PRIVATE SECTOR PARTICIPATION in WATER SUPPLY MANAGEMENT

TEAM COCTOBER 22, 2018

UBC GEOG 412 - WATER MANAGEMENT: THEORY, POLICY & PRACTICE

Economics of Privatization

Tara O’Brien

What is Privatization?● Capitalism● Goods● Market

Economies

● Externalities○ Free-Rider Problem○ Tragedy of the Commons○ Diminishing Marginal Return

● Structural Adjustment Policies

Goods in a Market Economy

Non-Excludable

Excludable

Rivalrous Non-Rivalrous

open-access resources (WATER)

pure private goods

pure public goods

club goods

Privatization + Goods

Based off economic theories and principles, how do we ensure sustainable use of water when it is non-excludable and rivalrous?

ANSWER: WE CAN’T! :(

Privatization + Common GoodsWE MUST:

1. Give it value (price tag): so demand and supply can achieve equilibrium

2. Internalize externalities: results in true costs and benefits3. Define property rights4. Regulate monopolies

PRIVATIZATION: INFRASTRUCTURE VS WATER

Privatization: Infrastructure● Pipes, pumps, filtration systems● Water is free but deliver system costs money

RATIONALE

● Public structures = free-rider problem● Profits = incentives

Privatization: Infrastructure● Pumping fee only● Water is free

● Tragedy of the Commons● Diminishing marginal

returns

KANSASAGNETWORK.COM

Privatization: Water● Value based off market forces (supply & demand)● Metered usage

RATIONALE

● No longer non-excludable good● Reduces exploitation

Privatization: Water

Maureen McCarthy

● Allocated certain amount per day and then charged○ South Africa vs private

operator

● Illegal to collect water from nature○ Kansas

ReferencesBudds, J. & McGranahan, G. (2003). Are the debates on water privatization missing the point? Experiences from Africa, Asia and Latin America. Environment & Urbanization, 15(2), 87-113Copeland, B. (2018). ECON371: Economics of the environment, week 3 notes [PowerPoint slides]. Retrieved from https://canvas.ubc.ca/Keohane, N.O. and Olmstead, S.M. (2016). Markets and the environment (2nd ed.). Washington, DC: Island PressPiketty, T. (2014). Capital in the twenty-first century. Cambridge, MA: The Belknap Press of Harvard University PressSinha, R. (1995). Economic reform in developing countries: Some conceptual issues. World Development, 23(4), 557-575. doi: 10.1016/0305-750X(94)00146-PUnited Nations Development Programme (UNDP). (2006). Beyond scarcity: Power, poverty, and the global water crisis. Human development report. Retrieved from http://www.undp.org/content/dam/undp/library/corporate/HDR/2006%20Global%20HDR/HDR-2006-Beyond%20scarcity-Power-poverty-and-the-global-water-crisis.pdf

The History of Water Privatization

By Quinn Klassen

What is Water Privatization?- Water Privatization is the full or partial shift away from

state run/owned operations in water and sanitation services.

- It’s a spectrum rather than a dichotomy

Key Arguments Surrounding Water Privatization

- Highly Politicized- Polarizing

- Advocates claim- Privatization leads to

- Greater efficiency- Faster and wider access- Lower costs- Better quality resource

- (neoliberal ideals)- Opposition Suggests

- Morality/Ethical issues- Basic human right = government’s responsibility

- Concerns of corruption & monopolies- Profits- Big corporate interests

History of Privatization: First Wave

19th Century

- First water and sanitation services provide in Europe and North America (US) were privately

owned and operated- Largely meant for those with capital- Mostly driven by business interests

- Centralised water system in Europe began in- 1802 in Paris- 1808 in London- 1856 in Berlin

First Wave Continued19th Century

- Health, corruption and environmental problems- Cholera outbreaks in 1832 and 1835 in New York led to state stepping in

- Similarly occured in 1840 in London- In 1902 “Metropolis Water Act

- By this point private sector only held about 10% of population

- France- Exception

- Has had private participation in water systems more or less continually through development- Modern day companies Veolia and Suez have been around since establishment in 1852

The Ebb

20th Century

- Water and Sanitation services largely public sector/state managed- Mostly due to recognition of

- Lack of efficiency- Corruption- Poor quality services- Clean water is an essential pillar to societal health and growth

Second WaveLate 20th Century

- late 70s - late 80s rise and implementation of neoliberalism- Deregulation of public goods and services (liberalization of services to the ‘free-market’- Water services lagged relative to other services in deregulation

- Common example of Water Privatization- England and Wales

Second Wave (continued)

England and Wales

- Fully Privatized water in 1989- Improved environmental conditions- Higher quality drinking water

- But also a relatively high cost for customers

Second Wave (continued)

Privatization Failures

- Attempts to privatize often fail because- Financial risk- Economic gaps- Political risk

- Especially true in less developed countries- Common examples in Bolivia, Jakarta, Manila, Nelspruit

- Private investment tends to favour less risky, more economically “viable”, and less challenging regions (cherry picking)

Current State & Future Outlook

- Often cited that 1997 was the peak private investment in water- Suggested that privatization efforts are receding- Heading towards next privatization ebb?

