TNI and CEO 2005 Reclaiming Public Water

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TNI and CEO 2005 Reclaiming Public Water
Reclaiming Public Water
Achievements, Struggles and Visions from Around the World
Editorial team: Belén Balanyá, Brid Brennan, Olivier Hoedeman,
Satoko Kishimoto and Philipp Terhorst
Translation assistance: Belén Balanyá, Meredyth Bowler-Ailloud and Katell Gelebart
External editing: Vicky Quinlan
ISBN 90-71007-10-3
Second edition March 2005
First published in January 2005 by:
Transnational Institute (TNI) & Corporate Europe Observatory (CEO)
Layout and cover design: Zlatan Peric
Printing: drukkerij Mittelmeijer, Amsterdam
Contents of the book may be quoted or reproduced for non-commercial purposes,
provided that the source of information is acknowledged. TNI would like to receive
a copy of the document in which this booklet is used or quoted.
This book would never have taken shape without contributions
from the authors, a diverse combination of utility managers,
water professionals, trade unionists, anti-privatisation campaigners and academics from around 20 countries. Our thanks
goes to all the authors for taking the time to share their experiences despite of the time pressures they face in their campaigns or as managers responsible for running water utilities.
We are also very grateful for the essential contribution from the
advisers who shared their expertise and helped us find the right
direction (including David Hall, Clare Joy and Tim Kessler as
well as Patrick Bond, Maj Fiil-Flynn, Antonio Miranda, Carla
Montemayor, Anil Naidoo, Pietje Vervest and Alberto
Villareal). Thanks to our editor, Vicky Quinlan, who has woven
these diverse contributions into a coherent and easily readable
shape. 11.11.11 (Belgium), Trécaire (Ireland) and Bread for the
World (Germany) provided crucial financial support without
which this book would not have been possible.
By David Hall
By Hélio Maltz
By Luis Fernando Yavarí
By Joy Elamon
By Charles Santiago
By Raymond Avrillier
By Sean Flynn and Kathryn Boudouris
By Hans-Werner Krüger
By Alberto D. Muñoz
By Hildebrando Vélez
By Nila Ardhianie
By the editorial team
By David Barkin
By Antonio Miranda
By Luis Sánchez Gómez and Philipp Terhorst
By Santiago Arconada Rodríguez
By Al-Hassan Adam
By Guillermo Amorebieta
By Laila Smith
By Carlos Santos and Alberto Villarreal
By Dale T. McKinley
By Svitlana Slesarenok
By Roman Havlicek
By Carla A. Montemayor
Due to the ideology-driven privatisation wave, the 1990s was
essentially a lost decade for the struggle for clean water for all.
The high-profile failure of privatisation in major cities of the
south, described elsewhere in this book, provide ample evidence that the water needs of the poor should not be left in the
hands of profit-driven, transnational water corporations.
Almost without exception, global water corporations have
failed to deliver the promised improvements and have, instead,
raised water tariffs far beyond the reach of poor households.
The rise of grassroots anti-privatisation campaigns in countries
around the world, increasingly linked in regional and global
networks, is starting to turn the tide against free-market fundamentalism. The time has come to refocus the global water
debate on the key question: how to improve and expand public water delivery around the world?
This book is intended to contribute to the achievement of
this much-needed shift in the global water debate. While privatisation is no solution, neither is the status quo of often
bureaucratised and ineffective, state-run water utilities which,
in large parts of the developing world, fail to supply clean
water to those that need it. This book provides a wide range of
inspiring examples of innovative approaches to public water
delivery. Important lessons can be learned from people-centered, participatory public models that are in place or under
development in Porto Alegre and Recife (Brazil), for example.
In these cities, the public water supply is being improved
through increased citizen and user participation as well as other
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democratic reforms. In other cities, such as Penang, Malaysia, a
rediscovered public service ethos has led to significant
improvements in the performance of the utility. Water workers
play a key role, to the extent that worker’s co-operatives are
running the water supplies in cities in Argentina and
Bangladesh. In Olavanna (Kerala, India) and Savelugu (Ghana),
local communities have taken control to improve water delivery, mobilising their own capacities and local resources.
The motivation to compile this book is that these oftensuccessful experiments have not received the attention they
deserve. The challenge to broaden access to clean water to the
hundreds of millions of people who need it is such that lessons from these approaches need to be shared. While there is
no one-size-fits-all solution, there is important inspiration to
be found on how to improve and extend public water services,
for instance through people-centred participatory processes
and inclusion of public utility water workers.
This book also includes chapters on struggles around the
world to prevent privatisation and, in some cases, to de-privatise water delivery. These chapters include often elaborate
visions developed by anti-privatisation coalitions on making
public water work.
The March 2003 World Water Forum in Kyoto, Japan, was a
defining moment for the international water debate. Civil society groups from around the world spoke out passionately
against water privatisation and testified to numerous, dramatic
failures of privatisation both in the south and north. These
interventions spoiled the attempts by the forum organisers,
particularly the neo-liberal World Water Council (WWC), to
promote Public-Private Partnerships (PPPs) as the way for10
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ward. The response to the withdrawal of multinational water
corporations from the south, argued the WWC, international
financial institutions and many northern governments, should
be to subsidise the corporations, cover political risks and guarantee profits. Remarkably, there was hardly any mention of the
far more obvious way forward: improving and expanding public water supply.
Straight after the World Water Forum, over 100 activists
from around the world attended a seminar on alternatives to
privatisation. The seminar concluded not only that there are
numerous examples of well-functioning public water utilities,
but also that a wide range of new innovative approaches has
resulted in substantial improvements in public water delivery,
not least in the south. Throughout 2003, a concerted effort to
advance awareness and debate about public water solutions
took shape. After a successful follow-up seminar at the Third
World Social Forum in Mumbai, India, in 2004, a joint project
was launched involving a diverse coalition of NGO campaigners, grassroots anti-privatisation activists, academics, public
utility managers and trade unionists. The www.waterjustice.org
website was established as a clearinghouse and forum for facilitating discussion. And the decision was made to compile a
book, to be published in time for the January 2005 World
Social Forum in Porto Alegre, with examples of improvements
in public water delivery and a special focus on the potential of
participation and democratisation.
The focus and format of the book has been shaped
through discussions with the authors as well with a large number of advisors. Alberto Villareal, co-author of the Uruguay
chapter, stressed that the book could be an important source
of inspiration for anti-privatisation activists by providing concrete examples from around the world of both achievements
and ideas for reclaiming public water. The book, indeed, presReclaiming Public Water
ents a broad range of experiences in an accessible style.
Beyond activists, the book is also intended to be a resource for
water professionals and water workers. They are in the frontline of the privatisation process and are often bombarded
heavily with pro-privatisation messages and pressure. Based on
his own experiences as the director of a public water utility,
Antonio Miranda, another of the authors, confirmed that the
role of citizens’ participation in solving urban water problems
deserved to be a major focus of the book. Carla Montemayor,
a campaigner against the Manila privatisation project, echoed
the importance of both these objectives in the light of the
urgent need to outline a concrete, public water alternative to
convince policy-makers and the wider population of the
Philippino capital.
The introductory chapter discusses the historical background
to the global crisis in water access and why the privatisation
wave of the 1990s has failed. This is followed by over 20 chapters which present concrete examples and ideas on how urban
water delivery can be improved through democratic public utility reforms. All chapters are written by public water utility managers, civil society activists and others involved first-hand in
these efforts. The chapters reflect the experiences and perspectives of the individual authors, which may or may not be
shared collectively by the others. Many chapters also have a
strong emphasis on the different political, financial and other
obstacles which may hinder the success of these approaches.
Public water solutions are likely to emerge from, and be shaped
by, people’s efforts to secure safe and affordable water for all.
This was another reason for including a number of chapters on
civil society campaigns against failing privatised water delivery
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and inadequate state-run water utilities. In the words of one of
the authors, Dale T. McKinley of the Anti-Privatisation
Forum: “In South Africa, the struggle against water privatisation continues to plant the seeds of an alternative.”
Finally, the last chapter of the book attempts to summarise
some of the lessons that can be learned from the experiences
presented and to identify the main challenges for multiplying
these approaches.
This book is not just a product in itself or simply an intellectual exercise but is part of a continuing process of collective
learning, with the aim to empower democratic, equitable public water solutions. It is our sincere hope that this book will be
not only a source of inspiration to many around the world, but
will also spark further sharing of experiences as well as discussion on each of the key questions addressed. We hope that civil
society activists and citizens will increasingly engage in how
public services are delivered, and that trade unions will contribute to the discussion and practice of assuring public services that actually serve the poor. This process also has to
involve public sector managers and water professionals, many
of whom are already engaged in emerging international campaign coalitions for people-centred public water.
Alternatives are our best inspiration to resist the forces trying to hand over our common resources and fundamental
human rights to private companies. We hope this book provides useful tools to all those who are striving to stop corporate-driven water privatisation and to reclaim public water.
The editorial team
Reclaiming Public Water
By David Hall
This introduction attempts to put the book in its historical
context. This context is a specific set of experiences and
responses with some outstanding features: failed privatisations,
widespread campaigns, a critique of past public sector weaknesses and the emergence of new structures drawing on the
strengths of earlier, northern, public-sector models and new,
southern forms of participatory democracy.
The 1990s was the decade of water privatisation which has
since proved to have failed. It was expected to bring greater
efficiency and lower prices, attract greater volumes of investment, especially in developing countries, and extend water and
sanitation to the unconnected poor. The actual experience has
been different.
The expansion of the private water companies in the 1990s
was supported by the World Bank and other international institutions as part of policies to transform developing and transition countries into more market-oriented economies. It entered
the transition countries of eastern Europe with a wave of
water concessions: in the Czech republic and Hungary; in Latin
America, especially Argentina, where a series of major cities
were privatised, including the “flagship” concession of Aguas
Argentinas in Buenos Aires; in Asia, including the privatisation
of two major cities, Manila and Jakarta; and in Africa, where
concessions were obtained in former French colonies, notably
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Cote d’Ivoire, as well as a few towns in South Africa. By the
time of the World Water Forum at The Hague in 2000, senior
World Bank officials were presenting water privatisation as historically inevitable, using the phrase “there is no alternative”.
Privatisation of water supplies and sanitation has taken various forms but has the constant element of transferring control and management of operations to private companies, thus
making them sources of profit for private capital. Complete
sale of the water system to private companies has been introduced in the UK, but elsewhere the form of privatisation promoted has been based on privatisation through concessions,
leases or management contracts (or special forms of concession for treatment plants or reservoirs, known as “build-operate-transfer” schemes (BOTs)). The precise form has been dictated by the private companies; in the early 1990s, concessions
were the favoured form but, since 2000, companies have preferred the less risky options of leases or management contracts. Variations on these themes include joint ventures with
public authorities, which have to be structured to provide the
private partner with the necessary freedom to achieve returns,
and so are invariably controlled by the private partner. Other
phrases – including “public-private partnerships” (PPPs) and
“private sector participation” (PSP) – avoid the word “privatisation”, which has become an increasingly unpopular concept,
but they still refer to the same kinds of contractual relationship
with the private sector.
The unpopularity of the concept of privatisation has been
caused largely by experience of the results, which have been
different from what was promised. Companies have failed to
invest as much as was hoped; private investments in infrastructure were falling by the end of the 1990s and investment by
development banks was also decreasing. Prices have risen to
reflect the returns on capital required by companies. When tar16
Reclaiming Public Water
gets specified in contracts have not been met, contracts have
been revised rather than enforced. Regulators have lacked the
authority and competence to control companies’ behaviour.
The contradictions have been made more acute by currency
movements and economic crises: the privatised water operations in Argentina are now bankrupt. Despite all the attention
and support given to private water concessions in Latin
America, they performed no better than public sector operators in terms of expanding services to the poor. Manila and
Jakarta, two large Asian cities with private operators, have
worse levels of water loss than the large majority of cities
where water is publicly managed. Finally, there is strong and
growing opposition to water privatisation in developing countries, from consumers, workers, environmentalists, other civil
society groups and political parties.
Faced with poor returns, unexpected risks, and political
opposition, water multinationals have decided to cut their losses. In January 2003, Suez, the largest multinational, announced
it would withdraw from one third of its existing investments in
developing countries, and Veolia and Thames Water are also
withdrawing from contracts. All three are using political and
legal action to recoup losses and claim anticipated profits.
The World Bank has acknowledged the failure of privatisation to deliver investments in extending water services. It has
devised new instruments to provide stronger guarantees to private companies and is exploring other forms of business
opportunities in the sector, such as franchising water vendors
in peri-urban areas. But the World Bank, other development
banks and donors remain reluctant to provide support to public sector water companies, even though these are responsible
for over 90% of the world’s water and sanitation services.
These responses by the companies and the World Bank
address their own concerns but do little for people who need
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affordable water supplies and sanitation. The development of
new approaches has, instead, come from the same campaigners
who opposed the privatisation.
The campaigns against water privatisation are spread across the
world. Privatisation has been a key issue in elections at municipal or national level in countries as diverse as Poland and
Panama. Campaigns are typically broad-based and include
many different groups – unions, environmentalists, consumers,
business associations (in the Philippines, industrialists have
threatened to disinvest because of price rises following privatisation), women’s organisations (who had spearheaded the
opposition to water privatisation in the Crimean region of the
Ukraine, for example), political parties, and religious bodies.
The campaigns have often united bodies normally in conflict with each other. In Poland, competing trade union organisations joined forces to campaign successfully against water
privatisation in Lodz; in Northern Ireland, the parties representing Irish nationalists and British Unionists sit side by side
in a campaign against water privatisation while refusing to work
together in political executive bodies.
The reasons for this opposition are also multiple. One reason is the experience of sharp price rises following privatisation. Another is the fear of job losses and weakened trade
unions. Another is to do with accountability and the difficulty
of influencing or scrutinising a privately-owned company compared with a municipality. A fourth reason is the belief that
water, both as an environmental good and a public service,
belongs in the public domain. Finally, there is a belief that
social and economic reasons for developing water supply services require the commitment of a public authority rather than
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private entities which are focused on their own rate of return.
These campaigns have occurred in both developed and
developing countries – even in the UK there was a strong campaign against water privatisation that persuaded Thatcher to
postpone privatisation until after an election.
A common element of the campaigns has been the critique of
privatisation itself, its economic and political problems and its
failure to deliver extension of services to the poor. But the
campaigns have also had to acknowledge the failures and limitations of the practices of public sector operators, especially in
developing countries, in the preceding years. During the 1980s
in particular, these structures had largely failed to deliver significant extensions to water services, even when development
banks had made loans available, and these failures were used to
justify the privatisation policies of the 1990s.
Blaming these failures on the fact that water was in public
ownership is too crude an explanation, however. Many developing countries in this period were subject to dictatorships and
corrupt regimes with contempt for human rights and democratic processes, let alone transparency. With no accountability,
services to the poor suffered while the corrupt regimes themselves benefited from the loans intended for water. The beginnings of privatisation flourished in these same undemocratic
regimes; Suez was active in South Africa under apartheid, the
privatisation of Jakarta’s water was corruptly arranged by the
Suharto dictatorship, the privatisation of Casablanca’s utilities
was arranged by a decree of King Hassan, not by a competitive
tender organised by the city council. The contracts they
obtained were kept secret even from elected municipal councillors – especially ironic in cities like Gdansk (Poland) and
Reclaiming Public Water
Budapest (Hungary) which were undergoing a transition from
undemocratic communist rule to a supposedly more accountable democratic system.
The problem of the 1980s public sector failures can therefore be seen as a lack of democratic process in the public sector, rather than a problem with the public sector itself. The
experience of Brazil after the ending of its military dictatorship
supports this; the opportunities of the new democracy were
seized in many ways, including the development of new
approaches to extending water and sanitation supplies to new
areas. These initiatives, rather than the privatisations endorsed
by the dictatorships themselves, indicated the need for a new
approach based on democracy and a level of public participation that guaranteed accountability.
The same analysis can be applied to the complaints by
development banks and donors that governments do not give
adequate priorities to water compared with other policies, as
though the governments and people of developing countries
cared less about water and sanitation than the enlightened
bureaucrats of the international institutions. The problem,
however, is not a lack of popular demand for water and sanitation services, but a failure of governments to respond to this
demand. In Brazil in the early 1990s, there was a very broadbased campaign for a national sanitation policy which was
abruptly rejected by Cardoso, the favoured candidate of the
International Financial Institutions (IFIs), when he became
president in 1995. Instead, he pursued a policy of encouraging
piecemeal privatisation which fitted with the IMF’s preference
for restricting government borrowing. This led to much less
investment in water (and other infrastructure such as electricity), as the IMF itself now acknowledges.
In Latvia, there were public campaigns for wastewater treatment plants even under the Soviet Union. In peri-urban settle20
Reclaiming Public Water
ments where the government fails to provide essential services, like Orangi in Pakistan, people have demonstrated a willingness to use their own labour and savings to create water and
sanitation schemes.
The ineffectiveness of governments can thus be seen as
evidence of failure of the political processes, often exacerbated by the policies of the IFIs themselves. The problem has
been a lack of democratic process.
In developing alternative policies and structures, the campaigns
have drawn on two main sources of inspiration. One has been
the historical success of the public sector model in developed
countries for much of the 19th and most of the 20th century
- the “northern past”. The other has been the emergence of
new forms of democratic structures in the south, especially the
initiatives in participatory democracy in Brazil and India - the
“southern future”.
The northern experience has been rediscovered behind the
misleading attention given to privatisation. The scope and era
of privatised water is very narrow, recent and very short.
Before 1990, nowhere outside France, except a few cities in
Spain and Italy and a few former French colonies, had experienced or seriously considered water privatisation for nearly a
century. The common European and North American experience was to replace the private contractors of the mid-19th
century with municipal water services, because the municipalities could deliver the necessary expansion of services more
efficiently and effectively. Only in France did these 19th century contractors survive and consolidate into a private oligopoly,
which is why the only large private water companies were
French until the ideology-driven privatisation of water and
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other utilities by the Thatcher government in the UK.
Communist countries and post-colonial independent countries also developed water services through the public sector,
either through municipal, regional, or national ownership.
Historically, public sector utilities are a highly successful model
for the extension of water and sanitation services to all urban
and even rural populations. Over 80% of the populations of
the EU and the US remain served by public operators, despite
the advocacy for privatisation in recent years.
In the south, new democratic forms have emerged which
emphasise participation and centralisation. India has a widespread system of elected village councils, “panchayats”, and in
the state of Kerala the left front government initiated a deliberate programme of decentralisation and participation - nearly
40% of the state budget is devolved to panchayats, citizens
have the right to see every document and budget priorities are
set through a series of public meetings. In Brazil, the Partido
dos Trabalhadores. (PT – Workers’ Party) has adopted policies
of developing similar devolved and participatory systems in
municipalities where it has power, through a system known as
“participatory budgeting” (Orçamento Participativo).
The campaigns and experiences presented in this book are part
of this historical context. They include a wide range of
approaches to the organisation of water services, but the case
studies are not a set of technical models. The various proposals and policies reflect the interaction between local economic
and political circumstances, global forces and the development
of new ways of understanding and developing water supply
and sanitation as a public service.
These campaigns also interact with each other through var22
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ious forms of active support. They thus form part of an international process which is dealing with local problems by engaging with the global dimension. The sharing of these experiences, through this book and other forms of information
exchange, is a part of that process.
This book is structured to reflect key aspects of the campaigns,
their critiques of privatisation and alternatives.
The first section includes examples of the northern tradition, with accounts of water services in Germany and the US,
overwhelmingly public sector in both cases, as well as an
account of how the French city of Grenoble rid itself of corrupt private water concessions and re-established a municipal
service. It also includes examples of the southern participatory models, with accounts of Porto Alegre in Brazil and a village in Kerala. Other studies give accounts of distinctive forms
of public sector development in Malaysia (Penang), Bogota
(Colombia), and the co-operative of Santa Cruz (Bolivia), as
well as an account of how social movements in Argentina have
responded to the privatisations of the 1990s and the subsequent economic crisis.
The second section is of “work in progress” and covers
cases where new forms of water and sanitation services are still
being developed or proposed. These include reforms of previously weak public sector operations - including Recife (Brazil)
and Caracas (Venezuela) - as well as the process of reconstructing a public water regime in Cochabamba (Bolivia) which both
replaces the disastrous privatisation and improves on the previous, inadequate, municipal service; and an account of an
innovative participatory development in Savelugu (Ghana) in
the context of a national water company threatened with fragReclaiming Public Water
mentation and privatisation. This section also includes a South
African experiment with “public-public partnership” in
The third section covers campaigns still in progress and in
different stages of formulating a new policy. Three of the
examples are of countries where private water companies have
had little success but new policies are needed and demanded by
campaigners: South Africa – where access to water supply is a
constitutional right; Uruguay, where a recent referendum supported making water privatisation illegal under the constitution; and Mexico, where the problems of water services have
not been solved by contracts with multinationals. It also features campaigns in former communist countries Slovakia and
Ukraine against commercial initiatives by multinational companies and development banks; and the continuing battles against
the failing water privatisations in Jakarta (Indonesia) and
Manila (Philippines), where the process of opposition is simultaneously becoming a process of reformulating new public
The final section summarises the general lessons which can
be drawn from these cases.
David Hall is director of Public Services International Research Unit
(PSIRU), University of Greenwich
For documentation on failed water privatisation as well as achievements by
public water utilities, see the PSIRU website: www.psiru.org/reportsindex.asp
Reclaiming Public Water
Reclaiming Public Water
By Hélio Maltz
Porto Alegre, a city well known worldwide for its participative
democracy, capital of the southernmost state of Brazil, Rio
Grande do Sul, is also proud to be home of DMAE, the successful public water and sanitation utility that has become a
model for opposing the trend towards privatization.
In 2004, Porto Alegre was considered the Brazilian state
capital with the highest quality of life and best human development index, and of course, water and sanitation have something to do with that.
DMAE is a publicly owned water utility intensively focused
on social inclusion through water and sanitation programmes,
and committed to city development combined with environmental protection. It is administratively and financially independent from city hall, but subordinate to it on political and
regulation issues.
The history of water and sanitation in Porto Alegre starts
in the early 1800’s. Until 1961, water and sanitation were managed by a municipal department in the central administration.
When the city decided to get a loan to expand water services in
the late 1950’s, the city council decided to transform the water
department into an autonomously administrated, financially
independent, municipally-owned utility. This was due to the
demand from the Inter-American Development Bank (IADB)
for a guarantee on the repayment of the loan. This decision
allowed DMAE to move from a property tax calculated on the
value of the building, to a tariff based on water consumption.
Besides being financially independent, the creation of
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DMAE had other important characteristics, such as the implementation of the deliberative council, which after more than
40 years, has been an important entity which practices ‘social
control’ by society, allowing the department to be totally transparent in its administrative acts.
Among the important features that made DMAE become
an international alternative model to water privatisation, are its
sustainability, both in financing and technological terms, and its
accountability with regard to safe water and environmental
protection. A very important and distinguishing characteristic,
however, is the democratic decision-making process of its participatory budget.
Until 1994, Brazil repeatedly had abrupt changes in its
economy with currency changes and hyperinflation. Despite
this, DMAE was able to maintain and expand the city service more proof that, even under harsh conditions, a well-run public utility is able to succeed.
Workers have a very important role in the utility. They have
faced technical difficulties such as the large-scale proliferation
of the golden mussel (Limnoperna fortunei), which obstructed
important pipes and other facilities. Research done to combat
this challenge has made DMAE one of the most important
references in the country on this subject.
During the past few years DMAE has seen its indicators
increase; in water, in 1989, approximately 94.7% of the population was supplied which rose to 99.5% by 2001, a figure
maintained until the present day. With regard to sanitation, figures have risen from 73% of the population having sanitary
sewage collection in 1990, to 84% in 2004. In the area of
sewage treatment, growth was even more outstanding; in 1989,
2% of the population was served, a figure which had increased
to 27% in 2002 due to the construction of five new plants during that period. At present, DMAE has plans to build a new
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wastewater treatment plant which is meant to raise the treatment index to 77% in five years.
It is important to show how public participation, mainly
through a participatory budget, has influenced DMAE’s services. While the population of the city has grown about 8.5% in
the last 10 years, household water connections have grown by
nearly 23%, and the households served with sanitary sewage
collection went up around 40%. This is illustrated in the table
Household water connections
Households served with sanitary
sewage collection
Source: DMAE and IBGE (Brazilian Institute for Statistics)
Up until 1989, DMAE served primarily downtown and affluent areas. However, when people started to discuss their
demands and vote in 16 regions, investments were also made in
the water and sanitation of the peripheral and shanty areas, so
everyone now has access to water.
As a direct consequence of this, waterborne diseases have
been substantially reduced in the city. For example, Brazil had
a cholera outbreak in recent years but no cases were registered
in Porto Alegre. When vibrio cholerae was identified in the sewers, DMAE’s highly controlled water treatment system behaved
as a barrier to the disease.
All these examples are the result of solid management
which has focused its efforts on keeping DMAE financially
sustainable, thus enabling it to reinvest its surplus money in
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water and sanitation facilities. In the past seven years, about
70% of money invested was from tariff collection. This has
been achieved due to a strong internal controls policy, with cost
evaluations and expenses management. DMAE could have
expanded its services even further, but from 1997 to 2003
there were no affordable loans from national credit banks,
which were oriented to assist privatisation of the water sector
in Brazil.
By the end of 2000 a law was proposed to congress with
the clear objective of privatising water. DMAE was in the vanguard of a national resistance movement which succeeded in
preventing this and the proposal was withdrawn. Under the
current national government, inaugurated in 2003, a new law
project which wants national regulation of water, sanitation,
solid waste and storm water, is being discussed all over the
country before sending it to congress.
The new policy encourages state and municipal water utilities to work side by side, but also allows municipal administrations the option of working independently, according to the
Brazilian Constitution, or commissioning a state utility based
on a long term contract.
One of the main purposes of the new law is to promote
both the regulation and social control of the water utilities,
public or private, by linking even loan offers to those utilities
that follow the law.
DMAE has already adapted to what is proposed by the
project, mainly with regard to social control, and has hired a
consultancy that is working on proposing improvements in the
administration of the utility.
Our tariff structure is based on strong cross-subsidies. There
is a social tariff for low-income people who have the right to
use 10 cubic metres per month but pay for only four. There are
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also three different rates besides the social tariff. People who
use water only for basic needs (they consume up to 20 cubic
metres per month) are strongly subsidised by others who use
between 20 and 1,000 cubic metres per month. Tariffs for the
group that consume between 20 and 1,000 m3, go up exponentially and, after this, tariffs become very expensive. Large consumers, such as airports, shopping centers and industry, fall
into this category. For instance, rich people who use water for
their swimming pools and not just basic needs, subsidise water
for poor people. With this tariff structure we are able to invest
substantial amounts in maintenance and expansion of the
water and sanitation services. It also generates an annual surplus of about 15 to 25% of our annual budget which goes to
new investments.
It is at this point that people participate in the following
year’s participatory budget cycle. People bring their demands,
discuss and vote on them and, after a technical feasibility evaluation, they are included in the following year’s municipal
budget. The water works are examined by DMAE.
During the works, a group of concerned citizens is commissioned to accompany and supervise the contractors, so that
there are people monitoring the process from decision-making
to the application of the money. It is a complete exercise in
control by society.
The implementation of the participatory budget has
changed DMAE just as the concept of meeting the needs of
the city has changed. All the staff and workers of DMAE have
had to focus on listening to people and taking forward their
demands. This has brought about a strong change in the way
we manage things. As a result, we don’t prescribe where money
will be invested anymore; people discuss their demands and, if
it is technically feasible, they are introduced into the following
year’s budget.
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DMAE administrators also know they need to have workers
who are motivated and can achieve high standards in meeting
people’s needs, so every year strong investments are made in
education, healthcare, insurance, transport and other areas. As a
result, many workers have had access to high school or university scholarships, as well as training courses on managerial and
technical subjects. The result of these investments is detailed in
a social audit, published annually since 2000, and they have won
important national prizes for social responsibility.
Citizens have played an important role in DMAE’s success
through the years. The deliberative council was created in 1961
and has represented many sectors of the society in overseeing
DMAE and played an important part in its success. The implementation of the participatory budget, in particular, brought
DMAE even closer to society and established a new level in
control over the utility. This was not only because it was the
point at which the demands began being heard, but also
because people began to be involved in checking the quality of
the services done.
In addition, DMAE established a close relationship with its
users through offices distributed in the city. Among other
things attended to, they can bring their bill complaints and have
the option to parcel their debts at these offices, which is an
important option for low-income users. They can also reach
DMAE by telephone and through a website where there is also
a large amount of information. It is possible to check here if a
maintenance service is already scheduled or find out their
month’s consumption, for instance.
Recently, Porto Alegre was judged to be one of several
cities worldwide with a high potential for attracting investment
1 See
http://www.joneslanglasalle.co.uk/news01/nr1221.html and
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in the next 10 years. It was published in the international report
“World Winning Cities” issued by the English consultancy
Jones Lang LaSalle. They had looked at 24 cities, only one of
which, Porto Alegre, was in Brazil.1 According to its spokeswoman in Brazil, besides being economically developed, Porto
Alegre was chosen for its excellent quality of life, as a global
reference point for participative democracy, and having good
conditions for starting a new business. It’s easy to understand
that a well-run public water utility would have an impact on this
A principle obstacle for DMAE to overcome has been the
threat of privatisation and DMAE has been the focus of a lot
of interest from those supporting this. Porto Alegre is the only
capital with over 1,000,000 inhabitants that still has its own
publicly owned municipal utility. This became evident during
loan negotiations with Inter-American Development Bank
(IADB), which made a strong effort to change DMAE into a
company and to separate it from the city hall, with the clear
purpose of privatisation. But the utility firmly opposed this
and still got the loans, showing how respected DMAE is.
Privatisation is a persistent threat and DMAE has to keep
defending itself. Corporations could generate the same surplus
as we do, possibly more, because they have no social concerns
and could raise tariffs. They could then send this money abroad
as a profit to their main offices. Instead, we give it back to the
people who provided it in improved infrastructure for water
and sanitation services.
We also believe that if the participatory budget is stopped,
it will take from people an important aspect of the relationship
between government and society and one that established it on
a new level.
Public water utilities are really viable and can be better than
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corporations in social, financial and technical ways. So, it’s clear
that all successful and viable public water utilities worldwide
should gather to firmly oppose the privatisation of water, and
also support those who are still trying to achieve higher standards.
In the last few years, many conferences have taken place
worldwide to discuss which is the better way to provide water
and sanitation services, but it seems that has already been happening in Porto Alegre for a long time. It is a model that could
be reproduced all around the world if adapted to regional conditions regarding natural resources, legislation and scale.
Hélio Maltz is with the municipal department of water and sanitation
(Departamento Municipal de Agua e Esgotos - DMAE).
The department may be contacted at www.dmae.rs.gov.br
Reclaiming Public Water
By Luis Fernando Yavarí
Since the Co-operatives Act of 1958, co-operatives have played
an important role in delivering public services (from water and
electricity to telecommunications) in Bolivia. According to this
law, co-operatives should follow these principles: all members
have equal rights and obligations; democratic principles are followed; every member has a vote; the goal of the co-operative
is not profit but economic and social improvement.
Bolivia is politically divided into nine regions. In the regional capitals, drinking water and sanitation services are provided
by co-operatives in 44% of the cases; in another 44% they are
provided by public companies; and 12% is in private hands.
Water services are governed by the 1999 Drinking Water and
Sanitation Services Act, which was amended in 2000 after the
water war of Cochabamba (see “Cochabamba: Public-popular
partnership after the water war”). The new law enforces the
following: universal access to services; the quality and continuity of basic services; efficiency in the use of resources;
acknowledgement of the economic value of services (tariffs);
sustainability of services; neutrality towards users; and protection of the environment.
This chapter will focus on the co-operative movement for
services delivery, particularly one developed in the city of Santa
Cruz de la Sierra (1,3 million inhabitants), the capital of the
Santa Cruz region. During the 1960s, the first two co-operaReclaiming Public Water
tives were created in the city to provide telephone lines and
electrification. In 1979, the Co-operative for Drinking Water
and Sanitation Services (Co-operativa de los Servicios de Agua
Potable y Alcantarillado Sanitario - SAGUAPAC) was established.
SAGUAPAC supplies drinking water and sanitation services in
most of Santa Cruz de la Sierra. A few small operators, independent of SAGUAPAC, supply drinking water in the periphery of the city.
The water company has experienced three very different
periods in its history. Until 1973 it was a public company and
then until 1979 it was a semi-public utility. In 1979 it was formally established as a co-operative. The good results other cooperatives (telephones and electrification) were having influenced the community’s choice of management for SAGUAPAC.
SAGUAPAC has a complex structure. The co-operative has
a concession over a specific area divided into nine districts,
each of which has a council whose task is to monitor members’
concerns (every owner of a water connection is a member) and
to satisfy their needs. Councillors serve a six-year term and a
third of these councillors are renewed every two years. Each of
the nine councils has three delegates at the Assembly of
Delegates whose task is to approve decisions by the co-operative. The assembly also chooses nine members for the board
and six members for the supervising council. The board is
responsible for approving the budget and accounts, and for
designing the policies of the company. The supervising council controls the board and does the external audits. Members of
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both bodies serve for six-years and every two years a third of
the members is also renewed.
Because SAGUAPAC is a co-operative, everyone with a
water connection becomes a member and therefore a co-owner
of the co-operative with a voice and voting rights. Besides the
structures for participation, through which members can voice
their needs and concerns, the utility carries out satisfaction
polls twice a year to evaluate where water and sanitation services need to be improved.
The goal of a co-operative is the well being of its members,
not profit. SAGUAPAC has a social tariff structure with different price levels for home consumption, commercial use, industrial use and special use (hospitals, public schools, government
offices, etc). Tariffs are also dependent on consumption levels
and increase every 15 cubic metres, so that those who consume
more pay more per cubic metre than lower users. SAGUAPAC
also runs promotion campaigns in poorer communities to
encourage access to water services.
SAGUAPAC has a quality control system based on ISO
9001 and at present is being certified by the TÜV Rheinland of
Germany. The co-operative also has optimal performance indicators by Latin American standards. For 2003 they are as follows:
Access to drinking water
Access to sanitation
Number of drinking water connections
Number of sanitation connections
Number of workers
Number of workers per 1000 connections
Average water tariff (US$/m3)
Average sanitation tariff (US$/m3)
Water loss
Annual billing (US$)
Collecting efficiency
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SAGUAPAC has developed a Strategic Development Plan
(Plan Estratégico de Desarrollo - PED) for the concession
period of 40 years up to 2039. This plan has identified the
investment that needs to be made and the estimated cost,
which for the 40-year period is US$559 million. The largest
amounts will be for sanitation infrastructure ($309 million) and
water networks ($118 million).
Net income has also been analysed and compared with
needed investment and operational costs. For an initial period
there is a gap in the budget (alternatives to cover this gap are
explored below), but for the period after that the company will
be financially self-sufficient.
Multilater Name of the
al body
of the
(US$ million)
(US$ million)
Water and
Programme in
of the
SAGUAPAC has carried out a number of projects funded
by multilateral institutions such as the Inter-American
Development Bank (IDB) and the World Bank. The table on
the left shows a summary of those projects.
In all cases, SAGUAPAC completed the projects in less time
than scheduled and with significant savings, with the result that
it could tackle more work. SAGUAPAC is also complying with
loan repayments.
The main concerns for the co-operative are summarised as follows:
• availability of water resources;
• low access to sanitation;
• the need for financial resources to carry out the Strategic
Plan for Development;
• the small operators at the periphery of the city.
Santa Cruz
Programme for
of Water and
Sanitation in
the main cities.
Programme for 30,5
Basic Urban
Water and
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Currently the drinking water supply system has one only source
and that is underground water. SAGUAPAC exploits the
aquifers with 47 wells in four fields (with an annual production,
in 2003, of 45 million cubic metres). According to the studies
undertaken, and taking into account the planned exploitation
and replenishment of these underground aquifers, it is estimated that by the year 2017 it will be necessary to find an additional water source. By this date, the underground reserves will not
be enough to fulfill the expected demand but SAGUAPAC is
exploring alternative sources to find a solution well before 2017.
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At present, only 50% of the population has access to sanitation
services, but the population growth index compared to the sanitation service growth shows that without new investments the
access index will be even lower. The city has an annual population growth of six percent, which has been taken into account
in the financial plan allocating the biggest amount to sanitation
infrastructure. An additional, worrying factor is that underground water is the only source of drinking water. Expanding
the sanitation network is needed to avoid contamination of the
underground water. At present, wastewater not collected in the
sanitation network goes into septic tanks, which directly pollute underground waters.
In the early years of the plan, the gap between the net income
on one side and the investments and operational costs on the
other shows a need for some US$50 million. A number of
alternatives have been explored: (i) multilateral loans; (ii) commercial loans; (iii) strategic partnership under the operator
modality; (iv) strategic partnership under the non-operator
modality; (v) sub-concession or BOT contract. The preferred
alternatives for SAGUAPAC are in this order (1) unilateral
loan, (2) strategic partnership non-operator and (3) commercial
loan and BOT.
SAGUAPAC has taken some steps towards securing multilateral loans. In loan negotiations with multilateral agencies, the
government is the party that guarantees the deal, but the one
who pays the interest is SAGUAPAC. However, the country’s
limited debt capacity is making it very difficult to access these
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These small systems of drinking water supply, run by eight
operators independent of SAGUAPAC, have their origins in
the uncontrolled growth of the city. The city’s expansion featured satellite areas in which independent water systems were
built, as the existing infrastructure was not able to support
them. After some time, these systems were consolidated and
they now supply the periphery of the city, but the quality of the
service is bad and there is no guarantee of the sustainability of
these companies. Furthermore, no effective action has been
taken by the government to reduce the number of operators
and to avoid water services of different quality. The government body in charge of drinking water and sanitation services,
(Superintendencia de Saneamiento Básico (SISAB)), should
play a more effective role.
Analysing the performance and results of SAGUAPAC, it can
be concluded that this company provides drinking water and
sanitation services of excellent quality. Its independent, cooperative status and members’ participation has benefited the
utility in many ways. It has avoided political intervention,
something that allowed the company to give continuity to its
plans, and it is based on the democratic participation of its
members. Its economic and financial situation, given the
growth of Santa Cruz de la Sierra, is forcing SAGUAPAC to
look for an injection of economic resources for the initial years
of its strategic plan of development, so it can guarantee its sustainability. For that it needs state guarantees for its financial
operations, although its financial obligations will be covered by
user tariffs. An important element is that, according to its coReclaiming Public Water
operative philosophy, the main goal of SAGUAPAC is the wellbeing of its members and not making a profit.
SAGUAPAC’s model is an alternative option to the public
and the private model, and one which it was invited to present
at the World Bank’s 2003 Water Week. Inspired by SAGUAPAC, Cobija, Trinidad, Tarija and other cities in Bolivia have
also established water delivery co-operatives. Although these
cities have not yet reached the same levels of efficiency and
sustainability as those of Santa Cruz, it is clear that the model
can be replicated.
Luis Fernando Yavarí is planning and systems manager of SAGUAPAC.
