mitidja aquifer doubless the sustainable yield (Figure 6.4). Overexploitation of groundwater, such as is happening in the Mitidja Aquifer, results in decreased water levels. Groundwater exploitation constitutes nearly half of total water withdrawal and almost three times the amount from surface water.90
Algeria has little water storage capacity, so it must invest in large, new dams that are contentious and costly.When “oued” flows are as variable as those in the southern Mediterranean environment, storage is necessary so that water supplies can be more closely matched to demands. The United States and Australia have over 5,000 cubic meters of storage capacity per person; China has 2,200 cubic meters; Morocco has 500 cubic meters; and Tunisia has 360 cubic meters. By contrast, Algeria has only 190 cubic meters per person,91 slightly more than Pakistan with 150 cubic meters. To remedy this situation, Algeria intends to launch an ambitious program of DA 740 billions (US$10.3 billions) to provide about 9 billion cubic meters to users. That will require 80 new dams and transfers to the existing 60 dams (ANBT 2005b).
Figure 6.5 Dam Situation in 2004
Much water infrastructure is in poor repair or is unusable. Because of age, faulty initial design, or limited maintenance, much of the mobilization and conveyance infrastructure needs to be rehabilitated. As shown below, several dams (Figure 6.5) and large-scale irrigation schemes (Table 6.1) must now undergo substantial rehabilitation if they are to deliver on their intended purposes. But rehabilitation should not be approved inertially; instead, only those productive investments should be retained in the future pipeline. For instance, an irrigation project can only be justified if its new associated technology truly answers to new market opportunities offered to those who receive the service.
Source: ANRH (2005).
Table 6.1 Condition of Large-Scale Irrigation Perimeters
Oranie
Chleff
Algerois
Constantinois
Old schemes
Habra: Old
Mina: Secondary canals bad
Hamiz: Old
Sig: Old
Bas Cheliff: Primary canals rehabilitated; secondary canals in progress
Kso’b: Renovated
Haut Cheliff: Renovated
Moyen Cheliff: Under renovation
New schemes
Maghnia: Degraded
Mitidja West: Overexploited by industries (Reagia) that use groundwater without authorization or payment
T he overall water management system is not financially sustainable. Three basic questions are relevant to the financing of infrastructure: Who pays? How much? And, how is the money used? In terms of “who,” there are many reasons why a substantial portion of the costs in water—especially for public works that provide individual services, such as irrigation water—should be paid by those who receive
the service. However, users of canal water in Algeria’s large public schemes pay only a small portion of the bill. In terms of “how much,” according to the authorities the average cost recovery for urban water (and sanitation) services was above 80 percent following the January 2005 tariff adjustment (Figure 6.6).92 Between 1984 and 2004, the delivery tab for average large-scale irrigation schemes (about 215 MCM) was roughly DA 27.5 billion, or US$380 million per year.93 In terms of “how money is used,” the first call is to pay bureaucracies, leaving insufficient funds for operations and maintenance. The vicious circle then continues: Service quality declines; users become even less willing to pay. The result? Farmers tend to tap into groundwater that is nonrenewable, as in the case of overexploitation of the Mitidja Aquifer.
A large share of the Algerian population has now access to improved water and basic sanitation services, but rural coverage continues to lag far behind. Ninety-two percent of the urban population now has access to improved water sources, and almost everyone in the country has access to improved sanitation (Table 6.2).94Official data indicate that about 1,040 communes over 1,541 (about two-thirds) have daily water availability. As in many parts of the world—and in particular, other countries in this region—rural service is lower than urban. According to authorities Algeria has eighty-nine percent coverage of water supply and eighty-five percent coverage of sanitation. Both rates are projected to increase to ninety-six percent and ninety percent in 2009. Thus, nearly 2.5 million people in rural areas lack improved water services and access to basic sanitation, compared with 1.5 million in urban areas without improved water and 0.19 million without adequate sanitation.
Table 6.2: Percentage of Population with Access to Improved Water and Basic Sanitation, 2004
Urban water
Rural water
Urban sanitation
Rural sanitation
Bahrain
100
Bahrain
100
Bahrain
100
Bahrain
100
Egypt
100
Kuwait
100
Kuwait
100
Kuwait
100
Kuwait
100
Lebanon
100
Lebanon
100
Qatar
100
Lebanon
100
Qatar
100
Qatar
100
Saudi Arabia
100
Qatar
100
UAE
100
Saudi Arabia
100
UAE
100
UAE
100
Egypt
97
UAE
100
Lebanon
87
Morocco
99
Saudi Arabia
97
Algeria
99
Jordan
85
Iran
98
Jordan
91
Oman
97
Algeria
82
Saudi Arabia
97
Iran
83
Syria
97
Iran
78
Syria
94
Algeria
80
Jordan
94
Tunisia
62
Tunisia
94
Oman
72
Tunisia
90
Oman
61
Algeria
92
Yemen
68
Iran
86
Egypt
56
Jordan
91
Djibouti
67
Egypt
84
Syria
56
Djibouti
82
Syria
64
Morocco
83
Morocco
31
Oman
81
Tunisia
60
Yemen
76
Djibouti
27
Yemen
74
Morocco
56
Djibouti
55
Yemen
14
Source: WDI.
