ogramme, but this did not address the problems of low levels of maintenance and deterioration of assets. Water distribution is heavily subsidised by the government, which encourages overexploitation of resources and the under-financing of services. Only some 10% of wastewater is treated, despite effluents also being used for irrigating crops. In 1989 the National Water Commission was set up at federal level to deal with water management by integrating water resource planning and management and co-ordinating efforts across the three levels of government (national, state, local). It acts as regulator at local level to finance and provide water infrastructure but not to operate it. This is the responsibility of municipalities and other local bodies; the private sector can also be involved (Hazin, 1997). In 1995 over 70% of water services were provided by municipalities. Levels of indebtedness are high among municipalities, with most public investment coming from the central government: 84% in 1994 (Hazin, 1997). This weakness is compounded by both a lack of technical and administrative capacity and lack of funds to cover operating expenses other than staff and administrative costs; the latter becomes more marked as the population size served by a municipality decreases. In an effort to address these problems there has been a programme to modernise water management INFRASTRUCTURE TO 2030: TELECOM, LAND TRANSPORT, WATER AND ELECTRICITY - ISBN 92-64-02398-4 © OECD 2006 5. THE IMPACTS OF CHANGE ON THE LONG-TERM FUTURE DEMAND FOR WATER SECTOR INFRASTRUCTURE companies, supported by funding from central government as well as from the World Bank, IDB and EBRD. As a result there has been an upsurge in agreements and concessions between municipal authorities and private water companies covering some 70% of the urban population (Barlow and Clarke, 2004). The Mexico City metropolitan area holds over 20% of the country's population (22.5 million by 2010). The water supplied to users is heavily subsidised; the wealthiest benefit 