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Water blog Part II – should water be privatized?
In the second part of our special blog series on water, Julian Claudi asks – is it necessary to privatize water, what are the different approaches around the world and what has happened in instances where a private corporation has indeed got its hands on the neighborhood pump or the household tap?
To pick a prominent example of the kind of passions and conflicts water privatization can unleash, let’s go back to the year 2000 – to Bolivia. There, the Andean city of Cochamaba erupted in protest after a private, foreign-led consortium took over the city’s water system. The previous year, in September 1999, the Bolivian government privatized the water supply in Cochamaba and allocated the rights to Aquas del Tunari, an affiliated company of Bechtel Corporation (Bechtel Group) which is ranked as the fifth-largest privately owned company in the US.
It must be said that Cochabamba suffered from a chronic water shortage. Most of the poorest neighborhoods were not hooked up to the network, so state subsidies to the water utility went mainly to industries and middle-class neighborhoods. In the World Bank’s view, it was a city that was crying out for water privatization.In a nutshell, the World Bank threatened to freeze credit to Bolivia if it did not privatize water.
But the consequences for the people were drastic – Aquas del Tunari raised the water rates many times over, which led to a national uprising. As a result, the Bolivian government backtracked and disbanded the contract with the company. In turn, Bechtel tried to sue Bolivia for over $50 million in compensation. Battered by several years of bad publicity, Bechtel finally settled the $50 million lawsuit for a symbolic amount of about 30 cents on January 19, 2006.
To get a glimpse of what happened in Bolivia in 2000, it’s worth watching “Abuela Grillo,“ an animated short film by a group of Bolivian artists which is based on the events in Cochamaba as well as on a myth from the Bolivian lowlands and deals in a metaphorical way with the issue:
The European Union may be far away from such a scenario nowadays, but there are already over one million Europeans who have signed the citizen’s initiative “Water is a human right“. Their biggest worry is that the EU will privatize European waterworks in the mid-term and through the back door.
The reason for the concerns are a much quoted proposal from the EU Commission to change a concessions directive to bring more market competition between public and private water suppliers “to ensure that EU companies have access to business opportunities and that public authorities get the best value for money.”
At the same time, the Commission insisted repeatedly in several press releases earlier this year that “the proposed directive will therefore not lead, under any circumstances, to imposed privatization of water services.” So will that really be the case? Not exactly, according to the non-profit foundation and campaign group Corporate Europe Observatory (CEO). It says the planned directive on concessions of the EU commission could have unforeseen consequences.
“Municipalities who have some form of private participation in their water supply, even a small part, would have to offer their water contracts for EU-wide bidding. This would give private water multinationals like Suez and Veolia new opportunities to expand,” the group says.
At the end of June this year, the EU Commission then unexpectedly said it would reconsider its position in light of “the concerns expressed by so many citizens.”
It’s probably not the last word in the public discussion about water privatization in the European context. Meanwhile, in many places around the world, water privatization is already a hot button issue with various models and strategies being discussed, practiced and fought against.
Advocates of privatization have many arguments. A common one is that “private entrepreneurs are more efficient in increasing access to clean drinking water and have more technological skills and more assets for investment.”
Another is that privatization is the right thing in general if “a government that is strong enough to uphold regulations and to force the private company to do a good job.”
Meanwhile, opponents have their own list of convincing points – mainly that the environmental price for privatization is simply too high. “Privatization has been accompanied by the degradation of water quality, increase in water loss, deterioration of infrastructure and increase in prices,” according to some.
There are yet other, more moderate voices that suggest that say that water must have a certain price to avoid ongoing water scarcity in many places. The Irish think tank, Institute of International and European Affairs (IIEA), for instance, comes to the conclusion that “water pricing” is an option which must be considered:
Another school of thought sees a constructive solution in re-municipalization – that means putting the water supply back in public hands. That’s what happened in Paris and Argentina:
A project from Greece called “Initiative 136” takes a different tack. It’s an attempt at a third way by avoiding both water privatization as well as public-private-partnerships.
“The idea is that if every water user bought a non-transferable share, ‘the public could own the water company through a system of neighbourhood co-operatives of water users coming together through a single overall co-operative.’136 euros is the figure you get from dividing the 60 million euros for which the company is to be put on the stock market by the number of water meters in the city.”
At the time, activists from the citizen campaign “Human Right to Water” are going in the same direction but aiming at high level EU institutions directly. “We are taking up the challenge to get implementation of the human right to water and sanitation’ on the European political agenda,” they say.
Meanwhile in Bolivia, residents of Cochabamba’s southern zones “frustrated with both the private and public water management models,[…] are increasingly relying on traditional community-run water systems as an alternative.”
There are a host of players involved in the water privatization debate – public state supply advocates, private companies, public-private-partnerships and cooperative citizen shareholder movements. They all have their own concepts about how access to water can be best ensured. In the best case, the different ideas will merge into a sustainable and resilient supply system and contribute to a fair and free global right to water distribution for everyone.
Surely this goal is only achievable under the premise of a local and global framework of sustainability and participation and not with an overarching focus on profit.
DateJuly 12, 2013
Tagsbechtel, bolivia, cochamaba, conflict, energy, julian claudi, money, privatizatin, resources, water