By Joy Elamon
Olavanna is a village situated in the northern part of Kerala
state in India. Kerala is considered as a development model
with its high rate of literacy, better health indicators and high
human development indices. Kerala is also known for its participatory local planning process where local village governments (panchayats) prepare and implement their own development plans with the active participation of the people (People’s
Plan Campaign). As at July 2003, piped water is provided to
64% of the Kerala population, but there are big differences in
coverage between regions.1
Hills, marshy areas and paddy fields constitute the geography of Olavanna. A river flows across the village, but the water
is salty and cannot be used for drinking. In many places, wells
cannot be dug due to the hard rocks underneath.
In the 1990s, Olavanna had a population of 45,000 living in
1 Out of the 204 lakh people (64%), 138 lakhs are in the rural area (68 %) and 65.6
lakhs (32% ) in the urban area. District wise analysis shows that Ernakulam has the
highest coverage of 89.5 % and Kozhikode the lowest with 46.6 %. Similarly, if we
look at the rural population the coverage varies from 90.5 % in Ernakulam and
Kozhikode with 33 %. With regard to urban population, Kottayam district is highest
with 97.6 % and Wayanad at the bottom (50%). According to a survey carried out for
the Rajiv Gandhi National Drinking Water Mission, there are 9776 habitats in Kerala.
Out of these, by 2003 April, 2091 habitats (21.4%) have been fully covered with piped
water and 7444 ie 74 % have been partially covered, and 228 habitats still remain to be
covered. In 1788 habitats, drinking water provided is below 10 lpcd whereas in 2091
habitats above 40 lpcd is provided. (Economic Review. 2003. Government of Kerala.)
Reclaiming Public Water
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an area of 21 square kilometres. The sex ratio is 1000:1022 in
favour of women. In the early nineties, almost 70% of the households of Olavanna suffered drinking water shortages. Even those
lucky ones who had wells were deprived of drinking water as the
water was salty and it was a summer of near total drought.
There were a few schemes organised by the state government agencies. Forty-five public taps and 42 house connections
were already in place, but of these 42 public taps, 30 were not
working. Moreover, the expansion of the nearby city brought
more people to the village thus adding to the drinking water
scarcity of the village.
Kerala is a politically active state; Olavanna is no exception.
Every election has been fought on the issue of drinking water
but, although promises were plenty, no solutions were found
and, slowly, people in various hamlets began to unite.
With people’s initiative and monitoring, the scheme was completed within the stipulated time, unheard of in the usual government programmes implemented through contractors. Apart
from implementing the project, the beneficiary committee
decided to take over the responsibility of managing the water
supply. It was in this context that the village panchayat decided
to meet part of the monthly running expenses.
It is interesting to note the factor which motivated them. A
person had been providing water to the neighbourhood from
his household well through a locally-laid pipeline free of cost.
Later, people in the neighbourhood willingly shared electricity
charges. All these things were not part of any project or
scheme, it was the benevolence of a single person which motivated the people to co-operate. This also motivated the people
in nearby areas who had watched this for years.
It started with a hamlet (Vettuvedankunnu) near the panchayat
office (village government) itself. The hamlet, with a large
majority of poor, had only a little drinking water for a long
period. It was provided with a well by the panchayat but there
was no water in it. People, especially women, had to carry water
down from the hill. Under the leadership of the elected representatives of the panchayat, they went to the district authorities
but in vain, so women, children and men marched to the district collectorate with empty pots and vessels. Eventually, funds
were allotted for a small drinking water project for the hamlet.
People joined together to form a beneficiary committee; one of
them donated land for the well and another for the water tank.
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The success of the people in Vettuvedankunnu hamlet triggered a series of initiatives. It was at this point that the government of Kerala, under the leadership of the Left Democratic
Front, decided to implement the People’s Plan Campaign
(decentralised planning). It was a bold initiative giving power to
the people. The state government decided to devolve 35-40%
of the state plan outlay to local self-governments. It also decided to initiate a campaign to mobilise people so that they participate in planning, implementing and monitoring the development projects in their own locality. Thus, the funds devolved to
the local self-governments were to be used for local development according to the needs and suggestions of the population.
Olavanna began to be active and people began to get organised. They knew money was required for water projects and
they tried to pool all resources available from various governReclaiming Public Water
ment and other agencies. They found that the People’s Plan
Campaign provided the ideal environment. In every hamlet,
meetings of the potential beneficiaries were conducted under
the leadership of village panchayat and people discussed the
problems of drinking water scarcity, the reasons for it and the
potential solutions.
In many places, even if they dug wells they would not get
good potable drinking water. In such situations, they were to
dig wells in ideal locations, tanks were to be constructed and
then water pumped to these tanks. From there, the distribution
lines were to be laid. Estimates were prepared locally and the
total expenses, in addition to the panchayat support, were
divided among the total number of households and they paid
their share in installments. There were concessions for the
poor decided on the basis of their capability. These decisions
were taken by the neighbourhoods.
The management of each of these projects is by the beneficiary committees. People paid their share not only in terms of
money, but also with physical labour. A person from the locality was posted as the pump operator and the beneficiary committee pays his wages. This committee monitors the drinking
water supply, takes the initiatives in its maintenance and sees to
it that the repairs are done at the correct time. They also monitor the water usage by the households. Every month, each
household spends less than a dollar (varies from rupees equivalent to US$0,5 to 0,9 according to the area). Every year, the
annual general body of the beneficiary committee is convened
and the audited accounts are presented. The new office bearers are also elected. It should be noted that the plan, estimate
and implementation responsibilities are with local people, who
find people skilled to do these activities from among themselves. In fact, one of their reports say that they have not so far
sought help from any engineers or technical experts and have
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not experienced any problems with their own technology.
Olavanna village now has a total of 60 new drinking water
schemes, of which 34 were with the support of the village panchayat and agencies related to that; 26 have been completely
people’s initiatives. All these together provide water to half the
population of the village.
Taking stock of the situation, we find that a people’s initiative,
together with the involvement of the local panchayat and the
support of the state government, could address the issue of
scarce drinking water in Olavanna to a large extent. Moreover,
all classes of people, irrespective of religion, caste, economic
status or political affiliation, participated in such a venture and
there were instances where the poor were subsidised by the
affluent among the community. People’s unity was strengthened to a great extent and, in addition, the need for people’s
participation in such development interventions was demonstrated. More than all this, the Olavanna initiative lessened one
of the major burdens women have had to face all their lives for
many years.
A few key points can be learned from the Olavanna model.
It focuses on the need for more decentralisation of the implementation of development activities. Olavanna proved beyond
doubt that instead of major mega projects, micro level projects
with micro water sources are the ideal. Such schemes can be
designed with local skills and capacities. If transferred to the
local people along with the resources for implementing them,
the people have the capacity to do things themselves. If it is a
centralised agency, the cost increases and the experience in
many situations is that projects fail to provide the expected
results. Sustainability is also an issue in such situations.
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An analysis of the Olavanna model shows that the management cost is much less compared to state-run mega projects. If
given powers, the local community is ready to supplement with
local resources including capital and recurring expenses. The
ownership of the projects gives them satisfaction, which in
turn leads to proper monitoring and maintenance of the water
schemes. This leads to the sustainability of the project.
Olavanna clearly shows that the local population can handle
most of the technical issues in such projects. This ownership
also prevents the misuse of water and adds to water literacy. As
people understand that water is theirs, they are empowered,
which in turn makes them fight the lobby of water exploiters.
So far urban centers have not done similar things. But, even
in larger centres, management of drinking water is possible
through people’s initiatives. In the case of sanitation, similar
initiatives are being launched in many municipalities, which
clearly indicates the viability of such initiatives in drinking
water. The government programmes on drinking water slowly
took lessons from Olavanna and to a major extent it helped to
shape the drinking water initiatives of the government.
Olavanna and similar models do suggest that the failing
state-run models and privatisation can be replaced with peopleowned models. The difference to be noted is that here the state
is not actually shying away from providing drinking water, but
it helps people own their drinking water projects and supports
them through support to the village governments.
Once such people’s initiatives are successful, we find that the
various agencies engulf those ideas and re-orient them to their
advantage. This is especially true of the international funding
agencies like the World Bank, which have started funding the
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drinking water projects in the state. While the Olavanna initiative was a movement by the people, owned by the people with
the support of the local and state government, such funded
initiatives are controlled by other agencies. Though the
Olavanna initiative was able to influence the design of such
projects to a major extent, the loan dumped on to the people
of the state is a potential burden to the population.
Such projects are more expensive with lots of costs for
technical expertise, management structures and the like. On
the other hand, the Olavanna model shows how the local people can design such projects with local expertise, with less cost
and with better chances of sustainability. International funding
agencies influence governments so that the state withdraws
from key sectors like drinking water in the name of facilitating
instead of providing. In the case of Olavanna, the state,
through its devolution of funds to the local self-governments,
actually brings the government closer to the people. Along
with funds, it also provides scope for people to decide themselves, thus it becomes an empowerment process where the
state also plays a major role.
Of course, local players in the drinking water sector also
play a major role in creating barriers for such people’s initiatives. The engineer-contractor nexus has caused problems for
many beneficiary committees in several other panchayats. By
questioning the expertise of the local people, by delaying the
funds, by not approving the projects in time and by initiating
parallel projects and schemes with the approval of the centralised agencies in the government, they discourage the local
beneficiary committees. In such situations the state also fails to
play a proactive role. This is especially crucial in the context of
globalisation and privatisation where the states are asked to
withdraw from such social sectors and then they are opened
for markets.
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Another major issue cropping up is that of multi-national
companies and transnationals trying to exploit water resources.
There are a few major struggles going on the state against these
multi-national giants. In the name of soft drinks, cola and mineral water, these companies take hold of the water resources in
the villages, thus exploiting it to the maximum. Worldwide solidarity is required to combat such forces and exploitation.
With the state being in a fiscal crisis, the lending agencies
are trying to influence the policies of the government. This has
worsened especially in the context of globalisation. Much of
the support from the national government is being linked to
such “reforms”, which in effect is government “withdrawing
from service sectors”. Thus the state has no option but to follow such directives which, in essence, is privatisation. This is a
retrograde step for Kerala considering its history in the service
sector where the state always provided services in areas such as
health, education, drinking water and the like. Whatever the
state has achieved is through these interventions.
Olavanna was a major weapon against total privatisation of
the drinking water sector. When the World Bank supported
drinking water initiatives being designed, the Olavanna model
became convenient for the people and the government, then
ruled by left-wing parties, to show that people’s initiatives are
possible. The mass mobilisation through the People’s Planning
Campaign gave the additional support needed to correct the
original proposal from the World Bank-directed project planners. Thus the World Bank model was remodelled after learning a few important lessons from Olavanna. Though there has
been dilution, the Olavanna model was adapted to a large
extent, so much so that even in a World Bank-aided project,
drinking water is owned by the people.
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Joy Elamon is the chief programme co-ordinator for SDC-CapDecK (programme on Capacity Development for Decentralisation) in Kerala, India.
Reclaiming Public Water
By Charles Santiago
This chapter explores the possibility of an alternative model in
organising water management in Malaysia. The experience of
the Perbadanan Bekalan Air Pulau Pinang (PBA) in water supply management could be emulated by other state water
providers in the country. Specifically, the PBA experience in the
state of Penang could provide a basis in which to forge and
organise a public-public partnership in water management in
the country. The PBA experience in water management serves
as an effective alternative to privatisation and makes a strong
case against the Malaysian government’s plans to hand over the
water management to private interests.1
Why should the PBAs experience in water management in
the state of Penang be the basis in which to organise a publicpublic partnership or arrangement? At present, Penang enjoys
one of the lowest water tariffs in the country2 as well as the
1 The state water authorities inherited an efficient management water supply system from the British about 200 years ago. More recently, in January 1973, the Pihak
Berkuasa Air Pulau Pinang (PBA), a state statutory authority was established. The role
of this authority was to supply treated water within Penang (both the island and the
mainland). In 1999 the PBA was corporatised into Perbadanan Bekalan Air Pulau
Pinang Sdn Bhd, (PBAPP) a private limited company, wholly owned by the government of Penang through its investment arm, State Secetary Penang. In 2000 PBAHB
was incorporated as an investment holding company to carry out all business activities
for PBA Group of Companies. See History of Water Supply in Penang.
2 From 1993 until the present, the Penang domestic water rates for the first 20 000
litres is 22 sen per 1000 litre and between 20 000 and 40 000 litres is 42 sen per 1000
litres. The tariff rates introduced in 2001 maintained the same tariff structure as in
1993. Based on the 2001 tariff increase, about 75% of consumers in Penang did not
have to pay more for their water as opposed to 1993.
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world.3 A 1999 comparative study of water charges in 65 cities
and towns in 38 countries in Asia, Europe, Africa and the
United States showed that Penang has the lowest water rates.
The PBA also recorded the highest profits among all the
water providers in the country. In the last few years, the company achieved record profits of between RM40-50 million.
Also, water is accessible 24 hours a day and reaches about 99%
of the population in the state. The non-revenue water (NRW)
is the lowest in the country at 18%, a target attained one year
ahead of schedule (2005). The company expects to reduce
NRW to 15% by 2010.
Its employee-to-connection ratio is about 1:373. The PBA
has attained 99% billing and collection efficiency, another
national high. The company’s strong operating profit margin of
50% owes a lot to its low NRW and good revenue collection
rate of 99%. Furthermore, Penang is the only state in the
country which provides an interest-free loan of RM1,000 to
poor communities for the purposes of connection. The PBA
is the only water provider in the country that can boast a cash
reserve or its equivalent of RM223 million.
Currently, Penang shows a remarkable achievement of 99%
universal access to drinking water at the lowest prices in the
country with a 98% revenue efficiency. It is important to note
that the efficiency requirements were met with no substantial
tariff increase and with a subsidy and cross subsidy in place.4
This was because profits of the water utility were reinvested5
and new infrastructure investments are self-financed.
3 The comparison of annual water charges for a family living in a house consuming
200 cubic meter per year shows that the Penang water charge is only ECU 10.13 for a
household consuming 200 cubic meter per year. International Water Association’s
International Statistics for Water Services 1999. Cited in Water Malaysia Issue No: 4. 2003.
4 The cost of producing per cubic metre of water is 35 sen. It is sold at 22 sen for
the first 20 cubic metres of water.
5 In 2002 and 2003 the PBA invested RM61,4 million and RM85 million respectively in capital expenditure for water resource development. Annual report 2002 and 2003.
Reclaiming Public Water
What are the critical factors that are responsible for the success
of this model of water management? First, a management that
is committed to administrative excellence and public service
wedded to a commercial outlook helped to create an efficient
management of the water system in the state. A strong commitment to public service influenced the management, operations
and delivery of services of the organisation. Interviews with
workers, unions and management staff indicate that a commitment to public service excellence was inculcated at every level
of the company. In fact, working for and serving the rakyat
(people) was internalised by the staff and represented a key
commitment and asset of the organisation. Also, it appears that
there was a real sense of commitment among the staff to a
work culture that promotes excellence in public service.
Second, interviews indicate that since 1973, the Penang
Water Authority operated autonomously and without political
interference from the state, albeit the water utility had to follow
federal government policies on staff recruitment. The PBA’s
day-to-day operations and management decisions, including its
policies, were free of political interference. Thus, the water utility was able to focus on its core responsibility and commitment
to balancing profitability with public interest. In this environment, the senior management could formulate plans and decisions without upsetting politicians or fearing employment
transfers or demotions, something that cannot be said for most
of Malaysia’s state water providers. Politicians acted on the
professional advice of the managers.
Interviews with retired senior management staff reveal that
the state politicians did not interfere with day-to-day operations of the company nor influence its policymaking. In fact, it
was pointed out that the PBA managers exercised their responsibilities and tasks professionally and were led by visionary senior management team committed to public service. In this
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sense, the PBA was very much a bureaucracy-led organisation
devoid of political encroachment.
Third, in 1973, the Penang Water Authority adopted a “commercial outlook with social obligations” strategy. This involved
increasing access to water at affordable prices while ensuring
high revenue efficiency. Such an approach ensured universal
access to water and yet made the provision of water cost-effective and profitable. The PBA adopted appropriate technology
either to enhance water accessibility or for revenue efficiency.
Senior and retired managers indicated that PBA embracing of
the “commercial outlook with social obligations” strategy early
in the 1970s, was the key in realising its aim of providing water
profitably yet being socially responsible.
A commercial outlook involved the organisation being
budget conscious, adopting a commercial accounting system,
instituting internal and external audits, a customer-friendly
service, accurate recording of payments, billing and collection
system. Also it involved developing a reliable and accurate integrated customer and engineering data system. Such a system
allowed for correct recording or identifying burst pipes in different geographical locations. Furthermore, it entailed putting
in place a leak detection and rehabilitation system. Essentially,
a commercial outlook involved cutting costs and enhancing
revenue efficiency. Furthermore, corruption and abuse of
power was neither systemic nor prevalent in the organisation,
although there were suspicions of corruption involving engineers in 1996.
Fourth, political party rivalry coupled with a vigilant public
is said to be another factor that forced the state-owned utility to
be efficient, transparent and accountable. Political competition
between the various political parties, especially between the parties of the ruling government, contributed to keeping the state’s
water supply system efficient, and the provider transparent and
Reclaiming Public Water
accountable. Interviews with management, workers and NGOs
indicate that the political rivalry, especially between the Gerakan
and the Malaysian Chinese Association (MCA), resulted in
unprecedented levels of scrutiny and demands for transparency and accountability vis-à-vis the performance of the statelinked and owned companies, such as PBA and Penang
Development Corporation, the investment arm of the state.
Furthermore, political pressure from the opposition
Democratic Action Party (DAP) and UMNO, a ruling coalition
partner which has been eyeing the chairmanship of the PBA,
forced the utility company’s performance, efficiency, transparency and accountability to improve. It appears that political
competition forced a higher demand of transparency, accountability and efficiency levels, and this is a phenomenon that is
absent in many other state water utilities in the country.
Since 2001, PBA was legally a privatised entity but one that
was owned and controlled by the state of Penang. The state
government owns 75% equity of the company. The remainder
is owned by PBA workers and staff, by PBA consumers in
Penang and the general public.6 While PBA, in its operations, is
financially and organisationally independent of the state government, the people of the state view the PBA as belonging to
the state and that is why its performance is scrutinised closely
by the various political parties, NGOs and consumers.
The PBA offers cheaper rates compared to other privatised
water providers in the country, ie Syarikat Air Johor Holdings
Sdn Bhd (SAJH), which is a wholly-owned subsidiary of
Ranhill Utilities. SAJH has been granted rights to carry out
water supply services in the state of Johor for 30 years from
6 The direct control of the company is exercised through a 55% equity stake
through the State Secretary Inc., while 20% of the shares are in the hands of stateowned companies. Santiago, Charles. 2004. Privatisation vs. Public-Public Partnership
in Malaysia. Monitoring the Sustainability of Globalisation.
Reclaiming Public Water
2000. The SAJH charges consumers 30 sen for the consumption of 0-15 cubic metres and 95 sen for the consumption of
16-30 cubic metres. The PBA charges consumers 22 sen per
cubic metre for 0-20 cubic metres and 42 sen for the consumption of 21-40 cubic metres.
The PBA charges for the first 0-40 cubic metres have not
changed since 1993, despite the privatisation exercise in 2001.
However, SAJH increased water charges by 40% on January 1,
2001, and a further increase of 30% was made in 2003.7 It is
interesting to note that a review of the water tariff in 2003 was
made before the expiry of the three-year requirement.8 In the
last 13 years, water tariffs have increased by 82% in the state of
Johor.9 In the case of SAJH, it exploited its monopoly position
to increase water tariffs, shore-up its share value and thus profits. However, the PBA, as a result of its “public although private” approach has not treated water like any other revenuegenerating commodity. It has reinvested its profits and maintained highly affordable rates in order to ensure universal
access and equity.
7 The Federation of Malaysian Manufactures (FMM) has this to say about the second tariff increase in the state of Johor: “SAJH Sdn Bhd should not treat its water supply business an indiscriminate cash cow to be milked at every three-year interval. As a
monopoly, SAJH Sdn Bhd must regard its water supply business as a social responsibility that must be carried out in fairness and in full consideration of the impact on all
consumers, including industrial and commercial consumers. SAJH Sdn Bhd should not
exploit its monopoly position in order to make obscene profits at the expense of its
8 Under the Concession Agreement (CA), 10 staggered increments of water tariff
rates are allowed over the 30-year period. Malaysian Rating Corporation Berhad
(MARC) Reaffirms Rating Of AID On SAJ Holdings Sdn Bhd’s RM680 Million AlBai
9 FMM Johor Branch Position Paper on the Latest Water Tariff Increase in Johor.
Statement by the FMM on the increase of water tariff in the State of Johor. The statement quoted the State Executive Councillor Y.B. Adam Abdul Hamid on May 29, 2003,
in The New Straits Times: “SAJH could raise the water tariff by not more than 30%
every three years.”
Reclaiming Public Water
There are potential problems in the long run for PBA. The
organisation needs to consider conservation seriously given the
increasing demand for water in the state, and that 80% of its
raw water comes from outside the state. It needs to protect and
gazette its catchment areas which are being eyed by business
for purposes of commercial farming and other business ventures.
Another serious problem that the water utility provider will
have to consider is in relation to its privatised status, although
it is owned and controlled by the state government. Various
stakeholders have suggested that the commitment to keep the
water provider “public although it is private” might not be
assured if the government changes to another political party.10
A privatised utility is vulnerable to foreign take-overs through
the General Agreement on Trade in Services, an international
trade agreement that is designed to control and regulate trade
in services, including water.
In conclusion, the PBA experience refutes the widely-held
notion that a state-controlled water utility is inefficient and
loss-bearing. In fact, the PBA is a profitable and efficient water
provider without imposing full-cost recovery, a phenomenon
that turns the privatisation logic upside down. For Malaysia and
the developing world the challenge would be to learn from the
PBA experience through a public-public partnership, one that
can keep the private sector out of the water management business.
Charles Santiago is with Monitoring Sustainability of Globalisation.
10 At present the Gerakan controls the state government. Their political rivals
within the state coalition government include the Malaysian Chinese Association and
UMNO. The three parties are part of the Barisan National government at the national level. The three parties compete with each other to lead the state government, albeit
the Gerakan has led the state government in the last decades.
Reclaiming Public Water
By Raymond Avrillier
Grenoble, located in the center of the Alps at the crossing of
valleys between mountains, is a town of slightly more than
150,000 inhabitants in an agglomeration of 400,000 inhabitants.
In Grenoble, we re-municipalised our water utilities system
in 2000. This service had been illegally privatised in 1989.
Corruption, involving the local conservative party and the
mayor at the time, led to the privatisation in 1989 of
Grenoble’s water and sanitation to Lyonnaise des Eaux (part of
Suez). After years of political and public pressure, court rulings
in 1997/1998 opened the way for the re-municipalisation that
occurred in 2000. Since then, a transparent public utility has
been created. The main lesson learned from our action for
public water management in Grenoble is the importance of
access to information and to independent analysis of the role
of the private sector. In this way, public debates, prior to decision taking, allow appropriate and controlled public policy
choices to be made. As a result of taking back our water, the
quality has improved, the costs reduced and decisions have
become more transparent though the complete disclosure of
information to the public by the local authorities, which has
become the rule. In order to achieve these improvements, all of
the essential work is provided by the public administration and
other services are provided by the private sector through public procurement.
Reclaiming Public Water
The personnel now carry out their public service mission
independently of market and private profit considerations. It
also assures that a long-term public service can be provided
that is conducive to the protection of resources, the maintenance and regular renewal of equipment, the undertaking of
important investment, and the assistance in reducing consumption and social policies for families in difficulty. As a result,
maintenance, renewal and improvement of the technical systems have increased threefold compared with the practices of
Lyonnaise des Eaux during the 1990s. Employees and local
elected officials, relieved of the pressure of pursuing private
interests, carry out the public policy practices on a daily basis.
Today, the city of Grenoble has the lowest water bill in all of
France for cities with more than 100,000 inhabitants.
Moreover, the water quality is exceptional, naturally pure without treatment and is sustainable.
Grenoble was able to eliminate the private-sector control of
water utilities mainly as a result of political will and the persistence of a few citizens. A local movement called “Democratie
écologie et solidarité” (ADES), was founded by members of
the green party followed by the establishment of a users’ association “Eau-secours” (SOS water). Their demand for a genuine local public water service has acquired overwhelming support today. Users and employees alike participate in the decision-making process. Decisions are taken democratically and,
for the most part, through majority vote of elected officials
and qualified representatives.
To claim back the water management from the private sector, we had to demonstrate the degree of corruption involved
in the choices imposed by managers at the Lyonnaise. Public
meetings were organised, spot checks of water bills were carried out against the will of public authorities implicated, legal
actions were taken and complaints filed accrediting our cause.
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The legal actions were long and drawn-out; a first complaint
was filed in 1989, whereas the Conseil d’État (Ministry of
Justice) only annulled the decision in 1997 to delegate the public water management, taken in 1989, and the resulting orchestrations by the Lyonnaise des Eaux, annulled in 1998. It was
only through our action, launched in 1989, that the Chambre
Régional des Comptes (the Regional Chamber of Accounts)
finally took up this dossier in 1995. The Appeals Court finally
judged on the corruption case in 1996, although the events had
taken place during 1987-90 and were revealed in 1993.
We claim that water is a public good but it should be a right for
all. It is therefore, above all, a public affair and an essential public service. To say that is a good thing (not every one gets this
far) but to actually do it, debate it, and act on it is better. In the
context of commercialisation and privatisation of public utilities and of policies that advocate the disengagement of the
state and collectives (instead promoting “lean government”
and a “lean city”), these actions led by users, citizens, tax payers, political movements, unions and elected people, are not so
easy. In Grenoble, our collective and individual experience is
that it took a 10-year struggle to regain and re-municipalise our
communal water public utility.1
The public water and sewage utility in Grenoble was privatised and handed over to Lyonnaise des Eaux (Suez) on July 14,
1989, the anniversary of the French Revolution. The city council was led by Mr Alain Carignon from the right wing party,
1 For a summary of actions undertaken in 1989 until 2004 in Grenoble, France to
regain the public water utility from the private interests of big corporations, see:
Reclaiming Public Water
who was later to be found guilty of corruption.2 I was then an
elected representative in the progressive minority. Mr Alain
Carignon wanted a “meager city”, just like Jerome Monod, who
was the CEO of Lyonnaise des Eaux and today one of the
main advisors of President Jacques Chirac. The privatisation
contract for Grenoble’s water followed the typical “French
model” of delegated public services, a kind of public-private
partnership that gives full power to the private sector. The contract guaranteed profits worth a few hundred million Euros for
the private sector over a period of 25 years (between 1989 and
2014). In return, a fee of a few million Euros (later invoiced to
the consumer) was paid to the municipality whose budgets
were in deficit. Dozens of millions of Francs were paid under
the table in a deal between (it was later revealed) corrupted
elected representatives and accomplices and corrupting heads
of private companies.
We have learnt from this collective campaign a method, in
other words a tool box, for the promotion and reinforcement
of public services and for the fight against direct or indirect
privatisation, such as mixed companies, subcontracting of public service to the private sector, public-private partnership etc.
The analysis of money flows is the key issue in the struggle for
a public water utility. The quality of the public service can be
analysed only on the long run.
2 Carignon was minister of environment during M. Jacques Chirac’s government
of 1986 to 1988, then Minister of Communication under M. Edouard Balladur’s government from 1993 to 1994, and convicted of corruption in 1996.
Reclaiming Public Water
To enact our rights, the right of the collectives, of the users,
and also the elected representatives requires:
• Access to information: information on water cannot be delegated and access to information about the real costs and the
quality of the public service is an action, a continuous action
(the big private water companies treat the information as private).
• Pluralist analyses: expertise cannot be subcontracted, especially on the technical and financial aspects (this implies the
existence of public sector employment and public procurement of expertise in accounting, law and technical issues that
are independent from the water oligopoly).
• The choices of public policy, management and engagement
must be clearly presented after an open public debate, for
example in annual reports on the quality and the price of the
water utility, so that they can be controlled and adjusted regularly.
• Collective action, such as the communal workers and user’s
strikes in 1989 to say “no to privatisation” of water; also, the
gathering of users in the organisation “Eau Secours” as well
as the local political movement persistently fighting for the remunicipalisation of water.
• Legal action: in administrative, financial and judicial courts. In
order to support collective actions, it also helps that collective
rights are not flouted and are acknowledged in court as the
rights of the users, of taxpayers, citizens and elected representatives.
• Action with regard to the authorities, especially in elected
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• Action in groups, such as associations, local social forum, network of organisations and movements, and political movements.
This last strategy of collective action is still going on today in
order to maintain better quality and least costs in the public
Public water services can deliver excellent results provided they
are given the necessary means, are responsive and careful with
regard to cost and quality. The municipal water management of
Grenoble today provides the cheapest water of all French cities
of more than 100,000 inhabitants, naturally pure and untreated water of excellent quality that is sustainable. It has 85
employees, a user committee, and mechanisms of constant
control by elected representatives. It is a public structure that is
certified ISO 9001-v2000. The intercommunal management of
sanitation has lowered the tariffs of sanitation and continuously improves the quality of the collection and treatment of used
waters by maintenance and improvement of the networks. It
has 77 employees, a users’ committee, constant control by the
community council and is about to be certified ISO 9001v2000.
Over the past five years, we have shown our public water
utility costs less for the community and to the users than “the
French model” of private management.3 Compared to the
3 The private sector invoice profits, excessive interest on investment and exploitation, the rent ability of the assets, as documented in reports of the Audit office and
Regional Audit office, as well as the Evaluation and Control Committee of the
Parliament, and the reports and judgments of the general committee on market, consumption and suppression of frauds (DGCCRF). See also the analyzes of users associations www.cace.fr, and http://eausecours.free.fr/
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102% increase in water prices between 1988 and 1995 (during
the period of private management), prices were not raised
from 1995 to 2003 (after the return to public management) and
increases for 2004 and 2005 are less than inflation. The price
of water is an issue of social policy: to save dozens of Euro
cents per cubic metre makes dozens of Euros per year per
family, when these charges are becoming heavier for households, and end up being millions in terms of overall consumption. Keeping prices low has been made possible by improved
monitoring of the water utility, which resulted in savings of up
to €40 million.
The quality of the services has improved significantly.
Maintenance and renewal tasks have increased by three to four
times compared to the years of private management. Users are
advised on how to save water and a 20% reduction of the water
consumption in communal buildings has been achieved. The
work of protecting the resource and improving the capture,
and maintenance of networks and storage cannot be planned
on the scale of an election or in terms of a subcontract to the
private sector (focused on short-term profitability) but requires
years, if not generations. This is one more reason water is an
essential public service. Improving the quality, benefiting from
the organisational memory and long-term planning are important features.
Work on maintenance, renewal, extensions and improvements are not cancelled in order to save money and to increase
dividends for shareholders and to deliver profits for bankers
and the executives.
Accounting of the utility is now public and tariffs are decided
each year by elected councils. Financial planning is made for 20
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years with tri-annual planning of construction. An annual
report on the price and quality of the public service (around
100 detailed pages) is approved by user-consultation commissions, the “council of exploitation” and locally elected assemblies. Assemblies of users decide and control the public utility.
This is in sharp contrast to the private accounting of the
subcontracted companies that are opaque and include various
non-justified, indirect costs (company fees, structural fees, subcontracting) and non-accounted financial options (delay of
repayment of rental fees to a third party). These companies
often see big maintenance and renewal works as a source for
generating excessive profits.
Whereas the private sector sees the users as consumers and
encourages them to consume more, the public utility involves
the users in the decisions and can advise them how to save
water or to promote a social policy. Whereas in the private sector, the employees are under pressure to make a profit, public
employees are the actors of the utility. While the private sector
seeks to take advantage of employees, we aim to provide useful and quality employment and work.
Unlike the private sector, whose profit-driven logic encourages consumption, including a price structure more favourable
to big consumers, the public utility in Grenoble strives to
reduce leakage and save water. Whereas for the private sector,
water treatment and pollution are sources of profit (as constructors and exploiters or via links to companies that bottle
water), the public utility of Grenoble is committed to preserve
naturally pure and renewable resources and to apply the precautionary principle.
Natural, pure and renewable tap water can be used by gardens, hospitals and people that are potentially weak. Treated
water, just like bottled mineral water, often contains wastes and
is very expensive.
Reclaiming Public Water
The lessons learnt in Grenoble are important, now that many
similar water concessions here in France made before the
transparency and anti-corruption law of 1993 are coming to an
end. These concessions may now return to public hands.
This lesson is very important when many European countries, not the least in Central and Eastern Europe as well as
developing countries, are under pressure by governments and
institutions like the World Bank, the WTO, the GATS, the G8
and the European Commission that seek to impose privatisation and public-private partnerships. They often promote the
“French model”, but the reality of this model is “profits for the
private sector, risks for the public sector, and costs for the people”.
Water is a public good far too precious to leave to market
forces. Management decisions must not be taken under the
influence of corrupt officials and private interests. It is an
essential public service whose mission must not be guided by
Raymond Avrillier is manager of the municipal water utility of Grenoble.
Reclaiming Public Water
By Sean Flynn and Kathryn Boudouris
In the United States, the term “public utility” refers to a class
of industries that, because of their essential nature and their
tendency toward monopoly provision, have historically been
subject to more direct and pervasive governmental control
than is common in other industries. Public control over utilities
has been effected through (1) direct government ownership of
utilities, or (2) government-appointed or elected regulatory
commissions that oversee the rates and services of private utilities. In each area, popular movements have been instrumental
in shaping the nature and structure of the government’s role,
including the role of citizen representation within public
“By the late nineteenth century there was a strong feeling among municipal leaders that any respectable
community needed a citywide waterworks.”
- Martin V. Melosi, The Sanitary Idea:
Urban Infrastructure in America from Colonial Times
to the Present, 116 (2000)
In the 1800s, as American cities increased in size and density,
the provision of municipal water systems emerged as a vital
public interest. Health was a primary concern as increasing
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congestion in the urban environment heightened pollution of
local sources and the spread of typhoid, cholera and other
water-borne disease.1 Additionally, the provision of a city-wide
water supply was important to many businesses and industries;
providing a water system became one of the most important
ways that a city could demonstrate its commitment to economic growth.2
Initially, private ownership and operation of water services
predominated. All but one of the 16 water systems in existence
before 1800 were privately owned and, in 1870, 52% of the 244
water systems in the US were privately owned. But over the
next 50 years, coinciding with the growth of the power and
importance of municipalities, the tide dramatically turned
toward public provision. By 1896, the number of water systems in the US had exploded to over 3,000 with the majority
owned and operated by municipal governments. By 1924, 70%
of all water systems were municipally owned and controlled.
The shift of most cities, especially large ones, to public
ownership of water systems by the close of the 19th century
was motivated in part by negative experiences with private
water suppliers. Private water companies “were notorious for
choosing a water source that would minimise the initial investment outlay, and for ignoring the concomitant shortcomings in
water quantity and quality.”3 Lacking incentives to complete
ostensibly unprofitable projects, companies “preferred to lay
their distributing pipes through the wealthier sections of the
city and to hold back from carrying water into the poorer dis1 Comm. on Privatisation of Water Services in the US, National Research Council,
Privatisation of Water Services in the United States: An Assessment of Issues and
Experience, 30 (2002).
2 Martin V. Melosi, The Sanitary Idea: Urban Infrastructure in America from
Colonial times to the Present, 119 (2000)
3 Peter H. Gleick et al., The New Economy of Water: The Risks and Benefits of
Globalisation and Privatisation of Fresh Water, 23 (2002), quoting L. Anderson,
“Water and the Canadian City,” Water and the City (1991).
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tricts.”4 The Baltimore Water Company, for example, provided
water to only about 30% of Baltimore’s citizenry, even after
significant infrastructure additions between 1835 and 1852.5 At
its peak, the privately operated Manhattan Water Company
served only one third of the city and was the subject of constant criticism for deteriorating water quality.6 Private water
companies were also more expensive than most municipal suppliers – by as much as 40% by the close of the century.
In many cities, including New York, these experiences
fuelled political movements that pushed city legislatures to pass
resolutions in favour of municipalising water suppliers. In
other cities, municipalisation was promoted by chambers of
commerce and boards of trade seeking to compete with rival
communities in attracting development.7 Finally, it was often
the case that the private sector did not have sufficient capacity
to meet rapidly rising demand.
Municipalisation did not automatically correct inequities in
service provision. Hierarchical relationships existed in the governing structures of many cities that favoured moneyed interests. In Detroit, for example, the public system prioritised
extending service to uninhabited land for development over
servicing working class areas of the inner-city.8 On the whole,
however, most municipal systems were favoured for their
greater capacity to meet the rapidly increasing demand for
water at a lower price than their private counterparts.
4 Id., quoting N.P. Blake, “Water and the City: Lessons from History,” Water and
the City (1991).
5 Privatisation of Water Services in the United States, 31.
6 Melosi, 37.
7 Melosi, 119-121.
8 Melosi, 123.
Reclaiming Public Water
“Regulation is a peculiarly American institution.”
- Roger G. Noll and Bruce M. Owen,
What Makes Reform Happen, 7 Regulation 19 (1983)
Although direct municipal provision of water and sewerage was
the dominant mode of supply by the early 1900s, there remained
a significant number of private water utilities serving towns and
cities of various sizes. With the advent of the Progressive Era,
these entities were identified as “natural monopolies” and subjected to control by state regulatory agencies.
The concept of a natural monopoly had its genesis in analysis of the railroad industry. There, it was observed that unbridled competition led to highly inefficient outcomes, including
multiple companies laying parallel lines of track to serve the
same locations at great cost.
The concept of natural monopolies provided a classical
economic justification for strong government intervention in a
finite class of “public utilities”, since without competition
there would be no incentive to keep prices low or to serve less
profitable areas of the community. To reach economically and
socially optimal solutions, either the government had to provide the goods or service directly, or it had to establish regulatory institutions that would “replace the invisible hand of
Adam Smith in order to protect consumers against extortionate charges, restrictions of output, deterioration of service, and
unfair discrimination”.9
Although economic academics provided the theoretical justification for government control of public utilities, it was pop9 Walter Adams, “The Role of Competition in the Regulated Industries”, 53
American Economic Review 40 (1963).
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ular organising, beginning with the Granger movement of small
farmer collectives, which drove the first action by governments.
In the 1870s the Granger movement grew rapidly to over
850,000 members that placed growing emphasis on the extent
to which farmers were being victimised by abusive pricing and
commercial practices of railroads, merchants and banks.
The Granger movement succeeded in pressuring state governments to create scores of state regulatory commissions with
the power to investigate (but often not to set) the rates of railroads. The development of regulatory institutions was
strengthened during the period of popular political agitation
known as the Progressive Era, lasting roughly from 1896
through World War I. Drawing on the lessons of natural
monopoly theory, the Progressives called for strong government regulation of a number of powerful industries of the day,
including private electricity and water utilities.
By the 1920s, every state in the US had a regulatory commission with authority to oversee the rates and services of privately owned public utilities. The commissions were generally
under an obligation to promote adequate services at reasonable
rates while protecting a fair rate of return to the utility on its
investments to reward shareholders and attract further infusions of capital from private markets.
By design and effect, regulation by state commissions shifted authority over regulated service priorities from local to state
governmental bodies, thus diminishing the power of municipalities. Municipalities could escape this loss of power by
establishing their own utilities, which were not regulated by
most state commissions. This provided an additional incentive
for enterprising cities to build and maintain their own water
systems and other utilities. Today, about 85% of the US population is served by public water systems and there are approximately 4,000 municipally-owned electricity systems.