- Maybe not as globally still in dire need for financial investment in water and sanitation services as urbanization expands and population grows and climate changes.

- Unclear based on publications whether there is a current trend or not- What is clear is the need for a diversity of options in handling water and sanitation efforts

- Privatization/public water services neither good or bad in sweeping generalization, local and region focus should be considered when considering which option to support

- Some scholars calling for remunicipalisation of water services to better serve the needs of society

Current State & Future Outlook

- Remunicipalisation- Local example

- White Rock BC- Historically privately run water services

- Since 1913- 2005 bought by EPCOR- 2015 Municipality obtained assets and operations in an attempt to increase efficiency, public health,

and water quality.

Conclusions

Historically

- Water services private industry

- Out of concern for public health mostly taken over by governments

- Neoliberalisation- Push for private involvement as a way to better service and access

Today

- Mixed bag

- Multiple systems = multiple solutions?

ReferencesBakker, K. (2003). Liquid assets. Alternatives Journal, 29(2), 17-21.

Bakker, K. J. (2010). Privatizing water: Governance failure and the world's urban water crisis. Ithaca, N.Y: Cornell University Press.

Bakker, K. J. (2003). An Uncooperative Commodity: Privatizing Water in England and Wales. New York;Oxford;: Oxford University Press.

Budds, J. & McGranahan, G. (2003). Are the debates on water privatization missing the point? experiences from Africa, Asia and Latin America. Environment and

Urbanization, 15(2).

Davis, J. (2005). private-sector participation in the water and sanitation sector. Annual Review of Environment and Resources, 30(1), 145-183.

Prasad, N. (2006). Privatisation results: Private sector participation in water services after 15 years. Development Policy Review, 24(6), 669-692.

Prasad, N. (2007). Privatisation of water: A historical perspective. Law, 3(2), 217-233.

Whiterockcity.ca. (2018). Water | White Rock, BC. [online] Available at: https://www.whiterockcity.ca/230/Water [Accessed 16 Oct. 2018].

The City of White Rock (2013). Acquisition of EPCOR White Rock Water Inc.. White Rock: The City of White Rock.EPCOR White Rock (2014). 2014 Performance

Report. White Rock: EPCOR.

Looking at the various forms of Private Sector Participation

Matthew Epstein

Summary

The various forms of Private Sector Participation (PSP)

● Leases● Concessions● Build Operate Transfer● Various Others

The Selection Process for choosing a private company to take control over a public good.

The Benefits and Risks associated with each type of management style from the Private and Public Sector’s view.

Lease

Is a form of private sector participation (PSP) where the private sector takes on limited responsibility.

Responsibilities of Private Sector

● The operation, maintenance and upkeep of existing infrastructure ● Acts as an interface and is entrusted with billing customers and collecting payments.

These agreements last usually about 20 years

Concession

A form of private sector participation (PSP) in water management where the private sector takes on a more active role in the long term planning of infrastructure.

Responsibilities of Private Sector

● The operation and maintenance of existing infrastructure ● Day to day operation of billing and taking payments● The long term planning of infrastructure

These agreements typically last over 30 years

Example: Buenos Aires

Build-Operate Transfer (BOT’s)

Is a form of private sector participation where the private sector has a leading and dominate role the facilitation of a public good such as waste treatment and other infrastructure.

Responsibilities of Private Sector

● Building of infrastructure ( Design, Financing, implementation, ect...)● Operation ( maintenance, management and operations)● Transfer back to the public sector

Transfer to the public sector comes in many different arrangements after a specified amount of time.

Various other forms of Private Sector Participation There are many other types of PSP’s especially when looking at the more limited end of private sector

involvement.

Management Contracts/ Intermediary Management - Usually limited to around 5 years and responsibility is limited to operations and maintenance. In this instance the company may not be generating revenue from tariffs but a fixed amount from the government.

Gerance Contract- Extremely similar to management contracts and Intermediary management but the difference being that some revenue can generated based on the performance of the contractor.

Highlighting the Similarities and Differences in (PSP)

Lease vs Concession - They are similar in that both don’t have ownership of assets and that they manage billing, maintenance and operations. They differ in that concessions are responsible for long term investment in expanding and improving infrastructure. Therefore have longer contracts and more in expected out of the participant.

Concession vs Build-Operate Transfer - The main difference being who finances and coordinates the building of infrastructure.

How does the Public Sector Choose who to Partner with?Looking at the selection process for choosing who to partner with is an extremely important process in which

governments and municipalities usually have multi stage processes to vet potential operators.

