Problems with Privatization of Water Supply and Sanitation by K2Tytb9

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									                    PSI Briefing - World Water Forum        The Hague 17-22 March 2000
                                          NO PROFITS FROM WATER!



   Undermining Democracy and the Environment
  1. Democracy............................................................................................................................... 1
     A. Lack of transparency and accountability ........................................................................... 1
     B. Secret contracts – the multinationals insist ......................................................................... 2
  2. Environment ............................................................................................................................ 2
     A. Pollution ............................................................................................................................. 2
     B. Excessive abstraction .......................................................................................................... 2


1. Democracy
Privatised water concessions tend to undermine democratic accountability, and the multinationals
systematically attempt to keep their contracts as commercial secrets.

A. Financial Irregularities and the FrenchLack of transparency and
accountabilitySystem

Undemocratic rulers
Privatised water concessions have frequently been negotiated by the multinationals with
undemocratic political leaders. One example is the water and electricity concession in
Casablanca, Morocco, which was negotiated between multinationals and the late King Hassan II,
without the involvement of the elected city council of Casablanca. 1 Another is the water
concessions in Jakarta, set up under the military dictatorship of Suharto, which have since been
renegotiated.

UK: secret decisions, no local accountability
Meetings of the boards of the water authorities in the UK were open to the public until the
Thatcher government made these into closed sessions in the lead-up to privatisation. The water
companies now have monopoly concessions in their regions, but these concessions are not
awarded by municipalities, as in the rest of Europe, but under statute. The companies thus
provide no reports at all to any elected public authority in the region they exploit.

France: “characterised by a lack of transparency”
The 1997 report by the Cour des Comptes, France’s national audit body, said that the move to
privatisation was rarely properly evaluated by councils, and that contracts are ambiguous. As a
result: "The lack of supervision and control of delegated public services, aggravated by the lack
of transparency of this form of management, has led to abuses".2 In the city of Metz, the water
company did not submit any accounts for a period of 20 years.
                                                                                                                                                    Formatted: Bullets and Numbering
    "A substantial mistake was made in the figures for the invoiced amounts when the joint
          water authority of the valley of Auzon (Puy-de-Dome) renewed its water concession.
          Only the company with the water concession at the time knew the true situation - and it
          finally won a renewal of its contract for 12 years".

    In Bandol-Savary (near Toulon), where OTV (a Geénéerale des Eaux subsidiary) was
          contracted to build and run a new water treatment plant, the plant ended up costing at
          least 15.3 million Francs more than it should. The final insult was that OTV arranged to
          charge the council twice over for the same treatment, every year. To the amazement of

   Public Services International                                                                              www.world-psi.org
                         Research by PSIRU, University of Greenwich, London SE10 9LS, UK www.psiru.org
               PSI Briefing - World Water Forum        The Hague 17-22 March 2000
                                     NO PROFITS FROM WATER!

        the regional auditor, the company tried to defend this on the grounds that the procedure
        had been agreed with the council.
A report being prepared in February 2000 on water services in Paris again declared that the whole
system set up in the 1985 privatisation of water and wastewater services in Paris was
"characterised by the absence of financial transparency"3.
                                                                                                             Formatted: Bullets and Numbering
B. Secret contracts – the multinationals insist
Multinationals typically insist that the contract which defines their responsibilities under the
concession be kept a commercial secret.

    The contract documents involving the multinationals invariably state that none can even see
     the terms without the permission of the multinational. A typical example of such a secrecy
     clause is in the contract between Suez-Lyonnaise’s subsidiary in South Africa, WSSA, and
     the municipality of Fort Beaufort, which prevents any member of the public from seeing the
     contract without the explicit approval of Lyonnaise des Eaux': “2.2.2: Confidentiality: the
     documentation contained herein has been developed exclusively by the operator (WSSA) and
     shall not be disclosed to third parties without the written approval of the operator." 4