Reclaiming Public Water
“A prime characteristic of the American consumer
movement over the past decade has been its concentration on the investigation and reform of administrative agencies lax in protecting citizens’ interests.”
- Robert B. Leflar & Martin H. Rogol,
Consumer Participation in the Regulation
of Public Utilities: A model Act. 13
Harvard Journal on Legislation 235 (1976).
Between the 1920s and 1960s, the main task of commissions
was to distribute to consumers cost savings from technological
advances and economies of scale in the form of rate decreases.
Although the commissions had their detractors,10 it was not until
the rise of the consumer movement in the late 1960s and early
1970s that serious reform was implemented. In those years,
increased interest rates, a world fuel crisis and rising inflation
reversed the steady course of declining utility rates, pushing
prices, especially for electricity, far higher. In this context, critiques of industry capture of regulatory agencies grew louder
and proposals for regulatory reform gained a serious audience.11
10 Horace M. Gray, “The Passing of the Public Utility Concept,” Journal of Land
& Public Utility Economics 16, 8-20 (1940) (“It originated as a system of social
restraint designed primarily, or at least ostensibly, to protect consumers from the
aggressions of monopolists; it has ended as a device to protect the property, ie, the
capitalised expectancy, of these monopolists from the just demands of society, and to
obstruct the development of socially superior institutions.”).
11 See Stephen Breyer, Regulation and Its Reform, 351 (1982) (“If agency decisions are not controlled by Congress, if they are not scientifically determined, if
agency decision makers are not elected, what right does the agency have to make its
policies? What makes the agency’s decision legitimate?”); Robert B. Leflar & Martin H.
Rogol, Consumer Participation in the Regulation of Public Utilities: A model Act”, 13
Harvard Journal on Legislation 235, 242 (1976) (“[commission] staffs frequently exhibit a tendency to subject the carefully prepared analyses of the data submitted by the
utility company to less than critical scrutiny, particularly if there is a lack of pressure
from consumer interests to do so”.).
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Many states responded to the growing legitimacy crisis in
regulatory commissions by transforming the selection of commissioners to an elected process. Another common series of
reforms was designed to broaden the degree of participation in
the regulatory process, particularly that of residential consumers who, because of lack of resources and high transaction
costs of forming associations, commonly lacked any representation within the process.
Reforms enacted to increase consumer representation
ranged from government or utility payment of fees to public
interest interveners to the establishment of special “consumer
counsel” offices staffed with lawyers, accountants, economists
and community organisers to engage the regulatory process
and organise and educate community groups about utility
issues. One especially innovative and effective institution established in many states is referred to as a Citizen Utility Board
(CUB), sometimes called a Residential Utility Consumer
Action Group.
CUBs are voluntary organisations funded through contributions from their members. The model laws creating CUBs
permit them to recruit members through bill inserts, through
which a consumer could check off a contribution to the organisation that would be added to the regular utility bill and transferred by the utility to the CUB.12 All members who make a
minimum contribution receive the right to vote for the CUB’s
board of directors on a one-person one-vote basis. The board
oversees a staff of organisers, lawyers and other experts needed to represent residential consumers in proceedings in regulatory agencies, legislative bodies and other public processes that
12 A much criticised US Supreme Court decision held that states could force a private corporation to “speak” in this way, after which CUB laws were changed to provide member recruitment in other ways, such as through inserts in government agency
Reclaiming Public Water
impact utility rates or services. The model act for establishment
of CUBs also gives them authority to conduct and support
research, investigations and public information activities
regarding utility matters and to participate in initiative and referendum campaigns.13
Many CUBs have been very successful in their advocacy of
consumer interests. One of the most successful, the Illinois
CUB, has saved consumers more than $5 billion in two decades
by blocking rate hikes and winning consumer refunds. The
CUB promotes tougher consumer protection laws in the state
legislature, publishes consumer education materials and operates a Consumer Hotline that fields more than 6,000 calls a
year providing assistance to consumers who have complaints
against their utility companies.
“Europe’s leading water companies saw the United
States as the last great bastion of water (and wastewater) still under public control.”
- Steve Maxwell, Musical Chairs in the Water Industry:
Consolidation or Fragmentation?
Journal of the American Water Works Association 28 (November 2003).
The cost of providing water in the US is increasing dramatically due to the need to replace aging infrastructure and to comply with heightening security and environmental regulations. At
the same time, national government support for local infrastructure development projects has been decreasing, forcing
municipalities and their citizens to bear the increased costs.
Small systems are perceived by many to be in a particularly
poor position to meet the increasing investment obligations. In
the private sector, there has been a wave of consolidations that,
according to the large water companies, increase the capacity of
the companies to meet investment obligations. The largest
water companies in the US have, in turn, been targeted for
acquisition by far larger European water companies, including
RWE/Thames, Veolia (formerly Vivendi) and Suez.
Powerful political forces have risen up against privatisation
in the US, derailing several large projects. Coalitions of citizen
organisations and public sector unions pressured the city of
Atlanta to cancel a $428 million operation and maintenance
contract after the Suez/United Water contractor drastically cut
employees, hiked rates 17%, slowed service delivery times and
failed to adequately respond to consumer complaints of brown
water coming from their taps. In New Orleans, the city spent
$5 million assessing private contracting offers before ending
the process of privatisation in April of 2004 in response to a
groundswell of popular and union organised opposition.14 In
Stockton, California, a plan to turn over operation and maintenance of the water system to RWE/Thames was overturned
by a court upon application by community groups alleging that
the plan failed to comply with environmental planning laws.
The privatisation focus is now shifting toward small towns,
where communities are often less organised and the financial
pressures may be more severe. However, as small-town citizens
learn more about the ramifications of privatising, opposition
appears to be gaining a foothold. In September, the town representatives of Lee, Massachusetts, voted 41-10 to reject a 20year monopoly contract with Veolia. Their decision to forgo
14 Public Citizen, “US Privatisation Update: State of Play and Recent
Developments” (Boston Social Forum, July 2004).
See Leflar & Rogol, supra.
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privatisation was influenced by a grassroots campaign that
raised concerns about Veolia’s past project history, articulated
the risks of privatisation and warned that current employees
might not receive fair treatment.15
Where private systems are in place, consumers in some
areas have pressured their governments to municipalise them.
In Lexington, Kentucky, a grass roots group successfully lobbied the city council to vote to take over the private company
that had served the town since the 1880s, but which was
recently purchased by the German conglomerate RWE.16
Municipalisation is also being pursued by communities in
Felton, California, and Nashua, New Hampshire.17 In Pekin,
Illinois, voters used the Progressive Era referendum process
(allowing citizens to pass legislation directly through popular
vote) to demand public ownership of its water system.
Democratisation of public utilities need not stop at the simple
distinction between public and private ownership. Democracy
is a process not an ownership structure. Participatory institutions, including CUBs, municipal utility districts and co-operatives, may assist the democratisation of publicly-owned utilities
by better empowering citizens to hold their leaders accountable.
For many communities, the pressure to consolidate
resources to meet their funding and operational challenges is
real. Often, these needs can be met through inter-local joint
15 Public Citizen, Currents: Public Citizen’s Water For All Campaign Newsletter
(October, 2004).
16 The group’s website may be viewed at http://www.bluegrassflow.org; see John
Stamper, “Mayor appoints task force to study how city could run water company,”
Lexington Herald-Leader (Mar. 10, 2004).
17 US Privatisation Update.
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action with other municipalities. For example, several suburbs
surrounding Manassas, Virginia, outside of Washington D.C.,
were facing rapid population growth prompting the need for a
new wastewater treatment facility. Rather than privatising, the
region defrayed the cost and benefits from economies of scale
by creating a new public authority, known as a joint action
agency, to build and operate a new treatment plant.
Access to necessary expertise can be accomplished through
public mechanisms. The public supplier in Cincinnati, for
example, extends technical assistance services to smaller public
systems surrounding it.
Within the US there are a variety of organisational structures that afford more direct participation in the governance of
utilities than mere government ownership with directors
appointed by an elected council or other official. The
Sacramento Municipal Utility District (SMUD), for example, is
governed by a board of directors that are directly elected. Each
of the seven directors represents a different geographic area,
or ward, within SMUD’s service area, with seats allocated based
on a one-person one-vote methodology. This structure allows
citizens to express different political preferences for governance of their utility than they might choose to do with respect
to governance of the rest of the city. It also ensures that all
areas have representation equal to their population, providing
a bulwark against utility decisions that favour investment in one
region to the disadvantage of others. Another example of a
more directly accountable utility structure is a co-operative,
where the consumers of the utility have the sole right to elect
the governance of the utility. There are over a hundred million
customers of co-operative utilities in the US, including water,
electricity and telephone co-operatives.
Where utilities are privately owned, advocates for democratisation need not end their advocacy with calls for municipaliReclaiming Public Water
sation. Establishing institutions that link citizen interests with
access to financial and knowledge resources, such as CUBs, can
increase popular power to control utilities through regulatory
processes and increase their sway with government leaders.
And regulators themselves can be subject to direct election to
improve their responsiveness to consumer concerns.
Sean Flynn is an Associate at the Washington D.C. based law firm of Spiegel
& McDiarmid. Kathryn Boudouris is a paralegal at the same firm.
The authors retain rights to authorize the reprinting of this chapter.
Sean Flynn may be contacted at [email protected]
Reclaiming Public Water
By Hans-Werner Krüger
The freshwater and wastewater services in Germany are some
of the best examples of well-organised and efficient public
services in Europe. Their development and the degree of performance compares favourably to neighbouring countries like
Austria, Switzerland and Denmark.
The rise of a technically modern water and sewerage system
in the second half of the nineteenth century included some
private companies, for example in Berlin, but mostly municipal
waterworks made up the administration. The rapid growth and
industrialisation of the cities demanded too much of private
companies, who often failed to establish a constant supply and
acceptable price system. These developments strengthened the
position of municipal waterworks and several long-distance
freshwater supply systems were established that still exist today.
Municipal waterworks are normally organised under public law
as associations between cities and other communities.
In 1909, of 1,291 communities 96% had their own waterworks, a figure which remained almost constant for many generations. Even the limited company Gelsenwasser, founded in
1887 and for a long time the only major example of a private
water (and gas) company, included several cities in the Ruhr
region as shareholders. In 2002 the cities Dortmund and
Bochum bought the 81% stock package from the multi-utility
giant EON, a move criticised as re-socialisation by right-wing
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Today there are still 6,700 waterworks and 7,000 sewage
treatment companies with individual owners, most of them in
public hands. Most waterworks are small and represent the typical village supply system in the rural area. They are normally
well adapted to the local hydrological situation and able to
guarantee their clients good or even excellent water quality. As
a rule, the villages and small water associations tend to keep
waterworks as their property and have municipal independence. Their water and sewage services can often profit from
low prime costs, compared to costs in unfavourable locations
like the middle and lower Rhine area which are much higher.
An international comparison of water prices has Germany
at the top. The waterworks refer to their high quality, the same
applies to the standard of the sewage treatment, and to very
different conditions of price setting, for example taxes and
direct or indirect subsidisation in the European countries. The
requirement of the European Water Framework Directive that
the water prices shall have a full cost calculation, which is reasonable in rich countries, is not usually fulfilled. A realistic,
multi-factor analysis will put German water prices in the middle of the scale.
The generally suitable structure and the high quality of
public water supply systems are partly the result of well-educated engineers and their specific sense of responsibility for
water as a common good and a basic foodstuff. The professional association of water and gas engineers has, for more
than 125 years, developed an incomparably elaborate and comprehensive body of technical and organisational rules and standards. It is hard to imagine that this successful model could
have developed under competitive market conditions. And
there are severe doubts whether it will be still be applied with
the same sense of responsibility under the growing pressure of
liberalised markets in the public services.
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In Germany the municipalities, with their high degree of
self-government and political and economic independence,
have mostly organised their public services, electricity, gas,
water and traffic in the form of Stadtwerke (municipal utilities), the public equivalent for the great private multi-utility
groups. The latter, after a process of mergers and acquisitions,
are now prominently RWE, EON and, in the energy sector, the
Swedish-dominated Vattenfall and EnBW.
The Stadtwerke generally have the right to make use of
cross-subsidising between more or less profitable public services. In this way they may guarantee an efficient infrastructure
and basic provisions under more or less public control. There
is no participation by citizens in the public companies, except
for the representation of trade unions, in this case for the public service, in some supervisory boards is seen as a certain substitute. The way in which the municipalities exact control of
their public enterprises is sometimes questionable but has seldom been subjected to public criticism or alternative proposals.
The whole system, widely guaranteed by law and, up to the
1970s, politically supported by all parties, should be considered
as a public good. The consensus that the state, and especially
state-owned enterprises, play a fundamental role as a regulative
force in the economy has diminished more and more, not only
as a consequence of neo-liberal ideology. The state itself has
produced the fundamental crisis in public finances by tax cuts
for companies and wealthy citizens. Cities, especially, are the
main victims of a misleading and misunderstood fiscal policy.
This and their own illusive assumptions about permanent
economic growth have made the utilities easy targets for economic takeovers by the big private multinationals. The VKU,
the association of the communal enterprises, (unofficially) has
counted among its 1,400 members more than 500 which
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already have private shareholders. They mostly bought parts of
the Stadtwerke who generally are the owners of the local freshwater and sewage services.
The leader in this process is the EON subsidiary, Thüga,
with 130 interests in municipal enterprises. Thüga in most
cases acquires about 25%, but gets the right to manage the
operative business and, consequently, dominance. In this way
political control of public enterprises often is reduced to
Private owners try to keep the whole system of shares and
crossover investments as invisible as possible. The Federal
Cartel Office has seldom intervened in this process of concentration and widespread monopolistic or duopolistic power play.
The Federal Government supported this development in
favour of building up internationally competitive units.
This argument also occurred during the discussion about
liberalisation and privatisation in German water services. The
announcement of neo-liberal office-bearers in the ministries
was and still is that the 6,700 existing water enterprises and
7,000 sewage plants, out of date, pre-modern, non-competitive
and inefficient as they are said to be, have to change their structure and have to reduce their number down to 300 or 500.
Even the Bundestag (parliament) in the petition “Sustainable
water services in Germany” in 2001 gave a clear market-oriented statement.
No doubt many people, flanked by the interested companies, banks and management consultants which work as a
lobby for privatisation, ignore the specialties of water supply.
This was one of the main results of the so-called Ewers
experts’ opinion about market opening of the water and sewerage services, initiated by the economics ministry in 2001.
Ewers seriously claimed in a hearing that the “water industry”
(water services are by no way an industry) has to “submit to the
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discipline of the capital market”.
After the harsh criticism of such mental aberration, the liberalisation express slowed down and officially changed its destination into “modernisation” of the water services.
This new label policy has reached the European
Commission and the European Parliament and is also supported by the different organisations of the water services in
Germany. Probably they are misunderstanding what they think
is their tactical refinement to get the train under control.
Modernisation so far shall be the result of a nationwide
process of benchmarking. It is not clear whether it shall be
made obligatory or not.
The process of selling public property already started during the 1970s, accompanied by a continuous change in the
interpretation of the role of the state in general and of the particular significance of the public enterprises. The promoted
market orientation as an all-out mechanism of public and individual conduct replaced the specificity and the understanding
of public services and common goods. The citizen turned into
the customer with his well-trained sense for prices.
The public, respectively the local citizens/consumers, seldom take care of changes in their local Stadtwerke or waterworks. Privatisation has become a somewhat normal process.
As a rule, people are not informed in advance about privatisation or one of the numerous cross-border leasing treaties in
their cities. In several cases, administrations directly hid their
intentions or lied to the public.
Nationwide attention was only given in 1999 to the 49,9% privatisation of Berliner Wasserbetriebe (BWB), which have
freshwater and sewerage in one hand, although the parliament
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only got very little knowledge of the treaty. It favoured RWE,
Vivendi (later renamed Veolia) and the insurance company
Allianz, which sold its share some years later, in a hitherto
unknown manner. The group got a guaranteed 9% payment of
interest upon the capital invested, irrespective of the actual
economic performance. The investment of €1,6 billion was
overpaid, but a so-called strategic investment into the emerging
water markets in Eastern Europe. BWB has lifted the water
price 15% higher in 2005 and the private investors are striving
for further increases.
Following the figures of the dominating multinationals,
they supply 27 million people through companies that are partly privatised or have engaged the big companies or their
numerous subsidiaries as operators. EON as a holding is
engaged in 138 companies, RWE in 84 and 11 are shared by
both. The next in the number of shares are Gelsenwasser (21),
EnBW (19), the French Veolia (5) and the French Suez/Ondeo
(2). The influence of the French big two still is limited to the
eastern parts of Germany.
Since privatisation has become more controversial, and
sometimes too expensive, the official policy from Berlin to
Brussels prefers the term public private partnership (PPP). It is
designed as a more elegant way to take private profit from public subsidies of all kind and to rely upon the guaranteed security of municipal services. Public enterprises, which see themselves as integral part of capitalist market movements, sometimes feel proud to blow the PPP horn.
The Stadtwerke, 850 of which are producers of energy, are
involved in the new energy market competition. Water is still
protected in its monopolistic structure by cartel law. But as a
part of the whole Stadtwerke system between the pressures of
fiscal poverty and the efforts to improve the efficiency, they are
undergoing a silent commercialisation. The water-only compa90
Reclaiming Public Water
nies in public property are not exempted from this policy of
This means less investment in new installations, plants and
pipelines, less means for maintenance, fewer employees, less
training, less know-how and, in the long run, the loss of a specific professional sense of responsibility. It is a corporate quality and may be seen as the equivalent of an involvement by civil
society in public enterprises – at least as long as it works.
People normally do not realise the transformation in the public services and until now only a minority has learned that all
citizens are directly affected by privatisation, which takes away
their public goods. But there is a growing consciousness that
some things are going wrong and people are learning that they
can differ from authorities, most of the mass media and the
ideology of competition. People are also beginning to learn
from successful opposition to privatisation in their own and in
others’ cities.
In Germany, citizens have fairly good opportunities to
exact political influence, especially in local affairs, through the
referendum. It comprises two or three steps with commitment
for the local authorities. In 2001, in the large town of
Düsseldorf, about 90% of the votes were against the privatisation of the Stadtwerke AG. In about a dozen referendums concerning water services, no one favoured privatisation. The last
one took place in Hamburg during August 2004 against the
threat of privatisation of the oldest municipal waterworks in
continental Europe. The local initiative collected 147,000 votes,
two times more than necessary. Following the vote, the city
council on November 24th 2004 accepted a resolution banning
any kind of privatisation, which will be transformed into law in
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2005. This will resemble the decision which Vienna (Austria)
made in 2003.
Local initiatives from big and middle-sized cities like
Munich, Stuttgart, Augsburg and Kassel in 2003 started cooperation in a network against water privatisation named
“Wasser in Bürgerhand” (water in citizens´ hands). It is supported by environmentalist groups, the trade union of public
sector workers, ecclesiastical and developmental aid groups and
some people from public enterprises. But the co-operation is
only loose and has not reached practical, mutual support or a
nationwide bundling of public address.
In Munich there is a remarkable unison between the local
government, the sewerage services and the anti-privatisation
initiative. The Stuttgart Water Forum has tried to stir the public mind to make the privatisation of the municipal shares in
the two water distribution systems undone. The Augsburg
Water Alliance, after a referendum and negotiations with the
municipality, got the municipal council on March 25th 2004 to
refuse to privatise any of the water and sewerage services.
Moreover, they fixed a target to use profits only for the maintenance of the water systems and for water protection.
The website www.privatisierungswahn.de gives support
against neo-liberal policy and Attac Germany has adopted the
subject on its website as well.
A completely different approach to possible privatisation
has been practiced in the small town Herten, with a debt of
€75 million. Starting in 2002, the local Stadtwerk, which makes
a profit, has sold personal bearer loans of between €1,000 and
€20,000 to customers with a fixed interest rate of 5%. They can
be terminated after one year and are somewhat similar to normal fixed investments.
Meanwhile, about 950 people have brought €10 million into
the municipal coffers to finance infrastructure measures such
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as the modernisation of the local bath. This now closed investment raises the public interest for municipal affairs but does
not give any right to exact control over the public enterprise.
The model, although prominent, has not found a successor.
Another idea is derived from the pension funds in the steel
and chemical industry. The so-called blue pension fund shall
combine the property of parts of waterworks with the guarantee of safe old-age insurance. Starting with the employees of a
company who give their private insurance rates into the company, other people also may invest in public waterworks, the
return on investment paid in fixed interests. This would mean
"ethical" investment and the security of a company that is
independent from private market uncertainties and failures.
The idea till now has not been further developed.
Hans-Werner Krüger works with Hamburger Wasserwerke
(the water utility of Hamburg).
Reclaiming Public Water
By Alberto D. Muñoz
During the 20th century, delivery of water and sanitation services in Argentina went from private to public and back again.
Private water management got a boost in the bigger cities at the
end of the 19th century as a result of cholera epidemics, but in
the 1940’s water became public. A national water services company (Obras Sanitarias de la Nación) was established, covering
the whole country. During the military dictatorship of the
1980’s, this company divided into regional utilities such as
DiPOS in Santa Fe, EPOS (later renamed DAS) in Cordoba
and OSN in the Federal Capital and Buenos Aires.1
The new privatisation wave of the 1990’s made it possible for
a single transnational corporation, Suez-Lyonnaise (together
with a local financial operator, Banco de Galicia), to “skim” the
emergent market and take over the most attractive Argentinean
contracts. In 1993, Suez got the concession for Buenos Aires
(Capital Federal and 17 other parts of the urban area of the
Buenos Aires region in 1993). In 1995 it got the Province of
Santa Fe (Rosario, Santa Fe and 13 other of the most important
cities except for Venado Tuerto, where it was needed to invest
before making profits), and in 1997 Cordoba (Capital of the
Province of Cordoba). It is worth mentioning that the water net1 DiPOS stands for Dirección Provincial de Obras Sanitarias (Regional
Directorate of Sanitation Works) EPOS means Empresa Provincial de Obras
Sanitarias (Regional Company of Sanitation Works), while DAS is Dirección de Agua
y Saneamiento (Water and Sanitation Directorate).
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work of the city of Venado Tuerto was built and managed by a
local co-operative at a much quicker rate than that of the subsidiary of Suez (Aguas Provinciales de Santa Fe S.A.) in the other
15 cities that it runs in the province of Santa Fe.
The other big water transnational, Veolia (previously known
as Vivendi), is also involved, although to a lesser extent. Veolia
has water concessions in the province of Catamarca, but the
company is also a minor shareholder (together with Anglian
Water) in Suez´s subsidiary Aguas Argentinas S.A. in the
Federal Capital and the other 17 districts of the Buenos Aires
province (the world’s largest water concession in terms of
number of inhabitants). This demonstrates that competition in
the water market is a fallacy.
Several privatisation contracts in Argentina have already
been terminated, for instance Vivendi / Veolia’s concession in
the province of Tucuman. Another is the concession inland of
the province of Buenos Aires previously run by Azurix, the
water and sanitation arm of the collapsed giant corporation
Enron (see “Argentina: Worker’s Co-operative Takes over PostEnron”). There are also other local private companies that
operate here, such as the ones in the provinces of Rioja, Salta
and Corrientes.
During the 20th century, the very strong agricultural co-operative movement in Argentina diversified into other fields such as
public services. This was often the result of the changing needs
of villages that grew into cities.
Water and sanitation co-operatives developed strongly during
the 1960’s and 1970’s and nowadays these co-operatives are
responsible for water and sanitation services in most Argentinean
cities with less than 50,000 inhabitants. Around 60% of urban
Reclaiming Public Water
water delivery is in private hands (mostly run by transnational corporations), while respectively 20% and 11% is supplied by municipal public utilities and co-operatives (which means over 4 million
people). The remainder is supplied by neighbourhood associations and users unions of different kinds.
In the privatisation process of the mid-1990’s, the co-operative movement was not only denied the possibility of participating as an alternative, it was effectively excluded. The views
of users and local authorities in the affected cities were never
taken into account. The possibility of restructuring and modernising the existing companies was not even considered.
Indeed, article 18 of the 11.220 Act of privatisation in the
province of Santa Fe states that, “for the selection of the concessionary, the preferences of the article 31 of Act 10.798 are
not applicable”. This meant that, in practice, municipalities,
communities, co-operatives, users or water unions and smaller
water companies were ruled out.
Many of the cities with a privatised water concession border cities with a well-functioning water and sanitation co-operative which would have been capable of running these utilities
as well. The city of Avellaneda, which shares a border with
Reconquista in the north of the province of Santa Fe, is one
example where the government clearly preferred to benefit a
single transnational company, Suez. A number of co-operatives
have also been prevented from providing a service by local
political authorities as a step towards privatisation (for example, the city of Funes, near Rosario), and some other co-operatives that were already providing services such as electricity or
telephones were never allowed to expand into water and sanitation delivery.
Still, water co-operatives and local community and neighbourhood-run utilities constituted a barrier to privatisation
policies for two reasons. First, because of the economies of
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scale that big companies need for their profits (much higher in
other countries than those they have in their countries of origin); and second, because of the stronger resistance that smaller communities posed in giving up utilities that were built with
their common effort, and of which people felt ownership.
Around 2,000 water co-operatives from various parts of the
province met in October 2000 in Buenos Aires and in March
2001 they established the Federation of Drinking Water Cooperatives of the Province of Buenos Aires (FEDECAP).2
Soon after the provincial government, with the participation of
the workers, regained control over the water utility that was
previously run by the Enron-subsidiary, Azurix (see
“Argentina: Worker’s Co-operative takes over post-Enron”).
These developments represented a strong step forward in the
recovery of public space and social control.
In the province of Santa Fe, on the other hand, the regulatory body controlling sanitation services (ENRESS), has a very
rigid and biased attitude towards the 114 water co-operatives,
eight municipal utilities and 76 community companies, many of
which provide a service of better quality and for less cost than
do the privatised companies. ENRESS seems determined to
serve the privatised companies by writing off their fines and
raising tariffs. Strong pressure is exerted on the water co-operatives by these supervising bodies to force them to adopt the
same conditions of supply as the privatised companies, which
undermines one of their main comparative advantages: a more
social approach towards the users.3 The co-operatives are now
under pressure to:
Federación de Cooperativas de Agua Potable de la Provincia de Buenos Aires.
Regulatory bodies like ENRESS were established to control the privatised companies, but also have authority over municipal utilities and cooperatives. They use regulation, fines and restrictions to enforce supply conditions identical to those of the private water companies.
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• Increase the price of new connections, something which cooperatives offer cheaper than private companies.
• Implement a policy of compulsory connection and payment
for vacant lots and houses, something many co-operatives do
not apply or only charge symbolic rates for.
• Increase the total amount of billing, either per cubic metre of
water or in the fixed charges.
• Standardise payment procedures, which are more flexible at
the co-operatives.
These regulatory bodies do not exercise similar pressure on the
privatised companies to comply with the objective of universal
access to water and sanitation. Private companies oppose
micro-measurement because profits are higher when they continue billing according to an estimated consumption based on
the amount of cubic metres.
The neoliberal ideology of the 1990’s also affected the cooperative movement directly. Some co-operatives changed the
founding ideas of solidarity and co-operation to adapt to the
conditions of market competition. This happened either in
order to survive or simply to benefit the interests of the ruling
leadership, which in some cases was co-opted by conventional
political parties and the neoliberal thinking that dominated the
debate. Other co-operatives diversified their activities and managed to consolidate and prosper without giving up the founding principles of the co-operative movement.
Natural resources, including water, belong to the provinces and
are governed by legal frameworks that are different in each
region. This, together with the dismembering of water and
sanitation companies, poses serious challenges for the efficient
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and sustainable management of water resources which, as we
all know, does not usually respect political divisions. The differences in legislation, shaped to facilitate the privatisation
process and the commodification of water, are contradictory.
For instance, there are different quality standards for different
regions. This ultimately divides Argentineans into first class citizens (with a quality level similar to that in Europe or the
United States) and second-class citizens.
Water co-operatives face problems with the quality of the
water, such as the arsenic pollution that is frequent in the north
of Buenos Aires, the eastern part of Cordoba and south of
Santa Fe. Other problems are pollutants derived from agriculture which uses more and more pesticides and hard waters. In
addition to this, the financing of infrastructure for collecting
wastewater and primary and secondary treatment plants is a
major hurdle for a lot of co-operatives. Many co-operatives
have chosen small, reverse-osmosis plants that allow them to
distribute a family quota in barrels for domestic use, and keep
the network water for other uses. Building big aqueducts from
the main rivers is the only solution to these problems.
As for the finances that co-operatives need for expanding,
they depend on public money. Over the years they have also
had the support of the Inter-American Development Bank
(IADB), first through the so-called SPAR (Provincial Service
for Rural Drinking Water and Sanitation)4 and more recently
from ENOHSA (National Body for Water and Sanitation
Works)5, that gives technical and financial assistance together
with the Federal Council for Sanitation.
After 15 years of neoliberalism, it will take a long time to
rebuild a public sphere in Argentina. Our alternative to privatisation is public-owned and publicly managed water utilities
with users participation in the decision-making. This can take
diverse forms, including co-operatives.
Water co-operatives in Argentina represent a realistic alternative model to the commodification of the sector. Clearly, cooperatives should not be idealised: the numbers of users who
actually use the option to participate is often low. Still, they are
much closer to the average citizen and subject to democratic
control and pressure than are large, private companies.
Co-operatives have demonstrated they can be efficient
providers in cities of less than 50,000 inhabitants and have
good quality services and more affordable prices. They have
been marginalised until now, but will hopefully be considered
as a serious option also in big cities in the future.
Alberto D. Muñoz works with the Users and Consumers Union (Unión de
Usuarios y Consumidores) and the Provincial Assembly for the Right to Water
(Asamblea Provincial por el Derecho al Agua), Rosario, Santa Fe, Argentina.
Servicio Provincial de Agua Potable y Saneamiento Rural.
Ente Nacional de Obras Hídricas de Saneamiento.
Reclaiming Public Water
Reclaiming Public Water
By Hildebrando Vélez
Bogotá is situated on a broad plateau in the equatorial Andes. About
seven million people live at an altitude of 2,600 metres. Bogotá is an
example of what happens in the cities of southern hemisphere countries where violence, social and economic inequalities, marginalisation
and insecurity are daily features. Subjecting their inhabitants to poor
and scarce public services is to create the risk of social upheaval.
There is no doubt that, due to the rapid destruction of the water
sources, the uncontrolled deployment of the freatic waters that are
the only reserves, and the general pattern of use and abuse of available sources, the threat to the drinking water supply is increasing.
Despite improvements in the last decade, there are still people in
Bogotá who do not have adequate amounts of water of the quality
that they demand. Moreover, if the city’s demographic trend continues, in the next 20 or 30 years the demand for drinking water will
double. Where will this water will come from? What are the efforts
needed to avoid this? These are the questions public services
providers need to answer.
The situation in a country like Colombia is such that without
good public services, peace is threatened. But a precondition for
obtaining good public services is democratic access to economic and
environmental wealth. Services must also be considered to be the
fundamental right of every person. A study of the National
University of Colombia reveals that 66% of its 44 million citizens are
poor, while half of the wealth is in the hands of the richest 10%.
Popular sectors who fight for public services also fight for democracy.
Reclaiming Public Water
Privatisation has a direct influence in the fundamental rights
of the people. In many countries, privatisation took place to
create resources to pay the external debt interests acquired, in
many cases, by dictatorial regimes and corrupt governments,
generally without public consent. In South America, water
market liberalisation and the privatisation of public services
have benefited TNCs and big national companies, while access
to water services has decreased due to the significant tariff
increases and reduction in investment.
It’s not possible to show here all the problems associated with
water in Bogotá, but we can sketch the conditions and features
of the public service supply to a city with over seven million
inhabitants. The mission of the Water and Sewerage Company
of Bogotá (EAAB)1 is to contribute to the improvement of the
quality of life of the city and the country through a committed
team providing an efficient supply of water and sanitation that
is of a high quality and makes a profit. Its goal is to capture,
carry, treat and supply drinking water, as well as recollect and
treat waste and rainwater. This goal is achieved despite the fact
that the utility does not purify water. Fulfilling this goal guarantees that citizens do not see their food, health, environmental or political security threatened.
In the 1990’s, progressive mayors in Bogotá refused to privatise water, despite continued pressure from the World Bank.
Instead, they successfully transformed EAAB into one of the
most efficient and equitable utilities in Colombia, if not Latin
America. Expanding water delivery to poorer neighbourhoods
was the highest priority. By 2001, 95% of the population had
Empresa de Acueducto y Alcantarillado de Bogotá.
Reclaiming Public Water
clean tap water while 87% were connected to the sewage system - quite an achievement considering the rapidly growing
population. The expansion was financed by introducing a progressive tariff system in which the city’s wealthy pay up to
200% of the actual cost of their water. The poorest pay affordable, subsidised rates. At the same time, educational campaigns
have reduced water consumption per person by around 30% in
ten years.2
EAAB has an external and internal debt of $800,000 million (approximately US$350 million) and a three-year-old loan
with the World Bank for US$200 million, negotiated under the
Astrid Álvarez administration and approved by the Council of
Bogotá. The money from these loans will be spent on expansion, service and coverage increase.
The Constitution of Colombia establishes that public services are “inherent to the mission of the state” and that it is its
“duty to guarantee an efficient supply to all the inhabitants of
the national territory”. Contrary to what neoliberal orthodoxy
establishes, the state can offer better results than private business between individuals through the market. The state can
guarantee that those services are provided with clarity, with
continuity, with security and at an affordable and fair price, in
accordance with the social conditions of the people who
receive them.
That is why the Water and Sanitation Utility of Bogotá,
EAAB, aims to be a leading public company rooted in society.
To guarantee that this utility continues operating is, in some
way, to resist the neoliberal business model imposed on our
countries by transnational corporations. Models imposed generally on countries other than those of their origin, which
2 Garland, Sarah. 2004. Keeping it public in Bogotá in NACLA Report on the
Reclaiming Public Water
encompass colonialist and archaic methods. To ensure the survival of the company is not an easy task, as that model can easily slip through the cracks. For instance, Petrobras, a company
of which the majority of its capital is Brasilian, operates in
other countries in the region by imposing worse conditions
than many of their competitors from northern countries. To
be a public company does not guarantee that it follows democratic procedures and acts ethically.
Unfortunately, some of the measures applied by EAAB follow
the same model. For instance, the labour model of private
companies abuses the outsourcing of labour, and so has
EAAB. It imposes a flexible model with workers tied to precarious contracts through third parties that bring instability and
social insecurity. The fragmentation of the business and the
handing of some tasks to private companies, who are not
required to follow labour and social standards, only economic
goals, is the model that EAAB follows. This is a slow way of
adapting to the privatisation processes by promoting market
EAAB has no shareholders as it is a public company.
Nevertheless, one of its corporate goals is to make a profit
through good financial performance. To collect the water fees,
the company has created five zones and each zone has been
given to a private operator, who does the commercial management and oversees customer relations. They are expected to
optimise operations and to reduce both the losses and the time
spent in attending to customers. Those operators collect, on
average, US$4,368,023 per zone per month, a total monthly
income of approximately US$20 million. Research shows a significant financial surplus could be achieved by taking action
Reclaiming Public Water
against clandestine connections, undermeasuring, leaks and
faults in stratification, that would provide new resources not
yet used.
The increased use of specialised commercial operators is
intended to reduce and control operational costs. It is expected that, in this way, the company gets access to the specialised
knowledge that the operators possess and improves the focus
of the utility itself on the integral control of the processes.
One of the central things those operators oversee is the
improvement of the service. Such improvement will be measured by various indicators: reduction of complaints, dealing
with all complaints, efficiency in dealing with complaints and
less time for repairing minor damages in tubes smaller than
three inches. The Water Regulation Commission3 says 60% of
the time is spent on fixing breakdowns and this is paralysing
the company.
Among the official goals of EAAB is for citizens to feel
ownership of the company, but the image of public participation that it promotes is not the reality. The utility spent $3,200
million on a change of image and a public relations campaign
to announce the establishment of new systems of management. This simply served the purpose of promoting the new
processes which had been handed to private operators. It is
obvious that the reality is not management in the hands of the
public, but is private economic actors now taking over the role
previously played by the company. However, it is also true that
the citizens of Bogotá did not show any organised opposition
to these changes.
This process of privatisation of management goes together with granting concessions. Following the Performance Plan
of 1993, EAAB granted the concession for the water treatment
Comisión de Regulación de Agua, the national regulatory body.
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plant of Tibitoc for 20 years to the French transnational water
giant, Generale d’Eaux (Veolia). This twisted process of privatisation is one of the biggest conflicts the company currently faces. Both the local municipality and the district council
want to reverse the concession and give a new direction to the
company as a municipal public utility.
There is no process that has citizens controlling the performance of private operators and the utility itself. Recently, a number of consumer organisations, environmental and popular
groups initiated a movement to defend the national wealth and
the right to public services. It operates nationally and is gaining
political weight.4 As part of a nationwide campaign in defence
of public services, grassroots groups, farmers, human right
organisations, neighbourhood associations, students, community mothers and others joined forces. A demonstration by this
movement took place on December 10, 2004 in Cartagena. On
the international day of human rights, hundreds of people
took part in a bike caravan, with drums and cultural activities
to defend public services and to demand that public companies
return to the state.
The Council of Bogotá is responsible for exercising political
control over the district administration and its companies. But
the involvement of councillors in the past has been mostly
about political ruling of the companies and enjoying the
bureaucratic quotas derived from such ruling. Some councillors
even participate in contracts through straw men. This reduces
the capacity of the local government to fully comply with their
duties and limits the autonomy of the company.
Some of the conflicts that EAAB faces are related to other
national entities, such as the conflicts with the environmental
authorities, the ministry of environment, CAR and DAMA
(administrative department of environment). Those are due to
the conflict and definition of competences and to the clash of
interests about benefits and investments connected with the
water treatment plants in which French transnationals and
national contractors are involved.
EAAB has shown it has the capacity to attend to the service
demands beyond the city where it sells bulk water competitively. At a national level, it participates in contracts in local aqueducts of the municipality of La Calera and part of its strategy
is to offer technical consultancy services and to develop new
projects and studies. By using the income provided by this, the
company hopes to get investments for improving the water
service and the sanitation of the city, and to negotiate a new
agreement with the Water Regulation Commission over the tariffs system. EAAB, as part of its strategic plan, has established
“Aguas de Bogotá Internacional” with the goal of competing
in markets such as Ecuador, Peru and Morocco. This would be
a further step towards commercialisation and undermining
EAAB’s identity as a public water utility.
Hildebrando Vélez is with Censat Agua Viva
(Friends of the Earth Colombia)
See www.censat.org
Reclaiming Public Water
Reclaiming Public Water
By Antonio Miranda
Recife, with 1,5 million inhabitants, is the capital of
Pernambuco State, in northeast Brazil. More than two thirds of
the population lives in poverty, half of these below the official
poverty line. Recife is at the coast with more than 60 rivers,
channels and creeks within the city’s perimeter – including the
largest urban mangrove in the world – all of them totally polluted with sewage. Only 27% of the population is serviced by
sewers, and less than 10% have even basic treatment. In addition, Recife has had water rationing through scheduled cut-offs
for the last 21 years. About 12% of the population is not regularly connected to the water pipes.
