At Large

The Myth of Water Privatization Failures

Today is World Water Day -- which many negligent Third World governments don't deserve to celebrate.

By 3.21.06

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March 22nd is World Water Day. The dire situation that a large chunk of the world's population is in when it comes to water provision will be put on display. With good reason. More than a billion people lack access to clean and safe water, and over two billion are without adequate sanitation facilities. Twelve million people die annually of terrible water-borne diseases. The inadequate water supply helps to keep millions of people in poverty. They either have to wait in line, or carry heavy vessels of water, or they are too ill to work or study.

Water distribution and sanitation have traditionally been a public responsibility. Currently, 97 percent of water distribution in developing countries is in the hands of governments. So the responsibility for above-described failures and fatalities lies with incompetent and negligent governments.

And yet, in the few cases where the private sector has been given a role in water distribution, there have been large and sometimes violent outcries against privatization. Local politicians have used foreign companies in general, and international utilities in particular, as scapegoats.

The debate on the role of the private sector has also been present in the West. Opponents to private sector participation claim that reforms have failed. NGOs such as the London-based World Development Movement and the American consumer advocate group Public Citizen argue that privatization has been a huge failure, that the poor have been ignored, and that most contracts have been cancelled. Some have even asserted that Western multinational water companies involved in the business have realized that there is no money to be made on poor people's need for water, and that they therefore are pulling back from developing countries.

The facts and figures tell a different story. In most cases highlighted by the opponents, be it Buenos Aires, Argentina; Manila, Philippines; or El Alto, Bolivia, more people have been given access to clean and safe water following privatization. The poor have gained disproportionately in all these cases, since they are more likely than the better-off not to have been served by the operator under the public regime. And once they're hooked up to water sources, they pay dramatically cheaper prices for water than was the case when they were forced to pay for black market water.

There are also cases that privatization opponents fail to mention, such as Chile, Cambodia, and Gabon, where success has been striking. Global data from the World Development Indicator database show that more people have access to an improved water source than in countries without such investment.

Also, new research from the World Bank rebuts most of the protesters' claims. A mere 7 percent of all developing country water projects with private sector participation have been canceled or distressed between 1990 and 2004. That means that the claim of anti-privatization activists that failure has been rampant just is not true. Ninety-three percent of water expansion projects have been successful.

Furthermore, while it is true that private sector investment in water distribution in poor countries dipped between 2000 and 2003, in 2004 it increased by 34 percent. That is, investment is flowing back into developing countries, meaning that more people are likely to be connected to a water main and to be liberated from all the difficulties associated with water poverty. The superior skills of private firms compared to poor-country governments have enhanced performance, and will continue to do so.

In fact recent press reports indicate that, in the two major canceled privatizations, Buenos Aires and Manila, the operations are likely to be taken over by new private investors, not by the government. Local authorities have come to realize that the advantages of giving the private sector a role in water distribution hugely outweigh the risks.

Many ideologically motivated NGOs have gathered for the mid-March World Water Forum in Mexico. But few there are likely to present these facts, or even take them into consideration. Instead, they will continue to spout rhetoric. Too bad for the poor, because they don't drink catchphrases.

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About the Author

Fredrik Segerfeldt is program director at the Stockholm-based think tank Timbro and author of Water For Sale: How Business and the Market Can Resolve the World''s Water Crisis (Cato, 2005).