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Private sector participation in water supply: too fast, too soon?

Is water privatisation being over-promoted? Is private sector participation (PSP) in its current forms likely to promote the achievement of the Millennium Development Goals to provide the poor with reliable, affordable and sustainable, safe drinking water? How do members of poor communities affected by the process judge PSP?

A report from WaterAid and Tearfund draws on participatory research in 10 developing countries to highlight the shortcomings of fast-track water privatisation. PSP, it argues, has enormous potential but is being introduced into developing countries with insufficient capacity for regulation as well as a lack of community participation, lack of enforcement of rights and entitlements and underdeveloped markets. PSP has been made a precondition for the provision of loans or grants to poor developing countries. Enthusiasts for water sector reform rarely seek to get municipalities, public utilities, small-scale private providers or civil society organisations involved, but instead assume that PSP will in itself produce necessary environmental changes. The private sector may be good at laying bricks and mortar, but it cannot be expected to involve poor communities in building a sense of project ownership or obtaining commitments to cost recovery and maintenance.

The report produces evidence in support of four sets of related concerns:

As state agencies are scaled down and private companies are called in to take over their roles, there is a risk of losing irreversibly public sector capacity to deliver water and sanitation services – which is especially serious if the private sector chooses to withdraw from a country where profit prospects are poor and leaves a powerless public sector unable to make alternative arrangements.
Institutional reforms are badly planned, implemented and monitored: public and private utilities both lack benchmarking, quality control and supervision or target-setting by authorities and consumer representatives.
Lack of interest in the genuine participation of poor people: as basic roles change, the poor generally remain in their old roles – invisible, passive and denied access to information as decisions and contracts are made for them, not with them.
Decision-making on costs and financing ignores the complexities of poverty: water tariffs are based on cash flows and operational, maintenance and financing costs. They usually ignore the massive costs of not providing water – the medical treatment of water-related diseases, resultant lost economic productivity and loss of education as time is spent fetching water.

The report calls for:

development of local frameworks in which civil society and the private sector can work together
assistance to enable civil society needs to develop the readiness and capacity to get involved in private sector contracting processes
a private sector mind shift towards meaningful co-operation with civil society and understanding the context of extreme poverty in which it operates
realisation that investment in community participation and social mobilisation is as important as investment in physical infrastructure
greater consideration, especially in urban areas, of affordable, low-tech water delivery and wastewater disposal systems
a Multi-Stakeholder Review of private sector participation, to bridge the damaging split between pro- and anti-PSP activists, review the impact of PSP to date, and work towards building agreement on a set of guidelines for future water sector reforms.

Source(s):
‘New rules, new roles: does private sector participation benefit the poor?’, WaterAid and Tearfund, by Eric Gutierrez, Belinda Calaguas, Joanne Green and Virginia Roaf, 2003 Full document.

Funded by: Department for International Development, UK

id21 Research Highlight: 1 December 2003

Further Information:
Eric Gutierrez
WaterAid
Prince Consort House
27-29 Albert Embankment
London SE1 7UB
UK

Tel: +44 (0)20 7793 4500
Fax: +44 (0)20 7793 4545
Contact the contributor: ericgutierrez@wateraid.org

WaterAid

Joanne Green
Tearfund
100 Church Road
Teddington
Middlesex TW11 8QE
UK

Tearfund

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