Water Supply & Consumption Out of Sync
The OECD estimates that 2.8 billion (or 44%) of the world’s people currently live in areas experiencing water stress. Projections based on population growth and the continuation of current consumption patterns indicate that this figure could rise to 3.9 billion by 2030.
In short, there is already not enough water of the form and quality we need, and this deficiency is not likely to be remedied soon. What are the implications of this water shortage?
Short-term implications
In short, there is already not enough water of the form and quality we need, and this deficiency is not likely to be remedied soon. What are the implications of this water shortage?
Short-term implications
- 1.1 billion people in the world lack access to safe water and 2.6 billion lack adequate sanitation. There are 3.6 million deaths each year from water-related illnesses, of which nearly 2 million are children.
- This is not only tragic but it is also an enormous waste of human resource. It is estimated that water-related diseases, deaths, and loss of productivity shaves about 2-5% off the Gross Domestic Product of many Least Developed Countries, which may be more than what they receive in aid.
- Population growth is expected to continue at least until mid-21st-century, increasingly contributing to the water stress described above.
- Much of what is currently done to address water stress in the short run will eventually create new problems in the long term. For example, dams and other man-made attempts to control water flows can damage the environment and adversely impact the water cycle.
- The natural environment itself needs to be counted as a water consumer for the purpose of health maintenance of ecosystems, but the environment is usually at a disadvantage when competing with human needs.
- Climate change also plays a key role in changing water conditions and intensifying water stress in ways that we cannot fully predict.
- Economic development often results in more water-intensive lifestyles. The average American uses 150 gallons of water per day, 50 times what the average Ethiopian uses. As economic growth spreads throughout the world, water conservation and development efforts will be more likely to undermine each other.
There are some who argue that one way to increase the efficiency of water usage is to put it under private (read, for-profit) control so as to let markets determine where the water goes, in what amount, and how much it costs. Right now the water industry is a hybrid mixture of public and private management.
- Looking closely at all the activities required to extract, treat, and deliver sanitized freshwater to consumers, you will find that some parts of the process are owned and/or managed by the public sector while some are contracted to private companies. Some parts are a poorly distinguished mix of subsidies, public-private investments, and market forces.
- In some places, the government may have a monopoly because it controls the treatment systems and pipe networks. In other places private entities may have a monopoly, such as areas where water vendors sell to households that are not yet reachable by public utilities.
- Often it is a mix since incentives to invest in water are great for both the public and private sectors: for the public in terms of large yield in human development from small improvements; for the private in terms of profits that can be made from distributing a valuable universally-used resource.
Definition
The term privatization covers a wide spectrum of water utility operations, management, and ownership arrangements. There have been at least 3 models of water privatization.
In the United States, the contracting of O&M to a private provider has been more common than the sale of utility assets. No major U.S. city has sold its utility assets although some smaller water vendors have done so.
- Outsourcing means both private contracting for water utility plant operation and maintenance (O&M) and private provision of various services and supplies (such as lab work, meter reading, and supplying chemicals).
- Design, build, and operate (DBO) means negotiating a contract with a private company for coupling design and construction services with comprehensive operating agreements for new or upgraded facilities.
- Asset sale means the sale of government-owned water assets to private companies.
In the United States, the contracting of O&M to a private provider has been more common than the sale of utility assets. No major U.S. city has sold its utility assets although some smaller water vendors have done so.
History of Privatization
Widespread privatization efforts grew in the late 20th century when international financial institutions such as the World Bank and International Monetary Fund required countries seeking assistance to deregulate, abolish subsidies, and even sell part of their water systems and infrastructure to private investors. The rationale was that privatization would result in more efficiency and less corruption. Private investors would have the incentive to build, maintain, and upgrade expensive water facilities in order to make profits, whereas governments in many of these countries (usually LDCs) had been doing a poor job of stewarding their publicly-financed (and often starved) water industries. These privatization programs continue today in many heavily indebted countries which continue to seek loans and aid from international institutions. It is estimated that around 15% of the almost 4 billion people in the world who have access to clean water get it from a private company.
