Water Crisis in Asia: Why the World Cannot Afford Inaction

“The water crisis in Asia is not only a humanitarian emergency but also a macro-economic emergency with global spillovers. If left unaddressed, it will undermine the region’s ability to deliver on the Sustainable Development Goals and national development agendas, and will threaten food security, climate resilience, and long-term economic stability,” writes Julia Polycarp, Senior Climate Change Specialist at Sectors, Themes and Finance Solutions Department at the Asian Infrastructure Investment Bank (AIIB).

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By Julia Polycarp

Asia lies at the epicentre of the world’s water crisis and recent months have seen the region caught between flooding and drought. Just last month, 200,000 people were evacuated following heavy rain in Punjab, Pakistan, while a deadly storm hit large parts of Vietnam, causing mass destruction. Iraq is currently navigating its driest year on record, with many in the city of Basra dependent on daily water deliveries. 

Asia is home to the majority of the world’s population, projected to grow to more than 5billion people by 2050 – and is anticipated to contribute to the majority of global GDP growth over the coming years. Yet, it still has the highest concentration of water stressed countries, with at least half a billion people in the region already facing water shortages and more than a billion people without access to drinking water and sanitation services. New analyses from the World Meteorological Organization and the Organisation for Economic Co-operation and Development (OECD) rank parts of Asia among the most exposed to future drought severity, frequency, and economic disruption in the world.

As a direct result of climate change, West and Southern Asia could see droughts happening as many as 10 times more often than at present by the end of the century. At the same time, extreme rainfall is intensifying from Pakistan to China, heightening the risk and severity of floods. Asia’s surging population, rapid urbanization as well as industrial and economic growth make the region’s water challenges more urgent than ever.

Closing the Financing Gap

Asia’s water security is constrained by shortfalls in infrastructure financing. Without sustained investment in irrigation systems, wastewater treatment, and urban drainage, governments will struggle to meet basic needs, safeguard food supplies, and reduce disaster risks.

National development priorities across the region – from expanding irrigation in Central Asia to upgrading water supply and sanitation in South Asia – require capital but also governance frameworks that attract both public and private investment.

Development banks have stepped in with large scale projects. In 2024, Multilateral Development Banks (MDBs) approved US$19.6 billion in water-related financing – of which, $14.4 billion was directed to low- and middle- income countries. This brought total water-focussed investment by MDBs between 2019 and 2024 to $50 billion, benefitting over 400 million people globally. 

Additionally, at COP28 and the 2024 One Water Summit, we saw MDBs commit to providing hundreds of millions more people with water security by accelerating universal access to safe drinking water and sanitation, improving irrigation, enhancing flood management, and promoting sustainable water resources. Regional needs still far exceed current commitments, however, and greater collaboration by MDBs, governments and the private sector is needed to close the gap.

Scaling Adaptation Financing 

Prolonged droughts, catastrophic floods, and shifting rainfall are no longer irregular shocks; they are becoming structural features of the region’s climate – as evidenced by the recent catastrophes across the region. However, too often, we see climate adaptation as an afterthought rather than a central investment priority – and financing still lags behind mitigation. As Asia adapts to this new more volatile climate, it is imperative that we integrate flood protection, drought resilience, and coastal defences into transport, housing, and agricultural development considerations. 

MDBs are beginning to show what this looks like in practice. 

At the Asian Infrastructure Investment Bank (AIIB), for example, we have scaled adaptation finance through innovative tools, such as the issuance of Asia’s first Climate Adaptation Bonds to channel capital into resilient infrastructure. Recent large scale projects, such as the Climate Adaptive Irrigation and Sustainable Agriculture for Resilience Project in Cambodia, provide a blueprint for development. As part of the project, irrigation systems will be upgraded in four provinces to increase water availability during dry seasons while enhancing flood protection and drainage in the wet season. Institutional capacity will also be upgraded to ensure effective oversight, laying the foundation for sustained resilience. This demonstrates how MDBs can act as a catalyst for adoption, but the challenge is ensuring this is applied systemically across the region. 

Harnessing Technology 

Innovative technology solutions can support the implementation of water efficiency gains critical for countries experiencing severe water scarcity and increase risks of prolonged droughts due to climate change.

The implementation of advanced monitoring sensors and earth observation can provide transparency into water overuse and help understand threats of water leakages. Early-warning systems and integrated modelling can prepare communities in times of heavy rainfall, enabling them to respond to emergencies. Meanwhile, hydropower represents an opportunity to leverage the continent’s monsoon weather patterns to provide a source of reliable, renewable energy. 

Uptake of these solutions is still alarmingly slow in some countries, with a number of barriers routinely preventing adoption. These include a lack of awareness, poor dissemination of proof of value and insufficient dialogue between infrastructure and technology stakeholders. 

To fill the gap, AIIB last year introduced its InfraTech Portal, which provides details on what sustainable water governance and climate adaptation technology currently exists and which companies provide them across the region.

The Path Forward

The water crisis in Asia is not only a humanitarian emergency but also a macro-economic emergency with global spillovers. If left unaddressed, it will undermine the region’s ability to deliver on the Sustainable Development Goals and national development agendas, and will threaten food security, climate resilience, and long-term economic stability.

Closing the infrastructure gap, embedding climate resilience in all water investments, and coupling technology with sound policy will not only reduce Asia’s vulnerability but also unlock economic gains, protect livelihoods, and enable sustainable growth.

Featured image: Wikimedia Commons.

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About the author: Julija Polycarp is a Senior Climate Change Specialist at Sectors, Themes and Finance Solutions Department at the Asian Infrastructure Investment Bank. She is a highly accomplished professional with a passion for driving positive change through sustainable development and climate resilience. With a strong background in financing adaptation and resilience, Julija has dedicated her career to exploring innovative financing mechanisms for scaling adaptation finance.