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Water privatisation: a profitable commodity or basic right?

[Niger] A young Nigerien slave collects water from a traditional well in far west Niger. Water is scarce in the desert region of Tillaberi and these traditional wells only touch the surface level of the water bed.
A young Nigerian slave collects water from a traditional well in far west Niger. Water is scarce in the desert region of Tillaberi. Furthermore, although the world is covered in water, only 0.77% of it is groundwater (IRIN/ G. Cranston)

Although water covers most of the earth’s surface, only 2.5 percent of it is freshwater. And only a small fraction of that - no more than 0.01 percent - is easily accessible in lakes or rivers; the rest of it is frozen in glaciers and polar ice caps. Because of this, access to clean water is a major problem for many millions of people.

In addition to the 0.01 percent of the world’s water in lakes and rivers, another 0.77 percent is groundwater that can be accessed through wells and boreholes, which require investment for drilling activities and pipeline construction. Involving private interests can be a way of finding the necessary means to expand such infrastructure, but doing so has sparked a fierce debate.

According to the United Nations World Health Organisation (WHO), slightly more than 50 percent of the world’s population have tap water in their homes or grounds. An additional 33 percent have an ‘improved water supply’, which means they have access to a community standpipe, a borehole, a protected well, a protected spring or safe rainwater collection. Unprotected wells and springs, as well as rivers and lakes and tanker-provided water, are considered ‘not improved’, meaning they pose potential health risks to users.

Since 1990, the percentage of people with access to an improved water supply, as well as piped-in tap water has increased. According to WHO and the UN children’s agency (Unicef), the increase in percentage has been mainly in rural areas: In 2002, 72 percent of the rural population globally had access to improved water supply and 27 percent had a house connection.

The largest share of the world’s freshwater is used for agricultural purposes, such as for irrigation or for livestock. Agricultural use of water amounts to 70 percent of total water consumption; 22 percent is used by the industrial sector, and only 8 percent by households.

The right to water

“Water is not a privilege, it’s a right!” said Mikhail Gorbachev, former president of the Soviet Union and current chairman of the board of Geneva-based environmental NGO Green Cross International. Many others agree with him. During the UN International Year of Freshwater in 2003, the UN Committee on Economic, Social and Cultural Rights issued a general comment that the right to adequate amounts of clean water for personal use is a human right. This means that all signatory countries to the Convention on Economic, Social and Cultural Rights are obliged to provide their citizens with enough quantities of clean and safe water for domestic use. It does not, however, say that water has to be provided for free; rather, it has to be ‘affordable’.

Traditionally, governments have provided water without demanding payment or included water charges in general tax fees. Recently, however, more and more countries and cities have looked into alternatives, such as private management of water works, especially in the domestic water sector in urban areas. It has as well become more and more common that public water companies in developed countries charge fees that will fully cover the cost of the water used, instead of the water being generally subsidised for all users through tax revenues.

This change of policy has been heavily criticised by those who suffer economically from the changes and those who advocate on their behalf. Many moral issues have been raised by lobbyists and anti-privatisation NGOs, which claim that it is not acceptable to make people pay for something as fundamentally necessary as water.

The most zealous anti-privatisation activists claim that poor people, at the very least, should always have access to free water, since it is available for free in nature. One of the most well-known anti-privatisation activists is the Indian author Vandana Shiva, who wrote in her book ‘Water Wars’ that “water must be free for sustenance needs. Since nature gives water to us free of cost, buying and selling it for profit violates our inherent right to nature's gift and denies the poor of their human rights.”

Still, providing safe drinking water for everyone everywhere is a cost that has to be covered by someone.

The beginning of privatisation

During the last decade, privatisation of the water-delivery system has affected millions of people. It been implemented in industrialised countries, and it has also boomed in the developing world, placing an extra financial burden on millions of impoverished people. The wave of privatisation in the developing world started in Latin America in the early 1990s, and it has spread to many countries in Africa and Asia as well. The UN Development Programme (UNDP) said about privatisation in Africa that “until the mid-1990s, privatisation was limited to a small number of francophone countries. Since then, many more privatisations have taken place with still more governments announcing tenders and intentions to privatise.”

