In a commentary published in the Financial Times, Swedish analyst Fredrik Segerfeldt counters the arguments of water activists who say that water privatization does not benefit the poor. In the cases that water prices have gone up after privatization, this is usually only for those already connected while the poor are already paying 12 times as much for lower-quality water from small-time vendors, he argues. In his recent book [1] on water privatisation, Segerfeldt wonders “why anti-privatization activists do not expend as much energy on accusing governments of violating the rights of 1.1 billion people who do not have access to water as they do on trying to stop its commercialization".

While Segerfeldt claims that water privatization in developing countries has usually had “good results”, research [2] by Okke Braadbaart has revealed high rates of failure for public-private partnerships (PPPs) in the 1990s. While some early PPPs led to improvements, this “was overshadowed by a wave of contract renegotiations, allegations of collusion and corruption and courtroom battles”. Many PPPs were too ambitious and poorly designed, making them “susceptible to macroeconomic shocks and political opportunism”.

For privatization to succeed Braadbaart recommends that governments choose short-term agreements such as service and management contracts, preferably with domestic private firms, including small-scale providers. Governments should also borrow in local currencies to avoid foreign exchange risks. Similar views are supported by the Asian Development Bank [3] and the Water and Sanitation Program (WSP) through the Domestic PSP Initiative [4] that it launched in June 2005.

[1] Segerfeldt, F. (2005). Water for sale : how business and the market can resolve the world's water crisis. Washington, DC, USA, Cato Institute. ISBN 1-930865-76-7. Ordering details. See also a review of this book by Ronald Bailey

[2] Braadbaart, O. (2005). Privatizing water and wastewater in developing countries : assessing the 1990s' experiments. Water policy ; vol. 7, no. 4 ; p. 329-344. Abstract and ordering details - http://www.iwaponline.com/wp/00704/wp007040329.htm

[3] ADB – Country Water Actions – Asia - Public-Private Models Offer Options to Utilities - http://www.adb.org/water/actions/REG/public-private-models.asp

[4] Unlocking potential of the domestic private sector, Access, no. 33, 30 Aug 2005

Related News: Privatisation: British NGO launches “Dirty Aid, Dirty Water” campaign, Source Weekly, 11 Apr 2005

Web site: WEDC - Public-private partnerships and the poor in water and sanitation

Contact: Fredrik Segerfeldt, Communication Strategist and Senior Adviser, Confederation of Swedish Enterprise, Sweden, fredrik.segerfeldt@svensktnaringsliv.se ; Okke Braadbaart, Urban Environment Program, Environmental Sciences Group, Wageningen University and Research Centre, The Netherlands, okke.braadbaart@wur.nl

Source: Fredrik Segerfeldt, Financial Times / Cato Institute, 25 Aug 2005

Tags: financing