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PrivatisationAlternatives / ReformsPublic-Public PartnershipsFinancing Public Water
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Oct 18 2013
Supplied or written by Satoko Kishimoto (Transnational Institute)

The final plenary session of the Budapest Water Summit entitled 'Investment in and Financing of a Water related SDG (Sustainable Development Goals)' probably did not expect to hear the word 'shit' in their discussion. But they were forced to move beyond mealy-mouthed platitudes, when the Norwegian water activist Jorgen Magdahl stood up without a microphone and called on the chair, a representative of the European Investment Bank, to allow participants to have a say.

This gave Jakarta-based activist Sigit Budiono the chance to tell the panelists that 'it seems lessons are not being learned: Public Private Partnerships (PPPs) are shit in Indonesia.' The panelists, which included representatives of the World Bank, African Development Bank, CocaCola and Nestle, appeared a little shocked by the blunt statement. But how can one better describe the mess of massive debts and terrible service created by 15 years of failed privatisation in Jakarta?

Budiono also shared the example of French food multinational Danone, which extracts large amounts of ground water for producing bottled water in Indonesia, with the result that local farmers and communities don't have sufficient water. 'Where are these private sector solutions?', Budiono pointedly asked.

World Bank must have a manual for how to respond to such criticism. Manager William Rex tried to placate Budiono, saying 'Let's not be ideological about this.' He argued that World Bank research shows the lesson with PPPs is that 'it is successful only where public sector has a capacity and framework to control the partnership relationship'. This had been their message throughout the conference, where they continuously pushed for 'sustainable cost-recovery'; 'getting the price right' in order to make public services attractive to bankers and private finance; promoted private sector 'solutions' and encouraged public water utilities to be run along business lines.

But isn't the World Bank the one being ideological? Despite empirical evidence of numerous failures of water privatisation, the World Bank continues without hesitation to impose neoliberal reforms that weaken states' involvement in water sector, including in many countries with weak regulatory framework and widespread corruption.

Take the example of Ghana's capital Accra. After five years of a failed private management contract (funded by the World Bank), the water services went back to the public sector. The 'financially viable' and 'independent' public water utility that was created remains grossly underfunded and World Bank pressure prevents funding from public authorities. The utility, therefore, is unable to to increase access to water for the poorest. This ideological pressure and constraints on public financing is what has created today's reality of cash-strapped municipalities desperately seeking private funding.

The World Bank's argument that private water companies can work with proper regulatory frameworks is not even convincing, once you study examples of countries with these supposed frameworks such as Germany. In Berlin, the contract between private partners and Berlin Water Company (BWB) was not disclosed to the public until Berlin citizens demanded a referendum and succeeded in securing a majority vote in favour of making the contract public. Last September, the Berlin government decided to buy back the shares from the private firm because of strong pressure from citizens. The biggest municipal PPP project in Germany has come to an end .

Or look at England where water services were fully privatised in the 1980s. They used to be portrayed as a showcase of privatised water operations working under a strong regulatory framework. Yet very few dare to highlight England as a positive example anymore. Throughout 2013, media coverage in the Guardian and other newspapers exposed how private water companies - of which 75% are owned by private equity firms - avoid paying tax using complex offshore holding structures . While these companies pay billions to shareholders and pay little or no tax, water bills in England have risen by 64% compared with 28% for average earnings in last 10 years. Moreover, it has also been revealed that the most persistent polluters of England's rivers are the privatised water companies . Another disturbing finding is that private water companies deliberately opt for more expensive technologies to raise operation and production costs.

There is, clearly, more than enough evidence to be critical about private firms' engagement in water sector in the North and South. Sigit Budiono's intervention changed the tone of discussion at the plenary session. Margarete Batty from Water Aid stressed, that governments cannot rely on the private sector but have the  responsibility to ensure universal access to water and sanitation, by developing policies and action plans to make these succeed. Encouragingly, the Nicaraguan and Nigerian ministers on the panel seemed to agree.

Instead of an ideological obsession with illusory private sector 'solutions', the international community would do better to support socially ambitious public operators working together in partnership with other public utilities. These solutions can be based on social justice, prioritising increases in access to services and water resources conservation rather than profit making for a few corporations.

Also read Budapest Water Summit offers mirage of water for all


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