[Egypt] Many of Egypt's economic migrants come from rural areas where unemployment is high. A woman working in the fields in Mansoura. [Date picture taken: 01/27/2006]

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[Egypt] Many of Egypt's economic migrants come from rural areas where unemployment is high. A woman working in the fields in Mansoura. [Date picture taken: 01/27/2006]...

Photo: Issandr El Amrani/IRIN
Agricultural use of water amounts to 70 percent of the worlds total freshwater consumption

Pro-privatisation activist Fredrik Segerfeldt is critical of the anti-privatisation movement. “The pace of privatization has slowed,” he wrote in one report. “It is therefore vital that we have a serious discussion based on facts and analysis, rather than on anecdotes and dogmas.”

A World Bank report from 2005 concluded that “privatization activity peaked in 1997 and dropped off in the late 1990s and, while still at overall low levels, is slowly creeping back.”

One of the reasons for the rapid rise of water privatisation in developing countries is that the World Bank is one of the biggest privatisation advocates, together with government donors and certain other development agencies. Through structural reforms, donors can oblige governments to privatise public services, often against the will of the affected citizens who fear privatisation will only increase their burdens.

‘Reclaiming Public Water’, published by Transnational Institute and Corporate Europe Observatory in January 2005, weighs in on the privatisation debate. The book focuses on how to make the public alternative work, rather than just arguing against privatisation. The institute’s fear that private, bottom-line-driven companies will not supply water to those who cannot afford to pay high prices is nevertheless clearly stated: “The water needs of the poor should not be left in the hands of profit-driven, transnational water corporations.”

Millennium Development Goals

The Millennium Development Goals (MDGs) were set by the UN in 2000. The eight goals represent a commitment by all UN member states to work together to eradicate poverty and improve lives all over the world by 2015. Enhancing water quality and increasing the number of people with access to safe drinking water and sanitation is vital to several of the MDGs, such as eradicating extreme poverty and hunger, improving health and attaining environmental sustainability.

Although everyone agrees that water is a basic need that should be provided for everyone, there are different opinions and approaches on how to do so.

The World Water Council is an international organisation for cooperation between NGOs and governments regarding water-related issues. They have estimated that investment in water and sanitation must be doubled to achieve the MDGs. Approximately $30 billion annually is needed, divided between just over $10 billion for supplying water and almost $20 billion for sewerage. At the moment, private financing only covers around 10 percent of investment in water-related infrastructure, and the vast majority of water consumers who are connected to a network are served by publicly owned and operated companies.

Kendra Okonski is the environment programme director at International Policy Network, a London-based charity that educates the public about the role of market institutions in the context of global policy debates. She used Senegal as an example of private interests investing in expanding the pipe network outside of the cities, with a 23 percent extension as a result.

The parties in the privatisation debate: World Bank vs. NGOs

The privatisation debate is largely divided between nongovernmental organisations that are against privatisation and larger donor organisations that favour it. The World Bank prefers to talk about ‘private participation’ rather than ‘privatisation’. In a staff-guidance report from 2004, it states that “Using the private sector […] to deliver services will remain a part of the Bank Group’s activities where this is feasible and effective.”

The World Bank also encourages public water systems to fully charge for the cost of the water they provide. Its justification is that “private participation, tariff policy [and] reform of public sector utilities are not ends in themselves,” but merely the most efficient way to provide clean water to the most people. Other pro-privatisation advocates are the International Monetary Fund and similar large donor organisations, but certain NGOs and thinktanks, such as the London-based Globalisation Institute, also agree.

The British Department for International Development (DFID), has been known to support the ‘British model’ of privatisation, where both the assets and the operation of the assets are privatised, while most other privatisation supporters recommend the ‘French model’, where only the operation of the assets is privatised, and the ownership still remains public. ‘Liberalisation’ of the service sector, including water supply, is also a fundamental part of the international trade agreements dealt with under the General Agreement on Trade in Services (GATS).