    Documents relating to the privatised Budapest Sewerage Company, where Vivendi is the
     multinational, are in fact kept secret, even from council officials, and Budapest City Council
     debates related issues only in closed sessions.5 This despite the fact that the privatisation
     was financed by the EBRD, which states that it has a commitment to ensuring that
     consumers’ interests are “fairly balanced” with those of the municipal authorities and private
     sector parties (EBRD, 1999: 26) .6

    The contract between SAUR and Gdansk city council in 1992 proved so unsatisfactory that it
     was renegotiated a year later. The new version, however, is still not publicly available.7

2. Environment
There are two ways in which the environment can suffer from water privatisation:
 Worse pollution and environmental damage, as expenditure on safety is cut
 Excessive abstraction and consumption of water to enhance profitability

A. Pollution
 A major environmental disaster occurred in Puerto Rico, whose water system is managed by
  Vivendi. Residents are suing the authority and the multinational for allowing a reservoir to
  overfill so that it burst during the hurricane.8
 All the privatised UK water companies have been convicted of numerous pollution offences:
  between 1989 and 1997 there were over 250 convictions for pollution incidents. 9
 The French companies too are offenders at home. Vivendi’s Générale des Eaux was convicted
  in 1994 for supplying water for a year and a half which was unfit for consumption due to
  excessive nitrates and pesticides.10

B. Excessive abstraction
Increasing numbers of privatised water schemes are linked to ventures to abstract more water
through dams and reservoirs.
 Private operators are getting involved in bulk water supply schemes with ‘take or pay’
    contracts, which guarantee profits by requiring consumption of water regardless of need. One

    Public Services International                                                        www.world-psi.org
                  Research by PSIRU, University of Greenwich, London SE10 9LS, UK www.psiru.org
               PSI Briefing - World Water Forum        The Hague 17-22 March 2000
                                     NO PROFITS FROM WATER!

    example is the water supply BOT in Chengdu, China, involving Vivendi, and financed by the
    Asian Development Bank. 11
   The huge Lesotho Highlands Water Project (LHWP) created a large commercial interest in
    selling water to South Africa regardless of environmental or consumer interests: “for
    consumers [in Johannesburg] to pay for the LHWP would mean raising the real marginal
    price of water dramatically. Moreover, while bulk water charges to municipalities rose by
    35% between 1995 and 1998 in large part due to the LHWP...” 12
   Following the 1989 privatisation of water in England and Wales, 20 water courses dried up
    in a few years because of over-abstraction. 13 In 1998, Suez-Lyonnaise des Eaux subsidiary
    Essex & Suffolk Water was convicted for illegal over-abstraction of water at five sites in
    Suffolk over a three-year period. “The company admitted 27 charges of illegal extraction and
    asked for 233 other offences to be considered”. 14
1
  Middle East Economic Digest 7 March 1997.
2 Cour des Comptes (1997) La gestion des services publics locaux d’eau et d’assainissement.
3 Le Canard Enchaine, 16/02/00.
4 Agreement for Management, Operation and Maintenance of the Water and Sewage Systems of Fort
Beaufort and Associated Customer Management, 05/10/95, p. 6.
5 NEPSZABADSAG: 7 Dec 1998.
6 European Bank for Reconstruction and Development (1999a) Municipal and Environmental
Infrastructure – EBRD involvement to date in the MEI sector. London: European Bank for Reconstruction
and Development.
7
  Interview with deputy mayor of Gdansk, March 1998.
8
  Interpress 13 Nov 1998.
9
  The Independent, 22/03/99.
10
   Les Echos 20.7.94.
11
   CHENGDU Generale des Eaux-Marubeni Waterworks Company Limited, in ADB Private Sector Project
Profiles : www.adb.org/Work/Projects/Profiles.
12
   The Lesotho Highlands Water Project as seen from Johannesburg. Submission to the World Commission
on Dams 11 November 1999, Cape Town by David Letsie and Patrick Bond.
13
   Martin, B. (1993) In the Public Interest? - Privatisation and Public Sector Reform.
14
   Water News, 14/08/98.




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                  Research by PSIRU, University of Greenwich, London SE10 9LS, UK www.psiru.org

								
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