Archipelagos and Networks: Urbanization and Water Privatization in the South

15 Pages·2008·2.25 MB·English

Archipelagos and Networks: Urbanization and Water Privatization in the South
Author(s): Karen Bakker
Source: The Geographical Journal, Vol. 169, No. 4 (Dec., 2003), pp. 328-341
Published by: Blackwell Publishing on behalf of The Royal Geographical Society (with the Institute of
British Geographers)
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The GeographicaJl ournalV, ol. 169, No. 4, December2 003, pp. 328-341
Archipelagosa nd networks: urbanization and
water privatization in the South
KARENB AKKER
Departmento f Geography,U niversityo f BritishC olumbia,1 984 WestM all, Vancouver,B C,C anadaV 6T 1Z2
E-mail:b [email protected]
Thisp aper was accepted for publication in February2 003
This paper examines the interrelationship between urbanization and water supply
privatization in cities in the global South. The purpose of the paper is not to evaluate
the impacts of privatization; rather, the paper analyses the differences in pathways
and modes of water supply privatization, focusing on urban and contrasting with
rural areas. A distinction is drawn between privatization (organizational change) and
commercialization (institutional change) of water supply. Emphasis is placed upon the
interrelationship between regulatory change (a shift from public to private management
of water supply systems), human use of and access to water, and urban waterscapes. In
contrast to metaphors of 'networks' so often applied in analyses of water management,
the 'archipelago' is posited as a metaphor which better captures the complex
overlapping strategies of water supply provision in urban areas in the South. Building on
this metaphor, and in response to the 'public-private' dualism often invoked in studies of
privatization, the paper outlines an alternative typology of water management in urban
areas in the South. This typology foregrounds the concepts of the territorialization of
corporate power as a means of understanding the articulation between privatization and
urbanization processes in the South.
KEYW ORDS:S outh, urbanization, privatization, political economy, water supply
Introductionp: rivatizationc, ommercializationa, nd 1998). In most cities of the global South, private
water supply water vendors - delivering water to households by
jerrycan or tanker - have long been the means by
rivate sector management of water supply which the poor obtain water, usually at a cost per
systems is not a new phenomenon. The diver- unit volume several multiples of that delivered via
sity of water supply management systems public water supply systems to the middle and
worldwide - which operate along a continuum upper classes.
between fully public and fully private - bear Despite this history of experience with private
witness to repeated shifts back and forth between sector management of water supply, the twentieth
private and public ownership and management century witnessed an increase in state dominance
of water systems'. In Buenos Aires, a private water (both local and supra-local) of this sector. A combi-
company was the first to supply citizens with nation of socio-economic, political and cultural
networked water supply. In many cities in France, factors underlies the growing dominance of the
private companies manage municipally owned state in water supply provision in industrialized
water supply infrastructure via long-term manage- countries in the twentieth century. Water is expen-
ment contracts (Goubert 1986). The first companies sive to transport relative to value per unit volume,
to supply London with water were privately requiring large-scale capital investments in infra-
owned; after a period of state (municipal and then structure networks which act as an effective barrier
national) ownership in the twentieth century, the to market entry. Water supply is thus highly suscep-
English water supply utilities were privatized by tible to monopolistic control (a condition termed
asset sale in 1989 (Bakker forthcoming; Hassan 'natural monopoly' by economists). Commercializing
0016-7398/03/0004-0328/$00.20/0 @ 2003 The Royal Geographical Society
Urbanizationa nd water privatizationi n the South 329
water utilities is as a consequence invariably fraught Table1 Watera nd seweragep rojectsw ith private
with difficulty, to a much greater extent than for participationin developingc ountries( 1987-2000)
other network utility services such as telecommunica-
tions, gas, and electricity. Numbero f projects Cumulativen umber
In addition to water's 'natural monopoly' charac- Year reachingf inancialc losure of projects
teristics, the symbolic and cultural importance of
water as a (partially) non-substitutable resource 1987 2 2
essential for life, its strategic political and territorial 1988 0 2
importance, the intense conflicts that arise over 1989 3 5
the shared use of a flow resource required to fulfil 1990 0 5
multiple functions (agricultural, industrial, drinking 1991 2 7
water, environmental), and the need in industrial- 1992 6 13
ized, urbanized societies to mobilize large volumes 1993 9 22
- invariably at a high cost relative to the economic 1994 15 37
value generated - have been used, particularly 1995 20 57
in the twentieth century, to justify public sector 1996 18 75
involvement. Moreover, the health and hygiene 1997 30 105
effects of lack of access to water, together with 1998 19 124
the tendency of private companies to fail to extend 1999 34 158
coverage to the poor (both as a result of the 2000 25 183
tendency to cherry-pick profitable neighbourhoods
and classes of consumers, and the high prices and Source:W orldB ankP PId atabase( 2001).
