Monday, August 30, 2004

Editorial: Third-World Water And The Private Sector

Source: World Bank

In the developed world, the stuff comes 24/7 from the tap. In poor countries drinking water comes out of taps, communal standpipes, the water-seller's cart, wells, boreholes, streams or puddles. It is apt to come irregularly, at some times and places not at all. Then some people die. Vastly more die in many poor countries from the non-existence or inadequacy of sewerage systems. Little wonder that water is a fiery topic, writes The Economist in this week’s editorial.

In Bolivia in 2000 an issue of water supply led to riots and a state of emergency. Why? Because a private-sector consortium including Bechtel, a big American contractor, had been brought in to improve supplies to the city of Cochabamba and charges were raised to pay for the investment. The affair has become a classic among those non-governmental organizations(NGOs) and anti-capitalists who argue that water falls free from the sky, is a basic human need and right, and so no one should profit from supplying it. All of which is true, except the conclusion. Rain falls free, but someone has to spend money and deploy skills in getting it to the tap, and removing it in a sewer. The best organization to do this may well be a profit-driven water company. Most of those who rail about Cochabamba do not also remind their listeners of the woeful failure of the city's previous public-sector water supplier.

Such woes are common in the developing world. So is a shortage of capital. No wonder the World Bank has long called for private-sector skills and money to be brought in. A good many local authorities have agreed. Governments and public agencies still finance nearly 90 percent of the poor world's $15 billion annual investment in water and sewerage; but private money pays for the rest. No wonder, either, that every so often the private sector makes a mistake, as anyone can: this new water-main or sewer is not built on time, or lack of rainfall means that a reservoir is dry. At that point fresh torrents of abuse swill around the world's NGO websites claiming proof, from one case of underperformance, that all private-sector involvement in third-world water is wrong.

Well, a shock awaits those who believe this. The world's three biggest water companies are coming to the same conclusion albeit for different reasons. As their opponents complain, they are not interested anyway in rural projects that can never show a profit. But now they are shy of urban projects too: even if consumers paid up, as many do not, the social, regulatory, political and currency risks are just too high. And with an army of critics on the watch, they risk bad publicity in the rich world as well. The result is likely to be a lot less private-sector involvement in the future. For the world's poor, this is bad news.