Thursday, May 1, 2003

Water, water … where?

Access to water is a fundamental human rights issue. Iraq has highlighted the importance of water infrastructure to communities, and how much can go wrong when it is damaged – as it was always going to.

Beyond Iraq, drought, civil war, the collapse of central government or just plain poverty endanger the lives of many and prevent access to a basic right.

The OECD estimates one out of every five people (ie 1.2 billion people), lack access to safe drinking water, and that twice that number lack basic sanitation.

So who is to provide this critical infrastructure to developing nations, the public or private sector? Background Briefing had an excellent documentary on this issue recently and my potted summary follows.

Cochabamba, Bolivia, is the worst-case privatisation scenario. In the words of Maude Barlowe, activist:
“Basically the World Bank convinced the government of Cochabamba to replace its corrupt … water company with a private sector company … and Bechtel, the big engineering company from the US, set up a water subsidiary, Aguas del Tunari, and … immediately raised the price of water [around 300%] … , and so there was a revolt and the army was brought in and people were killed.”

Bechtel had been given a 40 year contract.

Through the 90s supplying water to the developing world was promoted to big business by the World Bank, which saw the private sector as the means to bring water to the poor. Now, the water companies want out of the developing world, claiming, in what must come as a shock economists everywhere, that without subsidies selling water to the poor just isn’t profitable.
That said, the private sector has gone into some slums the pubic utilities wouldn’t touch because the local water-selling mafia was too strong, so there have been some innovative approaches and successes with public-private partnerships.

A big problem though, is local currency devaluation. Foreign companies don’t like being paid in internationally worthless local money. Imagine tis: you are a US water company operating in Argentina, the crash comes, the value of your revenue plummets. You try and put up prices, but people can’t pay anyway.

The French-based multinational, Suez, the world’s largest water supplier, lost a lot of money on its Manilla operation this way. The response? Corporations have demanded that governments accept the risk of currency devaluation, insuring their profit at public expense.

Remind me why we do this stuff through the private sector and not aid agencies?

Did the Third World Water Forum in Kyoto come up with an innovative new strategy? Well, it at least highlighted the need for one, and drew attention to the issue.

But the Forum wasn’t all altruism. Michel Camdessus, former head of the IMF, presented a report of the World Panel on Financing Water Infrastructure. That report provided in an annexe for a suggested “refinancing package” for the water corporations that would amount to foreign-currency devaluation insurance paid for with aid dollars.

Yes, the scarcity of water and rising demands for its use in agriculture worldwide mean that there are difficult economic issues involved.

But the best quote on the issue comes from Background Briefing.

Stephen Turner, Thames Water (a big corporate but also a key supporter of Water Aid): “I think when you go back and try to be rational about whether the international private sector was ever going to be the salvation, the panacea for the world’s poorest, we must have been blind to even consider this as an option. The basic premise that the international companies will be providing water for the world’s poorest is just off the wall.”

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