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  <%-- Page Title--%> Issue No 132 <%-- End Page Title--%>  

March 14, 2004

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Water supply - a public service?

Dr Sothi Rachagan

While water is vital for life, this basic need is denied to millions of consumers worldwide. One in six of the world's population (1.1 billion people) lacks an adequate supply of safe water. Two-fifths of the world's population (2.4 billion people) lack access to proper sanitation. Most of these people live in Africa and Asia with 1.3 billion in China and India. In Asia, less than half the population has access to improved sanitation.

Water supply in most nations is still primarily a public service controlled by the government, including in such developed countries as the United States, Japan, Germany, Sweden and the Netherlands.

However, since the 1980s, the public sector has been vilified and governments have moved towards greater reliance on market forces for allocation and delivery of services. This approach has been promoted by the Bretton Woods institutions (the World Bank and the International Monetary Fund) and welcomed by the transnational water corporations.

By the late 1970s when public enterprises fell into difficult times, many developing countries had to grovel before the Bretton Woods institutions. These institutions demanded "public sector reform" the privatisation of state-owned companies as a condition for getting loans.

The IMF and the World Bank have forced some of the poorest countries in the world, including Mozambique, Benin, Niger, Rwanda, Honduras, Yemen, Tanzania, Cameroon and Kenya to privatise their water supply. Ironically, most of these countries privatised as a condition for receiving credit from the IMF's new Poverty Reduction and Growth Facility.

Privatisation has continued unabated. What these institutions have achieved is the greatest ever transfer of public wealth into private hands. The transnational corporations had found the perfect means for market access in the developing world. But there has been much opposition to water being regarded as an economic commodity to be surrendered to transnational corporations.

This is because water is big business and controlled by a few big corporations. The value of the global water and wastewater industry is estimated to be as much as US$800 billion annually and is growing rapidly.

The world of privatised water is overwhelmingly dominated by two French multinationals - Suez (formerly Suez Lyonnaise des Eaux) and Vivendi Universal, with US$9 billion and US$12.2 billion of water revenue in 2001 respectively. The Global Fortune 500 ranks both among the 100 largest corporations in the world. Between them, they own or have controlling interests in water companies in over 100 countries and distribute water to more than 100 million people around the world.

Other major corporate actors include German water giant RWE and its British subsidiary Thames Water, and the US-based Bechtel. Before its collapse, Enron was also a major player. Nine of the ten largest water corporations in the world are located in Europe. Europe therefore currently has a comparative advantage.

Providing sufficient water of good quality calls for new investments for water harvesting, processing and distribution. Transnational water corporations assert that they can provide the answer. They will do so only by raising charges and the rise in prices is often to levels that preclude access to the poor. Some of these corporations have been accused of mismanagement of funds, fraudulent accounting and face corruption charges. This is of grave concern.

Since transnational water corporations see water as a commodity, only the greater use of it will ensure profitability. Privatised companies want control of river basins and aquifers and seek pollution abatement of these because it will reduce production costs, but they invariably show a lack of enthusiasm for any scheme that results in conservation by users. Transnational corporations seek to protect their commercial interests. They do not take a holistic view of the nation's resources and the need to conserve and manage these resources in a sustainable manner.

In most countries, water corporations source underground water for their bottled water industry without prior determination of the right to harvest from such sources and an assessment of the adverse impacts that such harvesting will have on the environment, farms and households that are also reliant on the same source for water. They seek formalisation of water rights that will enable them to acquire monopoly rights. The formalisation they promote is one that seeks to exclude communal ownership and penalise indigenous and farming communities.

Villagers from Wada Taluka in Thane district, India are forced to trek long distances in search of water as the water table has gone down due to off-take from wells by the multinational company, Coca Cola. Coca Cola is fast expanding through out the world by buying up smaller bottled water producing companies. It already has done so in 17 countries including Japan, Indonesia, India, Mexico and China.

In Malaysia, the failure of the water privatisation venture between Thames Water and the Kelantan State Government resulted in the payoff of US$13.2 million to the British multinational. The Sabah State government reportedly owes three concessionaires a total of US$137.9 million. The Selangor State government is similarly reported to be in debt to the tune of US$218.6 million to it concessionaire. The consequence is not better service but a drained treasury. It is vital to ensure that the terms of the privatisation contract are balanced and will not pose a liability to the government or consumers.

In Philippines, water concession by two private companies initially showed much improvement in comparison to the previous Metropolitan Waterworks and Sewerage System (MWSS). Six years later, worse problems than which existed prior to privatisation emerged. Water losses that prompted MWSS to privatise remained high and even worsened in the western half of the Metropolis and water prices went up. In December 2002, one of the concessionaires, Maynilad Water announced that it was abandoning a concession serving 6.5 million people in the western part of Metro Manila. The failed privatisation has proven costly for the government. Maynilad has demanded a refund of the US$303 million capital that it had invested.

Privatisation evokes different responses in different countries and amongst different population segments. Much depends on the experience that a country has had with public enterprises. Where the experience has been an undemocratic, inefficient and inequitable state economic management, there is understandably much enthusiasm for privatisation. There is also much anticipation of the efficiency that privatisation promises amongst segments of the population wealthy enough to afford better goods and services. Others are less enthusiastic or even antagonistic. They resent the transfer of public assets to private ownership and fear that the move will result in losses to both workers and consumers.

Privatisation of a nation's water supply system involves critical issues uncommon to other privatisation exercises. A decision to privatise, especially when it involves a transfer of ownership, is a momentous decision. How much does the rain cost? How much does the aquifer cost? What price the river basin? Yet, many water utility privatisations are undertaken on terms that involve the permanent alienation of these to particular private interests. Should not a nation's leaders consult with its citizens before they decide to privatise national assets and should not implementation of privatisation be conducted in a transparent manner? Unfortunately, this is hardly the experience and the terms of privatisation agreements are seldom in the public domain. Company law may require contractual terms to be revealed to shareholders but there apparently is no such equivalent in constitutional law for citizens to obtain copies of agreements that involve the sale of assets of which they are part owners.

Also at stake are citizen's rights over water resources and catchment areas. Of special concern is the threat to water security posed by developments at the World Trade Organisation and the dominance of the transnational water corporations.

It is clear that there is grave concern in not only about the manner in which privatisation is being undertaken but also about the whole concept of privatising a basic national resource. At threat is the nation's water security.

Water is an even more precious commodity than oil. In the logic of bombs, regime change and Iraq, oil played a significant part. Fortune (May 2000) magazine asserts, "Water promises to be to the 21st century what oil was to the 20th century". The Turks have a saying "Iraq has oil, we have water. Let them drink their oil."

The challenge facing many developing countries, therefore, is how to supply sufficient water of good quality at a reasonable price.

Dr Sothi Rachagan is Regional Director of Consumers' International, for Asia and the Pacific.

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