1. They will firstly look at the financial health, stability and capability of the a company to take the responsibilities they are bidding for whether it is a lease, concession or Build-Operate Transfer

2. The second stage usually involves some sort of bidding process, where companies will present estimates for costs of maintenance and price points for the sale of services.

In reference to Build-Operate transfers there is a huge emphasis on this vetting procedure due the magnitude of the financial burden and responsibility a company is taking on.

Benefits and RisksFrom the public and private sector standpoint there are benefits and risks and associated with these sorts of

partnerships. Benefits are also larger with larger amounts of responsibility due to the increased amount of exposure.

Private Sector

Benefits include - access to lucrative commodity since most water related infrastructure is a natural monopoly

Risks include - These systems are extremely complex and expensive, especially when looking at BOT’s costs and timelines can easily be overrun

Public Sector

Benefits include - the off loading of expenses to decrease debt, increase efficiency and coverage.

Risks - The risk of entrusting a public good to a corporation, which can fail for various reasons. Also inaccurate information the bidding process

Success and Failures

Leases

Concessions

Build-Operate Transfers

References

Chong, E., Huet, F., Saussier, S., and Steiner, F. (October, 2006). “ Public-Private Partnerships and Prices: Evidence from Water Distribution in France”. Review of Industrial Organization, 29(149), 149-169

Cowen, P. (April, 1999). “Lessons from the Guinea Water Lease”. Public Policy for the Privatesector, 78, 1-4.

Crampes, C and Estache, A. (September, 1996). “Regulating Water Concessions, Lessons from Buenos Aires concession”. Viewpoint, 91, 1-4.

Davis, J. ( November, 2005). “Private Sector Participation in the Water and Sanitation Sector”. Annual Review of Environment and Resources, 30, 145-183.

Emanuele, L. ( January, 2007). “Problems with Private Water Concessions: A Review of Experiences and Analysis of Dynamics”. International Journal of Water Resources Development, 21(1), 55-87.

Kumaraswamy, M and Zhang, X. (May, 2001) “Governmental role in BOT-led infrastructure development”. International Journal of Project Management, 19(4), 195-205.

Grimsey, D and Lewis, M. ( February, 2002). “ Evaluating the risks public private partnerships for infrastructure projects”. International Journal of Project Management 20(2), 107-118.

Water as a Human Right

Qingyang Liu

Human rights are rights inherent to all human beings, regardless of race, sex, nationality, ethnicity, language, religion, or any other status. Human rights include the right to life and liberty, freedom from slavery and torture, freedom of opinion and expression, the right to work and education, and many more. Everyone is entitled to these rights, without discrimination.

(UN, 2016)Image source: https://qph.fs.quoracdn.net/main-qimg-7c56f4fb02045583140e35fd381901d7

UN, 2018

By becoming parties to international treaties, States assume obligations and duties under international law to respect, to protect and to fulfil human rights.

The Universal Declaration of Human Rights (adopted by the United Nations General Assembly in 1948) (Assembly, U. G., 1948)

Image source: https://upload.wikimedia.org/wikipedia/en/d/dd/The_universal_declaration_of_human_rights_10_December_1948.jpg

1953 1966

1978

The Universal Declaration of Human Rights, Article 25

o Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. (Assembly, U. G., 1948)

Image source: https://upload.wikimedia.org/wikipedia/commons/d/d4/EleanorRooseveltHumanRights.png

Article 8: States should undertake, at the national level, all necessary measures for the realization of the right to development and shall ensure, inter alia, equality of opportunity for all in their access to basic resources... (Assembly, U. G., 1948).

1989 Convention on the Rights of the Child

Article 24

(c) To combat disease and malnutrition, including within the framework of primary health care, through, inter alia, the application of readily available technology and through the provision of adequate nutritious foods and clean drinking-water, taking into consideration the dangers and risks of environmental pollution (Unicef, 1989)

1992, Dublin Principles

Principle 4:

Water has an economic value in all its competing uses and should be recognized as an economic good. Within this principle, it is vital to recognize first the basic right of all human beings to have access to clean water and sanitation at an affordable price. (Gorre-Dale, E., 1992)

1966, International Covenant on Economic, Social and Cultural Rights (ICESCR)Article 11: The States Parties to the present Covenant recognize the right of everyone to an adequate standard of living for himself and his family, including... (Assembly, U. G., 1966)

2002, the UN Committee on Economic, Social and Cultural RightsComment No. 15: The right to water clearly falls within the category of guarantees essential for securing an adequate standard of living, particularly since it is one of the most fundamental conditions for survival.(UN, 2003)

2010, UN General AssemblyThe assembly recognizes the right of every human being to have access to sufficient water for personal and domestic uses (between 50 and 100 litres of water per person per day), which must be safe, acceptable and affordable; (water costs should not exceed 3 percent of household income), and physically accessible (the water source has to be within 1,000 metres of the home and collection time should not exceed 30 minutes) (UN, 2018).

Why do we need to explicitly acknowledge water as a human right?