This dramatic situation is the result of the municipal government not regulating and controlling these services’ delivery
– though it is the body responsible according to the National
Constitution – but it has been left to be done by a state
(provincial) level public utility named Compesa. This utility has
had a poor performance, in general, due to a number of factors. Compesa was one of the state public operators created
during the military dictatorship, during a period of total lack of
interest in municipal participation or, of course, any kind of
popular participation. Not surprisingly, Compesa has been the
worst state public services’ provider for the past few years.
Reclaiming Public Water
In 1999, the state governor decided to privatise Compesa with
the silent acquiescence of Recife’s mayor at that time. The people were so angry with Compesa that this idea was supported
by important, key players. But the municipal elections in 2000
brought a new dimension: The Worker’s Party candidate, Joäo
Paulo, was elected for a four-year mandate. Clearly committed
to a social agenda, with an anti-neo-liberal approach, Paulo
decided to take up the challenge and get the municipality
involved in the water and sanitation issues. The first ever
department of municipal water and sanitation services was
established and his very first institutional position was to
declare his opposition to Compesa’s privatisation. This
announcement literally stopped the process.
There were a number of reactions attempting to link this
position to a possible worsening of services. A little later, a
negotiation for a US$84 million loan from the World Bank for
infrastructure investments in Recife and the neighbour city of
Olinda, through the state government, brought up the issue of
water services’ privatisation again. The World Bank insisted on
privatisation as a pre-condition for the loan. The mayor’s position was clear and firm: Recife would not accept this. On the
contrary, the city hall offered a new institutional arrangement
to improve Compesa’s performance, keeping it as a public
provider and under social control mechanisms. The negotiations almost finished then, but eventually Recife’s proposal was
accepted by the World Bank. The loan was signed in 2003 with
no mention of privatisation.
Reclaiming Public Water
Due to people’s lack of satisfaction – mainly, the poor – it was
hard to defend the continued existence of Compesa. The
issue’s complexity and its various scenarios drove the municipality to launch a so-called “First Municipal Conference on
Water and Sanitation”, a seven-month long process which
involved 4,000 people in 20 meetings at neighbourhood level,
starting in 2001 and finishing in 2002. During this process, the
4,000 participants elected almost 400 representatives for a
deliberative session. Among these representatives, there were
ordinary people (more than 60%) and others organised in civil
society organisations (about 27%). The government’s representatives – from federal and state and municipal levels – had less
than 7% of the voting power. Such numbers show by themselves the value of the popular participation in a deliberative –
meaning decision-making – process.
Of course, all of the representatives received all the information needed to make their own choice on several issues
around water and sanitation matters. During those seven
months, capacity-building instruments were by and large
implemented. Workshops, seminars, articles, press releases, lectures, arts, all of the tools for improving knowledge, were used
so that representatives had both pro-privatisation and anti-privatisation information.
At the end of the conference process, more than 160 decisions were voted on and approved. The main ones were: to
oppose the privatisation of the water and sanitation services in
Recife; the maintenance of Compesa as the provider, but
under strict regulation and control of the municipality; the creation of the municipal council of water and sanitation as the
major body for strategic decisions in this regard; and the creation of a statutory body at the municipal level for the execuReclaiming Public Water
tion of a number of services, complimentary to Compesa –
mainly works and services at slums, the most urgent and
important problem to be faced.
The way to convene Compesa and the municipality is a
“concession contract”, on which all the rules, goals, roles and
penalties will be established. With this arrangement, the institutional model seemed to be theoretically designed, with the
legitimacy of a very democratic decision-making process. But
what did Compesa and its owner – the state government –
think about it all?
First of all, we realised that there would be a better environment for negotiations if we could have some kind of pilotproject. There was a good basis already in place: co-operation
between Compesa and the municipality for a community of
more than 30,000 people, aiming to rebuild and to expand an
existing water and sewers network, virtually not-operated and
not-maintained. The selection of this community came from
the mayor and was proposed to the state governor – although
they are political opponents, both are directly involved in commitments for administrative partnerships for the benefit of the
people. A few political analysts trusted this declared willingness, but the implementation of this commitment did come
very quickly on a number of areas – urban transport, housing,
etc. This happened despite clear opposition from within
Compesa on the issue of water and sanitation, mainly due to
corporative reasons – for the previously “untouchable”
Compesa, this negotiation is no less than a threat. At the time
of writing, the negotiations for the constituency of the concession contract were developing very well, with perspectives to
be concluded and signed in March 2005.
Reclaiming Public Water
The main goals of the concession contract will be related to
the time frame for universal coverage of quality services. In the
case of water supply, the initial proposal is to end the scheduled cut-offs within the next five years; for the sewage, coverage of 100% (with proper treatment) within the next 20 years,
according to priorities defined by the “participatory budgeting”, which exists in Recife as well as in Porto Alegre. At first
sight, 20 years might seem too long a time, but it means more
than 55,000 people per year added to the network – a huge
number, even for a city of 1,5 million people.
Other goals are related to the tariff structure and prices: to
guarantee the right to water, taking into account the payment’s
affordability; to the operation and maintenance standards; to
the transparency and accountability of the service’s delivery as
a whole, which will be one of the most important concerns of
the municipal council.
Today, Compesa makes a surplus in Recife which is transferred
to more than a hundred small towns throughout the state of
Pernambuco. This inter-municipal subsidy, though a good
source of resources for small communities, is very unfair from
the perspective of the poor people that live in Recife. The use
of this surplus will be carefully examined and the open and
transparent decisions that will be taken by the council must
consider the interests of those who need improvements most,
regardless of the city in which they live. We believe that, with
this criteria, Recife will have a lot more investment. Also, there
is already a considerable amount from the city budget – a decision resulting from the fact that investments in water and sanReclaiming Public Water
itation mean a large amount of savings on public heath care.
Nonetheless, investments in water and sanitation are expensive (and long term) enough to require loans with long-term
amortisation, from both national and multilateral banks and
agencies. Of course, harsh pre-conditions must be refused and
fair interest rates must prevail, but the fact is that the balance
of power is not favourable yet.
The key for the sustainability of these services is actually the
municipal council on water and sanitation. Democratically constituted and pro-consumer oriented, all the issues – coverage,
quality, maintenance, prices, etc. – will be under its control. The
decision taken at the first conference was that only 25% of the
votes of this council will come from the government. Another
25% will come from labourers and 50% from civil society representatives (organisations and individuals). Once this model is
established, the “blackbox” will be permanently open, avoiding
political manipulation of the management – including tariffs
and all other strategic decisions.
Certainly, a global watch on experiences like this is the most
effective way to deliver and to bring new ideas and shared
experience, and to constrain governments from dismantling
good (transparent and accountable) mechanisms of popular
participation. To be naïve is not an option for those who still
dream to make this world a better place, but with both feet on
the ground.
Antonio Miranda is head of the
Municipal Water and Sanitation Services, city of Recife.
This new arrangement means a rebalancing of power. From
the municipal side, there is a strong willingness to transfer the
decision-making power to the municipal council. This will
hardly be a priority for Compesa – the more power Compesa
has, the less the council will interfere. So, the main threat
comes from the possible – and probable – opposition from
Compesa. Again, once established, democracy will drive the
process; sometimes for the better, sometimes for the worse.
The opportunity that will come from this experience has a rev118
olutionary component – together with the participatory budgeting, there will be a mix of direct and representative democracy working not in opposition, but in harmony.
Reclaiming Public Water
For more information, write to [email protected] or visit the following websites:
www.recife.pe.gov.br (Portuguese only),
www.assemae.org.br (Portuguese only)
Reclaiming Public Water
By Luis Sánchez Gómez and Philipp Terhorst
This “million dollar” question is spray-painted on a wall in
Villa Sebastián Pagador, a poor neighbourhood in the southern zone of Cochabamba. It echoes the concern shared by
many who hope the victory over the U.S. water multinational,
Bechtel, can be transformed into a long-term success for
SEMAPA, a public water and sewerage utility of Cochabamba,
There are strong forces who want to see SEMAPA fail
because it stands as proof that popular struggle can indeed
open paths for viable alternatives to privatisation. The defeat
of water privatisation was the first step in SEMAPA’s ongoing
bid to create a public service that is transparent, efficient,
based on participation and builds social justice. These are the
four pillars for “SEMAPA of the population”, the proclaimed
objective of the Coordinadora del Agua y de la Vida (Coalition
for Water and Life).
However, the construction of a new model of public management and participation has proved to be very complex and
riddled with problems. The lack of finance, interference by
state institutions, party politics, corruption and conditions
imposed by international financial institutions (IFIs) are just
some of the hurdles the new SEMAPA faces. As a result,
progress in improved access to water and sanitation has been
slow. SEMAPA’s main challenge now is that it needs to
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strengthen as a public-popular partnership and deliver the
improvements the people want and need.
Cochabamba’s municipal water and sewerage services (SEMAPA) were privatised in September 1999 and sold to Aguas del
Tunari after pressure by the World Bank and an obscure tendering process. At the end of 1999, the people of Cochabamba
mobilised in response to the disastrous record of the U.S. corporation, Bechtel, which controlled Aguas del Tunari.
Privatisation had resulted in dramatic water tariff increases and
the expropriation of community water systems. Bechtel had
made excessive profits, 15% real return, in the secret privatisation contract that was illegal at the time, but made legal later by
a pro-privatisation law (Law 2029) drafted by the German
development agency GTZ. Civil society groups, trade unions,
irrigation farmers and water committees formed the
Coordinadora del Agua y de la Vida (Coalition for Water and
Life), in response.
The Coordinadora’s modest initial demands for tariff
reductions were not heeded by Aguas del Tunari or the city
government, but were met with hostility and repression by the
police and military. Public pressure increased and, in a referendum organised by the coalition, 50,000 people demanded the
end of privatisation. In April 2000, the water war culminated in
a weeklong general strike that shut down Cochabamba and
triggered heavy government repression, leaving hundreds
injured and a 17-year-old boy dead. The result was that people
turned out with more determination. Finally, on 11 April 2000,
the government conceded defeat and Aguas del Tunari fled.
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The demands of the Coordinadora were met; Aguas del Tunari
had to leave, Law 2029 was recalled and later rewritten (Law
2066) and SEMAPA returned to its former municipal control.
The Coordinadora joined an interim directorate with the trade
union and the local government and thereby gained partial
control to decide on the future of the utility. The public company was rescued from immediate collapse and a new general
manager, chosen from the ranks of the Coordinadora, started
to build a more democratic public service. The victory of the
water war made possible a more democratic management led,
to a large degree, by the citizens’ organisations. However, while
local government was largely disruptive, co-operation with
workers and trade unions was crucial but so difficult it, in fact,
stalled rather than helped the process.
On the basis of a participatory process, civil society organisations and other groups developed proposals for the reformation of the statutes of the municipal, corporatised public water
company SEMAPA. The Coordinadora wanted to establish
popular participation and control through elected citizens
being the majority on the board of directors. This proposal was
blocked by the trade unions and local government which has
allowed the board to be controlled by the New Republican
Force (NFR), the party in control of local government, a sore
issue in SEMAPA’s politics. Nor did the Coordinadora succeed
in removing SEMAPA from municipal ownership and regulation by state authorities to gain more operational freedom.
Despite the setbacks, in October 2001 radically new statutes
were passed by the interim board and in April 2002 the first
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secret and free elections for the board were held. Three out of
seven board members were elected by the residents of the
southern, central and northern areas of the city and, for the
first time, SEMAPA’s trade union had a permanent seat on the
board. Another seat was given to the College of Professionals
and the mayor controls two seats, one of which is the chair of
the board.
The new statutes were a hybrid of the former municipal
ownership and citizen control and reflected the powerful
dynamics of the time. The Coordinadora, of course, had
hoped for wider-sweeping changes but after the water war it
became more and more difficult to mobilise supporters, who
were “distracted” by other erupting social issues in Bolivia.
Despite this, the Coordinadora assured that popular participation was not limited to the official OTB structures (stateinduced level of local participatory democracy, mostly in the
hands of political parties) but was to be based on direct and
secret elections and open to informal organisations such as the
water committees. Article 15 of the new statutes incorporated
popular participation and control, a right that remains to be
fully operationalised in the future.
The changes were significant, not just for their actual outcomes but for the way in which they were brought about by a
coalition of social movements and civil society organisations
(CSOs). But a major point is that the democratic reforms in the
management need to be sufficiently formalised and explained
within the utility and its workforce in order to be effective.
Public participation has, in fact, been minimal since the water
war and political interference has been high, especially by the
New Republican Force (NFR) and the Cochabamba mayor.
Democratic management in SEMAPA is now assured by
the representatives of the directorate and the main drivers
from 2002 to 2004 have been the water committees in the
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southern zone. How to extend the earned rights to participation in governance and management and to operate effective
public control to get more efficient and fair service delivery are
issues currently on the agenda.
An important step is the creation of a unit for “vigilance and
social control” within SEMAPA. This should be independent
and made up of a mix of civil society and SEMAPA itself and
have the right to investigate incidences of corruption or inefficiencies and malfunctions. The idea is to create a method of
control by civil society so that, via public vigilance, SEMAPA
develops more fully into a “company of the population”. The
unit is to complement the representatives on the board of
directors, and partially fulfil the notion of participation in management but also the aim of social control expressed in Article
15 of the statutes.
Apart from the fact that this unit has been rejected by the
board so far, a further sign that SEMAPA has a long way to go
is the high incidence of nepotism. An internal review found 52
cases where family members had been employed at all levels,
from directors to street level workers. The fact that this is being
tackled is a sign of improvement but it will take time and effort
to transform the culture of public service within SEMAPA.
The major debt inherited from the previous owners make the
expansion of services to the urban poor and the increase of
water resources, ie, by reducing leakage, dependent on loans
from international financial institutions. The main problem for
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SEMAPA is that most IFI’s are unwilling to invest in
Cochabamba because they disagree with the idea of a public
company being in the hands of the people and with the antiprivatisation struggles that have occurred. Finance institutions
will only invest in Cochabamba with stringent conditions, such
as creating a semi-private company, which would reverse the
gains of the water war.
Despite this, the Inter-American Development Bank
(IADB) did agree to a loan. Though this was a major achievement, the conditions are restrictive and hinder progress. The
loan has a first phase of US$3,8 million ring-fenced for capacity building, reduction of leakages and management reform.
For the latter, 40% of the loan has to be spent on external
capacity building by the transnational consultancy company
Gerentech, who were chosen by the IADB. This condition
increases the debt burden for external consultancy and could
be done in-house or at least decided by the public-popular
regime itself instead of by the bank. In addition, in October
2004, a year after the contract was signed, Gerentech has not
yet done any substantial work for SEMAPA, which causes
delay for the loan procedure and thus SEMAPA’s improvements. In the second phase, the bank will invest US$13 million
for the expansion of piped water to the southern zone and
other improvements, but only after the completion of the
delayed first phase.
The second phase of the IADB loan will also only be
released if considerably more water resources have been
secured. SEMAPA is on track to fulfil its part of the deal with
the reduction of leakages and the increase of legal connections
having reduced unaccounted-for-water by between 18 and 20%
from a level of around 60%. (Water shortages and growing
demand have been long-term reasons for conflict in
Cochabamba such as during the so-called “War of the Wells”
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in the 1990s. The competing urban and rural demands have not
been resolved and overall resource management remains
volatile.) Water resources for Cochabamba will also be
increased by the Misicuni dam project which is under construction.
Most water supplies in the southern zone, a poor and marginalised part of Cochabamba, are organised through 120 water
committees, but groundwater in the zone is too saline to drink
and most households still depend on private vendors who sell
expensive and often unclean water. Unconnected to SEMAPA’s
sewerage system, these neighbourhoods currently depend on
pit latrines and septic tanks. Following the start of progressive
reforms in SEMAPA, the water committees have created an
association called ASICA-SUR in order to be collectively connected to the services of the utility. Together they have entered
a dialogue and consensus-building process with the authorities
to define a model of co-management of basic services, where
each assumes their own roles and functions. During its brief
time in charge of water supply, Bechtel simply expropriated the
wells and pipes that had been constructed by the water committees. The company only expanded the pipe system into the
southern area in return for excessive tariff increases. Today’s
constructive co-operation as a public-collective partnership
between the central utility and the informal water committees
is therefore an impressive improvement.
Because of the constraints of the IADB loan and other factors, there have been long delays in starting the expansion project. Acceptance of government agencies (such as the regulator
who decides on the concession for the expansion project) is
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also problematic as it lends legitimacy to a system of government that the Co-ordinadora opposes and had tried to avoid by
changing the ownership status of SEMAPA, for instance taking it out of municipal control. This was not possible because
of the legal constraints of the Bolivian state and also resulted
in the dependency of SEMAPA on local government. An
example of the influence by the NFR, the ruling party in the
city council, over SEMAPA is the fact that alternatives to the
expensive and environmentally controversial Misicuni dam
have never been discussed.
The project to expand the distribution system of SEMAPA
to the fringes of Cochabamba, part of the delayed phase funded by the IADB loan, includes the delivery of 200 litres of
water per second and then, in a second stage, 400 litres/second. This depends on the Misicuni development. So far the
construction work has been too slow and social organisations
in the southern zone want to increase pressure on SEMAPA
and co-operate with the company.
Another issue is that there are parts of the urban fringes
and peri-urban areas that are not included in the co-management package and still need infrastructure development.
Besides ensuring the expansion of water delivery to unconnected neighbourhoods, the new management also needs more
water resources to serve more people and improve the intermittent supply. Unfortunately, the Misicuni development is not
under control of SEMAPA but of private entrepreneurs,
although Aguas del Tunari had been granted control over it.
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The basic principle of the public-collective SEMAPA is that
social control and participation are necessary for efficiency and
both can only be achieved in tandem. The successful water war
and appropriation of SEMAPA, although limited by state law
and difficulties of maintaining grassroots pressure over time,
has demonstrated that participation via social struggle and proactive appropriation can lead to fundamental transformations,
although these will be delayed or not materialise if the environment is not conducive, ie, finance is not available. The secret of
success in the long-term will be to transform the social dynamic of April 2000 into a sustainable and effective system of
social participation that attracts long-term support from
Cochabamba’s people, something that may not be achieved at
all if the awaited investment does not reach them. Participation
in governance should be complemented with management participation and social control, for example through the Unit for
Vigilance and Social Control and the co-management in the
southern zone. Tangible improvements in services will be the
decisive factor, without which the population will lose either
interest or trust.
With the work of the Co-ordinadora, the company has the
potential to slowly develop into a transparent public utility with
a high degree of participation and sense of ownership by citizen-users. In order to flourish, it will require more external
support in terms of unconditional finance, technical support
to the CSOs and, crucially, the termination of Bechtel’s ludicrous lawsuit currently being dealt with by a World Bank arbitration panel. Their US$15 million compensation claim can
potentially destroy SEMAPA’s future.
SEMAPA also operates in the volatile political situation of
Bolivia that could prove either highly conducive or detrimenReclaiming Public Water
tal, according to whether neo-liberal elites or the populations
of Cochabamba and Bolivia keep the upper hand. Water delivery in Cochabamba remains an important political issue. The
success of the water war against Bechtel and the public-popular management have massively boosted Bolivia’s social movements fighting the neo-liberal policies of the national government in La Paz. Transforming a long-standing culture of neglect and corruption into a functioning public-popular alternative based on effectiveness, participation and social justice, is a
task that will take a long time and will have to overcome many
Luis Sánchez Gómez was an elected representative
of the southern zone on the board of SEMAPA from 2002 to 2004.
Philipp Terhorst is a PhD researcher (focusing on progressive public urban
water services) at WEDC and has worked with the Coordinadora in 2003.
Reclaiming Public Water
By Santiago Arconada Rodríguez
In February 1999, President Hugo Chávez Frías took office in
Venezuela. Between March and April he named the team in
charge of the water sector and in May this team, responsible
for drinking water and sanitation services, organised a workshop of veteran social activists. The delegates had varying
experience and were trade unionists, students, environmentalists, co-operative movement activists, academics, and came
from neighbourhood and cultural groups. Their goal was to
outline what, from June 1, 1999, was known as the Communal
Management of HIDROCAPITAL, the water company of the
capital, Caracas.
At that workshop, they discussed the experience of the socalled Water Technical Tables (Mesas Técnicas de Agua) during
the municipal government of Aristóbulo Istúriz (1993 - 1996)
in Caracas, particularly in the Antímano and El Valle neighbourhoods. Some elements of this experience were selected
and discussion of them generated a proposal to tackle problems concerning drinking water and sanitation.
This analyses the development of that proposal in the
country after its first five years of existence.
Reclaiming Public Water
Problems with the drinking water and sanitation service included not only the lack of service, but also the chaos of the water
network due to the lack of urban planning in Venezuelan cities.
This is particularly true in Caracas and the rest of the cities of
the capital area that were under the responsibility of HIDROCAPITAL.
From the start, the proposal of the Water Technical Tables
and Communal Councils was intended to re-establish the
involvement of citizens.
Until those first meetings, the relationship between communities and the public drinking water and sanitation utility (in
this case HIDROCAPITAL) was limited to demonstrations
that blocked streets and occupied offices to protest about
HIDROCAPITAL’s inability to provide drinking water. (The
Communal Management of HIDROCAPITAL began in the
summer of 1999, after the serious drought in 1998 caused by
“El Niño”.) Those first meetings acknowledged that there was
no option other than communal organisation to solve the serious problems affecting so many places.
The Water Technical Tables were a way of co-ordinating all
the knowledge the community had about their water network
with the human, technical and financial resources that
belonged to them through their public water company. This
was seen as necessary to harness the skills needed to solve the
problems and the proposal suggested a huge change.
Dispensing with the patronising state model that substitutes
citizens instead of supporting them, the Water Technical Table
was, in practice, the citizens’ response to the public water company on how to deal with any problem. Three tasks need to be
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a) the census - which should not be considered as pure
accounting, but as an x-ray of the community that includes
all references points to get an exact picture of the situation
they face;
b) the map - a drawing by the community of the way services
are established in their area. By doing this there is a retrieval
of the collective memory of the installation of the service.
This allows everyone to understand the problems caused by
the growth of the area, and the attempts to solve problems.
This input is key to designing the solution. It also helps the
public water company to understand better the water networks which were built by the people;
c) the diagnosis – this step is simply the collective processing
of the information to establish a diagnosis of the problem
and to formulate a working plan for works, repairs and
The communities which are organised into Water Technical
Tables, together with the representatives of the public water
company and officials of elected local government (mayors,
councillors or neighbourhood boards) constitute a Water
Communal Council.
Different information processes take place in those councils: from the various communities to the water company and
the representatives of local government; from the water company and local authorities to the Water Tables; and among the
Water Tables themselves. This information exchange increasingly empowers the communities.
The council has two main features: it is public and it meets
regularly. This means that is open to all citizens with no exclusions, and it meets at a regular time and in a place well known.
Reclaiming Public Water
It has three main functions:
a) It prioritises issues from all identified needs. Taking into
account available resources, it establishes a working plan
according to priorities established collectively.
b) Organises programmes. Both the water company and the
community take on commitments. An agenda for the workers is established and resources are allocated to each task.
c) It follows up. The main task of the council is to exert social
control over the public company. Meetings always start with
the same questions: What have we agreed? What did we do?
What didn´t we do and why? And so on.
More than five years have passed now and the organisational
proposal of the Water Technical Tables and Communal
Councils has been adopted by almost all the public water companies of the country. Subsidiaries of HIDROVEN (head
company) and the companies depending on the regional government have different ways of incorporating community participation.
Public water companies have experienced the transformation that comes from meeting their owners, the citizens.
Communities that five years ago drew the first maps of their
reality, and were mobilised by not having water in their taps,
now formulate their problems in the context of the water situation in the region.
Wastewater has also been on the agenda and sanitation is
acknowledged to be the most in need of an infrastructure overhaul in order to prevent disasters and tragedies. Investment in
infrastructure in high-density neighbourhoods has also
increased enormously.
Reclaiming Public Water
Information in the hands of the community about the situation of their public water company, of the infrastructure and
of the water sources on which they depend, has created a collective idea of future problems.
There has been a process of organising different areas of
drinking water and sanitation service into co-operatives.
Worker co-operatives are growing in the water sector as part of
a process of eliminating intermediaries between those who do
the work and the company that has to formulate, plan and
inspect this work. They are also a sign of the increasing control of organised communities over their basic services. They
have taken on diverse work such as collecting, treating, delivering and disposing of the water by means of networks throughout the whole country.
Some examples are particularly representative.
a) In Caracas (the capital region), managed by the Water
Communal Council of Antímano, the aqueduct has a cyclical pattern and cannot provide water to everyone at the
same time. For the past five years, this council has been controlling the supply schedule to the area and trying out various methods to improve it. The way in which the community uses the council as a control tool over the water services
is remarkable.
b) In the State of Zulia, the Communal Council of Páez, is a
municipality in which the majority of the population is the
indigenous wayúu people. Its water system, which draws
water from the Guasare River and sends it to all the settlements of the municipality, was working well below its capacity due to some unfinished repairs. Once the Water
Communal Council was established, they carried out inspecReclaiming Public Water
tions in which the community realised that repairs were not
done. Not only did they manage to get the service functioning with a bigger capacity, but also to organise a workers cooperative to operate the system.
c) In the State of Sucre, the Communal Council of the
Clavellino system is tackling serious management problems.
The system conducts water from the north of the eastern
Venezuelan massif to the peninsula of Araya and the city of
Carúpano in Edo, Sucre and, through an underwater tube, to
the islands of Coche and Margarita in the Edo, Nueva
Esparta. The communal council is working to get consensus
from the range of people who take water from this system
and to find a solution to the many and diverse problems.
It would be easy to pretend that in the past five years all the
problems and the chaos that affect the functioning of the
diverse water networks have been solved. Very many kilometres of pipes have been built, but many more are still needed.
The reality now is that the Venezuelan water service is increasingly in its citizens’ hands and much more under their control
than ever before. It is also the case that an increasing number
of communities do not think any longer only in terms of having water or not in their taps, but in terms of managing their
water sources.
National coverage in drinking water and sanitation services in Venezuela
Coverage drinking
water (percentage
of total population)
Coverage sewage
collection (percentage of total population)
Water Technical Roundtables established (as of October 2004)
Water Utility
Water Technical Roundtables
Santiago Arconada is a community promoter, working at the headquarters of
the regional public water companies of Venezuela (HIDROVEN).
Statistics from HIDROVEN, the Hydrologic Company of Venezuela and
the Ministtry of Environment and Natural Resources.
Reclaiming Public Water
Reclaiming Public Water
By Al-Hassan Adam
Ghana is a country in West Africa, populated by about 20 million people. The country has experienced colonial domination
from different European powers, including the Dutch,
Portuguese, Danes, Germans and British, who plundered the
wealth of the nation (gold, timber and people). The colonial
name the Gold Coast was replaced by the name Ghana after
the country became independent from Britain in 1957 and
became a republic in 1960.
The provision of essential services in the then Gold Coast
was to meet the needs of the colonial administrators and their
priests who lived in fortified castles and forts, mainly in coastal
towns. Cape Coast, the seat of the colonial government, was
the first place to get potable water in 1928. After meeting the
demands of the colonialists, water was extended to the auxiliary staff of the colonial administration. It was only after satisfying these classes of people that the administration extended
water to the public in the form of communal “stand pipes”,
out-door taps located mostly in public spaces such as schools,
hospitals and market squares. When the nationalist government assumed power in 1957, in a bid to fulfil the demands of
self-rule, they created a Water Supply body under the Ministry
of Works and Housing in 1958.
In 1965, parliament created Ghana Water and Sewerage
Corporation (GWSC) as a legal, public entity charged with
responsibility for providing and managing water resources.
This move was not unusual; most newly-independent countries
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were undertaking state-led development. This arrangement
created a massive, centralised bureaucratic institution, which
made it next to impossible for decision-making at regional
level, much less district and unit levels, and state bureaucracy
had its own setbacks due to alienation of the general populace
from effective participation in policy making.
In order to overcome these challenges, the state and its major
donors thought it best to decentralise some of GWSC’s operations. The donors, particularly the World Bank, were guided by
neoclassical economic school of thought and saw decentralisation as a step towards minimising the government’s expenditure
and influence over water provision. The decentralisation took
place from 1970 to 1985, but the results did not match the targets. The political landscape also contributed to the alienation
of the services from the consumers. The military dominated
political power and decision-making processes, crowding out
citizen participation. The military junta (PNDC) dominated the
political scene from 1981 to 1992, when it catapulted itself into
a political party (National Democratic Party-NDC) led by J.J.
Rawlings, and won the elections from 1992 to 2000. Not only
did PNDC and NDC crowd out citizens’ voices, but they followed the economic agendas laid down by the World Bank and
IMF to the letter.1 Ghana’s economy was celebrated by the IMF
and World Bank as a model, yet, the reign of this military junta
brought about unbridled corruption in the public sector.
This corruption engulfed GWSC, as the corporation was
restructured purposely for fiscal policies, which meant the
sacking of 2000 workers from 1990-93. The private water company Thames (UK) was contracted by the government and
1 The PNDC/NDC instituted the IMF and World Bank’s Economic Recovery
Programme (ERP) and Structural Adjustment Programme (SAP).
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donors to strengthen GWSC’s managerial and financial capacity through World Bank’s financial support (Project Credit
1342GH). Ghana supplied Thames with $13,5 million through
a World Bank loan. There are similar packages that were carried through up till 1997. At the end of the day the restructuring failed to deliver potable water to Ghanaians and the corporation was running into crisis.
The collapse of phase 1 of the neoclassical Structural
Adjustment Programme (SAP) gave way to further and harsher economic models. Phase 2 meant massive deregulation with
the focus on transferring public resources to private purses. In
1993, the NDC government accepted the World Bank’s recommendation to restructure the water sector in preparation for
privatisation, a process which worsened the plight of rural people, who face the toughest water burden, because the government relinquished responsibility for providing them with water
and gave the responsibility to under-funded local authorities
and unreliable philanthropists. Seeking to sell GWSC, the
NDC government went into negotiations with the private
water company Azurix (a subsidiary of Enron). There were a
lot of clouds hanging over the deal with Azurix and it was later
alleged that a minister accepted a bribe of $5 million from
Azurix in 1995. The government could not push through the
Private Sector Participation (PSP) deal in 1996 since it was an
election year and publicity of the bribery scandal would be
detrimental to their campaign.
After winning the elections in 1996, the NDC government
continued preparing the ground for water privatisation and the
Water Resources Commission oversaw the giving of water
rights and permits, opening the floodgates for selling water
bodies to private companies and individuals. In 1999, the government incorporated Ghana Water Company Limited
(GWCL) as a public, limited liability company, and it assumed
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responsibility for 100 relatively larger urban potable water supply systems. Under the privatisation process, the 100 systems
were reclassified into 69 systems and packaged into two business units to be sold to two separate companies. The business
units were supposed to be leased out for 10 to 25 years.
A wave of opposition to the neo-liberal policies in 1995 dubbed “Kume Preko” - resisted the moves of the NDC to
liberalise the economy. Mass demonstrations were held and the
state responded by killing four of the demonstrators. At the
forefront of the demonstrators were the leadership of the then
biggest opposition party, NPP (New Patriotic Party). This
party later became the ruling government, after which it
changed course and also started promoting privatisation.2
In 2001 a national water stakeholders’ workshop was organised
by the Integrated Social Development Centre in the capital,
Accra, to look at the pros and cons of PSP. At the end of the
workshop, the PSP plan which was previously shelved by the
NDC, but now being re-invigorated by the new government of
NPP led by John Kufour, was seen as a proposal that would
not deliver water to all, especially the poor. A declaration was
signed and the signatories formed the National Coalition
Against Privatisation of Water (NCAP).
The coalition membership cuts across civil institutions in
the country; Organised labour, students, communities and
NGOs are all involved. Since the start of the campaign, the
government has come down heavily on members, calling them
terrorists and un-patriotic among other names. Newspaper
advertisements by the government to tarnish its reputation did
2 One of the leading members of the NPP, Kan Dapaah, wrote in a national daily
“In Defence of GWSC: Stop the butchering.” (Daily Graphic, August 4, 1999, p7). His
article was very critical of the privatisation process but Dapaah is now a minister who
supports Private Sector Participation.
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not scare them. The smear campaign was masterminded by the
water sector restructuring secretariat, an outfit sponsored by
the World Bank and the UK development agency the
Department for International Development (DFID).
A principle argument in support of the privatisation of
GWCL was that there would be more money for the utility
after implementation of the project, but this argument is
flawed. There was an initial promise of $500 million from
international donors which would be made available for the
company to borrow at no interest. The final two private water
companies who will win the bids are obliged to contribute $70
million each for each business unit. This amount was challenged and the amount was dropped to $30 million. Soon after
the private companies refused to inject even these small
amounts into GWCL, citing currency devaluation, political
instability after the September 11 attacks and war conflicts in
the West African sub-region that make investment unattractive.
According to the World Bank, on offer at the time of writing is a three-year service contract rolled into a five-year lease
contract, by which time there will be less political and financial
risk in the sub-region. In essence, all risks are offloaded onto
the public and all profits to the private operator.3 GWCL’s
existing debt will be cleared and the private water corporations
are not required to make any significant investments.4
Additionally, the foreign company is allowed to repatriate
3 According to the new management service contract, 42 months after operation
of the service contract, the operator could be served six months’ notice for the termination of contract when it is realised out right lease is possible. Reading in between the
lines, the contract document says that 42 months after using public money to clear the
debt of GWCL, the contract would be transformed into “Lease”.
4 This became clear at a meeting to inspect the bid document. The private companies asked if they were expected to service the debt of GWCL and Alex McPhail of
the World Bank said only a deposit of $500,000 as working capital was required and
would be fully refundable at the end of the contract (p5 of contract document). Even
the World Bank’s Fact Sheet on the Management Contract says the company is not
required to invest in or expand the water sector.
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100% of the profits and has no obligation to re-invest in
GWCL. Therefore, whether the reform is a success or a failure,
the private operator will make a profit, while the Ghanaian
government will be deeper in debt.
Mr. Lamptey, managing director of GWCL, has estimated
the company requires US$100 million per annum to provide
safe water on a sustainable basis. Currently, GWCL has a budget of only $45 million. With the onset of the management contract, it will have a budget of $135-145 million over a five year
period. Therefore, there will be a significant de-investment in
GWCL, as it will be running on a budget of only $27-29 million per annum within the Private Sector Participation (PSP)
framework. The de-investment in GWCL of about $17 million
per annum is bound to cause far-reaching damage to the water
sector. In order to raise the necessary funds to keep GWCL
functional, the private operator will not provide the capital, but
rather potable water consumers will bear the cost in increased
tariffs. The government and the donors are finding it difficult
to tell the public that the private water companies, previously
presented as strategic investors, are in fact strategic managers.
The World Bank, meanwhile, has embarked on a new strategy
to gain the support of tribal chiefs in order to win over
Ghanaian citizens to PSP. World Bank President Wolfensohn
has pledged a $30 million loan to an Ashanti chief to enable
him to provide water and sanitation services to some communities in the country. This is despite the fact that the chief has
no previous experience in water and sanitation and is not democratically accountable to anyone.
Ever since government and donors (backed by NGOs like
WaterAid) have pushed hard to sell GWCL to Suez, Veolia or
Biwater, investment in GWCL has dwindled. Rampant water
shortages are the norm and private water vendors are cashing
in on this situation by drawing water from filling points with
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trucks and selling it at 600% of the original price, which is
unaffordable for most consumers. Worst affected are rural
areas. There has also been a surge in guinea worm infection, a
debilitating water-borne disease. Ghana has the second highest
rate of guinea cases even though it was almost eradicated 10
years ago.
It has been demonstrated that community control of water
resources is feasible by a guinea-worm infested community
called Savelugu in northern Ghana. Savelugu is a small town
whose inhabitants are basically farmers and middle men and
women who sell farm produce. It is also in one of districts
where guinea worm is most endemic. Savelugu, with a population of 20,000, had 600 cases of guinea infection, the highest in
the country. Out of necessity, this community has been able to
develop a water distribution model based on citizens taking
control of their water and has been celebrated by local water
activists, water service providers and international activists alike.
The achievements in Savelugu were possible due to the injection of funds and human resources from central government
represented by GWCL, and international NGOs (UNICEF,
GLOBAL 2000, World Vision). These organisations, in collaboration with the community, approached GWCL to sell water in
bulk to the community who will then distribute it.
By taking over distribution, the community is able to drastically reduce unaccounted for water, set lower tariff rates and
also do routine maintenance and some expansion of connections.5 Tariff setting is undertaken by the community water
5 For any amount of water supplied, the water board allows up to five percent
losses at the fetching points. Thus, water committees account for up to 95% of water
supplied to their respective sections.
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board and tariffs are cross-subsidised so water is affordable
even for the poor and the elderly. At the time of writing, cases
of guinea worm are virtually unknown in Savelugu. Access to
potable water has increased to 74,4%, compared to the national average of 36% access for the rural population.6
How can this model be replicated in other parts of the
country and the world at large? First, there must be public
investment in the huge capital outlay associated with water
infrastructure development. The community cannot mobilise
the investment required upfront for these types of projects on
its own. The community should be given the mandate to take
full control of the utility and its water distribution, with capacity building in project management and monitoring. Part of
this should include how to recruit skilful technicians, preferably
residents or others who have a sense of community development. The main task of water production should be the
responsibility of a bigger public institution. In the case of
Ghana this should be GWCL.
The sustainability of such public schemes is assured when
there are public funds available to support them. Also, the
recognition that consumers and community members can
make a meaningful contribution towards management of utilities and the demystification of decision making in the utilities
is important. Consumers and community involvement guard
against mistrust and help build public confidence in management. Acrimony associated with tariff collection would not
arise if consumers and the community were involved.
Current international economic trends, however, result in public institutions being short of funds and undermined. This is a
great danger to the success of initiatives like that of Savelugu.
The general crisis of Ghana urban water, created by lack of
investment and the privatisation preparation processes, now
also impacts on the performance of the Savelugu scheme.
GWCL in Tamale, the main supplier of bulk potable water to
Savelugu, has begun rationing its water which has drastically
affected Savelugu. The lesson here is that you cannot guarantee a successful performance of an enclave in the midst of crisis. The issue of delivering water for all should always be seen
in a wider context. There should be a common policy and purpose. The private corporations have recognised this and are
trying feverishly to institute a global water policy geared
towards privatisation. What we have to do is to fight to consolidate public funding and control of water resources and management. This will ensure cross-fertilisation of ideas and
resources for the common good.
Al-Hassan Adam is with the National Coalition Against Water Privatisation
6 “Report on Public-Community Partnership Model for Water Delivery In Ghana:
a Case Study of the Savelugu Water System”, Integrated Social Development Center
and Community Partnership for Health and Development, 2002.
Reclaiming Public Water
Reclaiming Public Water
By Guillermo Amorebieta
The 1990s witnessed the greatest asset sale in the history of the
Argentinean state. Together with the handing over of public
services in concession to national and trans-national businesses, it became a sad example of the “success” of neo-liberal
policies for developing countries.
Since 1990, the most conservative sector of Argentinean
politics took over the government and started the systematic
sale of public companies, from the metallurgic industry to oil,
including air, sea and land transport, telecommunications,
insurances, pensions, airports, etc. They even gave away concessions for electricity, water and sanitation, gas and all services that a nation provides for its citizens.