poor services resulting in a situation of natural
monopoly), were two of the most important justifi-
cations for bringing water supply under the control tion rather than the rule. Two decades later, the
of the state, whether through strict regulation water supply systems of over one hundred cities in
or public ownership of water supply infrastructure, developing countries are now managed by one of a
during the twentieth century. Thus, throughout handful of private multinational companies eagerly
most of the past century, water management, pursuing growth in a multibillion-dollar global
particularly but not exclusively in OECD countries, market (Table 1). The projects summarized in Table
was characterized by the dominant role of the state 1 include both water resources and water supply.
as owner, manager, and regulator of water supply Private companies may be involved in either the
infrastructure. construction of large-scale infrastructure develop-
Despite the apparent consolidation of state ments, such as reservoirs or canals, to supply raw
control over water supply management, the effect- water, or in management, rehabilitation and
iveness and legitimacy of publicly owned water extension of 'clean' (i.e. potable water) and dirty
supply systems has been challenged over the (i.e. wastewater) networks. The majority of projects
past two decades. At the same time, the state undertaken to date involve both 'operation and
has increasingly relinquished management and/or maintenance' of the infrastructure,t ogether with the
ownership to private capital and ceded regulatory construction and/or rehabilitation of infrastructure.
control to markets and market-mimicking regula- In the case of water supply, private sector participa-
tory mechanisms through a combination of tion may take a variety of forms (Table 2).
deregulation and re-regulation. Argentina, Bolivia, To date, the majority of contracts have been
China, Chile, England, Indonesia, Morocco, the granted on a 'concession' basis, in which a private
Philippines, Poland, South Africa, Spain, Thailand, company obtains the exclusive right to operate the
and Turkey are just a few of the countries in which water supply infrastructure for an extended period
the state has initiated private sector participation in of time (usually 20-30 years). The vast majority of
water supply2. The rapid increase in private sector contracts have been granted in urban areas; given
participation has taken a variety of forms: the economies of scale associated with concession
opening of the water supply industry to the private contracts, rural areas, or even conurbations with a
sector in the majority of EU countries (Petrella population less than 500 000, are unlikely to attract
2001); private-public partnerships in the South the interest of the formal private sector.
(Silva et al. 1998); the creation of water banks and The majority of these large projects have been
markets (Bauer 1998; Giansante etal. 2000); and undertaken by a very small number of companies.
the massive international growth of the bottled Local private companies tend to partner with the
water market. At the beginning of the 1980s, the sector leaders - ONDEO/Suez Lyonnaise des Eaux
private management of water supply was an excep- and Vivendi/G6nerale des Eaux (both French) - both
330 Urbanizationa nd water privatizationi n the South
Table2 Privates ectorp articipationin waters upply- contracts
Contractty pe
Service Management
Allocatedr esponsibility contract contract Lease BOO, BOT* Concession Divestiture
Asseto wnership Public Public Public Publica nd Public Privateo r
private publica nd
private
Capitali nvestment Public Public Public Private Private Private
Commerciarl isk Public Public Shared Private Private Private
Operationsa nd Publica nd Private Private Private Private Private
maintenance private
Tariffc ollection Public Public/private Private Public Private Private
Duration 1-2 years 3-5 years 8-15 years 20-30 years 25-30 years Indefinite(m ay
be limitedb y
license)
Examples Mexico City Gaza City Guinea Sydney BuenosA ires London
*BOOs tandsf or 'buildo wn and operate'a nd BOTf or 'buildo perate( or own) and transfer'
Fortune 100 companies; on most measures, these brought to the table . . . [World Bank investment] is
two companies control approximately 70% of the critical in the privates ector feeling secure.