Gleick, 2003

● Grounds the priority on the bedrock of social and economic rights

● Pay attention to inadequate states of water management● Set standards

○ In developing and using water resources, priority has to be given to the satisfaction of basic needs ... (UN, 1992)

○ The Assembly recognized the right of every human being to have access to sufficient water for personal and domestic uses (between 50 and 100 litres of water per person per day), which must be safe, acceptable and affordable… (UN, 2010)

● Resolve water disputes○ ‘in the event of a conflict between uses of water in an

international watercourse, special regard shall be given ‘to the requirements of vital human needs.’ (UN, 1996).

● Set priorities for water policy○ meeting a basic water requirement for all humans to satisfy

this right should take precedence over other water management and investment decisions (Gleick, 2003).

UN, 2018

By becoming parties to international treaties, States assume obligations and duties under international law to respect, to protect and to fulfil human rights. The obligation to respect means that States must refrain from interfering with or curtailing the enjoyment of human rights. The obligation to protect requires States to protect individuals and groups against human rights abuses. The obligation to fulfil means that States must take positive action to facilitate the enjoyment of basic human rights.

“Recommendations and decisions”

Snell, 2014

The U.S. representative: [t]his resolution describes a right to water and sanitation in a way that is not reflective of existing international law; as there is no “right to water and sanitation” in an international legal sense as described by this resolution.

Safe Drinking Water Foundation, 2018

● Share Canadian water with the world?● Open to indigenous right?

ReferencesAssembly, U. G. (1948). Universal declaration of human rights. UN General Assembly.Assembly, U. G. (1966). International covenant on economic, social and cultural rights. United Nations, Treaty

Series, 993(3).Assembly, U. G. (1986). Declaration on the Right to Development. Resolution, 41(128), 4.Gleick, P. H. (2003). The human right to water. WaterNepal WaterNepal, 117.Gorre-Dale, E. (1992). The Dublin statement on water and sustainable development. Environmental Conservation,

19(2), 181-181.Safe Drinking Water Foundation. (2018). Human Rights. Retrieved October 13, 2018, from

www.safewater.org/fact-sheets-1/2017/1/23/human-rightsSnell, K. (2014). Can Water Be a Human Right. Appeal: Rev. Current L. & L. Reform, 19, 131.UN. (2003). General Comment No. 15: The Right to Water (Arts. 11 and 12 of the Covenant), E/C.12/2002/11,

available at: http://www.refworld.org/docid/4538838d11.html [accessed 20 October 2018]Unicef. (1989). Convention on the Rights of the Child.UN. (2016). Human Rights. Retrieved October 19, 2018, from

http://www.un.org/en/sections/issues-depth/human-rights/UN. (2018). Retrieved October 20, 2018, from

https://www.ohchr.org/en/professionalinterest/Pages/InternationalLaw.aspx

Water Rights and Policies in regards to Water Privatization

Kathy Bi

“Privatization is nothing else than a legally and institutionally condoned form, if not encouraged, form of theft” (Davis , 2006)

Is it really?

Overview:

- Neoliberal ideas have had a profound influence on international development and policy debates in the water sector since the 1990s

- To help select the most appropriate policy options or programme alternatives, policy analysts divide the water sector into supply and demand side components

Difference between Supply and Demand Sides?

Supply Side: structure oriented: focuses on providing water and related services

Demand side: addresses human causes of water problems

“For most of the twentieth century, policy makers have focused their attention on the supply side” (FAO of UN)

Typical Forms of Private Sector:

■ Service Contracts —short term agreements where private contractor takes responsibility for specific task

■ Lease and Affermage Contracts — private operator takes responsibility for all operation and maintenance functions

■ Concession Contracts

Water Rights

“In an "ideal" market-based water allocation system, entitlements (water rights) are well defined, enforced and transferable and they confront users with the full

social cost of their actions” (FAO of UN)

Water Institutions: Property Rights and Public Domains

What are Water Institutions?

● Institutions are defined more broadly than simply government agencies and private organizations.

● Institutions are "sets of ordered relationships among people which define their rights, exposure to rights of others, privileges and responsibilities” (Prasad, 2006)

● In this context, institutions set the "rules of the game" within which the economic system operates

Property Rights

● Property rights structure helps define the incentives, disincentives, rules, rights and duties (including informal customs and formal legal systems) that guide human activities and encourage conformist behaviour.

Public Commons “ public domain refers to materials that are not protected by intellectual property laws”

Aboriginal Rights

● Canada’s policy for Indigenous Peoples requires: a. To negotiate and enter a succession treaty in exchange for limited water

and land rights, which will remain subject to federal and provincial laws

b. To prove the existence of Aboriginal Title, or Aboriginal Rights in water in a costly and time consuming court process.