Due to the resistance of some trade unions and a few
young NGOs, the province of Buenos Aires (10 million inhabitants distributed over 74 cities with 48 municipalities) kept
most of the state public services, but was constantly pressured
by the national government, which tried to strangle it financially to make it give up public companies providing public services. At the same time, the IMF and the World Bank persistently required the sale of assets related to urban services as a condition for diverse loans.
The Water and Sanitation Works Trade Union of the
province of Buenos Aires proposed a law called OSBASA and
managed to get it approved by the provincial Senate – not by
Congress – which established public provision of basic water
and sanitation services in the province, with the participation
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of workers in the administration and management of the company. This project forced all the administrations of the
province, the most important in the country, to protect water
resources, to universalise basic services, to guarantee the treatment of wastewater and force municipalities and operational
co-operatives to offer similar things.
Unfortunately, the strong political pressure exerted by the
national and foreign corporate sector, multilateral loan bodies
and consultants with a strong corporate link, caused provincial
parliamentarians to halt the project, which lay the ground for
the future privatisation of water and sanitation services.
In 1999, as a result of the political pressure posed by US
economic interests that, up to then, were excluded from getting
a piece of the Argentinean pie, the remaining public companies
in the hands of provinces were handed over, although with
tougher conditions due to a slow but continuous increase in
awareness by civil society.
In the province of Buenos Aires, (the highest contributor
to the national GDP and containing almost a third of the
country’s population) public services companies were the target of several Houston corporations. An important reason why
ENRON, Houston Corporation and AES obtained water and
energy services was the involvement of Marvin Bush, brother
of US President George W. Bush, and a well-known power
broker for Texas business.
Buenos Aires had the second largest national company in
charge of water services, OSBA. This company’s social mission
was to give access to the poorest areas and the marginal sectors
of the urban area, control industrial discharges, and be legally
competent on issues of water sanitation.
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As was the case with other water concessions in the country, ENRON – through its water services subsidiary Azurix
Corp. and its Argentinean representation, Azurix Buenos Aires
S.A., - took over the service supply with very benign contractual conditions, but at a time of social complexity: huge impoverishment of the population, almost 20% unemployment, a
monetary system close to collapsing due to the maintenance of
the currency convertibility, political erosion of the government
and the first social reactions to the general situation and, in particular, poor services.
The payment by Azurix of a “valor llave” (deposit) of
almost US$500 million (almost three times the offer of the
runner-up company) reflected technical improvisation and the
rush to acquire new companies to boost Enron’s Wall Street
stock prices. Azurix hoped that local governments would allow
the company to escape contractual obligations and ensure a
short-term profitable business, as French corporations Suez
and Vivendi had done for 10 years in the city of Buenos Aires
and in some provinces in the interior of the country.
The concession covered over 70 cities with water and sanitation, 47 treatment plants of wastewaters, 470 deep wells for
drinking water, close to 10,000 km of water networks and
7,200 km of sanitation drain pipes. Of the 2,000 original workers only 1,100 were transferred to the ENRON concession.
They called the new company Azurix Buenos Aires S.A.,
capitalised by Azurix Corporation headquartered in Houston
and by another company established for the purpose, Azurix
Argentina. The capital asset declared was $85,000 ($1 = 1
Peso), barely the value of any modest real estate anywhere in
the country.
To act as a responsible operator, as the contract required,
they used Wessex Water, a small British company that ENRON
had bought for this purpose, and established Wessex Technical
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in charge of the technical consultancy. It never had an active
part in the management of the concession, although it is
assumed it was part of the system of front companies established by ENRON to divert money to tax havens by means
considered illegal in the US.
During the first year of management of Azurix it was clear
it was limited to a superficial “make up” of the company infrastructure, and that it only looked for the quickest way of recovering the investment made to get the concession without making the needed investment.
The lack of care and interest of ENRON caused serious
problems in the service, both in the production and distribution of water and in the collection and treatment of wastewater. Water networks were polluted, water treatment plants
suffered considerable damage, waste water collection and treatment plants were paralysed, there was disinvestment in equipment and technology, important areas of the service were outsourced, etc. All this brought dissatisfaction among users and
consumers that, in turn, pressured the mayors of important
cities affected. This forced the provincial government to
repeatedly sanction Azurix, to ask for a change in its investment policy and the establishment of an adequate programme
to retrieve the quality and continuity of the service.
After months of negotiations, we, the workers, had to pressure the government to start Working Collective Bargaining
and the commissions to enforce it. What made it even worse
was that due to the seriously reduced workforce, the company
started outsourcing as a permanent method of carrying out
regular works, with negative consequences for company workers and poor quality of services for users.
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When the managers of Azurix realised that the government
could not defuse dissatisfaction with poor service in some
cities in the interior, they began substituting Argentinean professionals with those “imported” from the UK, Australia and
the US as a low-cost solution to problems that grew bigger by
the day.
Without speaking the language, without knowing the existing technology, with a low budget for basic works and with
pressure from users who demanded urgent solutions, the crisis
exploded between the state authorities and the company. The
regulatory body heavily fined the company. Not two years had
passed since the beginning of the contract and then, on top of
it all, came the bankruptcy of the head company in the US,
ENRON. That made the remaining US managers quit, causing
the withdrawal of the company without complying with
important commitments.
In February 2002, the provincial government either did not
have the technical staff or the managers needed to take charge
of the service. This (under the deadline pressure) led the Water
and Sanitation Trade Union of the Province of Buenos Aires
(Sindicato de Obras Sanitarias de la Provincia de Buenos Aires)
into urgent negotiations to guarantee the quality, quantity and
continuity of the supply to the almost three million people
covered by the concession.
A project was proposed that involved social actors beyond
the political conditions that circumstances currently imposed
on the government. The basic idea was a public utility with
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shareholder participation by its workers, with the approval of
the regulator body itself (then called ORAB and now
OCABA). It meant workers of the water sector organised their
own company in partnership with the trade union, became
operators of the service getting rid of conditions imposed by
the World Bank that referred to the need for international
Users were involved through the representative organisations both in the regulator body (ex ORAB) and in the management of the company Aguas Bonaerenses S.A. (ABSA), and
an agreement was reached to transform the salaries for operating the service into new shares for workers once the company
had got balanced accounts and got over the water and sanitation emergency created by the mismanagement of Azurix
Buenos Aires – ENRON.
The workers themselves used their knowledge and experience to capture, treat and distribute water and to treat wastewater. Cross control was done by the Regulatory Body on the
technical and operational aspects and by the Ministry of
Infrastructure – Public Works and Services on the commercial
management and the quality of the service provided.
Organisations of users (some 12 in the area covered by ABSA)
have the power to not only participate in the management and
control, but also to go to the ombudsman and local bodies representing users and consumers. This allows for a constant presence in every aspect of the service.
To establish a service operation system in such a large company, the trade union established a legal company (Sociedad
Anónima) formed by the trade union and the workers of
ABSA. This company owns 10% of the shares of Aguas
Bonaerenses S.A., the national service provider, and shareholder participation is scheduled to increase as part of the payment
for operating the service.
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From the start, the trade union did not want to take over
the accounting and administrative management of ABSA, but
focused exclusively on the technical operation, the designing
of policies aimed to overcome the main problems of water
and sanitation, better and fairer use of human resources, promotion and skills learning of the technical and professional
workers, participation of citizens through workshops aimed
at sharing knowledge about technical and operational activities, policies of works and expansion of the service, improving the technology of the control and administrative systems,
ABSA´s own resources and the financial contribution of
the provincial state were used to finance the main works and to
deal with the bigger problems inherited from the previous concessionaire. To do that, the workers-controlled operator (called
“5 de setiembre S.A.”) developed a broad policy of consultations with the authorities, users and consumer unions, and
reviewed the historical archives of the old company OSBA.
This was done to get the knowledge needed to develop a working plan to overcome the most urgent emergencies of water
supply and to drastically reduce pollution levels due to the lack
of treatment of wastewater.
For drinking water, more than 100,000 metres of the oldest
functioning water networks, some of them with over 70 years
of use, are being replaced, using modern techniques of piping
and contracting small and medium domestic companies.
Another priority was the building of new water networks in
the main cities to expand the service to highly populated areas
with sanitation problems, and to strengthen water pressure and
water levels in critical areas on the periphery of some cities.
The work interrupted by the paralysis of Azurix Buenos
Aires has started again, particularly the reactivation of the
Sewage Treatment Plants and equipping purifying systems that
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were out of service due to lack of investment. This guarantees
a reduction in pollution levels.
In 1999 – when privatisation took place - the province of
Buenos Aires had a rate of water supply of 74% and 47% of
the urban population had access to sanitation. In 2002, after
Azurix withdrew and ABSA was established, the supply of
water had decreased to 68%, due to demographic growth and
lack of investments. Sanitation did not reach 43% of the population. Today 71% have potable water and 45% have household sewerage. Importantly, up to now all investments were
with money from the company and of the provincial government budget. Very recently, the governor arranged a loan with
the World Bank which will be important for the expansion of
the services. We have had to urgently renovate the water networks as Azurix did nothing at all and leakages amounted to
40% of the drinking water produced. Millions of litres have
been lost due to the age of the tubes (over 60 years). More than
110,000 metres of tubes have been changed and we have
recovered the contractual water pressure in 30% of the area
covered. Similarly, Azurix had practically abandoned half of
the black waters treatment plants, which resulted in a substantial increase in the pollution of rivers. Now 30% more of the
paralysed plants have an optimal functioning. Investigations are
being done about the works that Azurix claim to have done.
Fraud is suspected in what they had declared as done but does
not exist in reality, or was only a simple fitting out of some
aqueducts that were supposed to be renewed but were not.
This investigation is linked to a compensation claim which
Azurix/Enron has filed at the international dispute settlement
court ICSID against the national state and the Province of
Buenos Aires.
The next steps that we must take are focused on getting
total autonomy by incorporating users as shareholders repre156
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sented by their respective organisations and the inclusion of
other productive sectors of the region where ABSA provides
services. This is needed to guarantee the highest possible level
of democracy in decision making, the rational use of the economic and financial resources, the start of a priority system in
the expansion of the service with a social approach and the
commitment of the state to financing the biggest works that
such an important region needs to match the demographic
growth and the productive development.
Guillermo Amorebieta is leader of the Water and Sanitation Works Trade
Union of the Province of Buenos Aires.
Reclaiming Public Water
By Laila Smith
South Africa’s first public-public partnership illustrates the
potential for addressing some of the critical difficulties local
governments face in delivering water services to the poor. In
just three years, the partnership between Rand Water and the
Harrismith local authority has had significant results that will
hopefully set a precedent for the development of future service-delivery initiatives.
Driving Harrismith’s need for a water partnership was years
of infrastructure neglect which led to very poor effluent control. The situation reached the point where “raw sewage was
running through the river”. The Harrismith city council needed to join forces with an external service provider to improve
the management of water and sanitation and explored numerous partnership options.
The service-delivery challenges facing Harrismith need to
be understood in the context of the region and recent municipal demarcation. Harrismith is part of the Maluti-a-Phophung
(MAP) local municipality in the Free State province of South
Africa. The local council boundary of Harrismith includes the
former white town of Harrismith, the African township of
Intabazwe five kilometres to the north, and parts of the former
Qwa Qwa homeland, called Tshiame, located between 15 and
20 kilometres to the west. It is, therefore, a dispersed urban settlement with little to connect or integrate the separate components.
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Harrismith’s urban complex is loosely grouped and spatially dispersed from the core of economic activity. Intabazwe is
the original African township associated with Harrismith.
Despite the fact that most households in this area are poor, the
township’s infrastructure is relatively well developed; most
properties have meters with in-house electricity connections
and water-borne sanitation. There are, however, a number of
settlements in the area that rely on community standpipes and
approximately 1,500 households still use the bucket system.
The township is separated from the economic hub and has few
formal employment opportunities, forcing most jobseekers to
look outside the area.
The challenges of poverty alleviation in both Intabazwe
and Tshiame are significant. Despite the advantages of its location, the Harrismith area has an unemployment rate of 38%.1
This could be reduced with the growth of entrepreneurial
activities, but the scope for business investment in the township areas in particular is limited by socio-economic conditions
there. Those who are employed are in low-paid, unskilled,
menial jobs such as domestic and maintenance work.
Why was a public-public partnership chosen to address the
service delivery backlog? Amid the fanfare given to a range of
public-private partnerships (PPPs) in South Africa in the
1990s, there was surprisingly little attention paid to the value of
public-public partnerships (PUPs) as a viable alternative. By
the late 1990s, the national government, through the
Development Bank of South Africa (DBSA) and the
Department of Water Affairs and Forestry (DWAF) in particular, began to realise that service delivery options needed to
extend beyond those offered by the private sector.
South African Census. 2001.
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When the Harrismith local authority explored private sector
options, it found there was little to interest capital when one
considered the high levels of poverty in the area and the town’s
relatively weak rates base. It believed a public sector ethos was
important to ensure low-income households would be protected from the profit motives of the private sector, which could
restrict access to essential services. The council was also sceptical that a private sector partner would uphold the local
authority’s constitutional obligation to improve the quality of
services to those who had been historically marginalised.
Rand Water in Gauteng is a province-based water board that
has been in the bulk water business for over 100 years and services more than ten million South Africans. It won the tender to
be the external service provider to the Harrismith area. The risk
was seen as relatively small since the contract would be limited
to operations and maintenance for only three years. After examining existing institutional arrangements for providing water
within the country, Rand Water proposed a corporatised model.
Rather than creating mechanisms for the city council to develop a separate utility, Rand Water would, instead, manage a business unit within the council to ensure a degree of autonomy.
In 1999, an 18-month negotiation process began between
labour, the residents of the area and the city council that led to
an agreement on the principles of the contract. The negotiations were structured around task forces on finance, technical,
human resources, legal, institutional and communications
issues, each of which generated information and recommendations for the council. The long process was at considerable cost
to both council and Rand Water, but was necessary to ensure
full support from all parties. The consultation process was particularly effective in ensuring labour union representation from
local and national offices, not only on labour issues but on all
aspects of the partnership (Floss and Chipkin, 2002). Both
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Rand Water and the council were willing to bear the additional
costs of the protracted process because of their respective cooperative experiences with the unions. In 2001, a management
contract was signed between Rand Water and the Harrismith
city council to create Amanziwethu (AWS) as a business unit
within the water and sanitation department. AWS would be
responsible for operations and management in the department
for three years as well as for revenue collection for all municipal services in the local authority.
The partnership had several positive aspects for the local
authority. First, the interests of the public authority were protected through the design of the contract. Rand Water carried
the commercial risk by guaranteeing the local authority R1 million2 if the contract came to a premature end. Second, as water
and sanitation revenues were ring-fenced to ensure adequate
reinvestment into the sector, the local authority was guaranteed
five percent of the sector’s revenue to pay for non-profitable
services such as community centres and libraries. Third, the
cost-recovery imperatives of Rand Water were capped to
ensure that no more than five percent of revenue went to Rand
Water in management fees. This was to keep tariffs affordable
by capping price increases for water and sanitation.
The regulatory structure of this partnership was well
designed and provided feedback from various committees.
Water forums were organised at ward level to provide an
opportunity for service users to raise concerns about operational and payment issues. These issues were then raised at a
monthly co-ordinating committee consisting of relevant stake2
Figure 1: Water service delivery levels in the greater Harrismith area
As of 2004, the rand/dollar exchange hovers around R6.50 to $1 USD.
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Source: Water Service Plan for the Thabo Mofutsanyana District, 2002.
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holders such as Rand Water senior managers, AWS senior staff
and city officials. These co-ordinating meetings were used to
solve issues raised through the water forum, as well as to
review the monthly technical monitoring reports provided by
the regulator.
Part of the success of this partnership was due to ward
councillors taking a proactive role in communicating the details
of the contract to their constituency. In ward committees,
water forums and door-to-door campaigns, ward councillors
explained how water services operated and the importance of
being registered as poor if the household earned below R1,100
per month.3 Ward councillors also took responsibility for protecting poor households from being disconnected if they could
not afford to pay. They accompanied the community liaison
officer from AWS on his or her rounds to inform service users
about this policy. If households were too poor to pay, the
councillor encouraged the service user to register as a poor so
they could receive a state subsidy and to ensure their water supply would be restricted rather than cut off.
With regard to service users, the extensive consultation
throughout the negotiation process was critical to earn the general support of different communities in the area for the partnership. In the AWS partnership, the community participation
strategy had two components: an education initiative and a
feedback mechanism. The educational objective was to inform
the public of council’s intention to change the provision of
water. Through council and AWS co-operation, creating awareness was done in a variety of ways: radio broadcasts, community video screenings, community theatre productions, newspaper articles, advertising and community meetings. Feedback
was obtained through local political structures and various
3 Households earning under R1,100 are considered to be living below the poverty line which, in South African vernacular, is indigent.
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stakeholders such as the unions, local NGO’s, political parties
and small businesses. This was, for the most part, seen as constructive. These consultation forums eventually evolved into a
water services forum in order to encourage popular participation in actual decision-making processes. It was envisaged that
this forum would transform basic consultative approaches to
the delivery of water into more participatory mechanisms in
which the expansion of services, tariff structuring and strategic goals and priorities could be thoroughly considered.
The value of institutional structures for public participation
has been instrumental in gaining service-user support for the
partnership. The improvements in service delivery were
demonstrated by formal townships being supplied with yard
taps or in-house connections and outdoor flushing toilets with
waterborne sanitation - a level of service considered to be high
given the poverty levels of the area. Interviews with residents
and councillors also revealed the sympathetic approach AWS
adopted in response to the socio-economic hardships residents
face. There are numerous instances in which households could
not be registered as indigents (poor) and were in arrears but
were not disconnected when they consumed more than the
amount they were allotted for free. AWS has tried to be flexible in these instances on condition that such households commit to paying on terms that are mutually agreed to, yet are
affordable. In addition, in cases where residents have been
restricted to six kilolitres of water because of their poor status
but need to exceed this limit because of an emergency, AWS
has been flexible by allowing a freer flow of water.4
4 One household interview conducted in Intabazwe serves to illustrate this point.
This particular household’s water supply was restricted by the installation of a trickler.
Subsequently, a death occurred in the family. After this was reported with supporting
documentation, the trickler was removed to allow for an unlimited flow of water. While
the free flow of water was intended only for the duration of the mourning period, the
trickler was never reinstated, according to the householder. (Smith and Fakir 2003)
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The general sense of improvement in the quality of services provided by AWS, and their efforts to institutionalise mechanisms for public involvement in service delivery, has led to a
general support for the partnership. This support cannot be
underestimated as it has contributed to residents generally
complying to credit control measures, which is illustrated
through very low illegal reconnection rates. There are, nevertheless, exceptionally high non-payment rates in some township areas, for example eight percent in Tshiame. This non-payment rate is largely related to high levels of unemployment and
the simple inability to pay for water. Despite this problem,
where households can afford to pay for basic municipal services there appear to be relatively high levels of household compliance with credit control measures. This is an anomaly in
South African cities and towns where non-payment is threatening to crush the ability of local authorities to finance the delivery of a service that is vital to life.
Despite these achievements, the partnership had several problems. The transfer of skills is often touted as a crucial outcome
of partnerships, yet it is an objective that is difficult to achieve.
The knowledge acquired through Rand Water’s managerial and
administrative experience has not been transferred sufficiently
to the city council in order to strengthen its own capacity to
manage the sector or to better monitor a new service delivery
agreement. While city councillors were certainly part of the
monitoring process, their own understanding of the detail of
the contract remains limited, which leads to acquiescence to
those who hold technical expertise. In short, despite the threeyear contract, the partnership did not alleviate the local authority’s dependency on an external provider. This problem is relat166
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ed to the turnover of city council politicians during a period of
intense municipal restructuring and is endemic to the regulatory difficulties facing local authorities across the country.
A second problem is that the value of the training provided to workers remains dependent on the sound management
Rand Water seconded. To what degree will the performance
benefits of this training continue when such highly skilled
managers are no longer seconded by Rand Water?
A third problem is the great difficulty in trying to balance
cost-recovery imperatives with the constitutional requirements
to extend equity to previously disenfranchised households. It is
a battle that has still not been won. Amanziwethu has made
strides in determining who can afford to pay and who cannot
and has tailored its credit control measures more harshly for
those who can afford to pay. As a result, it has been able to
enumerate the poor to ensure that their monthly access to 6000
litres of water free of charge5 is not denied. But when poor
households, most of whom have large numbers of people, are
reduced to trying to survive with a trickle, the dignity enshrined
in their right to water is lost. This raises larger questions about
national guidelines and the local authority implementation of
six kilolitres as a basic minimum, which is simply insufficient
for a poor household to manage its needs.
While technical and managerial expertise is still an external
contribution to the partnership, difficult political questions
remain unanswered. The challenge of service delivery alternatives is to ensure that the local authority capacity to govern is
built up in the process of partnering. This can then put the
local authority in a position of choice as to whether it runs the
5 In 2001, the Department of Water Affairs and Forestry set out national guidelines to ensure that all households receive a monthly allocation of 6000 litres, or six
kilolitres, free per month. The thinking behind this allocation was that it would allow
a household of eight people access to 25 litres per person per day to meet their minimum requirements.
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sector itself or can at least be in a stronger position to oversee
a partnership should it choose to enter into one.
On the bright side, there is hope for a growth in publicpublic partnerships as a preferred option for local authorities
in South Africa. The country has, since the late 1990s, experienced two long-term water concessions, both of which have
been plagued with difficulties. They have shown that private
sector options do not necessarily guarantee improvements in
service delivery or protect local authorities from the risk of
borrowing on the market. There are a number of public-public partnerships developing across the country between municipalities and water boards, with community-based organisations as well as with other municipalities. The more local
authorities are willing to test the waters of these options, the
more experience there will be to draw on in proving that public-public partnerships can be a viable service delivery alternative.
- Floss, MM and Chipkin, I. 2002. A New Model of Service
Delivery: Amanziwethu in Harrismith. Report commissioned
by Rand Water.
- Republic of South Africa, Census, 2001.
- Smith, L. and Fakir, E. 2003. The struggle to deliver water
services to the indigent: A case study on the public-public
partnership in Harrismith with Rand Water. Centre for Policy
Studies. Research report.
.. Smith is with the Research and Evaluation, Contract Management
Unit, City of Johannesburg.
Reclaiming Public Water
Reclaiming Public Water
By Carlos Santos and Alberto Villarreal
Through the mechanisms of direct democracy, the Comisión
Nacional en Defensa del Agua y la Vida (CNDAV-National
Commission for the Defense of Water and Life), supported by
64,6% of the citizens, made possible the inclusion of water as
a fundamental human right in the Constitution of Uruguay. In
this way, the foundations for the public management of water
resources, based on social participation and sustainability, were
In October 2004, the Uruguayan people endorsed a
CNDAV initiative that amended the Constitution in an election
victory backed by more than 1,440,000 Uruguayans, almost
65% of the poll.
The amendment stated: “Water is an essential natural
resource for life. Access to drinking water and the sewage system constitute a fundamental human right.” The Amendment
of Article 47 of the Constitution (Rights, Liabilities and
Guarantees section) says that the public management of the
water resources ought to be based on the criteria of citizen participation and sustainability.
The direct democracy mechanism was fostered by the
CNDAV. This commission was established in 2002 as a reaction towards the letter of intent signed between the Uruguayan
government and the International Monetary Fund, in which
the former committed to expand the privatisation of the drinking water and sewage services throughout the country.
Privatisation of these services began in Maldonado in 2000,
favouring the multinational French company Suez Lyonnaise
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des Eaux, followed by Spain’s Aguas de Bilbao.
Like most cases of water privatisation worldwide in recent
years, it had negative consequences in Uruguay.
From a social point of view, large sections of the population were denied access to drinking water as they could not
afford the privatised service, whose tariffs have risen up to 10
times more than the price charged by the public utility OSE.
The service also did not maintain the quality provided before
by the public utility (which still serves the rest of the country
with over 90% coverage). It was so bad that inspectors stipulated that the water ought not to be drunk as it did not comply
with minimum standards.
From an economic point of view, it was a very bad “business” for the Uruguayan state. Neither of the companies has
complied with the work scheduled in the contracts, nor have
they paid the fees that were initially agreed. Instead, they
resorted to a number of revisions of the original contract by
which the state effectively took over the losses each of these
companies incurred, effectively making the Uruguayan population subsidise them.
From an environmental point of view, the company Aguas
de la Costa – a subsidiary of Suez - was responsible for drying
up Laguna Blanca. As a result, neighbouring organisations in
the province of Maldonado have recently sued the company,
alleging environmental damage.
Reaction to the privatisation of water in Uruguay has varied
according to the characteristics of the area where it was carried
out. Grievances in coastal areas revolve around the quality and
price of the water services - “Water for a Fair Price” was the
main demand of the Liga de Manantiales (a community organ174
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isation), while organisations in Maldonado´s impoverished
areas focused their struggle on the defense of “public or popular faucets” (supplying posts). These taps were installed by the
public water utility at different spots throughout the country to
ensure a supply of drinking water. The cost and installation of
the service is borne by OSE, the public water utility in charge
of providing the drinking water and sewage system services.
In the privatised areas of Maldonado, companies decided to
eliminate the “popular faucets” as a way of increasing the number of people connected to their service.
In case of Manantiales (a locality near Maldonando), the
private company was able to eliminate the popular taps, and
poorer sectors were left without drinking water due to the high
connection costs.
Solutions sought by inhabitants also varied according to the
different socio-economic conditions: some drilled their own
water wells (at the risk of legal reprisals since regulations governing the supply of water where private companies have taken
control are not clear), while others have chosen to develop a
system to collect rainwater as their water source. The latter
strategy was adopted by a group of families that have settled
on land situated a few yards from residential and tourist areas.
These options have worked since the natural characteristics
of the surroundings allow this kind of strategy (the plots are
big enough to drill wells or install rain water drains).
The reactions in the city of Maldonado were different.
Even though the private company was successful at first in
eliminating the taps in many impoverished areas, it later faced
strong resistance from neighbours. Resistance was particularly
strong in San Antonio III where the water supply was cut for a
day after the private company removed the tap. San Antonio`s
neighbourhood commission - which has been committed to
community work for over a decade - managed to make the
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local authorities back their claim to restore the public tap,
despite the fact that the municipality had to cover the maintenance costs.
The CNDAV promotes a vision of water opposite to that promoted by multinational corporations. The Constitutional
Reform supports the notion that water is a basic human right,
not a “need” that can be satisfied by private corporations in
exchange for profit. Moreover, social criteria prevail over economic criteria, and water for human consumption is now given
constitutional priority over all other uses of water. The amendment also includes a clause that severely limits the ability of
corporations to pump water and export it without limits, either
as bottled or bulk water. The approved amendment demands a
special majority approval in parliament for “the provision of
water to other countries facing water shortages, for solidarity
Besides making the private provision of water delivery and
sanitation services illegal, by mandating that these can only be
provided directly by state or government entities, the successful constitutional amendment also enshrines the participation
of consumers, communities and civil society in all stages of
water management and institutions. Participatory management,
following the example of participatory budget administration
in Porto Alegre and several other municipalities in Brazil, will
certainly be the first and most effective weapon to protect –
through local community control mechanisms — the existing
public utility from corruption and the vices that were eroding
its public credibility, services and finances. Effective public participation will clean the public utility’s top management of
failed politicians who were given leading positions (which were
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created specially for them) in (mis)management, with very high
salaries. Similarly, existing and potentially new community-run
water and sanitation co-operatives will be protected as participatory management schemes.
Finally, the approved Constitutional Reform gives a mandate for the sustainable management of all water resources in
Uruguay. So far, the public utility has not incorporated high
environmental standards and sustainability criteria in its management. Additionally, there is a myriad of government bodies
that have decision-making powers over different aspects of
water management, and this has led to inconsistent, incoherent
and unsustainable policies. Water conservation will now be a
central thread in all water-policy making, and measures and legislation to prevent water contamination will be at the forefront
of management, with water basins as the basic management
Naturally, all these provisions need to be translated into
enforceable legislation, and this will be the challenge for the
incoming government and the CNDAV.
The Uruguayan electoral system requires that constitutional
reform prompted through a citizens’ initiative must have the
support of 10% of the electorate to be considered by citizens
as a whole, together with national elections (legislative and
presidential). In Uruguay, referendums are the traditional
method for popular movements to resist authoritarianism by
the military as well as the privatising “reforms” of neoliberal
In October 2003, a year after it was formed, the CNDAV
presented to parliament the 283,000 signatures that were
required to have a popular vote (plebiscite) on constitutional
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reform, thus triggering the plebiscite mechanism enacted a year
later together with national elections.
The water plebiscite was an important political victory spearheaded by CSOs such as grassroots, local communities, trade
unions and environmental organisations. CNDAV is a broad
coalition of social and political organisations that oppose the
commodification of water.
Among its founders are several neighbourhood organisations, FFOSE (the trade union of the public water utility workers) and REDES-FOE (Friends of the Earth) Uruguay. The
commission grew to include the left wing coalition (Frente
Amplio) that won the October 31st elections, and the majority
sector within the Partido Nacional (that came second in the
national elections).
Despite this political support, the water plebiscite was a
minor issue on the political and media agenda for most of the
two-year campaign. Moreover, private companies in the water
and other sectors (such as bottling companies), as well as conservative business sectors (large land owners, forestry plantations, rice industry and cultivators) carried out a strong political and media lobby against the reform.
During the three months prior to the plebiscite, the
International Monetary Fund (IMF) started a public debate
with the CNDAV, denying any imposition on the Uruguayan
government and rejecting any responsibility attributed to them
with regard to the content of the 2002 Letter of Intent.
The interests of water multinationals based in the country
are also affected by the special Z disposition established in the
reform document, according to which: “the compensation that
could arise as a result of the entrance in effect of these
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reforms, will not generate reparation for future lost profits, and
only debts not gradually being paid off will be reimbursed.”
This specific clause puts this local struggle against water
privatisation in the international arena as it comes into direct
conflict with what has become normal practice through bilateral investment agreements and free trade agreements (FTAs),
such as NAFTA; namely that corporations demand compensation for future lost profits, arguing that they have been expropriated (expanding the definition of an expropriation to almost
any government action that affects their interests).
Eventually, after the constitutional reform has been
approved, we get to the cutting edge of the conflict. If Suez
manages to pressure the new government enough with threats
of huge compensation into flipping sides and, through “interpretative legislation”, allows Suez to stay, the introduced
amendments in the constitution will be turned into dead literature.
Defending this constitutional reform from the claims of
Suez and other private actors in the water sector in Uruguay
will demand a strong international campaign. It will need to
expose and defeat the undemocratic character of the international arbitration panels that the water corporations have
already threatened to use to impose their will over the will of
the Uruguayan people.
Carlos Santos and Alberto Villarreal are with REDES-Amigos de la Tierra
(Friends of the Earth Uruguay).
Reclaiming Public Water
By Dale T. McKinley
In 1955, the main liberation movement in South Africa, the
African National Congress (ANC), adopted the Freedom
Charter as a popular expression of the desires of the majority
of South Africans. One of the most important clauses in the
charter - which the present-day ANC government still cites as
their guiding manifesto - states that “the national wealth of our
country, the heritage of all South Africans, shall be restored to
the people”.
The majority of South Africans, made up of the poor and
working class, fought and died not just for political freedom
from apartheid, but for socio-economic freedom and justice;
for the redistribution of all “national wealth”. An integral part
of that national wealth is water, a natural resource essential to
all life. When the majority of South Africans gave political victory to the ANC in 1994, they were also giving the new government the power to fulfil the charter and ensure natural
resources like water would be controlled by, and be accessible
to all citizens irrespective of race or class. This popular mandate was captured in the Reconstruction & Development
Programme (RDP), which formed the basis of the people’s
contract with the new, democratic government. However, it did
not take long for the ANC government to abandon that popular mandate by unilaterally deciding to pursue a water policy
that has produced the opposite result.
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Before the end of 1994, the South African government had
introduced its policy on water in direct violation of the RDP
commitment to lifeline supply. This gave the water officials the
authority to provide water only if they could fully recover the
costs of operating, maintenance and replacement. In 1996, the
adoption of a new macro-economic approach, known as
Growth, Employment & Redistribution (GEAR), located the
policies on water and other basic needs within a neo-liberal
Following the neo-liberal economic advice of the World
Bank, the International Monetary Fund and various western
governments (and heavy lobbying by private multinational
water companies such as Suez and Biwater), the government
drastically decreased grants and subsidies to local municipalities and city councils, and supported the development of financial instruments for privatised delivery. This effectively forced
local government to turn to the commercialisation and privatisation of basic services as a means of generating the revenue
no longer provided by the state. Many local government structures began to privatise and / or corporatise public water utilities by entering into service and management “partnerships”
with multinational water corporations.
The immediate result was a massive increase in the price of
water that necessarily hit poor communities the hardest. The
neo-liberal-inspired cost-recovery policy – ie, making people
pay for the associated costs of water infrastructure – led to this
dramatic increase. Under apartheid (1993), the black townships
around the Eastern Cape town of Fort Beaufort paid a flat rate
of R10,60 for all services, including water and refuse removal.
Under privatisation (Suez), from 1994 to 1996, the service
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charges were increased by 600% to R60 per month. A 100%
increase in water connection costs was also imposed. In another Eastern Cape town, Queenstown, a similar picture emerged
with a 150% increase in service costs. In the north-eastern city
of Nelspruit (Biwater), where the unemployment rate hovers
around 40% and average black household annual income is a
paltry R1,2000, the price of water delivered to black communities increased by up to 69%! The cost recovery policy caused a
national affordability crisis for black townships as well as rural
These early price increases were only further exacerbated by
the need to “recover” additional, huge costs associated with the
World Bank-funded Lesotho Highlands Water Project. (This
project featured dams built to provide water for South Africa’s
largest city, Johannesburg, and surrounding large-scale mining
and manufacturing industries.) The first price hike instituted by
the newly privatised water service in Johannesburg (the
Johannesburg Water Company and Suez’s South African subsidiary) was an astronomical 55%. Despite vigorous opposition
from the union movement, especially the South African
Municipal Workers’ Union and newly emergent (mostly urbanbased) social movements, the government persisted in its pursuit of privatising water.
Taking the World Bank’s advice to introduce a “credible
threat of cutting service”, the Johannesburg city council and
other councils across the country began cutting off water services to people who could not afford the increased prices. The
full-cost recovery model punted by the World Bank – ie, tariff
revenue sufficient to meet operations and maintenance costs,
without any public subsidies to keep prices in check – has seen
the water services of over 10 million people being cut off.
Additionally, more than two million have been evicted from
their homes, often as a part of the associated legal process to
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recover debt from poor “customers”. Those communities
without previous access to clean water have either suffered the
same fate since the infrastructure was provided or have simply
had to make do with sourcing water from polluted streams and
far-away boreholes.
The collective impact of water privatisation on the majority of South Africans has been devastating. The desperate
search for any available source of water has resulted in cholera
outbreaks that have claimed the lives of hundreds. In the
province of Kwa-Zulu Natal, the country’s biggest cholera outbreak occurred in 2000 as a result of changing the free communal tap system to a (privatised) pre-paid metering system.
Over 120,000 people were infected with cholera and more than
300 people died.
Not long after the French multinational, Suez, took over
Johannesburg’s water supply, an outbreak of cholera in the
township of Alexandra affected thousands of families. In both
these cases, it was only after the national government was
forced to step in as a result of community mobilisation and
pressure that the disease was brought under control.
Inadequate hygiene and “self-serve” sanitation systems have
also led to continuous exposure (especially for children) to various preventable diseases. There has been an increase in environmental pollution and degradation arising from uncontrolled
effluent discharges and scarcity of water for food production.
In addition, the dignity of entire communities has been ripped
apart, as the right to the most basic of human needs, water, has
been turned into a restricted privilege available only to those
who can afford it.
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In response to these privatisation measures, communities in
large urban areas such as Johannesburg, Durban and Cape
Town, as well as many smaller towns and peri-urban areas
across the country, have responded with active resistance. One
of the new social movements that has taken the lead in this
resistance is the Anti-Privatisation Forum (APF), an umbrella
organisation for grassroots groups primarily located in
Gauteng province (which includes Johannesburg and Pretoria).
Formed in 2000, APF’s guiding principle has been that basic
needs, such as water, are a fundamental human right, not a
privilege to be enjoyed only by those who can afford it.
Throughout the privatisation process, APF (alongside other
social movements and, to a lesser extent, the union movement)
has mobilised and organised poor communities and workers to
oppose it. Educational and legal initiatives have been combined
with regular mass action aimed at empowering ordinary people
to assert their right to free basic services (water, electricity, education and housing). As a result, the Coalition Against Water
Privatisation (CAWP) was formed in late 2003, bringing
together a range of social movements and progressive NGOs
in a collective effort to turn the tide against water privatisation.
With the assistance of APF and CAWP, residents have
launched a campaign called Operation Vulamanzi (“water for
all”), which has helped physically bypass some privatised water
control measures, such as pre-paid meters and trickler systems.
Water pipes have been re-routed to allow free access to water
and, in the process, strike a grassroots blow for the “decommodification” of water and self-empowering of the community. In some communities, residents have destroyed pre-paid
meters in an overt act of defiance against privatised water
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Displaying their contempt for the constitutional and human
rights of the poor, ANC politicians and government bureaucrats have publicly labelled those who resist privatisation as
criminals and anarchists who want to create a “culture of nonpayment”. These attacks have been accompanied by a largescale crackdown on community dissent and resistance. Over
the last three years, hundreds of activists and community
members have been arrested and imprisoned.
While anti-privatisation struggles have not yet succeeded in
halting the process, popular pressure forced the government to
implement a partial free-water policy in late 2002. However,
there are still millions of people who do not receive the “free”
6000 litres of water per household per month allocated
through this policy, an amount that does not meet even the
basic sanitation requirements of the average household. (The
World Health Organisation specifies a minimum of 100 litres
of water per person, per day. If the average (black, urban and
rural) household has eight people, then the minimum amount
needed is 24 000 litres per month per household.)
Grassroots opposition to privatisation has also contributed
to both the failure and / or re-negotiation of many South
African water privatisation projects.
It is within this context that APF and CAWP continue to
intensify the campaign against privatisation of water in all its
forms. It is through these campaigns that the majority has,
once again, moved to the forefront of the drive to reclaim their
basic human rights and dignity.
In South Africa, resistance to water privatisation continues to
plant the seeds of an alternative. One of those seeds can be
found in the ability of poor communities to undermine priva186
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tised delivery, both politically and physically, at the point of
“consumption”. Not only is this an act of self-empowerment,
but also it provides a foundation on which the majority of
South Africans can pursue the demands for policy and structural changes in the ownership and distribution of water and
other basic services essential to life.
At present, these demands, which continue to be pursued
by both APF and CAWP, include:
• The criminalisation of dissent and opposition to the privatisation of water must be immediately stopped;
• Pre-paid meters be outlawed immediately and removed from
all poor communities where they have been installed. They
should be replaced with an uncontrolled-volume, full-pressure water system, for which a flat-rate charge of R10 per
month is levied;
• The government reverse its policy of privatising water and all
other basic needs by cancelling all “service” contracts and
“management” agreements with private water corporations;
• A policy of cross-subsidisation (from corporate business and
wealthy individuals to poor communities) be immediately
implemented in order to effectively subsidise the provision of
free water services to the poor. This should be complemented by the government’s repudiation of apartheid debt and the
use of subsequent monies to assist in delivering free basic
• The government make a firm political and fiscal commitment
to rollout a universally accessible infrastructure (especially in
the rural areas) that is completely divorced from any “costrecovery” mechanism, and that is coupled with meaningful
participation from popular, community organisations located
in those areas most in need of infrastructure;
• The government publicly affirm the human and constitutionReclaiming Public Water
al right of all South Africans to water by ensuring full public
ownership, operation and management of public utilities in
order to provide free basic services for all. Over time, such
“public ownership” should take the form of public-community and public-worker partnerships in which community
organisations and public sector workers have equal participation and democratic control.