market. This concentration is due in part to the World Bank/IFC1 991, 4
absence of private sector local competitors, and in
part to the competitive advantage held by these The facilitation role played by both international
multinational firms, collectively serving hundreds financial institutions (IFIs)a nd national governments
of millions of customers on all five continents. is a critical and necessary condition for the existence
Another advantage has been the fact that private and functioning of the world water market. In the
companies receive support from key mediators of Far East,w here 'water privatisationh as been promoted
international finance - the International Finance by IMF pressure' (British Water 1998, 3), agencies
Corporation, the World Bank, the African, Asian such as the IMF encourage receptiveness for
and American Development Banks - and key private involvement in the water sector in 'client'
sources of bilateral aid, such as Britain's Depart- countries, facilitate contacts between 'developed'
ment for International Development. world water companies and overseas govern-
Given the limited number of competitors, ments, and provide financial assistance and
markets must be stimulated and simulated through guarantees for water privatization projects. The role
making 'conditions as favourable as possible for of these international facilitators is crucial. For
the [companies] to compete [and through] finding example, bilateral aid agencies such as Britain's
ways of increasing the number of interested com- Department for International Development provide
panies, both internationally and locally' (World technical assistance for countries considering
Bank/IFC 1991, 5). Markets must also be created privatization. In some developing countries, IMF
and fostered through the promotion of private conditionality requiring privatization and/or com-
sector involvement (e.g. through 'seed' loans and mercialization of the water supply sector has been
grants for technical assistance in preparing and imposed3.
implementing concessions and leases), and the use The current era of water privatization can be
of guarantees to promote private sector involve- distinguished from previous eras by four character-
ment (World Bank 1997b, 46). More subtly, the istics. First, the scale of involvement of multi-
World Bank realizes it plays a key role in creating utility, multinational companies is unprecedented.
investor confidence: The two largest companies, ONDEO/Suez Lyonnaise
des Eaux and Vivendi/G6nerale des Eaux (both
an institutionw hich 'brings confidence', such as the French), are among the largest 100 companies in
Bank, might have influence on the psychological the world, and dwarf their few credible competi-
factorsw hich may be much more importantth an money tors. Second, the amounts of finance being
Urbanizationa nd water privatizationi n the South 331
mobilized, via these private companies as well as subsidy to poorer consumers. Privatization can
multilateral lending and bilateral aid agencies, are occur without liberalization; the divestiture of
large and growing, particularly in response to rapid the public water companies in England and
urbanization and a consequent reduction of access Wales in 1989, for example, preserved their
to sufficient supplies of potable water for millions vertically integrated, monopoly structure. Com-
of city dwellers worldwide. The availability of petition for the market may occur without private
finance must be understood within the context of ownership of infrastructure; in France, municipali-
increasing flows of foreign direct investment to ties own water supply infrastructure, and may
the South, beginning in the late 1980s. Infrastructure choose to tender water services out to private
investments by the International Finance Corpora- companies who compete for long-term contracts.
tion (a World Bank affiliate that lends only to Privatization and commercialization may thus be
private entities), for example, surged 'from modest distinct modes of transformation of water services
amounts in the late 1980s to $330 million in the management.
fiscal year 1993 leveraged more than ten times In practice, however, private sector participation
so that, in 1993, the IFC participated in private and/or privatization of water supply often imply
[infrastructure] investments of $3.5 billion' (World commercialization. For the proponents of privatiza-
Bank 1994, 92). Third, as discussed above, private tion this is of clear benefit; water must be treated
companies are receiving both ideological and as an economic good - as specified, for example,
financial support from key mediators of interna- in the Dublin Principles4 and in the Hague
tional finance. Fourth, water privatization is Declaration5 - if it is to be managed efficiently and
occurring as part of a debate over the sphere of if greater numbers of people are to be provided
legitimacy of the state, and a much broader process with access to safe, sufficient water supplies.
of delegation of formerly core state functions to Countering the claim that water is an economic
non-state actors, in the context of high levels of good (and a human need), the Water Supply and
state indebtedness. Sanitation Collaborative Council's 'Vision 21'6, the
It is within this context that utility services such Cochabamba Declaration7, the Group of Lisbon's
as telecommunications, electricity, and gas, and Water Manifesto8, and the UN Committee on
infrastructure such as roads and housing have Economic, Social and Cultural Rights' statement9
been increasingly privatized and commercialized on the right to water have argued that water is a
over the past two decades. Privatization refers to human right under international law.
