The current water situation in the Arab countries is alarming, with critical implications for the future of development in the region. The demand for water is increasing exponentially as a result of rapid population expansion, changing lifestyles, urbanization, and the pressures of economic growth. The high dependency of the region on transboundary waters and growing competition over water use further intensifies the water crisis. Furthermore, the repercussions of climate change, both current and projected, will exacerbate these ongoing challenges. The complex nexus between this fragile water situation, food security, and the energy sector further emphasizes the social, economic, and political implications of the water crisis in the region. This water crisis is, at its core, an issue of governance. The water sector, in many cases, is managed by fragmented government institutions, with inadequate capacities, low coordination, and overlapping responsibilities leading to the inefficient provision of potable water and sanitation services. Furthermore, in many countries, lack of government funding and low cost recovery constrains the financial sustainability of the water sector. The water security of the region requires an integrated and comprehensive approach of "effective water governance", and is necessary to ensure sustainable development in the Arab region. Identifying and adopting the principles and practices of effective water governance can guide the evolving socioeconomic needs of the people in an equitable and environmentally sound manner. Going beyond the traditional debates on availability, uses and dependency of water resources, this Report places the issue in a socioeconomic and environmental context and lays out the building blocks of good water management. These includes "cost effectiveness" analysis as a tool for weighing the options and competing interests involved in complex water decisions; setting up and enhancing environments through legislation, regulations and institutions; supporting shifts in patterns of water demands; and creating incentives for investment in more sustainable approaches. Lastly, the Arab region's current political and economic transformations present an opportunity to advance water governance reform, while effective water governance systems can in turn catalyse region-wide aspirations for overall governance and sustainable human development.