Dale T. McKinley is the media-information officer for the Anti-Privatisation
Forum and acting chairperson of the Coalition Against Water Privatisation.
It is unfortunate that many progressive, international NGOs,
social movements, political parties and community organisations continue to support the socio-economic policies of the
ANC government in the mistaken belief that they are a genuine reflection of a “continuing national liberation struggle”.
APF, CAWP and other allied organisations and movements in
South Africa urge those who are part of the global justice and
anti-capitalist globalisation movements to act in solidarity with
us. The first act of such solidarity should be increased contact,
sharing of information and the content / character of mutual
struggles. Spreading the word about privatisation in South
Africa, engaging in protest actions at South African embassies
and consulates, and messages of solidarity would be welcome.
The writing of political articles in both progressive and mainstream print media is also encouraged. Very crucial at this stage
of the anti-privatisation movement in South Africa is the need
for legal defence funds. It is difficult for APF and CAWP to
provide funds to defend the many activists who are arrested
and face court action and the intensification of the campaign
will ensure that the need for legal defence funds is going to
become even greater in the coming period.
Across the world, people have begun to unite in defence of
the human right to water. Whether in Cochabamba, Bolivia or
Accra, Ghana or Atlanta, Georgia or Buenos Aires, Argentina
or Manila in the Philippines, or Johannesburg, the ongoing
anti-privatisation campaigns for water access are resonating
with those in other places to decommodify water and institute
public sector services in which genuine democratic participation and control is exercised in order to meet people’s needs.
Reclaiming Public Water
Information: [email protected] or [email protected]
To make a financial contribution, please visit http://www.apf.org.za
Reclaiming Public Water
By Svitlana Slesarenok
Ukraine (6,037,000 square kilometres, population 48,416 million) is one the 12 former USSR republics and a country in
transition. After the start of market reforms, neo-liberalisation
and privatisation, the situation in Ukraine and other former
USSR countries of East Europe, Caucasus and Central Asia
has changed dramatically. In the Soviet era, people in these
countries traditionally had a very high level of social protection. The new market economy gave birth to realities such as
prostitution, homeless people and constantly increasing poverty. Now, in the Ukraine, there is a small number of rich people
who, after privatising common goods like factories, plants and
mines, are now also trying to privatise common resources like
forests, lakes, springs, gas, oil and even rivers. And we have a
very large number of poor people and their numbers continue
to increase dramatically. According to official statistics, we have
a poverty level of 27%. But some alternative investigations by
scientists show much higher figures for poverty in Ukraine of
between 40 and 60%.
The history and activities of MAMA-86 show that women
can really improve the situation and create significant changes in
their communities. MAMA-86, created in 1990 by Ukrainian
mothers who were worried about the effects of the 1986
Chernobyl nuclear accident on the health of their children, now
works with several hundred active members in 17 cities and
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towns across the Ukraine. Today, the work of MAMA-86
includes research, advocacy and lobbying, education and capacity
development, pilot projects and policy analysis and development.
In 1998, Ukrainian women identified drinking water as their
most urgent problem. According to the UNECE definition,
Ukraine is a water-limited country with resources less than 1,5
thousand cubic metres of river run-off per capita. In a dry year
in Ukraine, this figure is reduced to 0,67 thousand cubic metres
per capita. In addition, water resources are unequally distributed in Ukraine, making supply problems even more complicated. The water resources of Ukraine have suffered from considerable anthropogenic pressure and degradation. About 75%
of the population is supplied by surface water, which is not
suitable for drinking. In Ukraine 70% of the population use
centralised water supplies, but still more than 814,000 people in
13 oblasts (regions) as well as the Crimea have no permanent
or regular access to water and are forced to use imported water
of low quality.
The worsening and, in some regions, already critical water
supply and sanitation services, combined with increasingly
ineffective water and wastewater treatment and lack of sufficient financing, are the most pressing problems facing the
water sector. Currently, 25% of water supply facilities and lines
have reached their expiry date; 22% of supply systems are in a
state of emergency, with 35% worn out and inadequate; half of
the pumping units have depleted their resources, with 40% of
them requiring immediate replacement; 26% of sewerage nets
and 7% of pumping plants are worn-out; moreover, 46% of
pumping plants are to be fully replaced. As a result of this,
45% of the population is consuming water that does not com192
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ply with state standards. If there is a serious accident in the
water distribution networks, consumers’ water supplies may be
switched off for several days. The problem of drinking water
directly affects the health and well-being of Ukrainian residents. In some areas, water-borne diseases like hepatitis A,
rotavirus infections, and “blue baby” syndrome have become
more acute.
From another perspective, the cost of water supply and
canalisation services is rapidly growing, without any improvement in service quality. In the Soviet era, the Ukrainian population paid only 2-4% of real costs for their water supply, the
rest was paid by the Soviet government.
The steadily growing tariffs for supply and sanitation services have resulted in serious protests from consumers, higher
social tensions and a reduction in the collection rates for water
bills. Consumers pay rates for water based on average water
supples, which are 2-3 times higher than elsewhere in Europe.
Due to the absence of water meters, consumers have no idea
about their actual water consumption and take no measures to
limit their consumption. Low quality and rising prices generate
protests from consumers and require urgent measures at
national and local levels, accompanied by the development of
mechanisms to protect consumers’ rights that currently exist
only on paper.
Protecting consumers’ rights became the corner stone of
the MAMA-86 work in rural and urban areas. MAMA-86 has
carried out independent water testing, launched several water
purification initiatives, surveyed 1,600 people on their problems with drinking water and installed citizen’s water centres,
where filters provide clean and affordable water for vulnerable
groups. MAMA-86 has shown that NGOs can provide significant help in giving legal advice and support in situations connected with consumer protection. The “Drinking Water in
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Ukraine” campaign was started with the aim of finding concrete solutions for local drinking water problems. Within the
framework of the campaign, the MAMA-86 network implements pilot projects to provide practical small-scale and lowcost alternative solutions for drinking water supplies. The
exchange of knowledge and experience of positive solutions to
ecological problems (water pilot projects in particular) are of
great importance for galvanising public activity. MAMA-86
develops and widely replicates such pilot projects.
Local activists from MAMA-86 carry out a wide range of local
initiatives to improve access to clean water, including research
into pollution in drinking water sources, cleaning of wells and
reservoirs to improve quality and human health, as well as
installation of purification and sanitation systems in kindergartens, schools, hospitals and sanatoriums. Other important
activities are raising awareness about water-borne diseases,
water saving technology and consumer’s rights.
Water wastage is a major problem facing the water sector in
Ukraine. The outdated supply systems and equipment, combined with irrational and unregulated consumer usage, create a
serious situation. In Ukraine people generally have not got
water metres and have no idea about the volume of water they
use. The implementation of water-saving strategies is a major
priority for the water sector. The state programme on the
installation of water metres exists but it is being implemented
very slowly because of a lack of money. Since 2001, MAMA86 has been carrying out experimental pilot projects in three
cities: Kiev, Odessa and Kharkiv, aimed at changing public attitudes to water use, with the main purpose of decreasing the
level of consumption. In Odessa, consumption in households
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in 2002 decreased by 14% because of 74,000 water-metres
installed as the result of MAMA-86 Odessa’s activities. This
included a pilot-project on water-metres, an information campaign in the city, and changing local legislation (the draft was
prepared by MAMA-86) which simplified the process and
reduced the price of meter installation.
In June 2003, a business plan for reconstructing the water
supply in Soledar (Artemivsk administrative unit) based on
local water resources was designed in co-operation with
Tebodin, Soledar Water utility and MAMA-86. MAMA-86
Artemivsk is responsible for the first stage of the project and
for a broad information campaign to involve investors and find
matching funds to start the second, more expensive stage. At
this first stage, the main task is to create the technical survey
for the project. Now MAMA-86 Artemivsk is working with
Soledar Water utility on preparing the technical background
materials for the business plan. One of the outcomes of this
project will be the introduction of new methods of collaboration between public organisations, enterprises and local government to realise town programmes.
MAMA-86 has been involved in some very innovative policy
developments, especially in the current context of post-Soviet
Ukraine. From 1998 onwards, MAMA-86 and a host of NGOs
initiated the first ever participatory and consultative process for
the development of the National Environment and Health
Action Plan (NEHAP). The national co-ordinator asked
MAMA-86 for their assistance to draft a paper for public participation on the NEHAP.1 More than 600 organisations and
1 The public consultation and feedback process was co-ordinated by MAMA-86,
EcoPravo Network and Bahmat with support from UNED-UK.
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individuals from across the country representing environmental groups, women’s groups, researchers, health workers, business people and government representatives, gave input. After
much lobbying by more than 50 organisations in the Ukraine,
the Cabinet of Ministers approved NEHAP in October 2000.
MAMA-86 and other NGOs were also instrumental in the
drafting the new Drinking Water Law. They analysed existing
legislation, provided comments on the structure and content of
the new law, provided the public with information on the
process, engaged them in hearings on the draft, monitored the
drafting process, and lobbied for amendments.
Since 2000, cases of “wild” privatisation have emerged. In July
2002, for instance, the inhabitants of five villages of the
Odessa’s oblast wrote to MAMA–86 Odessa complaining
about the infringement of their right to use of the river water.
A village head had authorised five local businessmen to rent a
part of the basin of the small river Kuchurgan for the period
of 49 years.2 It is first time in the history of independent
Ukraine that there has been an attempt to privatise a part of
the basin of a river. The new Ukrainian Land Code allows private persons to privatise land, water and woods but these articles of the new Land Code are in conflict with the rules of the
earlier accepted environmental legislation.
The persons who have rented the river Kuchurgan for 49
years felt they were the absolute owners of the river and violated the environmental legislation by illegally building dams on
the river. Their actions caused the complete drying up of the
river and local inhabitants lost the right to access the river they
2 The catchment’s area is 2090 square kilometres, the length of the river is 109
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have lived by and grazed livestock next to for centuries. They
have lost the main source of their existence as a result of the
privatisation of the river. This loss of right to usage of the
river, in conditions of severe unemployment and high level of
poverty in these villages, caused a disaster. MAMA–86 Odessa
provided legal support to residents and contracts to rent the
basin of the river have been annulled. The Odessa’s area public prosecutor started criminal proceedings in connection with
the infringement of environmental laws. It is still necessary,
however, to calculate the damage caused to the river by the
Unfortunately it is not always possible for local inhabitants
and NGOs to change the course of events. Often the interests
of local communities are neglected and protests of NGOs are
not taken into account in any way, particularly if the interested
parties are powerful multinational companies with the support
of international financial institutions. Frequently, the budget of
such multinational companies exceeds many times the budget
of cities and whole states where they conduct business.
In 2000, a small article appeared in the Russian newspaper
Moscow Komsomolets saying representatives of the Odessa municipality had concluded a protocol on intentions with a French
firm, Suez Lyonnaise des Eaux, for the reconstruction of
Odessa’s urban water networks (one million inhabitants).
Odessa-based NGOs contacted the urban authorities about
the case, but got no reply. In October 2000, representatives of
Suez Lyonnaise des Eaux visited Odessa and publicly declared
its intention to participate in the management of the urban
water supply. The formal tender to attract foreign investors was
announced only in December 2000. The conditions could be
met only by a company like Suez Lyonnaise des Eaux (the size
of the tender pledge was US$130,000), however, these conditions did not say anything about the protection of interests and
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rights of consumers, or about the social consequences of the
project for city dwellers. Considering the unfair conditions of
the tender it was no surprise that only one firm - Suez
Lyonnaise des Eaux –took part in the tender process and won
it. Similar practices that exclude competition are used by multinational water companies in all countries in transition in
Central and Eastern Europe.
International financial institutions, such as the World Bank
and the European Bank for Reconstruction and Development
(EBRD), encourage private capital in water supply. These institutions frequently provide finance only for the private sector,
in spite of the possible efficiency of alternatives with the public sector. In 1998, Odessa’s water utility, Vodokanal, did a feasibility study with the World Bank on improvements of the
water supply. On the basis of this study, Vodokanal requested
$64 million in credit from the EBRD, $14 million of which was
to be for foreign experts. EBRD did not want to give credit to
a local company so Vodokanal formed a closed joint-stock
company in order to provide a guarantee on basis of its property. It was refused the loan again. EBRD then declared they
were ready to pay $200 million for the same to the French firm
Suez Lyonnaise des Eaux.
MAMA-86 and other NGOs have asked for information
and details on the negotiations many times, but have always
had the same answer: the agreement with Suez Lyonnaise des
Eaux is classified. After two years of confidential negotiations,
Suez stopped its activities in Odessa; Suez found the economical situation in Ukraine unsuitable, because people can’t pay
the fees Suez wanted.
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Water is a critical resource and should not be a means for profit. In Odessa, the women of MAMA-86 and other NGOs were
successfully able to block the privatisation of their water supply by Suez Lyonnaise des Eaux. They were able to demonstrate that there was a lack of transparency in the tendering
process, that the local authority conducted secret negotiations,
and that the European Bank for Reconstruction and
Development (EBRD) was willing to provide financing for the
privatisation for Suez without public consultation, but were not
willing to finance a local company that would have been more
accountable to consumers.
In the Ukraine, there is a larger issue of poor state governance to consider, as water issues are connected to so many
other problems. The state has withdrawn from solving water
problems and left it to consumers to resolve them themselves.
Women’s actions for change are setting new parameters for
democratic governance. However, women are not yet equal
decision-makers and a gender perspective is still lacking.
There should be transparency in all water utilities and local
authorities and an open process of consultation with the public and consumers, especially women, who are critical to problem analysis and solutions. The key factor of mobilising poor
women for cleaner water, for pricing, accountability and
affordability, and for better management of water infrastructure has already been demonstrated through several successful
The arrival of multinationals and the push for privatisation
should be approached with caution as it could lead to an
increase in poverty and inaccessibility of water to a significant
part of the population. This will especially affect already poor,
women-headed households, families with children and penReclaiming Public Water
sioners. There is also a need to be vigilant about corrupt practices by transnational water corporations. For example, both
Suez and Vivendi/Veolia executives have been suspected of
bribing to obtain water contracts.
The public should have the right to access all information
as it pertains to discussions between local governments, water
utilities, multinational corporations and the national private
sector. International financial institutions (IFIs) should support the principle of sustainable development, which supports
the management of water resources at the local level as a key
to sustainable development. IFIs should guarantee the rights of
the local population and public participation in the process of
water sector reforms.
Attempts should also be made to learn from the practices
of successful public water utilities, for example the Municipal
Department of Water and Sanitation of the city of Porto
Alegre in Brazil. At the same time, activists from MAMA-86
have proposed their own practical solutions and given their
own examples of how to resolve local problems with drinking
Svitlana Slesarenok is the executive director of the All-Ukrainian
Environmental NGO “MAMA-86” and may be contacted at
[email protected]
By Roman Havlicek
In Slovakia, almost 85% of inhabitants are connected to public water supply systems, but only 55 % of them live in houses
connected to public sewerage. In the past, the reconstruction
and renovation of water infrastructure was neglected, which
resulted in a high rate of drinking water leakages, estimated at
30 % but reaching almost 50% in some networks. In order to
comply with regulations of the European Union, there is a
need to invest more than €3 billion in public water services by
the end of 2015.
Since the mid-1990s, the Slovak Republic government has
been preparing for transformation of state waterworks and
sewerage enterprises with the aim of transferring infrastructure ownership from the state to municipalities. The way the
property would be transformed and results of the transformation process remained unclear for a long time. One option considered included privatisation of a part of the state waterworks.
Privatisation of the Trencin Water Company (following the
public-private partnership model – PPP) was supposed to
serve as a transformation pilot project and learning model. In
2002 the government decided to transform formerly stateowned water utilities into seven joint stock companies and
hand over their shares to municipalities according to the number of inhabitants.
MAMA-86 can be visited at www.mama-86.org.ua
Reclaiming Public Water
Reclaiming Public Water
The first steps toward privatisation of the state-owned Trencin
branch of the Western Slovakia Waterworks and Sewage
Company (known as the Trencin Water Company – TWC,
serving around 150,000 inhabitants in the city of Trencin and
surrounding municipalities) were made in the summer of 1997.
At that time, the government’s plan for transformation of the
state water companies assumed that municipalities would
acquire the property, including water distribution systems, sewerage systems, sewage water treatment plants and the related
operational property. Other relevant property - buildings and
machinery - would be accessible in the process of privatisation,
and municipalities would be able to buy it for the price equal to
its current book value.1 Remaining property - mainly water distribution systems of strategic importance and big potable
water resources, such as water reservoirs - would remain stateowned.
In 1997, the municipalities supplied by TWC asked for the
ownership of water infrastructure property (including water
distribution and sewerage systems) and they acquired it in several steps. In March 1997, the municipalities established the
Trencin Waterworks and Sewage Company (Trencianske
vodarne a kanalizacie - TVK), and the property they acquired
was deposited into this company. The operational property
(mainly buildings, machinery and related devices) as well as laboratories and a water dispatching centre that were essential for
operation of the system, were designated for privatisation in
the form of “direct sale to the applicant appointed in
1 “New private waterworks and sewerage company begins to operate in Trencin”.
Trend No. 46, November 11, 1998.
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Privatisation of TWC was, according to the official documents, to serve as a model for transformation of other state
water enterprises in Slovakia. However, it was obvious that
from the start that the driving force of privatisation was managers of TWC, with close political ties to HZDS (the leading
political party), wanting to acquire property that had been generating profits for a while. As early as 1993, the management of
TWC had established a firm called Trencianska vodohospodarska spolocnost (TVS) which was not active; but was in
preparation for privatisation.
Its time came in 1998 when the government coalition,
including the HZDS, was afraid of losing power and political
influence in the upcoming elections. Since the municipalities
already owned the infrastructure property, there was just one
last step needed to privatise the operational property and to
gain control over future profits from the water business.
Private TVS had strong support from state officials which, significantly, simplified the privatisation process.
TVS was the only corporation running for privatisation of
the operational property of TWC. Only this firm received the
so-called “acceptation letter” issued by the Ministry of
Agriculture which guaranteed TVS operation of the public
water company. This is why TVS had no competitors and it
was clear in advance that TVS would win this “competition”.
The transfer of state property to TVS was then just a matter of
time and relevant government institutions hurried to finish the
privatisation before elections. The contract was signed on 23
September 1998, two days before the parliamentary elections in
which the ruling coalition lost its power.
2 This form of privatisation was introduced into the Act No. 92/1991 on
Conditions of the Transfer of State Property to Other Entities during the authoritarian government of V. Meciar in 1993. At that time, this method was used mainly to privatise the state property to people loyal to the government.
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The property of TWC was divided in such a way that
municipalities in the Trencin region had to sign an agreement
for the operation of municipal waterworks and sewerage systems with TVS if they were to fulfil their legal obligation to
ensure continuous delivery of water services. Any other
approach by the municipalities would result in a collapse of
water supplies in the region.
The financial value of the operational property of Trencin
was officially stated to be 93,318 million Sk (€2,3 million). TVS
had to pay only half of the price divided into 15 annual instalments, while the rest was to be invested by TVS until 2007.3
Taking into consideration the net financial profit, which
Trencin generated before privatisation, TVS was in a situation
where it could easily repay these sums from profits of the privatised operational property.4
The municipalities transferred at the end of 1998 the infrastructure waterworks property, which they gained from the
state, to TVK - whose shareholders are municipalities of the
Trencin region. Then, in October 1999, TVK and TVS signed
a contract for operation of the water services that became
effective on 1 July 2000.5 The operational contract turned out
to be very disadvantageous for TVK.
3 “Proposal to issue the decision on privatisation of
a part of the Western Slovakia
Waterworks and Sewage Company Bratislava, enterprise Trencin - the operational
property.” A document submitted for session of the Slovak government, August 18,
4 In the last three years before privatisation, the Trencin water company made a
surplus of respectively 35,081 million Sk (1995), 16,742 million Sk (1996) and 39,436
million Sk (1997). 1 Sk = €0,025.
5 The contract on renting and operating waterworks and sewage infrastructure in
the Trencin region and on providing services related to general repairs and investments
dated on October 7, 1999.
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Before signing the privatisation contract, TVS signed a
memorandum on a potential future collaboration with Suez
Lyonnaise des Eaux (SLDE). Apparently, for a long time
before privatisation, SLDE had been negotiating with TVS
about its future participation in operation of water companies
in the Trencin region. In October 1999, SLDE purchased the
majority of TVS shares and gained control over decision-making of the company. At present, SLDE occupies three of five
seats in the TVS board of directors, including the post of company president.
At the beginning of 2001, TVK was awarded almost €4 million
grant from the European Commission (EC) programme, ISPA,
for the construction of wastewater treatment plant (Trencin
Right Bank Waste-Water Treatment). The grant represented
50% of the total project costs and was accompanied by cofinancing from Slovak government amounting to 12,5 %. In
May 2002, however, the EC published a report by an EC team
that looked at the privatisation contract to evaluate “whether
there is scope for making undue profit”.6 The report’s conclusions clearly indicated that the Trencin Right Bank Waste Water
Treatment project represented a real risk in terms of undue
6 Final report of the expert team of the European Commission
“PPP/SK/01/TR, Framework Contract for Provision of TA for Analysing and
Monitoring PPP Operations in ISPA Countries Review of 6 WWTP ISPA Measures in
Slovakia” May 2002 (http://www.vlada.gov.sk/phare/finalrepport.pdf). The aim of
the expert team was to evaluate preparation and implementation of the ISPA-funded
wastewater treatment projects. The team had focused on an examination of the legal
status of final beneficiaries in relation to transformation of the state water utilities and
their institutional and professional capacities. One of the main goals of the expert
team was “the terms and conditions must be summarised and an estimation given as
to whether there is scope for making undue profit” in case operation of water companies was or may be given to a private company.
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profit for TVS, the private provider of water services. The EC’s
report pointed out several provisions of the operational contract between TVK and TVS that privileged the private corporation at the expense of the municipal company and consumers.
By this contract, TVS acquired exclusive rights to operate
the water infrastructure owned by TVK for 20 years.7
According to the expert report, the most problematic provisions of the contract were connected with the amount of the
rent, the guarantee of minimum TVS profits, the management
and organisational fees, planning and performing of repairs
and investments, accountability for damages, and protection of
TVK in case of violation of the contract by TVS. These provisions enabled TVS to increase its profit at the expense of
TVK and consumers.
The contract guaranteed that fees for water services paid by
consumers would cover not only TVS’s expenditures for
repairs, new investments and all organisational expenses including full annual inflation, but they would also guarantee 15
% profit. Profit guaranteed in this way is unusual, according to
the authors of the report: “Allowing recovery of a 15% profit
margin on unregulated operational costs may open up opportunities for TVS to make unreasonable profits, and is not in the
best interests of the consumer.”8 In the first few years after privatisation, TVS made constant profits, while TVK lost major
amounts. This was due to flaws in the operational contract and
the fact that the rent for using the infrastructure was calculat7 For using this infrastructure, TVS pays rent equal to depreciation of rented
property. The contract has several annexes, one of which was an agreement on the
loan that TVS provided to TVK. The interest rate, the payback period nor any other
details about the credit have ever been published. According to the TVK 2001 Annual
Report, the loan of 45,5 million. SKK was spent in 2001.
8 According to the report, it is not common practice that inflation is fully reflected in water prices. Usually, it is possible to cover a part of annual inflation in order to
increase effectiveness of the services.
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ed wrongly. Only in 2002, when the rent was doubled, this situation was corrected.9
Repairs and investments in the rented property were to be
covered by a major part of the rent as well as from a loan provided to TVK by TVS. According to the operational contract,
TVS prepares a long-term plan that includes repairs and investments necessary for providing water services and operating the
infrastructure. In addition, repairs and investments can be
made directly by TVS, which raise the risk of hidden financial
flows between repairs and operation of the services. In this
way, the contract allows for easy abuse of public resources:
TVS, itself, suggests what repairs and investments in the property of TVK are necessary and TVS, itself, sets the price and
the same company also carries out the work.10
The contract provides TVK with no possibility to sanction
TVS in the case of a material breach of the operational contract, for example, in the case of delays in repairs or investments. TVK has limited power to control the activities of TVS.
TVK can execute only annual inspections of infrastructure,
and TVS has to submit annual reports to TVK. According to
the operational contract, TVK is supposed to prioritise repayment of debt to TVS, for instance by taking additional loans if
9 The operational contract was defined by the amount equal to depreciation of the
rented infrastructure property. This is why TVS made constant profits, while TVK lost
more than 5,6 million Sk in the first year after the contract became effective. The
amount of rent was improperly calculated. The loss was repeated in 2001 as well. Only
when the rent was almost doubled, did TVK profit.
10 According to the operational contract, and apart from direct expenses for
repairs and investments, the budget for major repairs and investments includes the
organisational fees of TVS, interest from the loan provided to TVK by TVS (or from
any additional loans of TVK) as well as an additional 10% of total expenditures as a
reserve. Since the residence of TVK is located in the building of TVS (part of the privatised property), TVK pays TVS for renting their offices as well.
11 At the same time, TVS is supposed to facilitate such loans. From these new
loans, TVK is supposed to invest in infrastructure property, and subsequently, the
property is to be rented to TVS so that the debt can be repaid from the TVK revenues
generated by rent.
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it is unable to pay the loan to TVS.11 The EC’s experts pointed
out that the operating guidelines and performance standards
for TVS, annexed to the contract, have been to a large extent
defined by TVS. The European Commission report concluded
that “there is a risk that ISPA contribution is perceived as
inducing undue profits to the private partner, and/or that benefits for the local population induced by the ISPA contribution
are not evident”. The experts recommended that “TVK, as
final beneficiary, should renegotiate the contract with TVS in
order to reduce the current advantages of TVS that may
increase to a point where profits could be considered undue.”
After the expert report was published, negotiations between
representatives of the EC and the TVK company were held to
address concerns of the expert team. The EC made it a condition of the release of the second instalment of the ISPA grant
that there was a change in the operational contract between
TVK and TVS. The result of the negotiations was the annex to
the contract between TVK and TVS, signed in January 2003.12
The Center for Environmental Public Advocacy (CEPA), a
Slovak NGO, requested the Commission to tell them how the
contract was changed. An officer at the EC said “the contract
was re-negotiated and clearly improved to the advantage of
TVK. The commission has endorsed the result.”13 For any
other information he referred CEPA to the Slovak authorities.
The Slovak government’s agency responsible for implementation of ISPA projects confirmed that the EC made several
12 Minutes from the fifth meeting of the ISPA Monitoring Committee, March 13,
2003, Bratislava.
13 The letter of Carsten Rasmussen, European Commission, DG Regio, dated
April 10, 2003.
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improvements to the contract and that all deficiencies that
were criticised by the EC’s expert report have been resolved.
As a result, the contract as a whole was amended to reflect a
more balanced division of risks. But it refused to disclose the
contract between TVK and TVS because TVK declared it a
trade secret and, instead, recommended passing a request for
disclosure of the contract either to TVK or TVS.14 In February
2003, the TVK refused such a request, and TVS responded
Therefore, on April 24, 2003, CEPA submitted a request
for copies of the contract between TVK and TVS to the
Ministry of Environment according to Act No. 211/2000 on
Free Access to Information. CEPA requested access to both
original as well as amended versions of the contract. The ministry denied the request arguing that the content of the contracts is subject to trade secrets. Therefore CEPA, in January
2004, filed a complaint to the Supreme Court of the Slovak
Republic against the Ministry of Environment. In November
2004, the court cancelled the decision of the ministry and confirmed the contract should be revealed.
The case of privatisation of water services in Trencin is clear
evidence that the main goal of so-called public-private partnerships for private providers is to make a profit at the expense of
the public owner of the water infrastructure or consumers.
The Trencin case has become a poor example for municipalities in the rest of Slovakia.
By handing over the shares of water companies to munici14 A letter from Radoslav Liptak, ISPA project manager at the Implementing
Agency of the Ministry of Environment, dated April 11, 2003.
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palities, the government practically dumped all problems connected to water supply and sewerage onto municipalities. Now
it is clear that municipalities did not have enough expertise or
experience to exercise public control and management of
water services. There are real risks that municipalities that do
not have the capacity or management abilities will not be able
to responsibly fulfil their obligations, which might lead to privatisation of water services in different forms (sale of shares,
sale of property, operation contracts with private providers
etc). For example, the city of Bratislava (capital of Slovakia
with approximately 550,000 inhabitants) was already preparing
its water utility in 2002 for privatisation, with the French company Vivendi/Veolia among the strongest candidates. With a
new municipal council elected at the end of 2002, the city
changed the plan and stopped the privatisation process. This
decision however cannot prevent attempts by water TNCs to
privatise in the future.
In 2002, a new way of regulating prices was adopted. The
regulation office sets the top limit of prices for each water
company. According to the law, regulated prices in the water
sector should reflect eligible expenses and reasonable profit of
each provider. Unfortunately the regulation office has only a
limited ability to verify of data presented by providers. Also it
isn’t clearly defined what “reasonable profit” means, which
allows for different interpretations. However, the rates have
grown since 2002 by about 30% every year and it is expected
that the increment in 2005 (also projected at 30%) will not
mean the end of price increases.
Another difficult issue for municipally-owned water utilities
is investments for reconstruction, upgrade and building of new
infrastructure. The only finances from public sources currently available come from cohesion and structural funds of the
EU, supplemented with co-financing from a European
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Investment Bank loan (€30 million) and a small amount from
the state budget. Unfortunately, this cannot satisfy all requirements, which need to be fulfilled in order to comply with EU
regulation by 2015. The government refuses to increase the
state’s share. Instead, it uses insufficient public financial support as an argument to promote private involvement in water
services provision.
Currently, the main challenges for water services are environmental standards, finances, effectiveness, affordability for marginalised communities as well as socially weak citizens and public participation in decision-making.
Water companies must comply with environmental standards, related to both drinking water and wastewater, set by the
EU regulation at latest by year 2015. Required investments are
estimated at €3 billion, but the government now relies only on
financing from the European Union’s cohesion and structural
funds. Water companies and municipalities learned how to
apply for grants from this source but now they will have to
look for other sources. It is inevitable that the government’s
financial contribution will increase, otherwise the goals will not
be met. Development banks (EIB, EBRD, World Bank) should
also increase their financial involvement without any conditions on private or public modes of operation.
There is room for increased economical effectiveness of
water utilities. For a long time water services were provided in
a strictly centralised and non-flexible system, unable to accommodate possibilities for cost saving. On the other hand, the
function of public water utilities as important employers must
also be taken into consideration.
Affordability of water services for socially weak groups is a
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problem. Water companies have already disconnected several
Roma communities where people are unable to pay for water.
Not having access to clean water represents a potential threat
for inhabitants’ health.
The former centralistic management of water services
practically excluded effective public participation in decisionmaking. Even now, municipalities, management of water companies and other public authorities often doesn’t allow the public to “interfere with their competence”. It’s crucial for public
control that all information related to management of water
services, as well as decisions on strategic planning processes,
are open to the public. Municipal councils, officials and water
companies’ representatives have to understand that public control can help them to provide effective services.
Currently, there is not enough strong social pressure to initiate these changes. But possibly, with continuous increases in
water prices, the awareness and activity of different groups will
also grow. Consumers, trade unions, environmental and social
NGOs will have to articulate their positions on public water
services and initiate public dialogue with municipalities, water
companies and other relevant public authorities. Many citizens’
groups have experience in how to involve media in this dialogue and how to attract the attention of politicians at all levels. The international water justice movement can support this
dialogue by providing examples of successful, publicly-operated water utilities abroad and by facilitating communication
between Slovak institutions and foreign municipal water utilities, which may result in public-public partnerships emerging.
Roman Havlicek works with the
Centre for Environmental Public Advocacy
(Friends of the Earth Slovakia).
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By Carla A. Montemayor
The case for water privatisation’s failure in Metro Manila is well
documented and almost indisputable. Seven years after the utility was privatised in 1997, coverage, pricing, service obligations, non-revenue water, water quality and other targets stipulated in the Concession Agreement remain unmet. The two
private concessionaires, Maynilad Water Services, Inc.
(Maynilad, operator of the west zone) and Manila Water
Company Inc. (Manila Water, operator of the east zone) committed to 100% coverage of their respective concession areas
within the first 10 years of operation; a capital inflow of $7,5
billion to upgrade and extend the pipe network over 25 years;
and the reduction of non-revenue water (NRW) from 56% to
32%, among other targets. They also entered into a contract
that provided for no unnecessary price increases other than the
yearly adjustment for inflation.1
Maynilad, especially, has been grossly remiss. It has delivered and billed only 50% of the programmed volume of water
(which accounts for its 58% shortfall in revenue), while its
operating expenditures surpassed bid levels by 11%. Its capital
expenditure over the first five years was an incredible 75%
lower than the promised PhP14,1 billion. It also managed to
increase NRW levels to 69% - 14% higher than pre-privatisa1 Lo, Frances. 2004. Making the Public Work: Alternatives to Manila Water
Privatisation. Presentation at the Asia-Europe Meeting, Hanoi.
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tion levels. It has affected a 500% price increase since 2001,
while Manila Water has imposed a 700% price increase.2 A
cholera outbreak in October 2003 that killed seven people and
sickened over 600 is a compelling demonstration of poor water
quality and sanitation levels.
Coverage data remains disputed. Both companies place
unconnected individuals at an estimated one million. Some
experts place the number of Manila residents without direct
access to piped water at five million.3
There is no disagreement at this point among the different
water groups that the west zone (or at least the west zone)
should be de-privatised. This consensus directly opposes the
Philippine government’s position of bailing out Maynilad by
engineering a bogus “takeover”. The final terms of this bailout
scheme are not yet public, but previously floated scenarios
include: a government buyback of Maynilad’s shares at double
the market value; partial recovery of unpaid concession loans;
retention of the existing corporate structure (minus key
Maynilad executives and reduced Ondeo participation); and,
perhaps most importantly, maintaining the status quo for the
“privatised” character of the utility under the same concession
agreement and regulatory arrangements.4 The goal of the
2 Diokno-Pascual, Ma. Teresa. 2004 Lessons from Suez-Maynilad Water Venture
(presentation at the Belgian Parliament inquiry on water privatization). Brussels:
3 Private concessionaires report one connection per 9,2 people when population
figures for Manila show that an average household consists of 4,6 people. In a study
of water supply in Asian cities, Arthur Macintosh argues that the best measurement of
“coverage” is 24-hour access, which is not documented in Manila concessionaires’
reports. Numerous households in Metro Manila only have several hours of water supply delivered on alternating days during a typical week. McIntosh also questions standpipes, shared connections, vended water and neighbourhood re-sale of water as accurate measurements of “coverage”. See MacIntosh, Arthur. 2003. Asian Water Supplies:
Reaching the Urban Poor. Asian Development Bank and International Water
4 Diokno-Pascual, Ma. Teresa (2004) No to the Bailout (Bantay Tubig statement
on the bailout of Maynilad). Manila: Bantay Tubig.
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national government is to restore Maynilad’s financial health in
order to attract new private bidders. It has no intention of
altering the underlying framework of water privatisation, or
recasting its approach to water provision as a basic service,
with access to water being a fundamental human right.
While the rationale for the re-nationalisation of water utilities
seems well established, debates still surround the mechanics of
such an option. The history (and indeed, the present state) of
the Philippine public sector does not bode well for its efficiency or reliability in service delivery. Philippine water activists
have to contend with an inefficient and corrupt public sector
seemingly impervious to reform - the very basis for the
absence of any strong opposition to privatisation in 1997. The
specifics and feasibility of water sector reforms need to be
convincingly articulated in order to advance a politically
acceptable re-nationalisation program.
This takes us to the stubborn knot in the struggle for water
in developing countries. On one hand, the provision of water
is located within a larger ideological struggle, which compels us
to reject the injustice and inhumanity of the profit-driven
model. On the other hand, it requires us to face up to the practical, immediate needs of the communities we work with - the
poor need water now. To them, the public versus private debate
is distant and irrelevant; the public-private debate is probably
of greater concern to those who already have connections and
suffer from the dismal performance of the private concessionaires. Those who remain waterless welcome any entity that will
provide water - an attitude that creates enormous difficulties
for anti-privatisation advocates. The issue of access, then, is a
critical and immediate one that informs water struggles in
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countries like the Philippines.
Within such a context, the search for alternatives has
thrown up options that may not be similar to those advanced
by other movements caught up in the same struggle. We put
forward a range of possibilities that we are prepared to
advance given the enormous challenges that face us in Manila.
Any public entity that seeks to replace private concessionaires
must meet several requirements5:
1) Operational viability
Financial resources to fund a clear-cut capital expenditure programme that especially targets poorest areas for
expansion and most vulnerable sections of the pipe network for rehabilitation.
Institutional capacity to implement service obligation
targets. It must be demonstrated that a public agency / corporation can provide skilled, service-oriented and accountable
personnel. A system of incentives for good performance and
clear punitive measures for unmet performance targets must be
2) Conducive policy environment and legal framework
A broad national policy to provide universal water coverage aligned with the Millennium Development Goals and
5 Bantay Tubig has held several discussions on the issue of alternatives and the
Institute for Popular Democracy has conducted research on the same issue. The elements outlined here are drawn from those researches and discussions over the course
of three years (2001-2004).
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general poverty reduction targets. Individual water agencies,
government departments and local government units need to
be motivated by a clear, co-ordinated push towards water provision, especially for the poor. President Arroyo has
announced a 10-point programme that includes universal
access (for the entire country) in five years, but it does not spell
out priorities and preferences (for community-managed systems, for example, instead of private provision).
Legislation for the rules and regulations that will govern a public water utility, including performance standards and penalties for the non-fulfillment of such. There
is likewise a need for legislation creating a new, independent
regulatory system (discussed separately below).
3) Legitimacy and accountability
Social preparation, continuing education and dialogue to
develop consensus and commitment towards responsibilities, rights and obligations concerning water. Private corporations have either deliberately ignored these needs or have
undertaken self-serving promotional or “social marketing”
projects prior to their entry. Community participation is not
integral to private operations unless it impacts directly on profit levels. Community participation in water resource management, prevention of leakages and illegal connections and even
collective maintenance of a water system can be encouraged
through field personnel who can interact with, dispense and
collect information from residents concerning water issues.
Higher tariffs may be needed in the future to invest in improvements for the many unserved and badly served areas. The public needs to be convinced that a path towards reform has been
defined and is likely to be sustained. People must become confident that the money that they will infuse into a public compaReclaiming Public Water
ny (via taxes and via cross-subsidisation) will not be stolen by
corrupt officials and equally corrupt public works contractors.