the shift in ownership from the public to the The question of whether water supply is a
private sector. Private sector participation entails human right or a human need bears directly on the
the participation of private companies and private water privatization debate. In the mid-twentieth
capital, through a variety of contractual arrange- century, international debates stressed the import-
ments to build and manage infrastructure on behalf ance of water for health and sanitation in basic
of the public sector. Commercialization refers to a need requirements. In recent decades, the argu-
reworking of the management institutions (rules, ment for treating water as a human right has
norms, and customs), and entails the introduction been advanced, drawing on the Universal Declara-
of markets as allocation mechanisms, market- tion of Human Rights (1948), the Covenant on
simulating decisionmaking techniques, and the Economic, Social and Cultural Rights (1976), and
displacement of Keynesian-welfarist by neo-liberal as made explicit in the Convention on the Rights
principles in policymaking. A key element of of the Child (1986). Water as a human right would
commercialization of services is liberalization: be enshrined in legislation (as in South Africa's
selective de-regulation and re-regulation designed constitution1o) placing a duty on governments to
to allow and indeed encourage competition in ensure the fulfilment of this right. If water were a
the product market. Direct competition in the water human need, however, governments would have
market is in most cases unfeasible, yet various no such duty. In practical terms, a human right to
forms of competition, for rather than in the market, water would imply a basic volumetric allocation
and of simulated competition have been intro- per person per day; 'sufficient for everyone's need,
duced (Cowan 1997; Sawkins 1995). but not for everyone's greed'. The difficulties of
Privatization and commercialization are not implementing such a right are well understood in
necessarily concomitant. Some publicly owned South Africa, where many citizens have been
water companies (e.g. Amsterdam's) are run along promised, but not yet provided with, the minimum
fully commercialized lines. The converse can also level of 50-60 litres per person per day established
be found, most frequently in the case of public- by the government as 'sufficient' in its post-apart-
private partnerships in developing countries which heid Reconstruction and Development Plan (Bond
make concessions in the form of direct or cross 1998).
332 Urbanizationa nd water privatizationi n the South
Water and sanitation in urbanizing areas Expanding the network poses distinct technical
difficulties, depending on the spatial distribution,
We are in an era of giganticism,w here nation-wide physical layout, and concentration of housing. In
economic survival depends on gigantic organisations most cities, a networked water supply system exists
for mass production.W e no longer irrigateo ur own but covers only a proportion of the city, usually
small-holdingsa nd water our cattle from the village part or all of the most affluent neighbourhoods.
pump; we mass together for work, we mass-produce Expansion usually implies extension of services to
in mammothf actories.. . and therefore,w e must mass newer, often informal settlements in urban areas.
produceo ur water. This requires an enlargement of existing and build-
Twort1 963, 9 ing of new trunk mains, water treatment and
wastewater treatment plants. In many cases, new
Urbanization and the industrialization of water water sources such as reservoirs - expensive and
time-consuming to develop - are also required.
supply production
A second set of difficulties relate to institutional
Water lubricates capital circulation, a necessary, factors. In a weak institutional setting, for example
and yet often invisible precondition to life in in the absence of secure land tenure, it may be
modern, industrialized societies (Swyngedouw difficult to obtain the necessary permits to build
1997). The emergence of an industryd edicated to the infrastructure. Poor quality information - cadastral
mass production of water, and the concurrent surveys in newer, and particularly informal settle-
conversion of water from an artisanal to an indus- ments are often lacking - confounds the creation of
trial product, tends to occur in urban areas during a potential customer base and renders cost recov-
periods of rapid urbanization. In rapidly urbanizing ery more difficult. Communities often have strong
areas, the limited availability of clean water internal organizational structures, but these groups
supplies leads to widespread concerns over water may not have formal status and may not be recog-
quality and access, as artisanal water sources - nized by the water company or the municipality as
wells, rivers, ponds, streams - become increasingly legitimate interlocutors.
polluted (Lindh and Gilbrich 1996). To meet In addition to technical difficulties and institu-
growing demand, water production becomes tional weaknesses, a logic of rent-seeking and
gradually industrialized, with artisanal methods of patronage on the part of urban elites often under-
collecting and distributing water (such as water lies the failure to expand urban services.
