The peace process that began with the Madrid conference in 1991 has raised expectations of sweeping change in the Middle East. As well as ending the state of war between Israel and the Arabs there are popular expectations that peace will bring prosperity. Creating the conditions for sustainable economic growth in the countries most affected by the Arab-Israeli conflict is a priority of the peace makers. As they prepare to channel appropriate aid and development funds into the area, water resources are emerging as a critical element in future hopes of progress.

Putting water firmly on the regional agenda is a prerequisite if the best laid plans of the IMF and World Bank are to succeed.

IMF sponsored remedies have fundamentally affected the economic management of regional states as varied as Egypt, Jordan, Tunisia, Turkey, Algeria, Morocco and Pakistan. The World Bank is the leading source of multilateral development aid for these countries and has provided $4,500 million in financing for water, sewerage and irrigation projects in the Middle East and North Africa since the 1960s.

In a speech to the Amman economic summit in late October the bank's regional vice-president Caio Koch-Weser called for a regional summit on water and stressed its critical importance to the hopes of growth.

'In no other region of the world is water as important to growth and development as it is in the Middle East and North Africa,' he said. In a critique of past practices the World Bank official decried the mining of non-renewable water resources in the region as part of a boom and bust pattern that is unsustainable.

Several states in the region already face critical water shortages. The World Bank says that seven countries are having to withdraw 100 per cent or more of their renewable water resources each year to meet the pressures created by rapidly rising populations, urbanisation and agriculture (see box).

'Population and development have overwhelmed traditional management practice, and problems of water scarcity and pollution are as severe as anywhere in the world,' the bank said in a seminal report published in 1994.

And the problems are growing. Several countries, such as Egypt and Israel, are already withdrawing about 90 per cent of renewable sources of water. No fewer than eight states have per capita water availability of less than 500 cubic metres per year. Some economists define such a low level of water supply as constituting a barrier to growth.

According to World Bank estimates, 11 out of 16 states in the Middle East and North Africa region will have water availability below this barrier within the next 30 years. If water is not to constitute a barrier to growth in the region there must be a fundamental change in the way resources are managed.

The adoption of demand management techniques is seen as the key to averting disaster. The piecenieal approach of the past, which stressed meeting user needs at minimal prices, is no longer rational.

Regional states are being urged to adopt a comprehensive water resources framework to use in managing their water resources rationally. The politically sensitive imposition of user charges, which would price water realistically, should become a cornerstone of policy.

The World Bank argues that the allocation of water to agriculture, which accounts for about 90 per cent of regional water use, no longer makes economic sense. Through the heavy use of water to produce an exportable agricultural surplus states such as Egypt or Saudi Arabia are, in effect, exporting an increasingly scarce resource. Agriculture accounts for 90 per cent of water consumption yet contributes only 16-20 per cent of regional gross domestic product (GDP).

A powerful argument can be made for diverting water from agriculture to more productive uses. In Morocco, for example, it is estimated that the value added by a cubic metre of water in irrigated agriculture is a mere 15 cents; used in industry it is a striking $25. In Jordan, which uses highly efficient drip irrigation for over half of its irrigated agriculture, the equivalent figures are 30 cents for agriculture and $15 for industry.

Wasted water Lots of water is simply lost. About half of all municipal water supplies are lost through leakage, according to the World Bank. As many as 45 million people have no access to safe water; 80 million have no sanitation.

The arguments of the reformers hinge on the notion that a more appropriate allocation of limited water resources will help to create the conditions for economic growth.

The region should integrate itself into the world economy, promote the private sector, and invest in human development. Such a strategy would divert water from agriculture - which could remain productive by adopting more water saving technologies - towards higher value industrial uses.

'(Such) strategies could ultimately resolve regional water shortages, because thriving economies can afford to use unconventional sources such as desalination to supplement freshwater supplies,' Koch-Weser said in his Amman address.

The bank cites the case of Malta approvingly. Despite a chronic shortage of freshwater, Malta has used economic growth to fund the construction of desalination plants to provide 70 per cent of its water needs. Several Gulf states have made similar investments.

The most advanced thinking and application of these prescriptions is to be found in Israel where similar arguments have been made for more than a decade. A shift in water use policy since 1986 has reduced agriculture's use of water significantly. The adjustment, prompted by drought conditions, has been at the expense of Israel's farm lobby as agriculture has been downgraded from a prime element in the national economy to one that can be progressively reduced in status. Notions of food security and self sufficiency, so dear to Arabs and Israelis alike, are seen as a hangover from the 1950s and 1960s and inimical to future economic growth.

A similar trend is observable in Saudi Arabia. where the subsidies that supported the sudden expansion of agriculture are shrinking and wheat production is falling.

Despite such signs of progress, there is little prospect of rapid adoption of the strategies advocated by the World Bank and others.

'In the Middle East the adoption of new approaches to water management is taking time to take root,' Tony Allan of the School of Oriental & African Studies in London observed in mid-1995 at a conference on the Jordan catchment countries.

Much of the analysis on offer today is ori ented towards putting water in its proper context as a key influence on the region's ability to survive and thrive in the future.

The political economy of whole societies will be affected by the policy changes being advocated. If water is switched from agriculture to industry it achieves much higher economic returns and creates more livelihoods. The process of turning such ideas into policy is only now starting to make an impact in the region.