Transparency in the technical and financial processes
of the utility. The complexity of processes such as rate-rebasing exercises, have prevented broader public discussion on
pricing and the mechanics of regulation. Communities, however, have shown sufficient understanding of aspects of water
administration such as metering and reticulation standards, as
evidenced by village associations’ campaigns to end bulk-water
selling. Bantay Tubig worked with the United Homeowners’
Association for Water to stop the bulk-water selling practice of
Manila Water in their villages. Bulk-water selling involves the
use of a collective “mother” meter installed at the gate of a village. The entire community is billed in commercial instead of
household rates. Public access to the utility’s books, capital
expenditures maps, price indexes, audits, regulatory procedures, etc. should be ensured. This transparency will enable
greater and more meaningful participation of communities,
organisations, local government officials, and other stakeholders in policy and decision-making. This needs to be supplemented by new systems of representation and other institutional mechanisms that can discipline decision-makers, for
Waterworks and Sewerage System (MWSS) who will alert the
public when things are going wrong. An office for consumer’s
rights that can help prosecute erring officials is another option.
A clear responsibility and accountability chain. Both
the pre-privatised and privatised water utilities were managed
by bureaucrats and personnel who were largely unknown and
inaccessible to the public. Only bill collectors and engineers
dealt directly with users. There is a central Consumer Affairs
Office, but queries and complaints will not be addressed at
local branches of the utilities.
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An alternative structure should indicate the responsible personnel for specific areas of water administration such as coverage issues, service issues, repairs, metering and billing, etc.
Ideally, there should be locally assigned personnel to respond
to communities’ queries and concerns.
4) Financial sustainability
Several studies have already explored the conditions attached
to loans extended by development banks and multilateral agencies.6 Since transnational companies have likewise renounced
their willingness to invest in water utilities, financing remains a
problematic issue for public alternatives. The following have
been suggested as sources of alternative financing: co-financing between national and local governments; the corporatisation of water authorities, securitisation (floating municipal/city
bonds for water system projects), etc.
Cross subsidies and tariff adjustments. A form of
socialised billing has been implemented by private concessionaires, where the first ten cubic metres of water is charged at the
lowest rate, with prices increasing progressively after certain
volume levels are breached. However, the high connection
costs (4,000-6,000 pesos or around $100) have prevented the
poorest households from obtaining piped water. High connection fees are thus the biggest barriers to universal access. Yet,
ironically, in terms of water prices, many urban poor households use up to 20% of their monthly incomes to pay for vended water sold at rates up to 500% higher than piped water. A
typical Manila household consuming 30 cubic metres per
month pays around $4/month, while an urban poor household
6 Hall, David. 2004. Water Finance: A Discussion Note. Paper presented at the
World Social Forum in Mumbai.
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without a connection spends $20/month to buy six cubic
metres of water during the same period.7 The poor household
also has to bear the additional costs of collecting and transporting the purchased water, boiling and storage, health and
sanitation risks. Manila Water has required communities to pay
for service pipes leading to their houses, which is an often
impossible obstacle for households that are some distance
from the main pipes. In the slum areas the households also
have to pay for “after-meter” pipes, which can be very expensive because Manila Water (unlike Maynilad) sets up the water
meters at the entrance of the informal settlements, rather than
near the dwellings.
Without the infusion of loans or capital outlays from the
national government, it is becoming clear that universal access
through zero connection charges, expansion and rehabilitation
costs will have to be borne by subscribers. These will have to
be financed through tariff increases for certain income groups
– an issue that generates significant resistance given the record
of the two concessionaires. Tariffs that will be charged to
everyone can finance individual water connections and extension lines to whole communities. In effect, instead of the direct
beneficiaries paying for part of the infrastructure costs upfront, it should be possible for a larger set of consumers to pay
for these connections over longer period.
McIntosh outlines some principles that can be used to
guide these tariff increases: 1) that those who have connections
and especially those who have a 24-hour supply, should pay
more so that those who are without access can get connections; 2) tariff structures should be adapted to the income profile of the city, which should be studied thoroughly before any
increases are proposed; and 3) there should be a ceiling on
water affordability, ideally at five percent of a household’s
Bantay Tubig subscribes to these principles but only within
a reformed public set-up; we cannot advocate further price
increases under the current system or under the equally unviable pre-privatisation public set-up. That would be unjustifiable
and impolitic given the previous price hikes that did not translate into service upgrades and coverage expansion.
5) Independent, functional regulatory system
The need for regulation cannot be over-emphasised, even within a public setting. Regulation is necessary to ensure the consistent delivery of service obligations, to determine “efficient”
pricing, to conserve water, to extract professionalism from
managerial staff, and to ensure the financial viability of the utility (especially when public subsidies are involved). Regulators
of public water utilities should have equity as an additional and
explicit objective that might conflict with the regulatory function of devising “efficient” pricing patterns.
If the overall goal of water provision is to complement
poverty reduction goals, such a conflict would be moot.
Subsidies for water connections and even usage have been
demonstrated to have significant impact on poverty reduction.
Regulators of a public utility can be guided by such a principle
and enforce a universal service obligation on connection, while
balancing usage-related and other fixed charges.9
McIntosh, A. (2004) Asian Water Supplies: Reaching the Urban Poor. Asian
Development Bank.
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Chrisari, O, Estache, A and Price, C. 2001. Access by the Poor in Latin America’s
Reform Subsidies and Service Obligations. World Institute for Development
Economics Research.
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The above elements of a public alternative can find expression
in a range of options, whose merits and limitations are
described briefly below:
Pure public
Under this scenario, the entire utility is re-nationalised, the privatisation policy rescinded. Apart from being improbable (the
Arroyo government does not show any indication of exploring
this option, nor is there significant public clamour for it), this
option requires the following: 1) The removal of Manila Water
as east zone concessionaire. This is problematic given its marginally better performance record, compared to Maynilad and
the pre-privatisation public utility. 2) Massive and swift reforms
in the MWSS. A return to pre-privatisation management is simply unacceptable to Metro Manila residents and will only serve
to discredit the advocacy for re-nationalisation. Unless a coherent and operational reform plan is devised, this scenario
remains unimaginable at this juncture. 3) National/city
resources for a takeover. The current government is mired in a
fiscal crisis that may degenerate into an economic meltdown if
not resolved within the next two or three years. There are no
public funds to finance the utility.
mechanism while a more comprehensive reform program is
implemented. Manila Water remains in the east zone where it
can provide a benchmarking function in terms of price and
service levels. This prevents the publicly managed west zone
from ossifying into another corrupt and inefficient government corporation. Manila Water’s continued operations in the
East Zone, however, are also far from ideal. Indeed, it has dramatically failed on its efficiency targets and urgently needs to
catch up, without further tariff increases beyond inflation levels. It may be the case that the company’s own financial limitations and commercial-mode of operations prevent it from
implementing President Arroyo’s agenda for universal piped
service coverage in its franchise area. This would for instance
require the abolition of all connection costs that are charged
upfront to new (mostly poor) customers.
In cities like Washington, the threat of privatisation served
to revitalise the moribund water utility. The case of the city’s
Water and Sewer Authority (WASA) demonstrated that the
public sector can indeed perform efficiently given certain conditions: 1) financial autonomy; 2) the power to set fee structures according to certain processes insulated from political
interference; 3) the power to raise funds (such as bonds); 4) the
power to negotiate labour agreements (given the need for
streamlining); and 5) quantified measures of “efficiency” that
can readily be compared to those of the private sector, such as
cost reduction rates, service levels, etc.10
Public operator versus private concessionaire
A genuine takeover of the west zone can be engineered by a
decisive national government which does not stand to lose anything it has not already conceded to Maynilad. Reforms will still
have to be undertaken, but an infusion of fresh administrators
and a new management structure can serve as a transitional
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10 Gutierrez, Eric, 2002. Washington D.C’s Continuous Internal Improvement
Alternative—An Initial Inquiry on PSP in Water and Sanitation in the US. London.
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Smaller concessions, local governments’ involvement in water utilities
The proposal to split Metro Manila into smaller concession
areas solves management problems endemic to a water utility
that caters to 12 million people. The areas can be managed or
supervised by local government units (or a cluster of local government units) which have 1) direct links with communities
within their service areas, and 2) have the strongest political
motivation to deliver water services to their constituencies.
Local governments can also legislate to raise or allocate revenues for the water utility.
Comparisons can be made across local governments, some
of which may choose to nominate private concessionaires at
their own risk. The end-result is still the availability of benchmarking opportunities across communities.
The above proposals can be studied further, refined or combined to make public water a viable alternative even in as problematic a setting as Manila. The Manila water fiasco need not
end as one of those insoluble southern crises that no one quite
knows what to do about. The struggle against privatisation in
Manila continues as we - local and international water activists
- persuade our various publics, pressure national governments
and IFIs, and work with communities to establish that our
vision of public water is better because it works.
Carla A. Montemayor is with
Bantay Tubig (Philippine Water Vigilance Network).
Co-operatives in Binangonan, Rizal have been operating for 30
years on the outskirts of Metro Manila which remain unserviced by concessionaires. These co-operatives have raised
investment within their communities, jointly manage their
water system and actually earn revenue, which they re-invest in
the utility.
Yet, according to the Concession Agreement, concessionaires have the right to take over such co-operatives when they
do expand to those areas, without having to compensate communities for their investments. This policy needs to be
reversed. Communities must be encouraged to replicate the cooperative experiment, which has proven to be viable and participatory.
Reclaiming Public Water
Reclaiming Public Water
By Nila Ardhianie
Complaints about performance and various other problems are
increasing more and more as the multinationals Suez-Ondeo
and RWE-Thames continue to operate in Indonesia.
Privatisation started in 1997 with Jakarta’s water company PAM
Jaya. Thames Water controls the water supply in the eastern
part of Jakarta, and Suez-Ondeo runs the western part of the
city. Even though there have been serious problems since the
start of privatisation, the Indonesian government is planning
further privatisation that will include up to 250 state-owned
water companies.
The early part of privatisation of Jakarta’s water was done
through closed-door negotiations instead of an open bidding
process involving interested companies. Unusually, this is legal
under the Instruction of the Minister of State Affairs.1 In fact,
the government instruction was drafted so as to make the privatisation process as smooth as possible.2 In mid 1995,
President Soeharto instructed the Minister of Public Works to
speed up the process and the minister responded by allowing
the companies PT Kekar Thames Airindo (later named
1 Instruction No. 21/1996 on Co-operation Guidelines Between Municipal Water
Companies with the Private Sector.
2 An interesting point is that it was the only regulation with an English translation.
The instruction recommends all governors in Indonesia’s water service co-operate
with the private sector. The recommended process is through direct appointment; cooperation initiatives are supposed to be initiated by the private sector and the municipal water company chooses which private company to work with.
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Thames PAM Jaya with some shares owned by Soeharto’s son)
and PT Garuda Dipta Semesta (later renamed PAM Lyonnaise
Jaya) to handle water service delivery in Indonesia.
The privatisation contract between the two companies and
PAM Jaya was signed in 1997 and renewed in 2001. The private
companies have operational rights, from raw water supply to
billing the customers. PAM Jaya supervises company performance and advises on tariff increases. The contract clearly
defines issues like the profit-sharing model, termination conditions and asset ownership for the 25-years the contract will
run. The actual privatisation model, however, remains vague. It
is not clearly stated if the agreement is Build-Operate-Transfer
(BOT), build-own-operate (BOO), a concession, or some
other privatisation model. In a number of official documents,
the regulatory body states that it is a concession contract. Also
the World Bank, in documents related to Second Jabotabek
Urban Development Project, states that the agreement to supply water for 10 million Jakartans is a concession contract. In
any case, it is a very generous contract for the water corporations as the financial risks are covered by PAM Jaya. The contract specifies that if the contract is terminated by PAM Jaya,
then the state-owned company has to pay RWE-Thames and
Ondeo-Suez the following:
1: all investments made by the foreign companies;
2: insurance costs;
3: expected income before tax for half of the remaining years
of the contract.
The private sector’s performance in the first seven years has
been poor and most targets have not been met. Table 1 shows
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that the coverage target for 1998 was 49%, but the result was
only 43%. This pattern continued and in 2000 only 48% coverage was achieved, far below the 63% target.
The original target in the June 1997 contract was to supply
70% of Jakartans with continuous water supply by 2002.
According to an employee, the coverage levels reported by the
companies are flawed. On many occasions, the private companies have simply installed new pipes above functioning, older
pipes but count the new pipes as an addition to the coverage
level. The reality is that a lot of poor communities in Jakarta
have not seen any improvements during the seven years of privatisation.
Table 1. Comparison between targets and realisations until end of concession period (revised from the original targets, as described in the Restated
Co-operation Agreement)
Total Connection
Service Coverage NRW
Water Sold, Million
1998 470.674 487.978
1999 571.776 541.630
2000 653.885 562.255
2001 597.174 610.806
2002 636.461 649.429
2003 675.534 690.456
2007 796.738
2012 847.774
2017 864.511
2022 879.511
Source: Jakarta Water Supply Regulatory Body, 2004
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Since the beginning of privatisation, there has been an increasing deficit between the tariff collected from the costumers and
the fees paid by PAM Jaya to RWE Thames and Ondeo for
their operations in Jakarta. As illustrated in Table 2, the highest
shortfall was in 2000. The companies used this to support tariff increases. The water tariff has now been increased three
times since privatisation (35% in April 2001; another 40% in
April 2003 and an additional 30% in January 2004). The total
amount of shortfall until the first semester of 2004 is Rp 900
billion, and all this is regarded as PAM Jaya’s debt to RWE
Thames and Ondeo. Richard Gozney, the British Ambassador
to Indonesia, even found it necessary inform vice president
Hamzah Haz, at the end of 2003, that RWE Thames was losing US$1,5 million per month, and that by November 2003 the
loss amounted to US$58 million. By mid-2004, the governor of
Jakarta agreed to automatic tariff increases starting from 2005.
With automatic tariff increase, permission from the governor
and city council is no longer required. The increase would be
applied every six months; if privatisation continues as scheduled for the next 18 years; Jakarta will be faced with 36 automatic tariff increases (the contract was signed in 1997 for 25
years period).
Table 2. The shortfall (in billion Rp)
2003 2004 1st Total
Water charge
510,20 647,40 673,80 726,10
Water tariff
380,30 405,90 529,10 605,80
129,90 241,50 144,70 120,30 175,00
Lay-offs have been a common feature of privatisation around
the world and this is no different in Jakarta. Until now, at least
a thousand workers has been laid off with many people leaving voluntarily due to psychological stress caused by poor
working conditions. “Prior to privatisation, employees received
a lot more benefits than now,” said Zaenal Abidin, a member
of the PAM Jaya Labor Union. “Uniforms, paid leave and
health facilities are the right of every employee. But privatisation erased all of our rights. In fact, we had to wait for four
years just to get our uniforms, with a complicated and tiring
There are also serious problems with the early-retirement
scheme offered by the two companies. Employees who have
worked for ten years received pension funds of only Rp150
000 per month (approximately US$16). An expatriate in the
same company receives a salary of between Rp150 million and
Rp200 million per month (US$16,130 to US$21,500). They
also have other benefits which are not included in this salary.
The pension of an Indonesian worker is only 0,001% of the
monthly wage of an expatriate!
Poltak Situmorang, head of the Association of Indonesia’s
Drinking Water Contractor, Jakarta branch said: “These expatriates spend more than Rp 1 billion on security alone. All this
money is used to keep them “safe”, each one is guarded by five
body guards on a daily basis.”.3 Security expenses are well
beyond that allocated for the golden hand shake scheme of
only Rp 221 million.
Source: Association of Indonesia’s Water Contractor, 2004
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3 Presentation in Drinking Water Service in Jakarta as a 477-Year Old Megapolitan City,
August 31, 2004.
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Bad experiences with privatisation in Jakarta do not seem to
deter the Indonesian government. Currently, hundreds of
other state-owned water companies (PDAMs) around
Indonesia (most in a poor condition due to debts and mismanagement) are earmarked for privatisation. Director of Cities
and Villages, Department of Settlement and Regional
Infrastructure, Totok Supriyanto, told the media in April 2004
that 90% of the “sick” PDAMs will be privatised soon. Since
the “healthy” PDAMs account for only 10% (30 PDAMs),
there are at least 250 PDAMs to be privatised (Indonesia has
approximately 300 PDAMs).
The former Minister of Environment, Nabiel Makarim, has
said more than once that he supports plans for privatisation as
it will lead to a more efficient water resources management.
According to Nabiel, there is not a single state-owned water
company anywhere in the world that has managed water
resources efficiently.4 So far, there are three cities in Indonesia
whose water management is managed fully by the private sector: Jakarta, Batam by Biwater and Sidoarjo by a consortium of
Vivendi and Thames.
Totok Supriyanto has said that, in the future, more and
more PDAMs will be privatised. In the meantime, there are
eight PDAMs currently in a special program to make them
“healthier” through the “Urban Water and Sanitation
Improvement” project (managed by the World Bank with
funding from the Asian European Meeting - ASEM). It is very
likely that the eight PDAMs will be privatised once the project
is completed. A World Bank staff member in charge of urban
4 Tempo Interaktif. 15 December 2003. Ministry of Environment Agrees to Water
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water management said, however, that the goal of the project
is not to privatise the PDAMs, but they would be a lot better
healthier rather than sick. He added that for other “sick”
PDAMs, the World Bank is preparing another programme
through leasing. It should be clear, given the many definitions
and explanation of privatisation, that leasing is another form of
Jakarta’s experience is influenced by the World Bank through
the Second Jabotabek Urban Development project. Through
this project, PAM Jaya was given a loan of US$ 93 million to
increase its coverage to 70%. The target was not met and by the
time the project was completed, PAM Jaya was privatised. The
same project also funded PDAM Tangerang to build a water
treatment plant to increase the raw water supply to the western
part of Jakarta. The project was also partially funded by the
French government and when the project was completed, water
management in the western part of Jakarta was handed over to
Suez Lyonnaise des Eaux, the French water giant.
An important point is that the failure of hundreds of PDAMs
around Indonesia is usually due to enormous debts they cannot pay. In 1996, for example, PDAM Kediri owed Rp 3,25 billion to the World Bank and it was due to start repayments in
2001 of Rp 15 million a month for 18 years. But PDAM Kediri
only generates Rp 70 million a month and Rp 68 million of
that is used for routine operational costs and employee payment. With Rp 2 million left, how could they pay their debts?
A further burden is the donation of Rp 10 million per year to
the local government’s income.5 There is nothing to do by
Kompas, March 16, 2001. PDAM Could Not Pay the World Bank Rp 3,25 billion
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PDAM Kediri but wait to fail. PDAM Semarang, Papua, and
many others face similar problems, which is why debt-based
programmes should no longer be an option for making
PDAMs “healthier”.
In Table 3, we can see the results of Wijanto Hadipuro’s
research in 2003 that shows the pattern of debts in PDAMs.
The creditors are mostly international financial institutions
who have agreed to give loans that are higher than the assets of
the debtors. PDAM Tirta Nadi in Medan has assets worth of
Rp 16 billion, but their debts are Rp 70 billion. PDAM
Pematang Siantar’s assets are worth only Rp 1,8 billion, but it
has debts Rp 3,5 billion. Wijanto suspects that the wrong pattern is not an accident, it is intended that way so the PDAMs
will have no bargaining power over privatisation.
Table 3. PDAM Foreign Debt Vs Asset (in Rp)
No Name & PDAM
Foreign Debt
Foreign Debt 2000 Asset
Kota Medan "Tirta
Kota Pematang
Siantar "Tirta Uli"
Kota Bukit Tinggi
Kota Bandung
Kabupaten Bandung 0
Kabupaten Garut
Kabupaten Wajo
Source: Directory Indonesia Water Association 1998 and 2000
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Since the Law No 7/2004 was passed in March 2004, it is very
likely that privatisation and commercialisation of Indonesia’s
water resources is unpreventable. Only large- scale and persistent opposition from the population can slow it, and recently
this has emerged in many forms. Academics, activists, employees of PDAMs, the public in general and even customers of
RWE Thames and Ondeo, are trying different ways to prevent
privatisation in Jakarta. Komparta (Jakarta’s Water Customer
Community) has filed two cases against the two companies; the
first against tariff increases and the second against poor service.
Meanwhile, there are five suits filed against the newly
legalised Law on Water Resources. These suits have been
brought by groups of NGOs and the community before the
Constitutional Court on the grounds that the law violates
Indonesia’s constitution. Our Constitution, article 33, states
that all business entities essential for the lives of the people
should be owned by the state. But the Water Law provides
many opportunities for private-sector ownership in water management through applying water rights (water usage rights and
water exploitation rights), allowing the export of water and
allowing private companies and individuals to: 1) participate in
drinking water service; 2) manage parts of rivers; and 3) conduct weather modifications.
Another case against TPJ and Palyja is also being prepared
by a contractor organisation. The two companies are accused
of violating the Anti-Monopoly Law by appointing only a
handful of contractors for their outsourced works when there
are hundreds of other, well-qualified and experienced contractors in Jakarta.
The anti-privatisation movement is starting to spread in
cities like Jakarta, Bandung, Pati and Manado. Protests are usuReclaiming Public Water
ally about poor service issues or when the community refuses
a privatisation plan such as in Manado, Pati and Bandung.
Unfortunately, the movement has not yet evolved into a persistent, mass movement. The anti-water privatisation movement in Indonesia is still sporadic, reactive and not getting
enough support from the general public.
This lack of support is because the public is not well
informed and people don’t comprehend the issues in water privatisation; issues, for example, such as what is the impact when
water is privatised and what are the conditions which apply
when privatisation is about to take place. In addition, operators
of many public-owned water companies have been “influenced” to see privatisation as the best way to clear prolonged
debt. They think that through privatisation, they will end debt
and finally the company can run normally.
Most of Indonesia’s PDAMs are in a complicated situation
with regard to the huge debts they have. So, the first step to
take if we want to maintain public ownership is to cut or cancel all debt, both to the central government and debt to the
international financial institutions like the ADB and World
Bank. Without this, it will be impossible for the PDAMs to run
normally. They could then learn from healthy PDAMs how to
manage efficiently and effectively. (Most of the healthy
PDAMs in Indonesia are not burdened by foreign debts or
their foreign debt is very small.)
high since, in general, PDAMs in Indonesia only have 18%
coverage. Unlike other PDAMs, PDAM Solo already has an
active and critical consumer group, and complaints and expectations are documented and handled well.
Even though there are only a few healthy PDAMs, in the
future their operational methods and management should be
taught so that other PDAMs, the government, and donors can
learn and gain experience. The message from the healthy
PDAMs should be to erase, step by step, the understanding
that public management of water services is doomed to failure.
Nila Ardhianie is with the Indonesian Forum on Globalisation.
There are some PDAMs in Indonesia which are able to perform well, for example PDAM Solo. PDAM Solo, founded in
1929, has good financial management and is trying to conserve
the environment surrounding the water source and neighbouring community. It has a coverage level of 56% which is very
Reclaiming Public Water
Reclaiming Public Water
By David Barkin
Mexico has created yet another crossroads in water management. In April 2004, the Law of National Waters was amended to change the regime of water management in Mexico. On
the one hand, the National Water Commission (CNA) was
confirmed as a relatively powerful organisation charged with
the oversight of the sector; the law mandated a decentralisation
process that leads to significant changes in the control of
important parts of the system, including a reduction in the
power of the CNA. In this regard, the creation of local water
basin management councils (Consejos de Cuenca) is one of the
more innovative structures that place control of irrigation systems in the hands of the water users, while charging them with
the responsibility to finance their operation and maintenance.1
Urban water systems are also under pressure to change their
management structures.
Drinking water and sewage systems are the responsibility of
municipal government, of which there are about 2,500 in the
country. Most are small administrative organizations, with
water being managed by a department staffed by people with
little expertise. There are about 435 water systems operated as
independent agencies, either semi-autonomous organisations
dependent on municipal governments or concessions from
these governments that are either wholly owned by private
1 Unfortunately, these councils have been conceived without the participation of
small (peasant) users and other water basin groups whose conservation efforts are frequently crucial for the maintenance and recharge of the aquifers upon which
(urban/industrial) consumers frequently depend.
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companies or are joint ventures between public and private
parties; all of the major international water companies – Suez,
RWE, Aguas de Barcelona, Vivendi – along with many smaller
international firms, participate in the management of one or
more local water and sewage systems.2 A recent development is
the separate concession of sewage systems as an independent
enterprise, let out to a private company for a fixed period,
often under a BOT (build, operate and transfer) scheme, with
costs being transferred to the rate payers. At present, less than
one-quarter of the water systems have sewage treatment plants,
and only about 22% of the plants that have been built are actually in operation.
The major challenge facing in urban water management in
Mexico is assuring a universal drinking water service and adequate facilities for treating sewage water in an efficient and
financially viable manner. At present, no water system is financially self-sufficient and almost all are plagued by huge problems of water loss through their distribution systems, which
are old, often poorly designed and suffer from decades of neglect. Just as serious is the absence of any systematic ecosystem
management of either areas that supply water to the urban
areas or, more ominously, areas where wastewater is discharged. This water is still frequently channelled into the irrigation systems of fruit and vegetables cultivated for local markets.
2 A unique service contract was negotiated with joint ventures between foreign
and Mexican capital for the administration of billing and rate collection in each of four
sections of Mexico City. The companies are also responsible for maintenance of the
secondary distribution network in their areas. In this case, all policy matters and the tariff structure are decided by the local legislature and companies are compensated in
accordance with their original bids for the contracts; since initiated in 1994, one foreign partner has withdrawn and the quadrant is managed by a wholly owned Mexican
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Another serious problem facing authorities is their inability to
regulate the large water users on the one hand, and the “culture” of irresponsibility among consumers to pay for water
use. These problems are exacerbated by technical and political
features of the Mexican system that have not been attended to.
Constitutionally, water is a resource owned by the nation and
subject to political control; long-term concessions for drilling
and using wells have been let to private parties, primarily for
agricultural use since the beginning of the 20th century. With
urban expansion and industrial growth, new demands for water
have led to the emergence of a lucrative “parallel” market for
water rights for commercial and industrial purposes; they pay a
fixed permit fee to federal authorities and, although they draw
water from the same aquifers on which urban water supplies
depend, these users remain outside the control of the local
water agencies, in terms of both quantity and financial responsibility. Throughout the country, most consumers do not have
their water use measured, and even when consumption is
metered, many do not work correctly and others operate incorrectly because air running through the pipes when water is not
being pumped also advances the count. Exacerbating the problem is the large number of unregistered consumers – often
medium-sized commercial and industrial enterprises – who
have connected themselves to the system without informing
the water agencies. Finally, very little attention has been devoted to the problem of the “culture of water”, which requires an
educational campaign among users about their water-use patterns, controlling leaks and the possibility of reusing water
within the household. In contrast, many large industrial users
are installing treatment and recycling facilities because the
CNA has implemented an effluent fee for discharges of polluted water.
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The most far reaching aspect of the reformed water law in
Mexico is likely to be the move towards the private management of urban systems during the coming years. As in most of
the world at present, private companies control less than 5% of
consumption, but the government argues that the public sector
lacks the technical and financial capacity to meet the challenges
of assuring adequate supplies of high quality water to meet the
country’s needs during the coming period. Recent experience,
however, belies this assessment. In this short introduction, we
will mention only a few of the several dozen cases where privatisation is leading to serious problems.
Cancún, a large tourist resort, was originally served by a
subsidiary of Enron, Azurix, which, after declaring bankruptcy, sold its interest to Ondeo, the water subsidiary of the
French water giant, Suez, who in turn financed its purchase
with a loan from the Mexican government bank, Banobras.
The stipulated investments in water treatment are yet to be
made and sewage effluents are discharged into the Caribbean.
Water rates are high but protests are limited since most of the
charges are paid by the hotels.
Saltillo, a northern industrial city, bid out a long-term concession for potable water service to a joint enterprise owned by
a subsidiary of the Spanish water company, Aguas de
Barcelona, and the municipal government. During its first two
years, water rates rose between 32 and 68%, in contravention
of the terms of the concession, which stipulated that rates be
limited to the rate of inflation, after 11%. In this case, the
municipal members of the board of directors were negligent in
overseeing the decisions taken by the Spanish executives.
Although the company has increased fee collections and the
proportion of the population with service, its flagrant violation
of the terms of its operation has provoked energetic protest
that is still playing itself out at the time of writing.
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The water system of Aguascalientes was let out to a private
company with significant participation from the water subsidiary of another French giant, Vivendi. In this semi-arid
industrial center in northern Mexico, demand for water is rising rapidly but services are being extended to the poorer
regions only after serious public discontent got the government to “persuade” the company to modify its investment programme. Rates are among the highest in Mexico and the
aquifer on which the city depends is being dangerously depleted with no effective measures to either reduce consumption or
change watershed management practices. Although not accepted by local authorities, knowledgeable experts generally anticipate this region will be one of the first to suffer a water crisis
that will force a dramatic curtailment in plans for economic
In contrast, the title of best-managed system in Mexico is
generally awarded to the public agency in Monterrey, Mexico’s
second largest city. Other agencies vying for the title are water
companies in the northern order region. These organisations
have succeeded in assuring widely available service while reducing service water loss through their networks and increasing
collections from their customers.
The biggest challenge facing Mexico at the present time is
assuring adequate and affordable service to its urban population. With the notable exception of Mexico City, water charges
do not generally provide for lower fees for basic services. Even
more problematic, at present there is no adequate process that
allows the government to impose an effective regulatory system on water agencies, be they private or public, and the financial resources allocated to this infrastructure is insufficient.
Perhaps the greatest problem facing the country in attempting
to resolve these problems, however, is the reluctance of the
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government to encourage or even permit public participation
in the discussion of management, oversight or management of
public services. Until these problems of financial solvency, regulatory capacity and participation are resolved, it is unlikely that
the country will be able to effectively modernise its water system.
David Barkin is Professor of Economics at the Xochimilco campus of the
Universidad Autónoma. He can be contacted at [email protected]
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Viable alternatives to both privatised water delivery and inadequate, state-run water utilities clearly exist. The question is,
therefore, not if public water can work, but how it can work.
Due to the ideological obsession with private sector promotion
in the last decade, this question has not received a fraction of
the attention it deserves in policy debates and decision-making.
As described in the introductory chapter, there is now a fundamentally new situation as a result of the many high-profile privatisation failures, the withdrawal from developing countries by
private water multinationals and the realisation among even
privatisation proponents that private investment will not deliver for the poor. The need to refocus on amplifying the performance and coverage of public utilities is obvious. This book
aims to contribute to this long overdue re-orientation.
Many chapters here describe how significant improvements
in access to clean water and sanitation have been achieved by
diverse forms of public water management. These people-centred public water solutions have occurred under a variety of
socio-economic, cultural and political circumstances. Examples
include the accomplishments of public utilities and co-operatives in Porto Alegre (Brazil), Santa Cruz (Bolivia) and Penang
(Malaysia); the improvements realised by innovative public
delivery models in Caracas (Venezuela), Harrismith (South
Africa) and the province of Buenos Aires (Argentina); and the
achievements of community-managed water in Olavanna
(Kerala, India) and Savelugu (Ghana). These diverse public
approaches have all proved their potential for improving water
delivery, not least to the poorest.
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In virtually all cases, however, these achievements have happened against the odds as the obstacles for improving public
and community-controlled water delivery are manifold. Among
the worst are the systematic bias against public water of international financial institutions (IFI’s) and the privatisation conditionalities attached to the decreasing amounts of development aid offered by northern governments. The political,
financial and other hurdles that prevent public water management from achieving its full potential are however by no means
insurmountable. Essentially what is needed is political will to
create more enabling environments. This chapter outlines a
wide range of progressive policy options. It also concludes that
strengthening the democratic, public character of water services is fundamentally at odds with the currently dominant neoliberal model of globalisation, which subordinates ever more
areas of life to the harsh logic of global markets.
Drawing on the experiences from around the world presented in this book, this final chapter explores some of the key
issues that need to be debated far more intensively in the coming years.
• What are the options for improving and expanding public
water and sanitation services in order to meet the challenges
of sustainability, justice and access for all?
• What is the potential of citizens/user participation and other
forms of democratisation?
• What are the conditions needed to make people-centred public utility reform work?
• What are the problems posed by the commercialisation of
public sector water operations?
• What lessons can be learned on how to overcome the hurdle
of raising finance for much needed improvements?
• Which kinds of political processes are involved in developing
successful public water?
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• What needs to happen, from the local to the global level, to
spread, empower and implement public services for urban
water and sanitation?
In many of the cities featured in this book, citizen and user
participation in various forms is an essential factor behind the
improvements in effectiveness, responsiveness and social
achievements of the water utility.
Participation and democratisation can take many shapes.
Water co-operatives in Bolivia and Argentina allow the users
(all of which are members with voting rights) direct influence
in decision-making, for instance via elections for the governing
bodies of the utilities. This gives the users the opportunity to
hold the utilities accountable to their not-for-profit mission of
serving the users.
In Porto Alegre and a growing number of other Brazilian
cities, civil society involvement has been combined with innovative democratic reforms like participatory budgeting, a model
often described as ‘social control’. Like many other areas of
public life in Porto Alegre, the people directly decide the budget priorities of their water utility. Through a process of public
meetings, every citizen can have a say in which new investments
should be made first. In Porto Alegre, participatory budgeting
has played a key role in ensuring that 99,5% of the population,
including those living in poorer neighbourhoods on the periphery, today have access to clean water. For the utility, getting
active input based on the unique knowledge of the citizens is an
asset in itself. The increased sense of ownership contributes to
the willingness to pay and thus make new investments and
improved maintenance possible. Transparency is by definition
improved, which is also likely to reduce the risk of corruption.
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Porto Alegre is one of the wealthier cities in Brazil, which
is an advantage when setting out to improve access to clean
water, but this does not reduce the value of the achievements
made possible through participatory democracy. Like elsewhere in Brazil, the city has a large gap between rich and poor,
and before the start of democratic reforms a major proportion
of the population lacked access to clean water. Recife, the
north-eastern city with very large numbers of low-income people, has introduced democratic and participatory water management and aims for very substantial improvements in access
to water over the coming decades. This was kicked off in 2001
with a seven-month long participatory consultation process
starting with a series of neighbourhood meetings. Over 400
representatives elected at these meetings participated in a deliberative conference where no less than 160 decisions were made
about the future of water and sanitation in Recife. The conference decided against privatisation and for an institutional setup to improve and expand public water delivery, prioritising the
city’s slum areas. Other examples of Porto Alegre-style participatory water management in Brazil can be found in cities like
Caxias do Sul in the state of Rio Grande do Sul, and Santo
André, Jacareí and Piracicaba, all in the state of Sao Paulo.
The Brazilian experiences show that scale is not necessarily
an obstacle to participatory water management. Porto Alegre
and Recife both have over one million inhabitants and similar
models have proven successful in numerous other large cities.
The model of participatory water management under
development in Caracas, Venezuela, engages the population
very intensively in areas needing improved water delivery, both
in decision-making and in actual construction and maintenance
work. Local communities, the water utility and elected officials
co-operate in communal water councils to identify needs and
priorities for improvements, allocate available funds and devel250
Reclaiming Public Water
op joint work plans. The users exert democratic control over
their utility, for instance by holding it accountable for implementing the work plans. Major improvements in access to
piped water have been achieved in the last five years via community involvement and empowerment.
In Olavanna and other communities in Kerala, India, participatory water management has worked wonders as well. As a
result of the Kerala state government’s People’s Plan policy
(which decentralises decision-making about major parts of
public finances), the local population was able to decide to allocate public funds for improving access to drinking water. These
public funds were supplemented with financial contributions
by the communities themselves. Local people participate in
planning, but also in construction, management and maintenance. Using appropriate technology and avoiding dependency
on external contractors and expertise reduces costs. The sense
of ownership emerging within the community contributes to
monitoring and maintenance, thus ensuring the sustainability
of the improvements. It is significant that the decisions about
allocation of public funds and management take place within
existing community structures.
Similarly in Savelugu, Ghana, the involvement and democratic empowerment of the local community has reduced costs
and helped control leakages, thus contributing to making clean
water affordable for all. The community-controlled water management system in Savelugu is described as a public-community partnership. This refers to the fact that the national public
water utility delivers bulk water to the community, which in
turn takes care of all further steps in the water delivery system,
including billing the users, maintenance and new connections.
An important feature in this highly decentralised system is that
each neighbourhood has a water management committee,
which is one of the reasons leakages have been reduced to an
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absolute minimum. The city’s community water board decides
on tariffs which are designed to ensure access for all. Contrary
to Caracas and Olavanna, the Savelugu model was developed
without active government support, but the improvements
were only possible due to financial support from UNICEF and
several northern NGOs.
In Cochabamba, Bolivia, the term public-collective partnership is used to describe the new model of municipal ownership,
participation and democratic control that is emerging after the
disastrous privatisation by Bechtel, terminated by the April 2000
water war. The utility SEMAPA is now being restructured to
serve the citizens, particularly the poorest. In April 2002 elections, three out of seven board members were elected by the
residents of the southern, central and northern areas of the city.
At the same time, SEMAPA is entering a co-management
model with the pre-existing water committees which supply the
unconnected poor communities in the southern zone of the
city. In order to expand access to piped water into these periurban areas, SEMAPA co-operates with the water committees,
using their capacities to administer services in their local communities while SEMAPA supplies bulk water. Although a range
of factors still endanger successful outcomes of this co-operation, the public-collective partnership is a novel and innovative
format that can help overcome centralistic tendencies in utilities
and solve access problems in peri-urban areas.
A different form of participatory management is that of
the water utility in the province of Buenos Aires, Argentina,
which since 2002 has been run by the water workers and their
trade union, providing water for over three million people. The
workers took over in the emergency situation that arose when
the private concession holder, Azurix (a subsidiary of Enron),
withdrew after the provincial government had refused to agree
to price increases for the abominable services delivered by the
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US corporation. The option of leaving, it should be noted, is a
fundamental difference between a private concession-holder
and a local public water utility. In co-operation with user representatives who participate in and oversee the management,
the workers have achieved in getting the utility (Aguas
Bonaerenses S.A.) back on track after the years of gross mismanagement by Azurix. A similar workers’ co-operative has
successfully managed a water concession in two sections of
Dhaka, the capital of Bangladesh.1
There are also many cases where effective and equitable
public water has been achieved without user participation having played any major role, such as the water utility PBA in
Penang, Malaysia, described in this book. A key factor behind
PBA’s achievements is the strong commitment among the utility’s management and workers to public service excellence and
serving the population. The utility is operationally autonomous
from the state government, which prevents undue interference.
Efficiency, transparency and accountability of the utility, on the
other hand, are boosted by the vibrancy of politics in the state,
including continuous scrutiny from the side of competing
political parties. There are numerous other remarkable examples, also in the south, such as Phnom Phen, Cambodia, where
the number of households receiving running water has
increased from 25% to almost 80% in the last 10 years.2 Many
1 “Experimental Alternate Option to Privatisation of Water Industry in Dhaka,
Bangladesh”, by M.Z.Hoque, presentation for the seminar on advancing alternatives to
privatisation, Kyoto, 22 March 2003.
2 Today, water in Phnom Phen flows 24 hours per day instead of the 10 hours that
was common before. The inhabitants of the city’s large slums are no longer dependent on unreliable private vendors and the health situation has improved. Many
observers point to the inspiring role played by Ek Sonn Chan who, in 1993, became
director of Phnom Penh Water Supply Authority (PPWSA), the city’s public water utility. Chan emphasises that PPWSA’s autonomy from the city government’s bureaucracy
has contributed to the efficiency and achievements of the utility. Chan’s goal is that
95% of all households receive clean tap water before 2015. See “Reclaiming Public
Water – Participatory Alternatives to Privatisation”, TNI/CEO briefing October 2004.
