The pros and cons of water privatization

The pros and cons of water privatization

February 23, 2017

The pros and cons of water privatization

This topic triggers heated debates, especially since water resources are limited. But finding the best way to manage them means working for the good of humanity and the planet.

All too often we do not notice, but water is not an unlimited resource - especially water that is potable and can be used by humans. In fact, only 0.001 percent of the huge amount of water on Earth is good quality, and accessible at not too high a cost. According to the report “The World's Water” updated every two years by the Pacific Institute, just under 65 percent of drinking water is located in just 13 countries - Brazil (14.9%), Russia (8.2%), Canada (6%), USA (5.6%), Indonesia (5.2%), China (5.1%), Colombia (3.9%), India (3.5%), Peru (3.5%), Congo (2.3%), Venezuela (2.2%), Bangladesh (2.2%), Burma (1.9%). With this in mind, it becomes evident that we need to handle this resource with great care and fairness. To emphasize the importance of water, the United Nations (UN), with its resolution of 29 July 2010, acknowledged for the first time the "right to water": everyone, without discrimination, has the right to have access - physically and economically – to a sufficient amount of water that is safe to drink.

 A water economy for Blue Gold
Water is a precious resource, and as such is at the heart of what is known as the water economy, a science dedicated to the management of water resources to meet human needs without causing undue harm to the environment. Although demand for water is increasing, especially with the continued growth in population and urbanization (i.e. the transfer of people from the countryside to cities, with the resulting problems of providing water to all these new citizens), the availability of water that humans can use is decreasing. This is caused mainly by pollution, climate change and mismanagement (waste and misuse).

 What does privatization mean?
The conflicts over water privatization remain very intense throughout the world, but what does it really mean to privatize water resources, and what impact might it have, for better or for worse, on people and the environment? BCFN has attempted to gather together the experts' answers to these questions, although it is not easy, primarily because the term can refer to very different contexts.
 For example you can generate private property rights over water. In practice this allows the sale of water resources like any other asset, by a private entity which "owns" them. This model is rather distant from the European experience where water is considered to be of public ownership; water in Europe is owned by everyone, and we only buy the right to use water, not the water itself. In other situations, privatization means choosing to entrust water services to private management. In this model, private operators are involved in handling water in a variety of ways (from extraction to collection and distribution), while the water itself remains a common good. Finally, a third model envisages private financing of infrastructures and services. Allowing private entities to finance these aspects of water management (in exchange for the exploitation of the resource, or other benefits) may solve certain problems (such as lack of funds or difficulties in complying with construction times) related to the typical course of public finance.

 Is privatization a good thing or a bad thing?
Let’s consider another question that is not easy to answer. Proponents of privatization cite one of the main advantages as increased efficiency (real or alleged, as this cannot be established in advance) of the private sector compared to the public sector, which would lead to improved water distribution. This, along with other cost-saving measures, would result in lower bills for customers. Outsourcing water management to private entities would also make it possible to divide maintenance costs of the water mains network between different companies.
 On the other side of the fence, those who are opposed to privatization point out the risks involved in entrusting the management of water resources to private entities. Some of the problems include higher water rates, and the difficulty in ensuring that the new managers respect their obligation to develop the water supply in poorer areas, where consumption is lower. Conflicts and personal interests aside, it's important to remember that the focus should be on developing an effective monitoring system that protects citizens from bad management of “blue gold”, be it public or private.

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