There are many arguments for privatisation of water. A common one is that private entrepreneurs are more efficient in increasing access to clean drinking water and have more technological skills and more assets for investment. Anti-privatisation activists claim that this is not true, but that privatising will only lead to prohibitively high prices for the poor.

Using the example of Argentina, where at the same time some municipalities privatised their waterworks and others did not, Okonski said, “There is evidence to suggest that private systems provide cleaner water. The municipalities that privatised saw a decline in waterborne diseases, as well as child mortality due to diarrhoea and similar diseases.”

Privatisation: A success, given the right conditions

Privatisation of water is often characterised as profit-hungry multinational companies overcharging the poorest in the world, forcing them to choose between water and food. Those who favour privatisation, however, argue that this does not have to happen. Pro-privatisation lobbyists, water companies and donor representatives have maintained that successful privatisation of water is possible with a few prerequisites, including a government that is strong enough to uphold regulations and to force the private company to do a good job. AquaFed, the International Federation of Water Operators, claim that through reasonable contracts and cooperation with the government, private enterprises can provide reliable services to all citizens.

According to the World Bank, there are two more conditions that need to be fulfilled for any privatisation reform to be successful. First, the reform must be backed by political will, meaning that those who support the government must benefit from the reform in terms of lower prices or better services. Second, the reform has to be politically viable, so those the government rely on cannot lose from the reform.

AquaFed states in its code of ethics that private water should be provided in a way that still ensures total sovereignty of the public authorities over the services. The administration must have the power to fine the private service provider if it fails to achieve the previously established goals, and the provider must also have the financial incentive to provide the best possible service to avoid being fined. Multinational companies also have another motivation to perform well, since good results in one country make it more likely that the company can run the water system elsewhere.


Zambia has a US $6.2 billion debt
UNICEF/Giacomo Pirozzi
[Zambia] At a community school in Nthombimbi, Zambia, children gather around a water pump. The school is staffed and maintained by the community for children who cannot afford to attend formal school. Many of the pupils are orphans.
Tuesday, July 13, 2004
Mwanawasa calls for total debt relief
[Zambia] At a community school in Nthombimbi, Zambia, children gather around a water pump. The school is staffed and maintained by the community for children who cannot afford to attend formal school. Many of the pupils are orphans.

Photo: UNICEF/Giacomo Pirozzi
At a community school in Nthombimbi, Zambia, children gather around a water pump. “There is evidence to suggest that private systems provide cleaner water” and lead to a reduction in “waterborne diseases, as well as child mortality due to diarrhoea and similar diseases.”

Gerard Payen, the president of AquaFed, said in a speech at the 4th World Water Forum in Mexico in 2006 that “private water operators are used to making the right to access to water effective for individuals. In developing countries, they have helped public authorities to connect more than 10 million people to water-supply systems in the last decade.”

However, the domain of private water provision is not confined to multinational companies. Okonski said the term ‘entrepreneur’ would better describe those who sell water, as it is more inclusive of the realities on the ground. In many instances, in the developing world, water is provided by private means - not through large companies, but by local water vendors that use tank trucks or even donkey carts to transport it. “Maybe the solution to water problems is bottom-up,” Okonski said. “One step to drastic progress in Africa would be to make it easier for people to start their own business.” Less bureaucracy would thus help to provide more people with water, she argued.

Providing water to those not yet connected

Many cities, following the implementation of water privatisation, have shown an increase in so-called ‘system coverage’, which is the number of families connected to the water service. Buenos Aires, Abidjan and Conakry, Guinea, are three cities the World Bank claims have increased their system coverage. The first two examples have increased coverage by approximately 15 percent; and Conakry, almost 25 percent. In Lima, however, privatisation, reportedly, had little imact on coverage.

Okonski believed private entrepreneurs had a larger interest in connecting more people. “Municipalities,” she said, “see people as a burden; entrepreneurs see them as a resource.”

It is often the poorest areas that are not connected to the water system, and without regulations in the contract between the government and the private company, there are often small incentives to connect these areas. In Durban, South Africa, however, many new customers were connected to the water system with the new methods introduced by the private sector.