Water Laws and Water Policies

Water Laws

“The Water Law project seeks to encourage the development of national, regional and global policies, action plans and, where appropriate, legal

instruments for the sustainable use of freshwater resource” (United Nations)

Water Policies

“Water policy: addresses provision, use, disposal and sustainability decisions

■ Provision includes identification, access, preparation for use and distribution. Uses include direct human consumption, agriculture, industry and ecosystem protection.

■ Policy must set the rules for how water is allocated to the different uses” (FAO of UN)

How policies are created, executed and amended?

Canada Water Act

● Passed in 1970

“the provinces are "owners" of the water resources and have wide responsibilities in their day-to-day management. The federal government has certain specific responsibilities relating to water, such as fisheries and navigation, as well as exercising certain overall responsibilities such as the conduct of external affairs” (Government of Canada)

Federal Water Policy:

● Released in 1987

“ To manage Canada's water resources, the federal government has defined two main goals:

1. to protect and enhance the quality of the water resource2. to promote the wise and efficient management and use

of water” (Government of Canada)

BC Utilities Commission Act:

Two major categories:

“1. to ensure that water systems installed by land developers are properly designed

2. to ensure that these utilities provide safe and adequate water service at rates that are fair, reasonable and sufficient to operate their water systems sustainably” (BC Government)

Policies in Developing Countries :Case Study: China

Background with China:

● The Term “private sector” is politically sensitive since 1949, when China established a socialist regime characterized by the nationalization of ownership

● Often defined as economic organizations that aim to make profit, where assets are privately owned

Water Privatization Policy in China

● China hasn’t enacted specific laws before entering into privatization

● The marketization reform of and private participation in the Chinese water sector is conducted under various governmental policy papers, but without specialized legislation.

● Lack of regulatory frameworks

Chengdu No. 6 Water Supply A BOT (Build, Operate Transfer) Project

“For any policy to be successful, social, economic and political dimensions all need to be taken into account” (Prasad, 2006)

References Bakker, K. (2003) ‘Liquid Assets’ Alternatives 29(2): 17–21Budds, J. and G. McGranahan. (2003). Are the Debates on Water Privatization Missing the

Point?” Environment and Urbanization 15(2): 87-114.

Davis, J. (2005) Private-Sector Participation in the Water and Sanitation Sector. Annual Review of Environment and Resources 30: 145–163.

Government of Canada (2017). Water governance: federal policy and legislation. Government of British Columbia . Water Policies. Food and Agriculture Organization of the United Nations(1993). Water policies and demand

management. The State of Food and Agriculture Horbulyk, T. (2005). Markets, Policy and the Allocation of Water Resources Among Sectors:

Constraints and Opportunities. Canadian Water Resources Journal 30(1):55-64Prasad, N. (2006). Privatisation Results: Private Sector Participation in Water Services after 15

Years. Development Policy Review 24(6): 669 – 92.Saxer, S (2010). The Fluid NAture of Property Rights in Water. Duke Environmental Law and

Policy Forum 49-112 Schulpen, L. and Gibbon, P. (2002). Private Sector Development: Policies, Practices and

Problems. World Development 30(1):1-15United Nations Environment (2014) . Water Law. Walkim, A. () Indigenous Peoples Water Rights: Challenges and Opportunities in an Era of

Increased North American Integration. Ontario Native Women’s Association. Zheng,X. et al. (2016). People’s Republic of China: Do Private Water Utilities Outperform State-

Run Utilities. Asia Development Bank. Zhong, L. et al. (2008). Public-Private Partnerships in China’s Urban Water Sector.

Environmental Management 41(6): 863-877

Social Impacts of Private Sector Participation in Water Supply

Management

Siobhan Ward

Water is a renewable resource

BUT

With population steadily increasing, the freshwater supply is decreasing faster than it is replenishing.

Of the total amount of water on earth, only 2.5% is freshwater, and only 0.5% of it is accessible.

The Dublin Principles

In 1992 The Dublin Principles were established to recognize both the value and the increasing scarcity of water. To this day, the Dublin Principles remain the guiding principles for water related issues. un.org

The Dublin Principles:1) Fresh water is a finite and vulnerable resource, essential to sustain life,

development and the environment. 2) Water development and management should be based on a participatory

approach, involving users, planners, and policy makers at all levels.3) Women play a central part in the provision, management and safeguarding of

water.4) Water has an economic value in all its competing uses and should be recognized

as an economic good. (Global Water Partnership, 1992).

Social Concerns of Water Privatization

Rate IncreasesOne of the major concerns amongst the public vs. privatization debate is the potential financial burden that could occur due to rate increases. If private participation in water supply management occurs, these private companies can set their own rates. Furthermore, these private companies must pay taxes, which further raises their rates in an effort to maximize profits.

California (2006)The average household paid approximately 21% more for private water systems than for public (Natural Standard Research Collaboration 2011).

Illinois (1990s)Rates increased 204% over 18 years (Public Citizen 2018).

South Africa (1996-2002)Over 90 000 households were estimated to have had their water cut off for non-payment as a result of such high water costs (The Halifax Initiative 2003).

