This article is part of our special report Water Policy.
When the European Commission launched an investigation early this year into possible price fixing by French water utilities, the move added ammunition to campaign groups that oppose privatisation of a vital public resource.
A new report challenges the notion that corporations can deliver better service, leading to calls to roll-back liberalisation of water services in Europe and beyond.
“Proponents of privatisation promised increased investment and efficiency, but privatisation has failed to meet these expectations,” says the report by Food & Water Europe, which claims that privatisation can lead to higher prices without corresponding improvements in service and infrastructure.
In the French case, EU antitrust authorities said they were investigating whether Veolia, Suez and Saur colluded to fix prices on water and sanitation services. Two years ago, EU authorities launched probes into alleged cooperation between the companies in public tenders.
While the cases may bolster campaign groups’ calls to reconsider liberalisation of the water market – with major pushes for private water management now under way in troubled Greece, Portugal and Spain – there is also concern about exporting privatisation to developing countries, where needs are enormous.
Mildred E. Warner, an academic who has analysed water services in rich and developing countries, says development aid donors and lenders like the World Bank that promote a private role in the management of water services to improve service and efficiency should rethink their practices.
“The experience worldwide with privatisation, even in developed countries, has not been very positive. There is no support for the notion of cost-saving,” she said in a telephone interview.
“The World Bank policy with regard to water privatisation is not smart, and I don’t understand why they continue to insist on [this] policy in the face of overwhelming evidence of its failure,” said Warner, a professor of city and regional planning at Cornell University in the United States.
Warner also said projects can be misdirected, with rich-world standards applied to developing countries where needs are different.
“The problem is that we have focused on high-energy intensive, sophisticated treatment plant models because we thought that was the better way to go. Well, it turns out that these are hard to manage and not environmentally sustainable, especially in the low-income context.”
Global push for private expertise
International donors and lenders have long pushed for a hybrid system that has been favoured, for example, in France – private management of publicly owned water systems.
France’s Veolia is the largest water utility in the world, with water and wastewater treatment operations in 67 countries with a reputation for improving efficiency of public systems. The company said it was cooperating with the Commission’s anti-trust investigation, announced on 18 January.
The World Bank’s International Development Association – which has spent an average $15 billion annually, 10% for water projects, to aid 81needy countries – often backs public-private utility works.
Indeed, bank officials credit the involvement of the private sector in improving infrastructure and services while cutting waste.
A year after a damning Transparency International report on corruption in the water sector, a 2009 World Bank study on public-private partnerships acknowledged problems in contract transparency.
But overall, the study concludes that such arrangements reduce rationing and “have substantially improved service quality.”
“It’s easy to trash private companies, but the reality is they have to deal with corruption in some of these emerging countries from the highest government figures down to the lowest customs official,” one World Bank contractor familiar with public-private partnerships told EURACTIV on condition of anonymity.
“Still our experience shows they usually turn around outdated and unworkable public utilities and deliver to the people, which is something a lot of these government providers have not been able do.”
Outside the finance community, organisations like the London-based International Water Association are credited with promoting research, information sharing and best practices among utilities, industry and regulators to improve water quality and sustainable use.
A public commodity?
Yet aid and rights groups say that while the private sector has a role in emerging and developing nations, water – unlike mobile phones or electricity – is a public resource that should remain under public control.
Natalia Alonso, head of the EU advocacy office for Oxfam International, says there are good examples where the private sector has improved efficiency, “but the role of the public side is to ensure that the access for those most in need is ensured.
“Experience tells that privatisation of these services does not help to address the question of access for those most in need, and we believe that it has to be a public service that provides and ensures that the full coverage of those people in need.”
The Food & Water Europe report on public-private partnerships says public utilities can deliver better service at lower costs to customers, especially when they work in together. It praises EU programmes aimed at bolstering the non-profit water and sanitation sector in African, Caribbean and Pacific Island nations.
European funds, for example, have been instrumental in helping establish regional water cooperatives such as the western Kenya’s Rift Valley Water Services Board, which has overseen the expansion of piped water and storage in a region comprising 10 water companies and 5.5 million customers.
The anti-poverty organisation ActionAid credits the programme for improving water delivery in many parts of Kenya. Still, the country is still falling short of its 2015 UN Millennium Development Goals (MDGs) of 80% urban and rural access to water and 72% access to sanitation.
Cornell’s Warner says private companies play an important role – in providing technology, for example, but that local management of water is key.
“It’s not really public or private that is the issue, it is community ownership, control and management,” she said. “If you want public water systems to work well, they need to be locally controlled, locally understood and locally managed.
“If that happens, then the beneficiaries are paying very close attention to how well it works, they understand how the technology works – they can manage it – and then you get a more sustainable system.”