 order to meet these demands there will have to be rate increases coupled with increased government funding, as well as more efficient use of water and resources. Water rates are in the majority of cases insufficient to cover full cost recovery, and their revenues are not hypothecated for reinvestment in water services. Very few utilities have adopted pricing policies that encourage water conservation, such as block tariffs. The number of utilities and the decentralised nature of the industry are also seen as a problem, as they lead to duplication of effort and sub-optimal management of resources, and do not allow for economies of scale to be realised. In recent years there has been an increasing debate about the need to restructure water supply, particularly in light of the forecast needs for high levels of capital. But the evidence on whether public or private provision is better is inconclusive, although private utilities are said to be more successful in raising investment funds (Levin et al., 2002). Land use pressures and economic and social changes will pose challenges to water supply and sanitation systems. The provision of services has prompted massive population transfers to more arid areas and at the same time contributed to increasing per capita rates of consumption, putting further pressure on water resources. There is rising concern that the lack of clean water is becoming a limiting factor for industry; at the same time many communities do not have the ability to pay for the mandated improvements (USHR, 2004). Government loans provide about 10% of the overall infrastructure investment with the remainder provided locally, a situation that is exercising increasing congressional concern over how funding could be more effectively applied (USHR, 2004). Further concerns relate to a severe lack of investment in research and development for the water sector; asset management practices that lag behind other developed countries by some 10- 15 years; the need to move towards integrated water resource managemen