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DEVELOPMENT: Pipe Dreams Over Private Water Supply

Sanjay Suri

LONDON, Mar 23 2006 (IPS) - As the only country to have totally privatised water supply, Britain can lay some claim to the triumph of privatisation of water supply. But this is still not the unqualified success privatisation lobbyists can uphold, experts say.

Most developed countries have public water systems, but privatised water supply in Britain is efficient enough. ”The UK system has certainly not ‘broken down’ and there has not been the intensity of opposition that you find in the global south,” Peter Hardstaff from the World Development Movement (WDM), a leading independent watchdog on development issues told IPS.

”This is largely because despite the price hikes and the huge profits that water companies made over the first five to ten years of privatisation, water still does not take up a high enough proportion of peoples’ income to make it the kind of political issue it is in the global south.”

The honeymoon with privatised water may not last, though. Given the coming water shortages, over the next ten years ”the government may have to step in with some kind of investment rescue package, and water will be back on the political agenda – just as rail transport is in the UK.” Privatisation of railway services has been and has been acknowledged by British Prime Minister Tony Blair to have been a disaster.

But efficient as it is, privatisation has not brought any exceptional benefits either, Hardstaff said. ”If you compare the privatised UK system with public systems in other developed countries, based on price, quality, leakage rates, pollution control etc, then the UK system is not, by any stretch of the imagination, ‘way ahead of the rest’ – which you would expect it to be if the privatisation advocates were right.”

There is little point in replacing well functioning public systems in developed countries with privatised utilities, Hardstaff said. ”Even though privatisation in developed countries does not face some of the problems it encounters in the developing world, it is still hard to justify on cost, investment, efficiency or competition grounds. I can’t see any reason why a developed country government would do it – aside from pure political ideology – which is perhaps why no other country has followed the ‘UK model’.

The problem in developing countries can be severe, he said. Difficult issues arise ”such as the need to extend networks to large populations living in extreme poverty with little ability to pay for the costs of connection, or exchange rate problems when companies need to pay back shareholders or lenders in dollars or euros or pounds but generate revenue in local currency.”

The World Water Forum that concluded in Mexico City Wednesday has not achieved much, Vicky Cann from the WDM said. ”Important voices have been excluded and while we have been told that there is a consensus on issues such as finance which includes public private partnerships, that is not an accurate representation of the vibrancy of debates happening outside the forum.”

But there were some bright spots, she said. One was the role of the Bolivian government who made clear their opposition to water privatisation and the need for public solutions to the global water crisis. ”Secondly, the UN Secretary General’s water and sanitation board has officially endorsed the idea of water utility partnerships,” she told IPS.

”The crucial thing about these is that these are operators working together to capacity build but on a not-for-profit basis. This is an important part of the debate and we have to hope that south-south public- public partnerships can develop out of this initiative.”

The private sector had been active at the water forum, she said. ”However, it is not just the private companies that are moulding the debate. Discussions with official delegations and international finance institutions here demonstrate that the push for private water continues in these arenas too. Discussions have been held by groups inside the forum to look at public solutions to water but we are a fair way off from seeing that taking a central part of the debate.”

In a report ahead of the water forum titled ‘Pipe Dreams’, WDM and the non-governmental organisation Public Services International warned that ”water privatisation in developing countries is an ongoing disaster and the private sector is failing to deliver the investment necessary to meet international targets on water and sanitation.”

The report speaks of the failure of water privatisation particularly in Africa.

– Just half of one per cent of private sector investment has gone to sub- Saharan Africa, the area that needs investment in water services the most. – The public purse is repeatedly used to subsidise or bail out the private sector and pay for new connections. – In every case where the private sector has been responsible for extending water access in sub-Saharan Africa, it has failed to deliver the promised level of investment. – 70 per cent of African water privatisations have either been terminated early or are currently in some form of distress.

The report points out that 1.1 billion people lack access to clean water, and 2.4 billion lack access to basic sanitation, and that 6,000 children die every day because of water related diseases.