Algeria is projected to meet the Millennium Development Goals (MDGs); yet even so, a large number of people will remain without basic water services. Algeria is likely to meet the target of reducing by half the number of people without sustainable access to improved drinking water and basic sanitation by 2015. Nevertheless, 630,000 people would still remain unserved with basic water supply and 1.68 million would lack access to basic sanitation—94 percent in rural areas.95
Furthermore, existing water sanitation infrastructure does not always function. Sanitation facilities are often not able to achieve their designed capacity, and they are often not operational—because the source has dried up, or because water quality has deteriorated beyond the plant’s capacity to treat it. Other surveys and field visits confirm that coverage by functioning systems is lower than official estimates suggest, in Algeria as well as in other countries of the region (Table 6.3).
Table 6.3 Official Versus Best Estimates of Service Levels in Rural Areas (%)
Source: World Bank (2005e, 2003c); WHO/UNICEF, “Sanitation” (1999).
The performance of Algerian water utility companies is low.Government-owned utility companies do not operate under hard budget constraints. Investment, hiring, salary decisions, and pricing of services are all commonly subject to political interference. Predictably, this leads to poor projects, overstaffing, and unrealistically low tariffs. In turn, the water utilities offer poor service and they defer maintenance. By standards of international good practice—for example, Chile’s water utilities—Algerian operational performance is poor (Table 6.4). According to the Algerian authorities, the level of unaccounted-for-water (both physical and commercial losses) is estimated at about 40 percent. The national water utility company (ADE) practices intermittent supply when demand exceeds water available (as it is the case in Oran, dams are almost empty), so ADE has to ration water distribution. When ADE is working to repair a leak, water can be shut down for a certain number of hours, or in parts of some cities, for several days on a fixed schedule.96 It does so both to repair leaks and to ration water when demand exceeds supply.
Employees per thousand water and sewerage accounts
3.5
3
7.9
9.6
1.1
Operating costs over operating revenue (in percent)
90
132
108
116
59
Source: World Bank sector studies.
Note: ADE had 19,765 employees for 2.51 million accounts in 2002. Total costs were DA 9.21 billion, and total revenues were DA 8.58 billion (ADE, “Consolidated Budget,” February 2003).
Figure 6.7 Share of Area Irrigated in Area Equipped
Algeria does not reap the benefits of irrigation schemes already equipped. Algeria has about 800,000 hectares of land equipped for irrigation. However, only 53 percent of that area is actually irrigated. There are several reasons—theoretical water entitlements are not respected, infrastructure is degraded, and so forth. In addition, only one quarter of publicly funded, large-scale irrigation are actually irrigated.
Source: Computation using data from ONID and Messahel-Benhafid (2005).
According to international standards, Algerian water management can be improved.Table 6.5, below, shows a composite index of water management for the region.
Table 6.5 Composite Index of Water Management in the MENA Region
Source: MENA Water Development Report (forthcoming)
Notes:
a This is a composite index of access to improved water, access to sanitation, and hours of access to tap water in metropolitan cities with population above a million.
b The proportion water billed in relation to the total water supplied is used to measure urban water utility management. The average for utilities in metropolitan cities with population above 1 million.
c Water Requirement Ratio (WRR) is the ratio of actual quantity of water required for irrigation in the country in a particular year to the actual quantity of water used for irrigation.
d Composite index is the mean of the three indicators.
ow much is clean water, access to sanitation, and good hygiene worth? While the necessary investment costs are relatively well known, the corresponding benefits are harder to quantify. Recent studies (Sarraf 2004) undertaken in the Middle and East and North Africa region have attempted to quantify the benefits, and “costs avoided”, by properly 
uch water infrastructure is in poor repair or is unusable. Because of age, faulty initial design, or limited maintenance, much of the mobilization and conveyance infrastructure needs to be rehabilitated. As shown below, several dams (Figure 6.5) and large-scale irrigation schemes (Table 6.1) must now undergo substantial rehabilitation if they are to deliver on their intended purposes. But rehabilitation should 
he overall water management system is not financially sustainable.