In the informal settlement of Cato Crest, for example, installing pipes for traditional water supply would have cost too much, so a system of communal standpipes and private water tanks was introduced instead. At the standpipes, everyone has access to water and pays by the bucket, and there is also an option of installing private ground tanks instead. Each month, the tank owner pays for water in advance, and each day the tank is refilled. If the tank owner cannot pay a full month in advance, his tank is not refilled, but he always has access to the standpipes.

Private water providers have also shown to be more labour-efficient in many cases. Since the potential profit of a private company can increase if expenses, such as labour costs, are reduced, many public companies dismiss staff after being privatised. This was the case in Conakry, where the labour productivity was reportedly doubled after privatisation. On one hand, efficiency is good for the consumer because it keeps the costs down, but on the other, it increases unemployment.

Opposing privatisation

One of the most distinctive voices against privatisation is the World Development Movement, a UK-based NGO. It launched a ‘Dirty aid, dirty water’ campaign, which, among other things, tried to dissuade the British government from supporting international privatisation efforts. For example, the organisation opposed DFID involvement in the privatisation processes in Ghana and Tanzania, as well as Sierra Leone and other places. Other voices against privatisation of water are the Anti-Privatisation Forum in South Africa; the Water Page, an online information site; and a number of NGOs all over the world, especially in places were water facilities have been, or are about to be, privatised.

“The private sector has failed to keep the promises of investments, which are often used as arguments in the privatisation process,” said Vicky Cann from World Development Movement, when she explained why public companies are better suited to provide water due to the impossible nature of providing necessities such as water and at the same time making a profit. “Private water companies just don’t deliver, especially for the poorest communities,” she said.

Okonski, however, said that in cases where privatisation has not been successful, the “biggest contributing factor is the lack of rule of law.”

Alternatives to privatisation

The town of Teshie, outside Accra, Ghana, has a water supply system that was built in the 1960s. Since then, the population has quadrupled, but the waterworks have not been modified to accommodate increased demand. Since 1999, no water at all has been delivered through the pipes. To provide for their needs, people were forced to buy their water by the bucket, a solution that cost as much as 16 times more than water from the tap. To solve this problem, it was suggested that Accra’s waterworks, including those at Teshie, be privatised. Despite protests from some quarters, the inhabitants of Teshie themselves were not picky. Their priority was access to clean water at a reasonable price; it did not matter who provided it.

Following the decisions to privatise water in Accra, Ghana, prices almost doubled in some areas. The small town of Savelugu in northern Ghana, however, took a different route. They formed a ‘public-community partnership’: The community collectively buys water from the public company and takes responsibility for payment collections and minor repairs. They also set the price at which they sell the water to members of the community. This partnership has reduced to 15 percent that quantity of water which is unaccounted for - through poor management, compared to Ghana’s average 50 percent.

Is water a commodity?

In 2000, ‘Fortune’ magazine claimed that water would be “to the twenty-first century what oil was to the twentieth”, meaning that the trade in water would escalate and involve larger and larger sums of money.


Water provision has improved in Dakar
[Senegal] A street standpipe where poorer residents of Dakar come to buy water by the bucket. This one is in Grand Yoff.
Tuesday, March 22, 2005
A model for water provision in urban Africa?
[Senegal] A street standpipe where poorer residents of Dakar come to buy water by the bucket. This one is in Grand Yoff.

Photo: IRIN
A street standpipe in Dakar, Senegal, where poorer residents buy water by the bucket at inflated prices. Across the globe, millions of poor pay a high price for what many see as a basic human right

In India, poor citizens have been promised water for free since independence, but this promise is not even close to being fulfilled. Sometimes, the poor have to pay 10 or 20 times more than their well-off neighbours for safe water, according to UNDP statistics: those on-tap normally pay far less than those buying form street tanks and by the bucket. In many areas, such as in Vijayawada in Andhra Pradesh, the poor have said they would actually be willing to pay for water, if the services were safe and reliable, and especially if those who are better able to afford water were excluded from receiving subsidised water. One example of how this could be done is through microfinance institutions. With a small loan, a family could afford to drill its own well and install a simple pump, and thus have access to safe water at a small cost.