The Quality of WaterAs companies aim to increase profits, cheap and poorly maintained water infrastructure often becomes an issue. Water system concerns include seepage from landfills, septic tank interference, fuel tank contamination, pesticides, unsafe pipeage material, and fertilizer exposure.

The US private water industry is represented by The National Association of Water Companies (NAWC) which lobbies Congress and the Environmental Protection Agency to refrain from requiring higher water quality standards. The NAWC also lobbies for all federal water regulations to be based on sound cost-benefit analysis. (Public Citizen 2018)

Corruption

In some cases, municipal officials and those in high ranking positions have accepted bribes by private companies in an attempt to win city contacts.

East Cleveland (1990’s)The mayor along with multiple municipal officials were sentenced to jail time for receiving bribes by private water companies (Natural Standard Research Collaboration 2011).

Effects on Jobs

Often individuals working in the municipal water system are negatively affected when a switch to privatization occurs. Job loss occurs as private companies aim to reduce operating costs as they see fit.

Philippines (2001)The Metropolitan Waterworks and Sewerage System laid off thousands of workers after taking over the municipal contract. Many of these workers had been employed for over 20 years (Public Citizen 2018).

Profit Maximization Private water management companies are answerable to shareholders, this means that the ultimate goal is profit, resulting in key concerns like efficiency and sustainability taking a back seat to profit maximization.

Privatizations Effects on Lower Income Populations

Water privatization negatively impacts lower income and marginalized populations at a disproportionate level. In many instances, marginalized communities cannot afford the rates set out by private companies. As a result, they often experience complete water shut off.

These communities are forced to find alternative water sources which are often polluted and dangerously contaminated.

This is a key example of environmental racism, defined as the disproportionate level at which socially marginalized and racial minority communities are exposed to pollutants and often denied access to basic living necessities (such as clean air, water, and natural resources).

South Africa (2003)

Millions of people had their water supply cut off because they were unable to afford payments due to privatization. As a result, these residents used local rivers and lakes as a source to their water needs. This resulted in one of the most devastating outbreaks of Cholera experienced in South Africa. Symptoms of illness included diarrhea and vomiting, and in some cases, death. Reported numbers state that over 300 000 people were affected and 350 people died as a result of the contamination (Natural Standard Research Collaboration 2011).

Gerhard Jacobs (2014)

Positive Social Impacts of Privatization

Improve Sustainability and Minimize Environmental Impacts

“A survey was conducted in 1999 by the NAWC to evaluate public-private water partnerships in 29 cities throughout the United States. The study concluded that water privatization improved compliance with environmental standards. Before privatization, 41% of the facilities surveyed did not meet the Federal Safe Drinking Water Act (SDWA) requirements. One year after establishing a public-private partnership, all facilities were in compliance with the standards.” (Natural Standard Research Collaboration 2011).

Levitan (2015)

Improving Water Quality

Milwaukee (1993):Residents experienced an outbreak of Cryptosporidiosis due to the contamination of their public water system. This outbreak resulted in illness for much of the city, and in the some cases, death. “Milwaukee contracted United Water in 1998 to operate the city's wastewater system. The contract, which ended in February of 2008, showed many positive outcomes for residents. According to United Water, savings reached $170 million, and customers paid 14% less than they did in 1997 for the new $90 million system, in addition to clean and safe water.” (Natural Standard Research Collaboration 2011)

The Case of Flint: A public water system disaster

One of the most prolific examples of public system failure as well as environmental racism.

In April 2014, a municipal decision was made to switch from The Detroit Water and Sewerage Department (DWSD), which retrieved water from Lake Huron, to retrieving their own drinking water from Flint River. This switch occurred in attempt to try to cut costs and offset the large city debt. The water was then treated at the Flint Water Service, however, officials failed to add corrosive inhibitors which then resulted in lead from the pipes leaking into the water. Lack of acknowledgement and response by city and state officials resulted in over 3 years of contaminated water for Flint, Michigan.

The St. Louis American (2016)

Pacific Standard (2018)

The Flint RiverMaria Palmo /WKAR-MSU

Flint is an extreme case of public water mismanagement, but still should serve as an example as to how public water systems can fail. In the case of Flint, would privatizing the water system have avoided the lead crisis? Furthermore, if Flint wasn’t a low income and largely minority city, would the reaction time of city and state officials have been different?

The argument of public vs. private water management systems is complex and highly debated. The social impacts can be costly for both public and private systems, and thus it is crucial to examine the other aspects of the debate.

