Private water suppliers poised to grow as demand set to surge

Global Water Intelligence analysts expect the water supply market to grow about 20% in the next five years
Juliette Jowit, guardian.co.uk 28 Apr 10;

Private companies are poised for a surge in demand to take over water supplies, despite widespread opposition to privatisation of what is seen as a life-giving public service.

Global Water Intelligence analysts expect the water supply market to grow about 20% in the next five years, and demand is especially strong in North Africa, the Middle East and China, GWI's publisher Christopher Gasson told the Guardian.

Another big growth area is likely to be the US, where "hundreds" of public water authorities thought to be talking to private operators, said Dan McCarthy, president and CEO of the global water division of engineering group Black & Veatch.

Renewed growth is being driven by poor services and the need for huge investment to repair and expand supplies, which in a recession is even harder for governments and municipal authorities to fund, said Gasson. It is also encouraged by less historical opposition to private suppliers in much of the big-growth regions, and the continuing "marketisation" of China, he said.

"There's been a move towards private sector finance and operation because of this failure to deliver," said Gasson. "If you have a contractor and the contractor doesn't deliver you can beat him over the head, but if you have a public employee who's got a job for life it's much more difficult to demand performance."

Private companies are seen as a source of finance, and a useful scapegoat to raise bills to help pay for the investment, because the decision would be made by state regulators rather than local politicians, said McCarthy: "It takes a bit of pressure off the local officials if they can shift that to somebody who's less impacted by the politics."

Despite huge controversy over privatisation of water suppliers in the last couple of decades – most famously violent protests in Bolivia over huge big bill increases – a World Bank report last year showed the population served by private companies has continued to expand, from almost zero in 1991 to more than 160m in 2007.

GWI's annual market report forecasted private company spending on water supplies would rise from about $45bn (£30bn) last year to nearly $70bn in just five years' time, and private finance of other water infrastructure more than double from about $30bn to more than $70bn.

However, still only about 10% of the world population is supplied by private operators, although more than four out of 10 people have no network supply at all.

The resurgence of privatisation interest, and continuing controversy over the issue, prompted GWI to chose it as the theme for the main debate at its major annual industry meeting in Paris this week.

AquaFed, the private industry lobby group, defended the continuing growth of public supplies, citing the World Bank study of 36 contracts in Africa, Latin America and Asia, which found private operators improved continuity of service and water quality, reduced leaks, and did not charge prices higher than public managers under the same conditions.

"Everybody needs access to water and sanitation in a way that's affordable," Gérard Payen, Aquafed's president, told the debate, referring to calls for water to be treated as a human right. "[But] the right which is recognised but not effective for people is useless."

Many delegates described the debate as "sterile", "pointless", or a "red herring"; they argued there were good and bad examples of water operators from both public and private sectors, and private suppliers could be controlled by good regulation.

Passionate opposition remains however, and not everything is going the private operators' way: officials in Gary, Indiana, in the US, want to terminate their private contract early, claiming they can do the job for half the price; and the concession to supply 2 million residents in central Paris was recently awarded to a public authority, after 25 years of private operation.

Maude Barlow, chair of Food & Water Watch campaign group, told delegates that although private companies could help build networks and big infrastructure, they should not be able to make a profit from supplying water.

"I don't think anybody should be making money from delivering water because it can be done in the public sector on a not-for-profit basis," said Barlow. "No corporation can survive on that basis ... You make decisions about life and death because you have to make a profit, and that's the issue here."

Oxfam said it was concerned about big private operators "cherry picking" the most profitable customers, and suing governments if they tried to terminate contracts for poor performance or exorbitant prices – as Bechtel tried to do in Bolivia.

"Market-led solutions have often undermined the provision of essential services and have had a negative impact on the poorest and most vulnerable communities," said a spokesman. "Water privatisation is the most notorious example."