vendors moving on foot through city streets) being Governments may be unwilling to extend services
replaced by networks of pipes leading from reser- to informal settlements due to their unwillingness
voirs to consumers' taps, achieving economies of to support or encourage additional rural-urban
scale and scope, and enabling higher consumption migration. The existing public water supply
levels. Surface watercourses - which typically network is frequently badly managed; sufficient
support a multiplicity of uses including transport, water resources may exist, but leakage and high
trade, drinking water, and effluent disposal - are rates of unaccounted for water may significantly
filled in, or covered over. The water network is, in reduce the availability of water supply. In many
part, an artefact of urbanization. cases, the public water supply network operates
in a vicious cycle of the '3 lows': low investment,
The urban services challenge low service standards, low cost recovery. In some
cases, corruption and the misuse of the water
There are numerous difficulties posed by the provi- supply business for political ends occurs; water
sion of services such as water and sewerage in services are particularly open to such behaviour
rapidly expanding and unplanned urban zones. as public water companies are one of the few
Technical difficulties may be posed both by a rapid revenue-generating utility services controlled at
increase in demand (volume of water and waste- the municipal level. As such, they are frequently
water), as well as the distribution of demand. employed to subsidize other municipal services
Water and sewerage infrastructure networks are and activities, without applying the surplus (if any)
highly capital-extensive, with relatively long lives. to network maintenance and expansion. Rent-
They are also sunk networks - often physically seeking and patronage aside, the multiple demands
buried below city streets and, in many cases, on water supply utilities in urban areas - where
below layers of other infrastructure networks. Built industrial and institutional sectors account for
to peak load specifications that may have become the majority of water use, and are well placed to
quickly outdated, water and sewerage networks are advance their claims for services - also contribute
highly inflexible - very expensive and unwieldy to to the relative neglect of some residential
update. neighbourhoods.
Urbanizationa nd water privatizationi n the South 333
This behaviour must be understood in the context out the developing world (see, for example, Lovei
of 'urban primacy', the pattern of dominance of and Whittington 1993).
one (or, at most, a handful of) urban area(s) within It is in the context of inequitable access to water
many, if not most, 'developing' countries. As Gilbert supply that calls for improving water and sanitation
and Gugler note, in many third world countries, services must be viewed, particularly in the context
'most large-scale modern activities, most forms of of rapid urbanization in the 'global South' (see,
social infrastructure, and most centres of decision for example, Kjelln and McGranahan 1997). Annual
making are found in a single major city' (1992, 36). investment in urban water supply in Africa, Asia
Unlike the feudal order of Europe's Middle Ages and Latin America and the Caribbean over the
or the 'hacienda' system in the colonial and early decade 1990-2000 was just under US$8 billion
post-colonial period in Latin America, throughout (half funded by external support); annual invest-
the South today virtually the entire elite is located ment in rural water supply was significantly
in cities (Gugler 1997). The social surplus that smaller, at just over US$4.5 billion (with external
would have been controlled by private interests support funding just under half) (WHO 2000). In
under laissez-faire capitalism, or by colonial powers the context of government investment, these figures
during the age of empire, is now controlled by are significant: the medium total investment in
the state, which reallocates resources with three water supply and sanitation as a percentage of
goals: improving the immediate environment (of overall government investment during the same
decisionmakers); 'assuring the continued collabora- period was 5.3% in Africa, 3.6% in Asia, and 8.3%
tion of the middle class'; and 'placating in Latin America and the Caribbean.
strategically placed elements of labour... with the The imperative to change this pattern of unequal
result that public resources are disproportionately distribution of potable water has lain at the heart
spent on the privileged consumption of the few, of calls for increased expenditure on water supply
and conspicuous investment for the few - in cities' and sewerage services since the International
(Gugler 1997, 120). Within this hierarchical, differ- Water and Supply Sanitation Decade in the 1980s
entiated socio-political model, individuals do not (WHO 1990). Water supply and sanitation exp-
have equal entitlements to state services by virtue enditures, as a proportion of total aid (or
of citizenship. Not all citizens, in other words, are 'cooperation') budgets in OECD countries, have
considered to be political constituents of society. increased steadily since the 1980s to 6.6% in 1996
Rather, urban elites - with entitlements to local (WHO 2000). However, in the decade from 1995
state services such as piped water supply - consti- to 2005 the World Bank estimates that US$60
tute the privileged constituency of the local state. billion per year must be invested in the sector to
Indeed, urban elites are often state elites, staffing ward off a situation of 'water stress'" (Haarmeyer
state institutions and constituting a core base of and Mody 1997):
political support for governments.