The Detroit News (2016)

ReferencesGlobal Water Partnership. 1992. Dublin-Rio Principles. Retrieved from https://www.gwp.org/contentassets/05190d0c938f47d1b254d6606ec6bb04/dublin-rio-principles.pdf

Jacobs, G. 2014. Retrieved from https://www.thesouthafrican.com/drink-up-while-you-can-south-africas-drifting-towards-a-full-blown-water-crisis/

Levitan, K. 2015. Retrieved from https://thesustainabilitychallenge.wordpress.com/2015/01/28/moving-toward-sustainable-water/

National Research Council. 2002. Privatization of Water Services in the United States: An Assessment of Issues and Experience. Retrieved from https://www.nap.edu/catalog/10135/privatization-of-water-services-in-the-united-states-an-assessment

Natural Resource Defense Council. The Flint Water Crisis. Retrieved from https://www.nrdc.org/flint

Natural Standard. 2011. Water Privatization. Retrieved from https://www.health24.com/Lifestyle/Environmental-health/Faqs/Water-privatization-20130312

Pacific Standard. 2018. Retrieved from https://psmag.com/environment/flint-is-the-urban-crisis-of-the-century

Palmo, M. The Flint River. Retrieved from http://www.wkar.org/post/flint-water-crisis-turning-point-green-movement#stream/0

The Detroit News. 2016. Retrieved from https://www.detroitnews.com/story/opinion/2016/01/13/thompson-flint-water-crisis-snyder-katrina/78770564/

The Halifax Initiative. 2003. Water, Land, Labour: The Impacts of Forced Privatization in Vulnerable Communities. Retrieved from http://www.halifaxinitiative.org/fr/node/86

The St. Louis American. 2016. Retrieved from http://www.stlamerican.com/news/local_news/source-says-first-criminal-charges-to-be-announced-in-flint/article_5073f148-06fa-11e6-9fbd-0795037ff139.html

The Public Citizen. 2018. The 10 Reasons to Oppose Water Privatization. Retrieved from https://www.citizen.org/article/introduction-water-privatization

UN. un.org

The Environmental Impacts of Privatisation

Nikki Rao

http://beautyofthe-world.blogspot.com/2012/08/the-crystal-clear-lake-in-canada.html

Relevance: Why care?

“ Questions have been raised about the potential negative environmental impacts of privatization in connection with (a) the transfer of polluting industries to developing countries seen as "pollution havens"; (b) the development of previously undisturbed resources (as in new oil drilling or mining activities); (c) the cumulative impact of many small-scale polluting operations (such as in urban transport or fuel distribution and retail networks); and (d) the exceptions from regulatory requirements that are sometimes part of privatization transactions.”

(Lovei et. al 2002)

A Reason To Think: ENVIRONMENT

Commercial pressures drive environmental concern:

- Constant evolution

- Stringent environmental standards

- “Social license to operate”

https://www.petsofchampions.com/animals/earth-day-2018

Why Governments Integrate Environmental Issues Into Privatisation Programmes

1. Pressure- Risks and uncertainties

2. Financial benefit- Past environmental liabilities- Being unprepared isn’t the best idea

https://launchdarkly.com/blog/risk-elimination-and-the-launchdarkly-value-add/

Government Action:

- Information and clarification

- Rules and mechanisms (environmental liabilities)

- Include environmental agreements

- Institutional coordination

https://novato.org/community/sustainability/green-government

Structuring and mobilizing privatizations:

- Commercial incentives for efficiency, minimising waste, and “clean” products

- Collaboration between environmental and privatization authorities from the start.

- Clear and predictable

- “Doer” to “Enabler and Overseer”

- Transparency

- Supporting the civil society and public+private resources

- The Bank

Issues To Consider When It Comes To Water Privatisation

1. Coverage and quality of the service

2. Environmental and public health goals to be met.

https://www.timeshighereducation.com/blog/response-do-ref-cycles-really-encourage-poorer-quality-research

Recommendations: Private Provision of Environmental Infrastructure services

- Realistic environmental Targets

- Don’t separate water and sewerage services

- Coordination

- Tariffs and affordability

- Oversight

Macro-scale case studySource = River

China, 45% of major river reaches surveyed in2008 were moderately to badly polluted

Estimates suggest that at least 10,000–20,000 freshwater species are extinct or at risk

65% of global river discharge, and the aquatic habitat supported by this water, is under moderate to high threat

https://gifimage.net/river-gif-2/

Micro-scale case studiesMexico City

● Main source of water: aquifer - Overtaxed- Leaks- Overuse

● Entered the private sector → 1993

● In phases 1 and 2: customers identified and a more effective billing system was designed and implemented

● In phase 3: improvements in the physical distribution system.

- Water meters to combat overuse- Leak detectors to reduce water loss

http://fromwayuphigh.com/is-mexico-city-safe/

● JOINT VENTURE

● 1997 the Eastern Water Resources Development and Management Company or East Water - a subsidiary of Thailand's Provincial Waterworks Authority (PWA) - endered the stock exchange → 44% of EW is owned by PWA

- Capitalization enabled a new project (pipeline system)

● 2 ways EW can become a clean water business:direct participation in the privatization of the state-owned water utili- ties, and expansion into areas not yet covered by the state agencies

http://www.matthewwilliams-ellis.com/gallery/thailand-travel-photography/

Micro-scale case studies Thailand

● Kenya: WSRB’s market-driven cost recovery responsibility is aimed to ‘encourage consumers to use water wisely by basing their consumption decisions on prices reflecting the actual value of the water they use’ (McKay and Bjornlund 2001: 391).

