Drinking water management: Can privatisation solve all problems?

Ram Kumar Bhandari

The World Bank and the Asian Development Bank are the largest financiers of water projects in low-income countries, and the most important international institutions in policy-making for the water sector. They see the solution to meeting people’s basic requirements lying in private sector — not in public institutions. Through loan conditions, political influence, and direct subsidies for transnationals, they are actively pursuing the privatisation of water supply infrastructure, distribution, service operation, and testing facilities. ADB is now a major financier of water sector in Nepal and influencing its water policies while ignoring the public and their right to water.The pursuit of corporate interests often conflicts with public interests. Entrusting private sector with the provision of water supply and energy has, in many instances, caused social, political, economic and environmental damage. In many cases, companies have knowingly allowed such damages.

In Nepal, the water-sector is not transparent and participatory in terms of reporting, publicising relevant issues, appraising benefits, clarifying the roles of government and donors, budgeting and formulating state policies and local strategies to manage and develop water resources. But the political leadership is silent on this matter.The 1990s was the decade of water privatisation and failed experiences. It was expected to bring greater efficiency and lower prices, attract greater investment and extend water and sanitation to the poor. The actual experience has been very different. The expansion of private water companies in the 1990s was supported by the World Bank and other institutions to transform developing countries into market-oriented economies. It entered the countries of Eastern Europe with a wave of water concessions: in the Czech republic and Hungary, in Latin America, especially Argentina, where a series of water management systems of major cities were privatised. The same was done in Manila and Jakarta.

Companies failed to invest much and private investments in infrastructure were falling by the end of the 1990s. The investment of development banks also decreased. Prices rose to reflect the return on capital. When targets specified in contracts were not met, contracts were revised rather than enforced. Regulators lacked the authority and competence to control companies. The privatised water operators in Argentina are now bankrupt and despite all the support for private water sector in Latin America, they have performed no better than public sector operators.Manila and Jakarta, both with private operators, have worse levels of water loss as compared to the large cities where water is managed by public sector. India, Sri Lanka, Thailand, Pakistan, Bangladesh and Cambodia have had the same kind of experiences. As a result, there is growing opposition to water privatisation.

But still water supply services for Kathmandu Valley are being privatised as per ADB’s loan conditionalities. Although ADB views water as a ‘socially vital’ economic good, it extols the virtues of private investment. It argues that water should be allocated to and used by those who can best afford it. Furthermore, ADB supports establishment of markets for transferable water rights, policies, programmes and projects of IFIs, endangering people’s right to water.In Nepal, too, there has been a growing opposition to water privatisation from different quarters. The reason is that when water is privatised, only those who can pay get clean water. Moreover, privatisation has not improved efficiency, though it has increased tariffs without service obligations. Multinationals will only add to our debt.

The privatisation wave of the 1990s has made clear that the water needs of the poor should not be left in the hands of profit-oriented, transnational corporations. In cities around the world, water corporations have failed to deliver promised improvements and have raised water tariffs beyond the reach of the poor. Hence, foreign experiences in water privatisation must be studied carefully before coming to any conclusion on the water privatisation bill now in the parliament. Before passing it, the interim parliament must deliberate on the issue vigorously.Rather than embrace privatisation, the country should adopt a people-centred management approach, granting greater autonomy to public utilities and municipalities, and involving cooperatives and communities in the management and distribution of water. Water should be recognised as a public service and human right, and not an economic good. Nepal must learn lessons from other countries and our policies should be based on developing sound institutional and operating principles — including transparent and participatory systems of accountability — rather than privatisation. Democratic and community involvement in water management decisions is essential.Bhandari is involved in social research

Source: The Himalayan Times, May 9, 2007