Currentt rendss how that several regions, most notably
tWhea tSeoru atnhd sanitation services in urbanizing areas of tlahreg Me nidudmleb Eerao sft a cnodu nNtroiretsh inA farlilc paa,a rntsdo af nth ien wcroeralsdi nagrely
approachinga 'waterc risis'.
For the urban elite, water supply is often relatively World Bank 1997b, 47
abundant, and relatively cheap. For the urban
poor, the scarcity of potable water is a daily The increase in 'water stress' or 'water scarcity' as
hardship. Wealthy, mostly white South Africans, for measured by indicators linked to unit volume avail-
example, use on average 600 litres per person per able per consumption masks a more profound,
day of potable water delivered through taps inside widespread, and longstanding experience of water
the home, whereas the poor and largely black scarcity in cities. On a global scale, consumption
residents of peri-urban settlements may average 10 of water by domestic users is only 4% of total
litres per person per day (Van der Merwe 1995), water consumption. Yet twenty-first century urban
often walking several kilometres to fetch water. dwellers consume large quantities of water; each
This highly unequal distribution of water is in this inhabitant of London uses perhaps 160 litres per
case the legacy of apartheid, which entrenched person per day, and the inhabitants of Los Angeles
differential access to water resources and domestic closer to four times that amount. In industrialized
water supply networks (Bakker and Hemson 2000), countries, demand per capita has increased steadily
but is by no means unique. The pattern of elite throughout the twentieth century. Whereas wealthy
access to piped water supply, and reliance of the residents of desert states such as Nevada consume
poor on the informal water sector (water vendors) on average over 950 litres per person per day
or unimproved water sources is repeated through- (Solley et al. 1998), the World Health Organization
334 Urbanizationa nd water privatizationi n the South
estimates that 1.1 billion people worldwide do not tional response to the problem of providing access
have access to safe drinking water, and 2.4 billion to water supply was an argument in favour of
are without access to adequate sanitation (WHO increased state spending. In addition to the multiple
2000). market failures'2 characterizing its supply, the
Investment in urban areas is directed in part uniqueness of water - as a partially non-substitutable
to meet the water supply and sanitation needs resource essential for life and critical to public
of rapidly increasing urban populations. Cities health - was a strong justification for managing
globally have experienced since 1950 what Harvey its supply as a service, which should be available
terms 'hyber-urbanization', with 'the pace of on a subsidized basis to citizens. Water supply
urbanisation accelerating to create a major ecolog- was perhaps the most basic of entitlements, and
ical, political, economic and social revolution in running water inside the home considered to be
the spatial organisation of the world's population' a powerful material emblem of citizenship. More
(1995, 10). Between 1950 and 1985 the proportion pragmatically, given the high degree of public
of the world's population living in urban areas health externalities, water supply was reconceived
doubled. By 1985, in the more affluent countries in as a 'merit good'3 - necessary for both production
the Third World urbanites had become a majority. and reproduction. After a period of experimenta-
As cities have grown, urban services have not tion in the nineteenth century in many countries
kept pace. The number of people without access with private sector provision of water supply, the
to sanitation in urban areas was estimated to have local state increasingly dominated water supply,
increased by 10 million in the 1980s (Haarmayer and any remaining private activity was, in most
and Mody 1998). If the rate of urbanization does cases, strictly regulated.
not decrease significantly, this number is predicted In contrast, arguments in favour of increased
to grow (Haarmayer and Mody 1998). The World private sector participation attribute the failings
Bank estimates (lower than those of the WHO) that of water supply management not to the failure to
1 billion people have no access to safe drinking guarantee entitlements, but to the assumption that
water, and 1.7 billion are without access to adequate entitlements are a mechanism by which potable
sanitation (World Bank 1997b). An increasing water can be supplied:
proportion of those lacking potable water live in
urban areas. In most developing countries, access in the majorityo f countries. . . water has been treated
is highly correlated with income. as though it were available in unlimited quantities,
Even those with access to networked services and supplied at zero or low cost to consumers who
may have problems with low quality and reliabil- resent the idea of water as an economic resource.