- This is what Bakker (2003) has termed as ‘market conservation’. By reducing the unnecessary consumption of water, economic pricing would help reduce the demand for environmental infrastructure related to water consumption like water and wastewater treatment plants, sewers etc. - K'Akumu 2006

Micro-scale case studies Kenya

http://www.fubiz.net/2013/07/03/kenya-photography/kenya-photography-26/

Sources:● Davies, P. M., Vörösmarty, C. J., Dudgeon, D., Sullivan, C. A., Glidden, S., Liermann, C. R., . . .

Green, P. (2010). Global threats to human water security and river biodiversity. Nature, 467(7315), 555-561. doi:10.1038/nature09440

● Pérard, E. (2009). Water supply: Public or private? Policy and Society, 27(3), 193-219. doi:10.1016/j.polsoc.2008.10.004

● K'Akumu, O. A. (2006). Sustainability prospects for water utilities privatization in kenya.International Journal of Technology Management and Sustainable Development, 5(3), 271-280. doi:10.1386/ijtm.5.3.271/1

● Lovei, M., Gentry, B. S., & Open Knowledge Repository. (2002). The environmental implications of privatization: Lessons for developing countries. Washington: World Bank Publications.

The Global PSP Patterns

Iris Jiang

PSP in developed countries

- UK: England & Wales are totally privatised - French: a long history of public owned with private operated

water system- Other developed countries: more or less transfer from public

to private sectors

UK as a successful case Regulations:

- Office of Water Services (OFWAT)- the Drinking Water Inspectorate (DWI) - the Environmental Agency (EA)

Achievement: - Improved water quality- Improved ecosystem

-

Image source: right water http://www.rightwater.co.uk/water-for-business/water-in-england/

Multinationals - 5% of the total drinking water in

the world is provided by private sectors

- Several largest water companies dominate the private water provision and sanitation services.

- The ten largest water companies are mostly from UK and France

Multinationals

- Driven by interest - Investment in

low-middle countries rather than the poor country

- Conflicts among the states, companies and users are easy to flare up

PSP in developing countries

Dar es Salaam, Tanzania as a failed case - Government: lacks funds to improve

basic water infrastructure - Users: rely on informal water sector -

vendors - World Bank: provides fundings only

when the investor appears- Private sectors: too risky

Image source: Tanzania invest https://www.tanzaniainvest.com/construction/world-bank-wb-financing-water-dar-es-salaam

References

Budds, J., & McGranahan, G. (2003). Are the debates on water privatization missing the point? experiences from africa, asia and latin america. Environment and Urbanization, 15(2), 87-113. doi:10.1630/095624703101286763

Byatt, I. (2013). The regulation of water services in the UK. Utilities Policy, 24, 3-10. doi:10.1016/j.jup.2012.07.00Davis, J. (2005). PRIVATE-SECTOR PARTICIPATION IN THE WATER ANDSANITATION SECTOR. Annual

Review of Environment and Resources, 30,145-183.

Dore, M. H. I., Kushner, J., & Zumer, K. (2004). Privatization of water in the UK and France—What can we learn?Utilities Policy, 12(1), 41-50. doi:10.1016/j.jup.2003.11.002

HUNT, L., & LYNK, E. (1995). privatisation and efficiency in the uk water industry - an empirical-analysis.Oxford Bulletin of Economics and Statistics, 57(3), 371-388.

Prasad, N. (2006). Privatisation results: Private sector participation in water services after 15 years.Development Policy Review, 24(6), 669-692. doi:10.1111/j.1467-7679.2006.00353.x

Smiley, S. L. (2013). Complexities of water access in dar es salaam, tanzania. Applied Geography,41, 132-138.doi:10.1016/j.apgeog.2013.03.019

Xian, R.(2007) The Water Margin. Chinadialogue. Retrieved fromhttps://www.chinadialogue.net/article/show/single/en/1305-The-water-margin

ConclusionFrom an economics perspective, in order for water to be used efficiently and sustainably, it should be classified as a pure private good so that it is considered excludable and rivalrous

Water as a human right is officially recognized by UN in 2010. But this right is not well practiced in reality considering complicated legal implications, accountabilities, and obligations.

Privatization comes in many different forms to vary degrees of involvement in the public sector.

For policies to be successful, social, economic and political aspects need to be taken into account.

Privatization tend to fail in poor countries due to the interest-driven nature of the private water companies.

There are positive and negative social impacts of the public vs. privatization debate, and these impacts can be costly if not carried out properly.

Privatization comes with its risks and rewards regarding environmental and human health