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more cases have been documented by the Public Services
International Research Unit (PSIRU).3
While it should not be considered a panacea to be implemented in every situation, and in some circumstances may not
be feasible, participation and democratisation in its multiple
forms can be a powerful tool for positive change in most circumstances. There is the general potential to improve the quality of decision-making and management, effectiveness and
responsiveness and thus contribute to better services provision. Decision-making on urban water delivery in cities of the
South is often an intense political battleground where the interests of political and economic elites clash with those of the
poorest. When democratisation means increased political control by the marginalised and the poor, it boosts the likelihood
of their needs being met.
Participation, as described in the chapters of this book, is
something substantially different from the way the World Bank
and most international donors use this term. For these powerful institutions, “participation” is often little more than an
instrument for smoothing the way for privatisation and commercialisation, for instance by using consultants to assess the
willingness to pay in order to assist a private investor to decide
on service levels and tariffs. Also the World Water Council, the
much-criticised neoliberal think-tank that controls the World
Water Forum process, has recently adopted a new discourse
over-flowing with ‘public participation’ and other feel-good
terms.4 There is no indication, however, that the World Water
Council has moved away from the corporate agenda it promoted at previous World Water Forum events. The examples of
3 See for instance “Public services work!”, Public Services International,
September 2003, http://www.psiru.org/reports/2003-09-U-PSW.pdf ; and “Water in
Public Hands”, July 2001 http://www.psiru.org/reports/2001-06-W-public.doc
4 http://www.worldwatercouncil.org/
Reclaiming Public Water
participatory public water management described in the pages
of this book imply far-reaching, genuine democratisation of
decision-making, empowering people to change, if they desire,
the system of service delivery. Rather than a tool to engineer
consent, the aim of participation is emancipation.
What constitutes enabling environments (local, national and
internationally) in which various people-centred public water
approaches have a chance to succeed? Among the most important factors are the local availability of water resources, the capacity of public administrations to deliver services, and the crucial
factor of political support - or lack thereof - from the state, international institutions, governments and political parties.
Since the 1990s in Argentina, national and regional governments have, for ideological reasons, actively obstructed the further development of co-operatives and public utilities, despite
their often excellent performance. While there are good reasons to expect that co-operatives could deliver water in many
other and larger cities more effectively and more socially
responsibly than private water corporations, the neo-liberal
political elite is unwilling to allow this option to be explored.
Similarly, public utility reforms were not considered as a possible alternative to the privatisation programme promoted by the
World Bank and the International Monetary Fund (IMF).
Unfortunately, this is a common pattern in many countries
around the world.
In Cochabamba, Bolivia, the local and national governments are hostile towards the attempts to move towards participatory public water management. This means very difficult
circumstances and limited political space for those promoting
democratic control in Cochabamba. The model of water manReclaiming Public Water
agement that is now emerging still has less democracy, transparency and accountability than civil society would like, reflecting the continuous power struggle. The reforms and improvements achieved are the result of the power built up by the
grassroots water movement. While the vision behind the public-popular partnership in Cochabamba is comparable to the
participatory planning systems of Porto Alegre or Kerala, in
Cochabamba there is hardly any money for people to make
decisions about. Clearly, this lack of resources discourages
active participation.
In another Bolivian city, Santa Cruz, an important factor
behind the success of the water co-operative is its independence of party politics and the fact that the city and its water
utility has been ignored, but not obstructed, by the national
government. The utility was transformed into a co-operative in
1979, at a time when neo-liberal ideology had still not emerged
as an obstructive factor for people-centred water approaches.
The co-operative status (and a less politicised reality than
Cochabamba after the water war and de-privatisation) has provided the autonomy needed to steer free from political interference, bureaucracy, cronyism and corruption typical in other
Bolivian cities.
Santa Cruz and, far more immediately, Cochabamba are facing water scarcity, a growing problem in many parts of the world.
As demand increases due to industrialisation, urbanisation, rapid
expansion of intensified agriculture (often for export purposes)
and other trends related to economic globalisation, conflicts over
water resources intensify. Improved water resource management
to secure sustainable availability is a key challenge for urban areas
around the world. Any progressive urban water delivery model
needs to include a sustainable approach to water resources and
balance urban with rural water needs.
The Cochabamba experience shows that it takes a long time
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to change a dysfunctional utility, especially when the local political elite is obstructing such change. The more general absence
of a tradition of effective public administration means that
developing performing public services has to happen if not
almost from scratch, then certainly from a very difficult starting point. It is illustrative to compare the difficult conditions
for re-municipalisation in Cochabamba with the situation in
the French city Grenoble. In Grenoble, the pre-existence of an
effective local public administration, the absence of widespread poverty and the availability of abundant freshwater
resources from the Alps provide a far more conducive environment for successful public water delivery. The achievements in
Cochabamba, in other words, are very much against the odds.
Success is by no means guaranteed, especially when the local
population may lose patience if concrete improvements in
water delivery are not secured. To overcome the many hurdles
facing improved water delivery in Cochabamba, international
solidarity is desperately needed.
The administrative capacity of the local public sector to
deliver public services is, indeed, a crucial factor. For a variety
of reasons described in the introductory chapter, public
administrations, especially in developing countries, are often
not sufficiently resourced or capable of delivering a public
service dependent on large network infrastructures and soft
skills such as demand responsiveness. This reality has often
been abused as an argument for privatisation, which has
proven not to be a solution, particularly in cities with large
populations of low-income people. It is clear that the capacity
to deliver public services is a key component of democratic
societies and a necessity for enacting the right to water.
One way to overcome weak local public administration
capacity is through public-public partnerships. In South Africa,
the public-public partnership between the local government in
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the city of Harrismith and a large public water utility from elsewhere in the country achieved good results. The three-year
experiment showed that sharing - and hopefully transferring management and technical skills can contribute to rapid
improvements in public water delivery. Participation and extensive consultation at ward level was also a key feature in the relative success, financially and otherwise, of the public-public
partnership. Due to the lessons learned from these consultations, a social tariff approach and support from the communities, Harrismith does not suffer from the very high rates of
non-payment typical in privatised concessions in South Africa.
This experiment was only possible with government sponsored
financial subsidies to the poor, which were administratively
well managed through the partnership.
The public-public partnership project has led to concrete
improvements, but has not managed to overcome the enormous backlog in access to clean water that exists in the impoverished township communities in Harrismith. It is hard to see
how water for all can be achieved without far more ambitious
policies to fight poverty and redistribute wealth locally and
nation-wide. As a result of the disastrous socio-economic circumstances, riots broke out in August 2004 in the Intabazwe
township in Harrismith. Locals demanded government housing subsidies, improved water and electricity services, employment opportunities and general social development. On
August 17, the police opened fire on demonstrators, killing 17
year-old Tebogo Molois and wounding dozens of others.
In Ghana, the achievements made by the public-community partnership in Savelugu are now endangered by the fact that
the Ghana Water Company (GWCL) is unable to deliver sufficient bulk water to the community. The deepening crisis of the
GWCL is, to a large extent, caused by under-funding and has
everything to do with the joint efforts of the central govern258
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ment and the World Bank to prepare the company for privatisation. This underlines the importance of national and international policies that facilitate rather than obstruct participatory
and other public water solutions.
In the Brazilian cities like Porto Alegre and Recife, but also
Kerala in India and Caracas in Venezuela, improvements were
achieved due to the facilitating and empowering role of national and local governments, as well as political parties. In Kerala,
decentralised participatory budgeting was initiated and consolidated by the state government, controlled by the Left
Democratic Front. In Brazilian cities like Recife and Porto
Alegre, improvements were achieved due to the far-reaching
commitment of mayors and local city councillors from the
Workers Party (PT). Participatory budgeting was introduced
and institutionalised after election victories by the Workers
Party and resulting political control. Also in Caracas, participatory water management is developed with - if not driven by strong support from the government. In the deeply polarised
reality of Venezuelan politics, this has meant that some neighbourhoods opposing the Chavez government also reject community water management. This obviously raises the question
of whether participatory water management would survive if
the opposition ever manages to take power. Similarly, will participatory water management (and participatory democracy
more generally) survive in Porto Alegre after the Workers
Party’s loss of the October 2004 municipal elections?
Encouragingly, the multi-party coalition taking over after the
PT has promised to keep participatory budgeting intact. If the
future of participatory democracy is seriously endangered, one
may assume that 16 years of radical democracy has equipped
people with sufficient confidence to defend its achievements
and their rights.
Reclaiming Public Water
While it is a reality that many water utilities in the south suffer
from bureaucratisation and often fail to deliver to the poorest,
this book describes numerous attempts to boost capacity for
public administration, either in state-led, worker-led or civil
society-led forms. This often involves a radical redefinition and
reinvention of public service and the meaning of publicness
(the quality of being public and belonging to the community).
Most of the successful utilities described have improved water
and sanitation via a vision of public service that serves broader societal objectives, including democracy, environmental sustainability and human security.
Indeed, a shared feature of these reformed public water
utilities is the development of a new public service ethos.
Publicness is redefined as something that goes far beyond simply public ownership or management by public employees. In
many cases, internalising and consolidating the philosophy of
serving public needs is facilitated by direct citizen participation
and other forms of interaction with users. This progressive
publicness is of crucial importance for meeting challenges like
providing access to clean water for marginalised groups on
urban fringes and, more generally, achieving a sustainable
resource management for ever-growing cities.
A new public service ethos has emerged under a range of
different forms of non-profit water management, from cooperatives to municipal utilities, but also corporatised utilities
under public control. The water utility in Penang, Malaysia,
whose shares are, in part, owned by workers and users, has
developed a high-level public ethos which enables it to deliver
high-quality water for all at affordable prices.
Reclaiming Public Water
Several chapters in the book highlight some contradictory
trends in the future of public water services. Firstly, the influence of neo-liberal ideology results in a very problematic convergence in the practices of public and privatised utilities. The
introduction of neo-liberal business and management models
(often referred to as New Public Management - NPM) leads to
forms of commercialisation that are often seriously at odds
with the type of public service ethos described above. This
trend is visible, for instance, in the operations of EAAB in
Bogota, Colombia. Outsourcing of key tasks to private contractors and the introduction of “flexible” labour conditions
are examples of the adoption of a corporate business model.
A related trend is that public utilities like EAAB, but also
Rand Water in South Africa and PBA in Malaysia, are increasingly expanding into operations abroad. While they may
uphold a public service ethos in their domestic operations,
these companies intend to operate as commercial water
providers overseas.
Financing is a key challenge for every community wanting to
ensure water for all. The day-to-day running of a water utility
comes at a cost and expanding access to water requires significant upfront investments. There are essentially two ways to pay
for public water delivery: taxes or user fees.
In some cities with successful public water delivery presented in this book, water is entirely paid for by user fees (full-cost
recovery), but with cross-subsidisation through “stepped tariffs”, so that larger consumers pay proportionately more.
Taxation is commonly used to finance the extension and develReclaiming Public Water
opment of systems, and also to provide subsidies to reduce the
burden which has to be borne by users through water charges.
When governments or municipalities borrow money or issue
bonds to finance investment, the cost of the loans is normally
borne by taxes. In some countries - such as Ireland – water services are paid for almost entirely through central government taxation. Some of the public water utilities described in this book
have combined expansion of water services with social tariff
structures, thus enabling all citizens, including the poorest,
access to affordable water. DMAE in Porto Alegre, for instance,
channels the surplus resulting from the higher fees paid by welloff users into an investment fund that finances new water and
sanitation infrastructure for all those that need it.
In South Africa and many other countries around the
world, neoliberal cost-recovery policies (without cross-subsidisation) have caused disastrous affordability problems and millions of poor have been cut off from water supply. The prepaid meters that have been installed in many poor communities
in South Africa are a particularly blatant violation of the
human right to water. While the South African constitution
guarantees 6,000 litres of free water per household, the right to
water is not effectively implemented and the 6,000 litres of free
water per household has moreover proven insufficient for the
often large families of the poorest. To genuinely guarantee
affordable water for all, at least a doubling of the constitutional amount of free water would be needed, combined with
cross-subsidised low tariffs for low-income people.
Overcoming financial obstacles to the expansion of water
delivery can also be done by reducing operational costs and
increasing efficiency. By ambitiously taking on leakages and
improving billing, lower shares of non-revenue water (NRW)
can be achieved and the financial viability of the utility
improved. In Penang, Malaysia, very low rates of NRW enables
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the utility to have the lowest water price in the country. In the
Brazilian city of Matão, privatisation seemed the only option
for a cash-starved local government needing to invest to
expand water connections to the fast growing population.
After a public consultation process, the utility was reorganised
with a different tariff structure and incentives to reduce leakages and waste.5 This improved the financial health of the utility and solved the water resource problem. Clearly, this is also
a matter of sustainability: reducing leakages can also help overcome threatening water shortages and may even make major
investments in new dams unnecessary.
Citizen participation can help the financial health of the
water utility, as is the case in Porto Alegre. Citizens are not only
empowered by the government to prioritise allocation of public funds, they are also involved in monitoring implementation
of decisions and projects. Locals from the areas where the
water infrastructure construction takes place participate in
commissions that supervise the contractors during the works.
This means continuous scrutiny of the water utility and of
external contractors, which has helped reduce costs of new
construction projects.
Access to finance for investments in expansion and
improvement of water delivery is an obstacle in most cities in
the south. The Savelugu model in northern Ghana was made
possible by funding from UNICEF and international NGOs,
but other communities wanting to implement similar models
cannot rely on philanthropy. For impoverished communities,
external funds to pay for large, upfront investments are needed. This points to the crucial role of national governments and
for international funding and access to loans.
5 Antonio da Costa Miranda, municipal director for water and sanitation in Recife,
speaking at the seminar “People-centered Water Management is Possible!”, January 17
2004, World Social Forum, Mumbai.
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There is much that can be improved in the approach of
southern governments towards water delivery. In many countries, access to water for the poorest remains under-prioritised
and often neo-liberal approaches dominate among local elites
in the political process. In stark contrast to the democratic
empowerment of the decentralisation of decision-making on
government funds in Kerala, India, a very different form of
decentralisation process has taken place in many southern
countries in the last decades. Following IFI advice, governments have transferred responsibilities to local municipalities
while at the same time starving them of funds for fulfilling
their new obligations. This has had predictably negative consequences for essential services delivery, often leaving little other
option than privatisation.
At the same time, the current context of neo-liberal globalisation is very much the opposite of an enabling environment
for improving and expanding people-centred public water systems. For large parts of the populations of the south, as well
as countries in Central and Eastern Europe, trade liberalization
and other neoliberal reforms have resulted in unemployment
and economic marginalisation. Governments are facing everdecreasing budgets due to dwindling tax income, often combined with excessive debt repayments. Added to this is the
pressure to liberalise and privatise from IFIs, development aid
agencies and trade negotiators. The cumulative impact of these
neo-liberal policies is a fundamental obstacle to the development of public provision of essential services. Lasting solutions, it seems, are only feasible if this model of development
is replaced by a different model of globalisation, one that facilitates progressive public solutions rather than hindering them.
With southern governments often impoverished by an
unfair global economic system and crippling debt, loans from
IFIs are currently one of the only ways in which governments
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and municipalities can raise external funds for investments to
expand water access. The disastrous reality is that most IFIs
remain stubbornly addicted to privatisation and use various,
more or less subtle pressures to impose this on borrowers.
Northern governments and IFI’s continue to use finance as a
political tool of leverage over southern governments to push
them to take on board neo-liberal reforms. The European
Union and various European governments pro-actively use aid
to encourage privatisation. The willingness to finance non-private sector options remains far too limited.
There are exceptions, such as the IBRD’s loans for co-operatives in Argentina and Bolivia. The co-operative in Santa
Cruz, Bolivia, is facing restrictions on further lending not due
to its own financial situation, which is very healthy, but because
of the indebtedness of the national government. Porto Alegre
and Recife secured IFI loans after tough negotiations in which
the World Bank insisted on moving towards privatisation. The
democratic legitimacy of the utilities and firm political support
from the mayors helped resist these pressures and obtain loans
without conditions that would undermine the essence of the
participatory models.
In Cochabamba, the IADB did offer the new SEMAPA a
loan, but with conditions that hamper the transformation of the
utility and, in fact, endanger popular support by delaying visible
improvements in water delivery. In Indonesia, a majority of
water utilities are caught up in a debt crisis following IFI loans
from the last decade. The debt trap they are in undermines the
viability of utilities and de facto paves the way for privatisation.
IFI loans in foreign currency, due to the risk of devaluation and
currency crisis, often have very high interest rates. Concluding
that IFI loans do more harm than good, civil society groups
united in the Jubilee South network campaign for the World
Bank and other IFIs to withdraw altogether from the south.
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There is a desperate need for funding mechanisms that are
without political conditions and that are oriented to serve societal goals instead of economic and ideological objectives.
Except for the crucially important progressive redistribution
via taxation and cross-subsidised water tariffs, there are a wide
range of local and national finance options, including floating
of municipal bonds.6 To boost international finance flows for
expansion of access to water to the poorest increasing the
development aid budgets of northern governments is a
straightforward option, obviously in combination with ending
current privatisation conditionalities and pressures. It is important to remember that just a fraction of current military expenditure would be sufficient to finance clean water for everyone
on the planet. In Europe, a small tax on bottles of mineral
water has been proposed. Such a tax could bring in billions of
euros, but still far less than the enormous amounts that could
be raised via a Tobin tax on speculative international financial
As shown in many chapters in this book, social movements
contribute actively to preserving and improving the public
character of water and sanitation services around the world. By
exerting public pressure on governments and utilities to change
and improve access to clean water, such movements have a key
role in achieving sustainable water for all. In many countries,
social movements are mobilising to defend the interests of
marginalised people against the neoliberal policies promoted
by political and economic elites. Social justice and democratisa6 See for instance “Water Finance - a Discussion Note”, by David Hall, PSIRU,
University of Greenwich, January 2004: http://www.psiru.org/reports/2004-01-Wfinance.doc
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tion of water management decision-making are integrally
The example of Cochabamba and many other cities in this
book illustrate how models of public water delivery are, to a
large extent, shaped by the political struggles preceding them.
The political process of pursuing public utility reforms and
alternatives to privatisation defines the character of the public
water management approach. These political struggles, therefore, are an essential element in understanding the future of
water delivery.
Anti-privatisation campaign coalitions in countries around
the world, as the final chapters of this book show, go beyond
mere resistance. These movements, uniting a broad range of
actors, from environmentalists, women’s groups and grassroots
community activists to trade unions, political parties and public utility managers, have often very elaborate visions and concrete proposals for public sector alternatives.
That is certainly the case in Uruguay where, in the October
2004 national referendum, a large majority supported constitutional amendments that will define water as a human right and
ban privatisation. The constitutional amendment promoted by
a coalition of movements defines a central role for the participation of consumers, communities and civil society in all stages
of water management and institutions. Effective public participation is envisaged to further improve the management of
public water utilities. While these generally operate very effectively, there is scope for improvement, such as stopping the
flawed practice of failed politicians abusing the utility as a wellpaid retirement option.
Inspired by the victory in Uruguay, civil society groups in
Argentina have also launched a campaign for a referendum in
order to get access to water recognised as a fundamental
human right and to declare water public property exempt from
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privatisation. A growing global coalition of NGOs is demanding that governments commit themselves to negotiate an international convention on the right to water, within the framework of the United Nations. Such a convention should provide
a strong legal instrument to guarantee the right to clean water
for all and ensure that water is not treated as a commodity.7
In the Ukraine, NGOs like MAMA-86 are struggling
against privatisation but are also working hard to improve public water delivery. This happens within the context of a postcommunist state in crisis that is gradually withdrawing from its
responsibilities to deliver essential services to its citizens.
MAMA-86, for instance, joins hands with schools, hospitals
and other public institutions to improve the quality of their
water supply. It promotes water meters and prevention of
water wastage through public information campaigns, but also
works closely with water utilities, for instance in the city of
Soledar, to improve public water delivery.
In the Philippines, the record of public sector water delivery was so bad that people were not a priori concerned about
the 1997 privatisation. After the disastrous failure of privatisation, a return to the pre-1997 reality of public water is not an
option. The Water Vigilance Network advocates concrete ways
in which public solutions can help overcome risks like bureaucratisation, inefficiency and lack of responsiveness to the needs
of the poorest. The civil society coalition has developed a
sophisticated set of requirements which a public sector alternative must meet, ranging from financial resources, institutional capacity, an independent regulatory system, transparency,
accountability and social tariff systems, to mention a few. A
public water utility running water supply in the west zone
7 The demand is described for instance in “Why we need an international water
convention” (Swiss Coalition of Development Organisations, March 2004):
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would have to fulfil contractual delivery targets, but also face
scrutiny in comparison with the private utility operating in the
eastern half of the city. These combined pressures would likely improve the performance and accountability of the public
utility. Another option to be considered is to split up Metro
Manila into smaller concessions involving local governments
to reach a manageable scale. This would allow for benchmarking between the utilities. Also, existing co-operatives in the
peripheral parts of the city are part of the solution.
The anti-privatisation movement in a range of countries
advocates public-public partnerships and other models in
which ailing utilities learn from the operational methods and
management structures of successful utilities, as highlighted in
the chapters from Indonesia, Malaysia, Brazil and South Africa.
In Indonesia, for instance, civil society rejects the government’s
sweeping ideological prejudices and points to examples of best
practice in public water delivery within the country, concretely
the water utility of the city of Solo.
Not all anti-privatisation coalitions promote radical forms
of participatory democracy as a central part of their vision for
public water solutions. User participation, however, is promoted almost everywhere. In Mexico, where the Fifth World Water
Forum will be held in March 2006, the government is unwilling to allow for public participation in decision-making on
public services. Instead it insists on continuing the privatisation
process, despite the poor performance of private water corporations in cities like Cancun, Saltillo and Aguascalientes and the
fact that public water utilities have proven able to improve coverage, reduce water losses and improve their financial viability.
The fight for transparency and public access to information
is a recurring theme in many campaigns. It is hardly a coincidence that transparency is a fundamental characteristic of
almost all the successful people-centred public utilities
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described in this book. The potential for transparency is an
essential advantage of public utilities over privatised water
delivery, where key information is defined as out of reach due
to reasons of commercial confidentiality. In a post-communist
country like Slovakia, however, transparency and citizen participation is a major battle. Public utility managers and municipal
officials often consider citizens engagement as undesirable
“interference”. Anti-privatisation campaigners face the challenge of convincing public water operators that citizens’ participation and democratic control can help improve the effectiveness of public services.
Campaign strategies are obviously shaped by the local and
national context, including the intensity of the problems and
the political opportunities. Campaigns against privatisation and
for improved public services in a country like Germany, where
water is cheap, safe and plentiful, will necessarily take a different form than in places like Ghana or South Africa where
access to water is a daily struggle for large parts of the population. Water struggles, moreover, are always dependent on
broader political environments. For example in Uruguay, the
water movement is successful as it came at a time of major
political changes and a political shift to the left. Still, learning
experiences from campaigns for public water can be of great
value across borders and continents.
Whereas privatisation waves swept the south in the 1990s,
the pressure is now increasingly on the still overwhelmingly
public-controlled water sectors of US, Canada, Japan and particularly (western) Europe. This means a major challenge for
civil society in the north. Luckily there is a lot which can be
learned, not only from the anti-privatisation campaigns that
have grown strong in the south, but also from the innovative
forms of water management that have reinvented public services in a range of cities in the south during the last decade. Also
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in the north, the struggles against privatisation cannot be simply to defend the status quo. The extent to which citizens’ participation will be part of the agenda for improving public water
delivery in the north remains to be seen. In the US (where 85%
of the population is supplied by public utilities), various democratic and participatory mechanisms have been developed to
regulate and improve the performance of utilities, these could
be further expanded in the water sector. In Italy, new forms of
citizen participation in water management have been introduced in several municipalities in recent years.8
The French city of Grenoble is an example of democracy
revitalising a water utility. Grenoble shows that it is possible to
win a campaign for de-privatisation with the long-term commitment of a broad coalition involving consumers, environmentalists, trade unions and political parties. Since re-municipalisation, the enhanced democratic accountability and public
governance has resulted in major improvements in maintenance and infrastructure renewal, water usage reduction and
lower tariffs. The actors involved in the struggle for re-municipalisation also took on active roles in the implementation of
utility reform.
The process of collective learning between public utility
managers and water professionals, civil society, trade unions,
social movements and governments is an essential tool for
overcoming obstacles and needs to be accelerated. In recent
years, a global process of exchange of experiences and debate
between progressive forces has emerged. Indeed, this book is a
result of this process and will hopefully contribute to further
“Local Democracy”, Hilary Wainwright, Red Pepper, August 2004.
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boosting this important development. It presents a broad
range of alternatives to privatisation and inadequate public
water delivery, highlighting the role of citizens’ participation
and civil society movements in solving urban water problems.
It underlines the need to strengthen the capacity of public
administrations and institutions to deliver services and outlines
strategies for change towards improving these.
There is no single blueprint for how to make public water
utilities deliver affordable, clean water for all, but the different
cases in this book of municipal utilities, users co-operatives,
workers co-operatives, community-utility partnerships and
other forms of public-public partnerships, all offer valuable
information, suggestions and lessons to be learned.
In the end, decisions about the exact management model,
the degree of user / citizen participation, the social structure
of tariffs, etc. are to be made by local people in democratic
debates about what is most appropriate to specific, local circumstances. But while local communities should have the right
to choose how their water is delivered, the reality is that the
range of choices continues to be narrowed down dramatically
by factors outside of their control. There is an urgent need for
accelerating a change in thinking among governments, in the
south and north, and international institutions so public water
solutions get the political support they need. Included in the
bold approach needed to help overcome obstacles to improving and expanding public water around the world are certainly
cancelling of crippling debt, boosting aid flows and a shift
away from neoliberal trade policies.
One example is the disastrous proposal to include water
delivery in the WTO’s services agreement (GATS). In the
ongoing round of GATS negotiations, the EU has targeted the
water sectors of 72 other WTO member countries for liberalisation, including developing and least developed countries.
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Any country making GATS commitments in water would bind
in existing levels of privatisation for the future, making it effectively impossible for it to change course and embrace public
water strategies. Water must clearly remain outside of the
scope of neoliberal trade rules and should also be exempted
from bilateral investment treaties (BITs). Several chapters in
this book highlight attempts by water multinationals to use
BITs to secure excessive and unjustified compensation after
failed privatisation. In cases still under consideration by panels
at the International Centre for Settlement of Investment
Disputes (ICSID), US-based Bechtel and Azurix as well as
French water giant Suez demand multi-million dollar ‘compensation’ from the deeply indebted governments of Bolivia and
There are major ideological prejudices that need to be overcome, for instance in international financial institutions. Both
IFIs and aid agencies must be forced to stop pushing privatisation and end their obstructive attitude towards public water
utilities and communities pursuing democratic utility reform.
The continued unwillingness to provide finance and adequate
technical support for public sector solutions is a structural
obstacle which urgently needs to be tackled. The global water
movement needs to stay on the offensive and demand concrete
policy changes from IFIs and governments in order to achieve
enabling environments for public utilities to flourish. Instead
of closing down the space for people-centred delivery models,
we must insist that governments do all they can to support
these models politically, technically, financially and in other
In a non-binding resolution on the EU’s approach to water
in the south (September 2003), a majority in the European
Parliament insisted on “the need for local public authorities to
be given support in their efforts towards establishing an innoReclaiming Public Water
vative, participatory, democratic system of public water management that is efficient, transparent and regulated and that
respects the objectives of sustainable development in order to
meet the population’s needs”. These are the right noises, but
old neoliberal habits seem hard to break for the European
Commission and for many European governments. Far more
political pressure from the local to the global level is needed to
convince governments that support for public utility reform
and expansion of people-centred public water supply is,
indeed, the best route for development and the best way of
spending aid money.
The departure from neo-liberal policies that needs to happen at the level of national governments and international
institutions may take a long time to achieve. Meanwhile, far
away from the centres of political power and finance, local utility operators, grassroots movements, trade unions and NGOs,
will continue to show the way forward and create public water
solutions against the odds.
Some key steps towards an enabling international environment
for public water:
• Sustaining and expanding innovative and participatory public water
delivery models around the world, for instance through international
public-public partnerships.
• Canceling the crippling debt of developing countries in order to free
public funds for expanding access to water.
• The World Bank and other IFIs must end privatisation conditions for
financial support to those requesting it.
• Wealthy northern governments must increase funding flows and end
the pro-privatisation bias.
• Enshrining the human right to water in international legal instruments,
including a UN convention.
• Exempting water from the GATS negotiations (services liberalisation
talks within the World Trade Organisation) and other trade agreements.
• Renegotiating bilateral and regional trade and investment agreements
which enable private water corporations to claim undue ‘compensation’ from public authorities via arbitration cases.
By the editorial team
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works as Chief Programme Co-ordinator at SDC-CapDecK (Capacity
Development for Decentralisation in Kerala, supported by the Swiss Agency
for Development Co-operation).
Al-Hassan Adam works with the National Coalition Against Water
Privatisation (NCAP), Ghana.
Guillermo Amorebieta is co-ordinator of the Latin American network of
Water Sector Trade Unions affiliated to Public Services International. He also
heads the Water and Sanitation Works Trade Union of the Province of
Buenos Aires. He co-authored books as well as magazines and newspaper
articles published in Argentina, Chile, Paraguay and Brazil.
Santiago Arconada Rodríguez works at Hidroven, the main agency for
drinking water and sanitation in Venezuela. He is the former secretary-general of the Textile Worker Union U.T.I.T. and has worked in water management in the cities of Caracas and Maracaibo.
Nila Ardhianie works with the Indonesian Forum on Globalization
(INFOG). She has been involved in advocacy, participatory monitoring, and
community development projects for more than 10 years - particularly on
water resources and pesticide issues. A current main focus is advocacy and
information dissemination on Indonesia’s new Water Law passed in February
Raymond Avrillier is a technical engineer, ecologist and elected member of
the city council in Grenoble since 1989. He is manager of the municipal
water utility of Grenoble since 2001 and vice-president of the community of
agglomeration in Grenoble in charge of water sanitation and rainwater since
1995. He is also co-author of the book “Le Système Carignon” (1995).
David Barkin is Professor of Economics at the Xochimilco campus of the
Universidad Autónoma Metropolitan and is currently directing a national
diagnostic study of urban water management in Mexico. He can be contacted at [email protected]
Joy Elamon published a wide range of books and articles on health issues
and participatory development. He was a consultant with the State Planning
Board that coordinated the People’s Campaign for Ninth Plan, the Kerala
experiment on democratic decentralisation. He was also a member of the
District Planning Committee in Trivandrum where he is based. At present he
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Sean Flynn is an Associate at the Washington D.C. based law firm of Spiegel
& McDiarmid. Kathryn Boudouris is a paralegal at the same firm. Spiegel &
McDiarmid represents local governments, agencies and municipal and cooperatively owned utilities in the US and abroad in matters concerning regulatory design and compliance, environmental compliance, antitrust, complex
litigation, telecommunications and other areas. Flynn may be contacted at
[email protected]
David Hall is director of Public Services International Research Unit
(PSIRU), responsible for its overall work. He specialises in water, energy and
healthcare, and the design and maintenance of the PSIRU database and website. Before joining PSIRU he worked at the Public Services Privatisation
Research Unit, which developed a database on privatisation for the UK trade
unions. He had previously worked for trade union research units, and as a lecturer in higher education. He has written books on public expenditure and
labour law.
Roman Havlicek has been active in the environmental movement since the
late 1980’s. Since 2002 he works at the Center for Environmental Public
Advocacy (CEPA) as the coordinator of the Corporations project which
evaluates the impacts of the Slovak government’s policies towards foreign
direct investments. He is also responsible for CEPA’s water project which
aims to defend the public interest in the ongoing process of transformation
of water services.
Hans-Werner Krüger has since 1977 been employed at the Hamburg
Waterworks plc and is currently heading the public relations department. He
is a member of anti-privatisation networks and published a book about water
supply in West Germany (1982) as well as a range of articles on water and
privatisation subjects.
Hélio Maltz is the Planning Coordinator at DMAE (Municipal Department
of Water and Sanitation) of the city of Porto Alegre, Brazil. He is responsible for managing the team working on budgets, expenses control, loan management, costs evaluation, international relations and special projects. Before
joining the planning field, he was the manager of DMAE’s Sewage Division,
responsible for managing operation and maintenance of the sanitary sewerage and pumping facilities.
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Dale T. McKinley grew up in Zimbabwe and studied in the USA, but has lived
Laila Smith is the Director of Research and Evaluation at the Contract
in Johannesburg, South Africa, since the early 1990s. He presently works as
an independent researcher, editor, lecturer and writer. McKinley is an activist
within the Anti-Privatisation Forum and the Social Movements Indaba. He
has written a book on the history of the ANC’s liberation struggle, numerous scholarly articles for journals and publishes regular articles in the press
and progressive political publications.
Management Unit for the City of Johannesburg. She participates in the
Water Service Authority team within the City and oversees the service delivery standards for Johannesburg Water, a public utility fully-owned by the City.
Prior to this Laila worked for many years in the research and policy arenas
focusing on the equity implications of private sector involvement in the
water sector.
Antonio Miranda is the former president of ASSEMAE (Brazilian
Association of Municipal Water and Sanitation Public Operators) and currently its Director of International Affairs. He is also the Head of Municipal
Water and Sanitation Services in the city of Recife, and member of the UN
Secretary-General’s Advisory Board. More info: [email protected]
Philipp Terhorst is an activist researcher and PhD scholar at WEDC,
Loughborough University. His focus is the potential of water movements
for the democratisation of urban water services. Previous work includes
research on water management in Cochabamba, Bolivia. He is active in various civil society networks, both international and German.
Carla A. Montemayor is the former co-ordinator of Bantay Tubig
(Philippine Water Vigilance Network). She has written a number of articles
on the water privatisation debacle in Manila and has presented the role of
French water giant Suez at many conferences in Asia and Europe.
Hildebrando Vélez is an environmentalist and has during last 15 years
worked with Censat Agua Viva (Friends of the Earth Colombia).
Alberto Daniel Muñoz is based in Rosario, Santa Fe, Argentina. Muñoz is
the vice-president of the National Roundtable of the Users and Consumers
Union. He is also a member of the Provincial Assembly for the Right to
Water and part of the co-ordination of RED VIDA, the Inter-American network of water activists.
Luis Fernando Yavarí is Manager of Planning and Systems of SAGUAPAC,
the water supply utility in Santa Cruz de la Sierra, Bolivia. He has also worked
as Manager of Engineering, managing the operations and maintenance of
the company. He is also a Professor in Civil Engineering of the University
Gabriel René Moreno in Santa Cruz de la Sierra.
Luis Sanchez Gomez (Cochabamba, Bolivia) served as an elected representative of the southern zone on the board of SEMAPA from 2002 to 2004.
Charles Santiago is the director of Monitoring Sustainability of
Globalisation (MSN), a Malaysia-based research, advocacy and activist NGO.
He is also the coordinator of the Groups of Concerned Citizens, a minority-based group working to increase democratic participation and empowerment of the poor.
Carlos Santos and Alberto Villarreal are with REDES-Amigos de la Tierra
Svitlana Slesarenok is the executive director of the All-Ukrainian
Environmental NGO “MAMA-86” and may be contacted at
[email protected]
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Al-Hassan Adam
Dale T. McKinley
Joy Elamon
Luis Fernando Yavarí
The website waterjustice.org is both a virtual resource centre and an open space to
connect people from around the world dedicated to effective, democratic and equitable
water solutions, including community activists, NGO campaigners, academic
researchers, trade unionists and water utility managers. The success of the website will
depend primarily on the active participation of these diverse groups. The site has a
content management system which allows you to upload contributions (from articles,
report and case studies to calls for action and campaign news) and a discussion forum
on the issues covered in this book. We warmly invite you to get involved!
Laila Smith
Hélio Maltz
Transnational Institute (TNI) manages the [waterjustice] email listserve, aimed to facilitate information exchange and strategy debate among activists from around the world
campaigning for people-centred alternatives to water privatisation. For more information, contact [email protected]
Guillermo Amorebieta
The Coalition of the Flemish North South Movement in Belgium.
www.11.be (in Flemish and English)
Charles Santiago
ACME campaigns against privatisation and for the human right to water.
www.acme-eau.com (in French)
Antonio Miranda
Campaigns against water and electricity privatisation in South Africa.
Hans-Werner Krüger
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Progressive federation of public water utilities in Brazil.
Website on the “Treaty Initiative to Share and Protect the Global Water Commons”
and related activities, hosted by the Council of Canadians.
www.brot-fuer-die-welt.de (in German)
Federation of autonomous environmental organizations from 68 countries.
GATSwatch brings together the growing body of NGO and academic critique of the
WTO services agreement and ongoing liberalisation talks.
A network of jubilee and debt campaigns, social movements, people’s organizations,
communities, NGOs and political formations.
CEPA (Friends of the Earth Slovakia) defends the public interest in the transformation and reform of the Slovak water sector.
Ukrainian Environmental NGO campaigning for water for all.
www.mama-86.org.ua (also in English)
Excellent collection of articles on the impacts of privatisation in cities around the
world (also published as a book titled “The Water Barons”)
Bantay Tubig is a citizens’ coalition for adequate, accessible and affordable water in the
Helping citizens attain universal water, healthcare, education and electricity services.
Canadian institute campaigning against GATS and for public services.
Info briefs on the European Union’s push for water privatisation.
Analysis and campaign news on privatisation in Germany.
www.privatisierungswahn.de (in German)
Campaigns to ban the bulk export of water and head off commodification and
Campaigning to keep water as a public trust.
Municipal department of water and sanitation, Porto Alegre, Brazil.
www.dmae.rs.gov.br (also in English)
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The international trade union federation of public sector workers, involving
more than 600 trade unions in over 140 countries.
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For a wealth of research on water privatisation and public water, go to:
Friends of the Earth Uruguay.
Website of the water co-operative of Santa Cruz, Bolivia.
www.saguapac.com.bo (In Spanish)
Website of the water utility of Cochabamba, Bolivia.
www.semapa.com.bo (In Spanish)
Corporate Europe Observatory (CEO) is an Amsterdam-based research and campaign group targeting the threats to democracy, equity, social justice and the environment posed by the economic and political power of corporations and their lobby
Transnational Institute (TNI), founded in 1974 is an international network of
activist-scholars committed to critical analyses of the global problems of today and
tomorrow. It aims to provide intellectual support to those movements concerned to
steer the world in a democratic, equitable and environmentally sustainable direction.
Contact: Satoko Kishimoto <[email protected]>
tel: + 31 20 662 66 08
fax:+ 31 20 675 71 76
For more on TNI’s Water Justice project, see:
The UK-based WDM campaigns to tackle the root causes of poverty.
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Main photo:
As the privatised utility fails to ensure promised water connections,
residents of this Manila suburb have to rely on old hand well.
Photo by Rod Harbinson, www.diversityphotos.com
Photos at the top:
Anti-privatisation demonstration in Uruguay (October 2004)
Water activists walk out of the World Water Forum (Kyoto, March 2003).
Consumers march to Mendiola, Manila, denouncing a water rate hike both by Maynilad
and Manila Water (November 2004). Photo by Freedom from Debt Coalition.
Photos at the bottom:
MAMA-86 certifies a water well in the Ukrainian city of Nizhyn.
Participatory decision-making on water services in progress at
neighbourhood meeting in Recife, Brazil.
Water pipe construction works in Porto Alegre, Brazil.
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Fly UP