Water Privatization

Water privatization - Wikipedia, the free encyclopedia
Water privatization is a short-hand for private sector participation in the ... In the case of water privatization in England, tariffs increased by 46% in real ...
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CBC News - Indepth: Water Privatization
Water, like air, is a necessity of human life. ... Water facts and figures. Canadian statistics. Walkerton ... Troubled Water. A CBC News Big Picture. Nova Scotia ...
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Key Issues of Privatization. of the Water Sector. for Practical Application 2003 ... Welcome to the PSP Forum. for water sector professionals! ...
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Africa: Water Privatization
Home > Resources & Information > Africa Policy E-Journal > Africa: Water Privatization ... with IMF-imposed water privatization and cost ecovery policies ...
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Water is Life - Water Privatization Conflicts
... two of these principles are directly compromised by the privatization of water. ... Medical Association condemned water privatization for its health ...
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Water privatization is a short-hand for the privatization of water services, although more rarely it refers to privatization of water resources themselves. Because water services are seen as such a key public services, proposals for privatization of them often evoke stronger opposition than for other sectors. Globally, over two-thirds of modern water and sanitation systems are public ownership and operated.

Types There are two main types of water privatization, sometimes known as the "British Model" and the "French Model". The British model consists of privatising both the assets (water and sanitation network, treatment plants and so on) and the operation of the assets, whilst in the French model, the assets remain publicly owned. The British model is largely limited to England and Wales (the system is still public in Scotland and Northern Ireland), with only isolated examples elsewhere.

For the usual privatization structure of keeping assets public and privatising service operations, there are three major types, in order of increasing risk transfer to the private operator:

management contract, under which the private operator is responsible only for running the system, in exchange for a fee (usually performance-related). Investment is typically financed and carried out by the public sector, but implementation may be delegated.
lease contract, under which assets are leased to the private operator, who recoups the cost from end users. Investment is typically financed and carried out by the public sector, but implementation may be delegated.
concession (contract), under which the private operator is responsible for running the entire system, including planning and financing investment. Concession contracts usually run for 20-30 years.

An additional structure, a BOT (Build-Operate-Transfer), exists for the carrying out of investment, usually the construction of specific new water or wastewater treatment plants. The BOT contract involves the private partner constructing the plant and then running it for a number of years (during which payment is received for the treatment capacity provided) before handing it over to the public water company. The risk for the private company for these is often relatively low, especially when contracts relate to capacity provided (rather than services provided) and the water company takes the demand risk.

All these structures may involve public-private partnerships, where the operating company is a joint venture between the public owner of the assets and the private company, which usually has at least day-to-day management control, where it does not have a majority of shares.

Reasons for privatization Typically there are five specific reasons for attempting to privatize a pubic water system.

improvement of water quality
financing needs for investment
need for technical expertise
efficiency concerns
greed

In developing countries, there has often been pressure from international financial institutions such as the World Bank and IMF to privatise water, for examples through the imposition of conditionality.

A recent World Bank paper summarised evidence on efficiency: "For utilities, it seems that in general ownership often does not matter as much as sometimes argued. Most cross-country papers on utilities find no statistically significant difference in efficiency scores between public and private providers."

Multinationals Privatization is often associated with multinationals. According to the industry bible Masons Water Yearbook 2004/5, 545m people (9% of the world population) are served by private providers. Of the three biggest multinationals active in the sector

SUEZ serves 117.4 million people around the world;
Veolia Environnement, 108.2 million;
RWE, 69.5 million (before selling its major water subsidiary, Thames Water, to Kemble Water

The next biggest players are Aguas de Barcelona (35.2 million); SAUR (33.5 million); and United Utilities (22.1 million). Exceptionally, none of these is United States-based. Of the big three, SUEZ and Veolia are France-based, and RWE is Germany, although its water subsidiary (Thames Water) was originally British.

However, increasingly, domestic water operators are entering the market in Middle Income Countries (e.g. Brazil, Malaysia, and China).

In addition, public utilities are going overseas and entering contracts that do not require investments (e.g. management contracts). Examples of these include Rand Water (South Africa) and Vitens (The Netherlands) winning the management contract in Ghana. The lines between public and private are thus blurring.

Anti-water-privatization campaigns Privatization proposals in key public service sectors such as water and electricity are in many cases strongly opposed by opposition political parties and civil society groups. Usually campaigns involve Demonstration (people) and political means; sometimes they may become violent (eg Cochabamba Riots of 2000 in Bolivia). Opposition is often strongly supported by trade unions. Opposition is usually strongest to water privatization - as well as Cochabamba (2000), recent examples include Ghana and Uruguay (2004). In the latter case a civil-society-initiated referendum banning water privatization was passed in October 2004. A law banning privatization of public water supply was also passed in the Netherlands in September 2004, with broad cross-party support.

References

Scott Wallsten and Katrina Kosec. "Public or Private Drinking Water? The Effects of Ownership and Benchmark Competition on U.S. Water System Regulatory Compliance and Household Water Expenditures", Brookings Institution Working Paper 05-05. (March 2005)
A. Estache, S. Perelman, L. Trujillo (2005), "Infrastructure performance and reform in developing and transition economies: evidence from a survey of productivity measures", World Bank Policy Research Working Paper 3514, February 2005.
Clare Joy and Peter Hardstaff (2005), "Dirty aid, dirty water: The UK Government’s push to privatise water and sanitation in poor countries", World Development Movement, February 2005
Belén Balanyá, Brid Brennan, Olivier Hoedeman, Satoko Kishimoto and Philipp Terhorst (eds), Reclaiming Public Water: Achievements, Struggles and Visions from Around the World, Transnational Institute and Corporate Europe Observatory, January 2005. ISBN 90-71007-10-3
Greenhill, Romilly, and Wekiya, Irene (2004), Turning off the taps: donor conditionality and water privatisation in Dar es Salaam, Tanzania, London, UK, ActionAid.
David Hall and Robin de la Motte, Dogmatic Development: Privatisation and conditionalities in six countries, War on Want
Emanuele Lobina and David Hall, Problems with private water concessions: a review of experience, PSIRU, University of Greenwich
Steven Renzetti and Diane Dupont (2003), "Ownership and Performance of Water Utilities", Greener Management International 42, Summer 2003
De Witte, Kristof (2006), 'Efficiëntieprikkels in de drinkwatersector', Economisch statistische berichten, 5 mei,