Privatise and let water flow to poor

Worldwide, 1,1-billion people, mainly in poor countries, do not have access to clean, safe water. The shortage of water helps to perpetuate poverty, disease and early death. However, there is no shortage of water, at least not globally. We use a mere 8% of the available water for human consumption. Instead, bad policies are the main problem.

Ninety-seven percent of all water distribution in poor countries is managed by the public sector, which is largely responsible for more than 1-billion people being without water. Some governments of poor nations have turned to business for help, usually with good results. In poor countries with private investment in the water sector, more people have access to water than in those without such investment.

There are many examples of local businesses improving water distribution. Superior competence, incentives, and access to capital for investment have allowed private distributors to enhance both the quality of the water and the scope of its distribution.

The main argument against privatisation is that it increases prices, making water unaffordable for millions of poor people. In some cases, it is true that prices have gone up after privatisation; in others not. But the price for those already connected to a mains network should not be the immediate concern.

Instead, we should focus on those who lack access to mains water, usually the poorest in poor countries. It is primarily those people who die, suffer from disease and are trapped in poverty. They usually buy their low-quality water from small-time vendors, paying on average 12 times more than for mains water, and often more than that.

When the price of water for those already connected goes up, the distributor gets the resources to enlarge the network and the incentive to reach many new customers. When prices are too low to cover the costs of laying new pipes, each new customer entails a loss rather than a profit, which makes the distributor unwilling to extend the network. Therefore, even a doubling of the price of mains water could give poor people access to cheaper water.

There is another anti-privatisation argument. Since water is considered a human right and since we die if we do not drink it, its distribution must be handled democratically; that is, remain in the hands of the government and not be handed over to private, profit-seeking interests. Here we must allow for a degree of pragmatism. Access to food is also a human right. People also die if they do not eat. And in countries where food is produced and distributed “democratically”, there tends to be neither food nor democracy.

Let us, therefore, have a discussion on how to make them work better. Greater scope for businesses and the market has saved many lives in Chile and Argentina, in Cambodia and the Philippines, in Guinea and Gabon. There are millions more to be saved.

Source: Fredrik Segerfeldt Privatise and let water flow to the poor, Business Day 26 August 2005

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For more on privatisation:

FMF Policy Bulletin/ 30 August 2005
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