Water sector reform revisited - Part 9

Between 1997 and 2001, the former SLP administration began a process to seek solutions to the water authority’s (WASA) problems. Within that time period, WASA was corporatized and became WASCO and the water rates were doubled. That didn’t work and three separate studies were done on the water sector in 2001 (studies which were never shared with the general public) by deceased Lawson Calderon, the World Bank and the Caribbean Development Bank (CDB). Between 2004 and 2006, the then government held a few meetings to introduce the idea of privatization of the water sector and the Water and Sewerage Act became law in 2005. In 2006, alarmed at the speed with which the former government was proceeding with its privatization plans, the NCA began challenging government officials to make known all information relative to the privatization issue available to the general public. In that regard, (with the information not forthcoming) the NCA began agitating against and generally resisting the privatization idea. In 2006, we wrote a total of nineteen articles on “Water Sector Reform and the Consumer” to help consumers better understand the issue.
This present government, vehemently opposed to water privatization when in opposition, has now decided that privatization is the way to go. In that regard, and just like the previous administration, it has already initiated a series of actions designed to bring this matter to fruition without properly consulting with the general public on such a crucial issue. In response, the NCA has already written to the Minister for Public Utilities on the issue and allied itself with other members of civil society to call consumers’ attention to the underhand manner in which the government is seeking to commodify, a la World Bank prescription, one of our most precious resources.
The following preface and summary are taken from a report entitled ‘Water in Public Hands’ written by Professor David Hall of the Public Services International Research Unit (PSIRU) of Public Services International (PSI). The report was commissioned by PSI.

Preface
PSI is the global confederation that represents the world’s water workers, through our 587 affiliated unions in 146 countries. Those workers are intimately involved in, and deeply concerned by, the decisions taken by politicians and water managers.
Decision-makers are now under increasing pressure to contract the operation of water systems to the private sector, usually through a concession or management contract. The water division of the World Bank, the multinational water companies themselves, and bodies such as the Global Water Partnership have all argued that the solution to water problems is always in the private sector – whether it is called privatization, public-private partnership (PPP) or private sector participation (PSP) .
This orthodoxy is now virtually compulsory for developing countries. Both the World Bank and the IMF impose privatization in some form as a pre-condition for funding water and sanitation. The institutions are saying, in the words of Mrs. Thatcher: ‘there is no alternative’.
PSI is publishing this guide as a counter to these theoretical and commercial publications which advocate a central role for the private sector. This guide is the result of research conducted by the Public Services International Research Unit (PSIRU) at the University of Greenwich in the United Kingdom. It is based on extensive empirical observation of what has happened in the field over the years. It shows simply the problems experienced with private sector involvement, and also the real achievements of public sector water and sanitation systems. Finally, it shows the potential for development and capacity-building through using the experience and know-how of the public sector, through public-public partnerships (PUPs).

PSI believes that this analysis demonstrates why the private sector should not dominate decision-making.
Water and sanitation systems are essential in sustaining life, in social progress, and for economic development. Access to water should not be left to market forces, which affect too heavily the basic questions of who gets water (only those who can afford to pay), the impact of water decisions on the environment, and a range of other questions. Water should remain a public good, owned and operated by the public sector.

Executive Summary
Many organisations encourage developing countries to privatize water through some form of public–private partnership (PPP) or private sector participation (PSP). The alternative of a public sector water undertaking (PWU) is ignored, although public sector water undertakings are the providers of water and sanitation services for the great majority of the population in developed countries.
Ignoring this option means that the main competitor to any of the private companies is being excluded. Yet there is evidence of problems with PPPs, and evidence that the public sector can successfully operate PWUs in developing countries, which the booklet sets out. Decision-makers are advised to follow three rules:
- Always construct and consider a public sector option.
- Always evaluate any PPP proposal against a public sector option, in a public process.
- Avoid secret agreements and secret contracts.
There have been problems with privatized management of water systems through all forms of PPPs, whether concessions, leases, management contracts, or build-operate-transfer (BOTs). These include:
- a lack of competition, with two globally dominant multinational companies
- higher prices, often caused by privatizations used to make debt reductions
- difficulty in terminating unsatisfactory concessions
- poor results from private management
- private sector reluctance to extend water and sanitation access to the poor
- multinationals use of water profits to subsidize other global investments
- difficulty in regulation, lack of transparency, secrecy and cases of corruption
Public authorities have been able to operate successful PWUs in transition and developing countries, as well as in developed countries.
- PWUs score well on efficiency indicators, and have better public support
- a PWU can take various forms, ranging from a department to a corporatized body
- transparency, accountability and defined managerial autonomy can be built in
- business plans and pricing policies can include a range of cross-subsidies
- PWUs can turn around their finances and improve collection of bills.
Examples of good practice by PWUs are drawn from cities in a diverse range of countries, including Sao Paulo, Brazil; Debrecen, Hungary; Lilongwe, Malawi; Tegucigalpa, Honduras.
Raising finance for investment is a key issue for any water undertaking. A range of sources is available to both private and public sector operators, including internally generated surpluses, government grants or loans, bank loans and bond financing, and aid agencies. Special municipal development funds may also be used. The development banks, including the World Bank, can and do make loans for investment by PWUs, but conditionalities may create a political obstacle. Lenders use defined criteria for making loans. PWUs may be able to get loans on terms as good as the private sector.
Where there is a need for managerial capacity-building it can be done through ‘public -public partnerships’ (PUPs), without the need to hand control to the private sector. These are twinning arrangements which linked established public sector providers with PWUs in need of restructuring. There are successful examples of PUPs in transition and developing countries, especially in the Baltic states where financial packages were often arranged as part of the PUP.

Next week: Water Sector Reform Revisited – Part 10

For further information please contact Andrew Antoine at 4518858/6069.

EMPOWER YOURSELF. PROTECT YOURSELF. BECOME A MEMBER OF THE NATIONAL CONSUMER ASSOCIATION!!