The most common argument against privatisation has a moral basis: How can one privatise a communal commodity like water, and who should be allowed to set the price for a resource that is so essential? The pro-privatisation lobby responds to this question by asserting that the more important issue should be how to provide affordable water to as many people as possible. If private contractors can do this better than public agencies, they argue, why should they be prohibited from doing so? According to the World Development Movement, 95 percent of the world’s drinking water is in public hands, but only 83 percent of the world’s population has access to an improved water supply. There must be a more efficient way to provide safe drinking water than the present system.

When the price of water escalates too much, people must choose between water and other necessities, such as food. In the north of Mexico, along the US-border, water is sometimes so expensive that children drink cheaper bottled soft drinks instead, according to the US-based consumer advocacy organisation Public Citizen.

Subsidising water for the poorest, or not?

The pro-privatisation lobby has argued that instead of paying for water services through tax money, it is fairer to pay for what one uses. This would also help reduce waste. To ensure that everyone would be able to afford water, governments could subsidise a base amount of water. The government in Senegal, for example, subsidises the first 10,000 litres for all families every month. The amount of water is based on what is considered to be enough to fulfil the everyday basic needs of a typical Senegalese family.

Some countries, however, have found it difficult to continue subsidising water after being compelled to privatise by international donors such as the International Monetary Fund or the World Bank. Donors often require that governments stop subsidising in connection with privatisation reforms, as was the case in Bolivia in 1997. In order to be given a $138 million loan to help the country control inflation and bolster economic growth, Bolivia had to agree to sell off all remaining public enterprises, including the waterworks in Cochabamba, Bolivia's third-largest city. After closed-door negotiations, the Cochabamba water system was handed over to Aguas del Tunari on a 40-year concession. After seeing a major increase in water prices that was many times higher than the 35 percent forewarned by Aguas del Tunari, the people of Cochabamba took to the streets. For four days they closed down the city by erecting roadblocks and organising marches in protest against water bills that easily reached $20 per month - in a town where a minimum monthly wage was less than $100. The demonstrations and the violence continued for several months, and a six people were shot dead before the Bolivian government changed its mind and terminated the contract with Aguas del Tunari.

Later, Aguas del Tunari and its parent corporation, Bechtel, sought $25 million in damages as well as $25 million in lost profits for the breach of the exclusive, 40-year, multimillion-dollar contract to bring drinking water and sanitation services to Cochabamba. In January 2006, however, they dropped the claim and settled with a token payment.

Okonski praised the example of Chile, where there is almost full system coverage (95 percent in 2002) since the water works were privatised in the 1990s. Chilean interests own all the private providers, which creates a greater collective responsibility for the vital national resources. There is also a ‘water stamp’ system that is used to make sure that everyone has access to sufficient amounts of water. The government gives those who cannot afford water special vouchers that can be used to pay the water bills.

What will happen next?

The debate over whether or not privatisation is good for people and for the environment is not likely to end anytime soon. So far, the trend points towards more and more countries and cities privatising their water facilities, and more and more people being affected detrimentally with the main burden falling on the poor.

Vicky Cann from the World Development Movement, however, said the trend will reverse. “As civil society and trade unions are voicing their opposition against privatisation in the same time as private water companies withdraw from the former public market due to the difficulties to profit from this sector,” she said, there will be a shift towards less privatisation. “The crucial question is whether international donor organisations will recognise this and stop advocating privatisation so hard.”

On the other hand, Okonski said, “Private provision has been successful, but there is still much more to do.” She advocated the strengthening of property rights and the rule of law for privatisation to work, adding that “the rhetoric against privatisation will collapse on its own contradiction.” In the meantime, the fact remains that millions of poor pay a high price for what many see as an essential and basic resource in life. For those that cannot the consequences are, according to numerous civil society organisations world-wide, clearly seen in the quality of their lives and their profiles in terms of health, morbidity and ultimately mortality.


This article was produced by IRIN News while it was part of the United Nations Office for the Coordination of Humanitarian Affairs. Please send queries on copyright or liability to the UN. For more information: https://shop.un.org/rights-permissions

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