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.
