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PSI Media Release - 22 March 2005

On World Water Day:   PSI Calls for an End to Water Privatisation

Water privatisation has caused deterioration in services, higher prices for the poor, more corruption, environmental problems and more.  The list of problems is long and the consequences of privatisation can be disastrous for communities and governments.  Just ask citizens of Manila, Buenos Aires or Cochabamba. 

Water privatisation has failed to deliver its promises.  It does not give the poor better access.  It does not free up more money for major investments.  It does not lead to better management.  Evidence of these problems can be found in the reports section at www.psiru.org.

Despite these problems, many northern countries insist on privatisation of water services.  The European Union is pushing for it in the WTO’s General Agreement on Trade in Services (GATS), despite widespread opposition.  Donor countries continue to make privatisation a condition for access to development loans or grants.   And recently, the United Nations is being pressured by member states to endorse these failed privatisation policies. 

The motive for privatisation is corporate ambition to generate massive potential profits.  The biggest water corporations by far are the French Ondeo-Suez and Veolia (formerly Vivendi).  Third is the German RWE-Thames.  A number of other corporations are getting active, including the USA’s military as well as Japanese construction firms Marubeni and Mitsui.  And some financial groups are sticking their toes in, including French Paribas Affaires Industrielles (PAI) and a number of Asian investment groups. 

The problem is that the water sector does not respond to market dynamics.  It is operated as a natural monopoly.  There is no substitute to water.  Clients are captive consumers, they can’t live without it.  And water is an inherently political issue, requiring decisions affecting the poor, the ecology, international relations, etc.  All of these factors make private, for-profit management extremely problematical. 

Says David Boys, PSI’s Utilities specialist : “Donor countries and the international institutions must get this one right.  Governments need to ensure safe and reliable water services for all citizens.  This is not a responsibility which can be abdicated through privatisation or ‘commercialisation’.  It will require making funds available, especially to local authorities, to ensure that public utilities can invest for the long-term.  And citizens should have a say in what happens with their public services.´

The global union federation PSI is challenging governments and international institutions to support quality public services.  Says Hans Engelberts, PSI General Secretary, “We challenge governments, development banks and the UN system to stop this misplaced emphasis on privatisation.  We must rebuild our public services.  Workers and their unions will support such policies, and we offer our collaboration in reforming an improving public water services.” 

Contact : david.boys@world-psi.org  +334 50 40 11 65

NGOs call on EU to end water privatisation push,support public water solutions

In an open letter to European Commissioner Louis Michel  on the occasion of World Water Day, over 70 civil society groups have called on the EU to stop imposing water privatisation on developing countries. Welcoming statements by Commissioner Michel that essential services should be exempt from market pressures, the letter demands a "change of course in the EU's approach to the crisis in access to clean water and sanitation in developing countries".

"Concrete experiences in developing countries have shown that multinational water corporations are ill-equipped to deliver clean and affordable water to the poor," the letter points out. Despite this reality, European donor governments and international financial institutions continue to attach privatisation conditionalities to loans and grants, and use aid budgets to finance key players in the global privatisation industry.

A recent example is the case of El Alto, Bolivia, where the government terminated the water concession of Suez, after seven years of privatisation had failed to deliver the promised improvements. The local population wants a public utility with citizens` participation, but German aid agency GTZ refuses to provide loans unless Suez remains involved in the management.

Against heavy odds, significant improvements in access to clean water and sanitation for the poor have been achieved in cities around the developing world, by diverse innovative forms of public water management (see for instance 'Reclaiming Public Water', http://www.tni.org/books/publicwater.htm). Due to the obsession with private sector promotion, working public water options (ranging from reform of existing public utilities to community-based management schemes) are largely ignored by donors.

The open letter urges European Commissioner Michel "to ensure that by the next World Water Forum (March 2006, Mexico), the EU will champion a different approach to water and sanitation in developing countries. By providing the necessary financial and political support for workable public solutions, the EU will be part of the solution rather than the problem."

The number of groups and coalitions that have signed on reached a total of 70. Several groups have indicated that they will forward the letter to Members of the European Parliament. Bread for the World, for instance, will send the letter to the German MEPs. You can find the list of members of the Committee on Development on the following website (with links to their personal websites which include email addresses):http://wwwdb.europarl.eu.int/ep6/owa/p_meps.short_list?ilg=EN&icom=C02

You can also choose to forward the letter to the chair and vice-chairs of the Committee on Development:
Luisa Morgantini, Chairwoman (European United Left)
Max van den Berg, Vice-Chairman (Socialist Group)
Michael Gahler, Vice-Chairman (European People's Party - Christian Democrats)
Danute Budreikaite, Vice-Chairwoman (Alliance of Liberals and Democrats for Europe) fax: +32 2 284 9635

The open letter to European Commissioner Louis Michel can be downloaded  here. 
Please forward the  letter to members of parliament in Europe and to your governments.

World Water Day-Asia: Private Sector Still Eyeing to Own Every Drop

Anil Netto, PENANG, Malaysia, Mar 22 (IPS)

Selling water rights to private institutions and then having people buy them back again is an issue that keeps rearing its ugly head at every World Water Day, which falls on March 22.

