Has the case for water privatisation been exaggerated? Are public sector water providers really that inefficient? Could public sector water undertakings (PWUs) or public-public partnerships (PUPs) between northern and southern public water utilities be more efficient, pro-poor, and more accountable than the much-vaunted and better-known Anglo-French model of public private partnerships (PPPs)?

A study from the University of Greenwich Public Services International Research Unit reviews the performance of public and private sector suppliers in a number of transitional and developing economies. It argues that municipal authorities responsible for making the long-term commitments required to improve water-supply systems are being denied information on alternatives to PPPs.

Is there really a transparent and competitive market in water supply? The industry is dominated by a handful of companies. Major long-term concessions have gone ahead without competitive tendering. Private water operators frequently insist that contracts remain secret, sometimes even from elected municipal officials. Two major French water multinationals have been convicted of paying bribes to obtain contracts in France. Major companies are being prosecuted for alleged bribery of officials involved in the Lesotho Highlands project.

The report contests the validity of the main claims made for privatisation. Evidence from France shows that customers pay 13 percent more for water delivered by private or PPP concessions. Private sector management is often unimpressive. Once concessions are obtained, the water multinationals fight tooth and nail to hold on to them and have pursued legal claims against municipalities, which have prevented contract termination. Suez-Lyonnaise and Vivendi have large engineering, chemical and materials subsidiaries to whom they may provide uncompetitive and over-priced contracts.

Can privatisation extend water access to the poor? Insistence on the principle of ‘full cost recovery’ makes it unlikely that privatised and PPP suppliers will extend full service to those unable to afford the full economic cost of water. In KwaZulu-Natal enforcement of cost recovery has deterred the poor from using piped water , a causative factor behind a cholera outbreak in 2000.

Other key points include:

• The extent of ongoing public sector financial support to concession holders is often hidden.
• The ability of long-established public sector water undertakings in developed and transitional economies to run efficient businesses while maintaining good relations with consumers, staff and governments is under-acknowledged.
• Similarly little publicised is the success of many public companies in developing countries of implementing restructuring programmes.

Key recommendations urge southern water sector decision-makers to:

• Always consider an alternative public sector option before going down the private road.
• Learn from the successes of the first public-public partnerships in transferring institutional and technical expertise from northern-based public water suppliers to southern partners.
• Follow the lead of Kerala and enshrine a comprehensive right of public access to all documents relating to public utilities.
• Implement pricing policies to ensure the poor receive a target of 50 litres per capita a day and to discourage consumption in excess of 200 litres per capita a day.

Source(s):
‘The public sector water undertaking – a necessary option’ Public Services International Research Unit (PSIRU), University of Greenwich by David Hall, Feb. 2001 Full document.

Funded by: Public Services International

id21 Research Highlight: 22 June 2001

Further Information:
Public Services International Research Unit (PSIRU)
School of Computing and Mathematical Sciences
University of Greenwich
30 Park Row
London SE10 9LS
UK

Tel: +44 (0)208 331 9933
Fax: +44 (0)208 331 7781
Contact the contributor: d.j.hall@gre.ac.uk

Contact the contributor: psiru@psiru.org

Public Services International Research Unit, UK

Other related links:
See further reports on Water by PSIRU

Insights #37 - 'Can private enterprise supply water to the poor?'

WSSCC's IMO Group has been looking at Anglo-French PPP models

World Bank's WaterHelpDesk lists a number of online reports

IRC is the host of the useful Interwater portal

IPWA promotes opportunities for private sector participation in water utilities

Global Water Partnership has papers reviewing private participation