Japanese Water Management Systems from an Economic Perspective: The Agricultural Sector - Water and Agriculture: Sustainability, Markets and Policies - page 56

5. Conclusions and recommendations for developing countries
5.1 Conclusions of this paper
Overall, the Japanese systems of water management can be characterised as a kind of
property rights regime. In the agricultural sector, several instruments have had decisive
roles in improving economic efficiencies, securing effective and equitable cost
recoveries, and abating conflicts between non-agricultural sectors, under the current
legislative framework that prohibits explicit trading in water rights is prohibited:
The LIDs, voluntary farmers' groups, are entitled to the water rights and responsible
for the management of all irrigation water in the corresponding territory. Based on the
independency of the organisation and easier access to the necessary information, the
marginal (O&M) cost recovery, at the least, is assured and effective water use in terms of
both technical and economic efficiencies is mostly expected at the same time.
The area pricing commonly applied in LID management is supported compared with
other systems like volumetric pricing, taking into considerations the technical aspects and
transaction costs under the conditions of uniform, collective and small-scale paddy
farming in Japanese agriculture.
The LIDs, in some cases, have conserved watershed areas for the primary purpose of
stable water flow to be extracted. The whole system of agricultural water management in
this context realises positive impacts on the environment.
Facing the occasions of serious water shortage, the government provides quasi-
markets in water implementing transfers between non-agricultural sectors, and among
LIDs, to improve economic efficiencies. Recently, serious water shortages take place
only once every ten years on average, in limited areas and during limited periods. Explicit
trading is prohibited, but the community-like decision making of water allocation in the
quasi-markets would help abate social conflicts. The permanent transfer of water rights is
also managed under the authorisation of the government.
5.2 Recommendations for developing countries
The Japanese systems of agricultural water management will be leading examples for
developing countries under the monsoon climate, where small holdings of paddy field
agriculture dominate.
Some form of farmers' organisation should be responsible for irrigation water
management. Once well-defined property rights to access irrigation water are entitled to
the organisation, securing the marginal (O&M) cost recoveries at the least and efficient
water use will be mostly expected regardless of pricing systems actually applied inside.
Uniform pricing by any governmental organisation would be inferior. Economic
instruments to improve efficiencies can be considered after this kind of institutional
problem concerning effective and sustainable governance is solved.
For economies of scale, which will benefit the economy as a whole, be revealed,
capital investments may have to be subsidised to some extent. The benefits from
productivity enhancement will accrue mainly to consumers in many developing countries.
Where the property rights of water use are connected to these investments, farmers might
intend to pay part of the sunk costs from the investments (average cost recovery).