Source: http://blogs.sacbee.com/photos/2010/07/pakistan-water-crisis.html
The Debate
On one hand, many would say privatization has produced the intended benefits.
On the other hand, privatization is often seen as having failed much of the world’s poor.
Many argue that water is a human right and as such it should not be treated like a commodity. However, a number of investors argue that water could become the “new oil,” and this view is spurring considerable investments in the industry. The privatization debate remains highly contested. Looking forward, it is unlikely that entire water systems will reflect a pure form of either private or public ownership. Governments at all levels will likely maintain a role in water regulation and management no matter how the industry itself is funded, but major power brokers will likely be private entities. That said, although privatization of water systems seems unavoidable in the future, it still undeniably has important impacts on the livelihoods of billions of people around the world. The following pages of this section will look more closely at two case studies of water privatization--Bolivia and Sweden.
- Many water systems in poor countries would not have existed if not for the private funding of international lending institutions. Cash-strapped governments simply had no choice but to outsource expensive upfront costs of providing water to their citizens. Moreover, governments overwhelmed by other development needs are often unable to efficiently manage the complexity of water extraction, treatment, delivery, and finance.
- When people must purchase water through the private market, cost serves an important incentive for conservation. People are less likely to waste a resource for which they are paying a market rate, as opposed to a rate heavily subsidized by the government.
On the other hand, privatization is often seen as having failed much of the world’s poor.
- In their efforts to recoup expensive investments, private water companies usually increase prices on the water they provide. In some cases, the price increases have been so hefty as to entirely knock poor consumers out of the market, leaving them with no access to clean water because they cannot afford it even when it is physically accessible.
- The UN Development Program notes that privatization has hurt many in the developing world, where poor people pay some of the highest prices for water. For example, the poorest 20% of households in El Salvador, Jamaica, and Nicaragua spend up to 10% of their income on water.
- Privatization schemes often appear undemocratic in that they exclude the citizenry from the decision-making process in what was formerly a public utility.
- When profit is a motive in water provision, less lucrative services often suffer. Efficiency dictates that resources go where they produce the highest return, which means poor rural areas and other hard-to-serve customer bases get lower priority. In some cases, private companies have retreated from particularly poor areas where returns on investment are very low or from areas where local resistance and protests against privatization have made for bad public relations.
- Cases in which privatization has worked well usually include special voucher programs whereby purchases for those unable to afford water are subsidized by the government or aid organizations.
Many argue that water is a human right and as such it should not be treated like a commodity. However, a number of investors argue that water could become the “new oil,” and this view is spurring considerable investments in the industry. The privatization debate remains highly contested. Looking forward, it is unlikely that entire water systems will reflect a pure form of either private or public ownership. Governments at all levels will likely maintain a role in water regulation and management no matter how the industry itself is funded, but major power brokers will likely be private entities. That said, although privatization of water systems seems unavoidable in the future, it still undeniably has important impacts on the livelihoods of billions of people around the world. The following pages of this section will look more closely at two case studies of water privatization--Bolivia and Sweden.
Sources & additional readings
- http://www.serconline.org/waterPrivatization/fact.html
- Guidebook to Global Water Issues. “Water Wars –The Global Viewpoint.” ITT Industries.
- Water Science and Technology Board, Committee on Privatization of Water Services in the United States and the National Research Council. “Privatization of Water Services in the United States: An Assessment of Issues and Experience.” Washington, D.C.: National Academy Press, 2002. http://books.nap.edu/books/0309074444/html/index.html
- Water Privatization in the Developing World: http://www.youtube.com/watch?v=p6RAHQrpNg0
- Barlow, Maude. Blue Covenant. New York: The New Press, 2009.
- United Nations Development Programme. Human development Report 2006: Beyond Scarcity: Power, Poverty and the Global Water Crisis. New York: UNDP, 2006. http://hdr.undp.org/.
- World Water Assessment Program. “Water: A Shared Responsibility – Executive Summary.” The United Nations World Water Development Report 2, March 2006. http://unesdoc.unesco.org/.