Goaded by international financial institutions and corporate interests, regional governments are pressing ahead with plans for more private participation in water services. And yet all across Asia, water privatisation schemes are failing to deliver clean and safe drinking water to communities, despite forcing consumers to pay for a basic human right.

''If you look for a water privatisation arrangement that works ... I cannot think of any ,'' Manila-based Mary Ann Manahan, a researcher with Focus on the Global South, told IPS in a telephone interview.

In contrast, the sterling performance of some major publicly managed water utilities in Asia has demolished the argument that private sector participation is the only way to improve efficiency. Cities like Osaka, Phnom Penh and Penang, where water is publicly managed, have outperformed Jakarta and Manila, two cities with massive privatisation arrangements in several key sectors.

• Osaka, for instance, has a non-revenue water level (NRW) - an indicator of the level of unaccounted water and lost income due to leakages and unpaid bills - of seven percent. This is an outstanding performance.
• Phnom Penh records an NRW of 26 percent and Penang a commendable 19 percent.
• In comparison, Jakarta has NRW of 51 percent and Manila 62 percent.

The British-owned Thames Water Plc and the French operated Suez-Lyonnaise respectively operate the largest water privatisation schemes in Jakarta and Manila.

The Public Services International  (PSIRU), based in Britain, which analyses the privatisation and restructuring of public services around the world, revealed in a recent study that Sri Lanka's capital Colombo, where water is publicly managed, has a water leakage level of only 23 percent compared to a leakage level of 35 percent for the city of London covered by Thames Water Plc.
''There has been an extremely high failure rate for private concessions and long-term BOT (Build Operate Transfer contracts) which may get worse if Suez and Thames leave their contracts in Manila and Jakarta ,'' said the study.

And yet, privatisation schemes are being pushed with vigour by international financial institutions such as the World Bank and the Asian Development Bank, coupled with lobby groups such as the Global Water Partnership and the World Water Council.
Manahan points out that the World Bank has increased its lending on water projects from 546 million U.S. dollars in 2002 to three billion U.S. dollars in 2005.
''But there is no clear indication that this has led to cleaner, more affordable water for people on the margins,'' she said.

In addition, the European Union has come up with initiatives in the World Trade Organisation to prise open national water services to the big foreign players. Indeed, since the mid-1990s, developing countries have been coaxed to privatise water services through 'public-private partnership' or private sector participation.

But many of these schemes in Asia have had disastrous results: soaring water tariffs, unmet targets, and crippling financial losses and debt.

Faced with embarrassing results, several Western multinationals that once thirsted for water privatisation projects in Asia have tried to make a quick exit from loss-making or problem- saddled privatisation agreements in Asian countries. Instead, they are now restricting themselves only to sure-fire problem-free projects or 'safer' markets like Japan and South Korea.
Critics of water privatisation complain that it tends to focus on urban consumers whereas the vast majority of those who most need water live in rural areas.
Worse, privatised water operations are diverting water in rural areas to urban centres, said Kuala Lumpur-based economist Charles Santiago, coordinator of Monitoring Sustainability of Globalisation.
''They do this in two ways: by actually channelling water meant for rural areas into urban areas and by ground water mining in rural areas (for use in producing) bottled water, which is largely consumed in urban areas,'' he told IPS.

The experience in cities across Asia and elsewhere is that when multinationals enter the scene or when private participation is introduced, water tariff rates invariably soar.

For instance, in Manila, the government touted water privatisation as the solution to a looming water crisis in the Philippines. ''They promised there would be no price hikes in water for five years,'' points out Manahan. ''But within three years, they filed for tariff increases.''
Instead of the promised lower rates, Maynilad Water Services, which holds Manila's west zone concession, raised tariffs by as much as 400 per cent between 1997 and 2003. Manila Water Company, the east zone concessionaire, raised water tariffs by 700 percent in the same period. When Manila's privatised arrangements failed, the eventual 'solution' by the Philippine government was 'rehabilitation'. But Manahan prefers to call a spade a spade. ''It's a bailout ,'' she said starkly.
But civil society groups are making their voices heard. In Manila, they have filed a petition in court to oppose the ongoing 'rehabilitation', arguing that it is against public interest and would only burden consumers and taxpayers.
In Thailand, thousands of workers protested against the government's privatisation policy in early 2004 - though the Thaksin-led administration has since reiterated its plans to press on with privatisation.
In Malaysia, a newly set up Coalition Against Water Privatisation, made up of 26 civil society groups, is opposing the government's plan to privatise even more publicly owned water utilities in the country. Manahan has her own solution to the dilemma facing many Asian governments.

The Focus on the Global South researcher points to the example of Porto Alegre, Brazil. Water services in Porto Alegre were private until 1904, then the city took it over.
In the participatory budget process the city people get together in meetings throughout the year and decide where the investments of the Municipal Department of Water and Sanitary Sewage are going to be made. Between 1989 and 1996, the number of households with access to water services rose from 80 percent to 98 percent, while the percentage of population served by the municipal sewage system rose from 46 percent to 85 percent.

''My bias would be to call for a democratisation in decision-making on how water should be managed in the community,'' said Manahan. ''Water is such a basic need, it should remain in the hands of the public.'' (END/2005)

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