ity. In many networked water supply systems, Consumers,a betted by their governments,h ave clear
water may flow intermittently - a few hours per notions of their water 'requirements,' and the task
day, or only a few hours per week. Water pressure of water authorities has, until recently, been seen
may be low, further reducing access. In some as supplying those needs, with cost a secondary
households, a water tap is left constantly open - consideration. Pricing for water services has been
when the arrival of water announces itself in a meagre and sporadic, and is normally incidental to
sudden gush from the tap, users rush to fill buckets cost-recovery, narrowlyc onceived. This 'entitlement'
and other vessels with water. In part because of syndrome, relying on supply-side solutions to
problems associated with infiltration in pipes in requirementsta ken as given, is unsustainable.
which supply is intermittent rather than constant, Winpenny1 994, 2
water is frequently not potable, and may be of
insufficient quality for other household uses, such The reference to 'unsustainability' refers, in
as cooking. As a result, most households rely on a this case, to economic sustainability: the ability
mix of water supply strategies: for the wealthy, a to recover costs in order to meet operations and
tank on the roof connected to both a private deep maintenance requirements, and eventually fund
well and the network, supplemented by bottled network extension costs. The inability of many
water for drinking; for the less affluent, a hand- local states to mobilize revenues from users of the
dug shallow well for bathing and cleaning, often existing water supply system - frequently expressed
in conjunction with a supply of drinking water as very low cost-recovery rates - is one of the
purchased from neighbourhood water vendors. widespread failings of municipally owned water
utilities in developing countries. According to
Winpenny, the 'entitlement' syndrome has
Privatization and commercialization of water supply
additional 'perverse' economic effects, such as
management in the South
the encouragement of water-intensive industries,
Over much of the twentieth century, the conven- the encouragement of inefficient uses of water,
Urbanizationa nd water privatizationi n the South 335
discouragement of technical innovation necessary commercialization are thus often accompanied by,
for conservation, and under-investment in water and implicated in, a more generalized shift in the
infrastructure due to low revenues and consequent practice of deliberative democracy at the local
low profitability. level. The initiation of private sector participation
In essence, neo-classically derived arguments in contracts, for example, is often accompanied by
favour of valuing water rest on the assumption that a discursive rescripting of users as individual
'the failure to treat water as a scarce commodity consumers, rather than a collective of citizens, and
lies at the heart of the [water industry's] problems'14 by a higher prioritization of environmental water
(Winpenny 1994, 1), most frequently identified quality standards. Yet opponents of privatization
as water pollution, over-abstraction, and under- and commercialization often object to this alliance
investment. This failure, caused by the (inter- between commercialization and conservation. As a
related) factors of externalities, a 'political' support response to the Hague Declaration, the Declaration
for the notion of water as a public good, and the of the P7'5 at their fourth Summit in 2000 outlined
under-pricing of water, is exemplified by subsidiza- principles of 'water democracy': decentralized,
tion of water production and non-volumetric community-based, democratic water management
consumption charges. in which water conservation is politically, socio-
The above argument rests upon the assumption economically and culturally inspired rather than
that flawed management by the state, due to struc- economically motivated (see also Shiva 2002).
tural defects in public sector management of water, Rather than defending the state, water activists
is responsible for the well-documented poor quality are increasingly outlining alternative visions of
and low penetration of water supply systems. community-centred resource management (see,
The state, argue organizations like the World for example, IFG 2002).
Bank, is 'overextended' (World Bank 1997a); These debates have increased in scale and scope
only by 'relaxing the government's grip' can over the 1990s, in part in response to the dramatic
countries 'free up public resources for high- increase in private sector participation in the
priority activities; pave the way to better, cheaper financing, construction, and management of water
services; and unlock opportunities for private supply infrastructure. During the last 14 years of
sector development' (World Bank 1997a, 61-2). the century, 183 water and sewerage projects with
The underlying assumption is that the market is private participation were initiated in 'developing'
more efficient than government at providing basic countries (Table 1), with a total investment of over
services. Given 'state failure', 'there is no good US$33 billion (World Bank 2001). The water sector
economic reason for state ownership to persist in is not unique; capital for infrastructure investment
tradable-goods industries' (World Bank 1997a, 64). was increasingly sourced through the private sector
Underpinning this statement is a two-pronged during the 1990s. Capital may be raised by the
discursive move. First, the category of tradable state through leasing or divesting infrastructure to
goods has been expanded, and the utility sector private firms, and these same private firms - who
simultaneously re-conceptualized as potentially are assumed to have better access to loan finance
profitable, rather than a service provider in need of than governments - are also contracted to operate,
subsidies. Second, water scarcity is depicted as a and in some cases build additional infrastructure.
universal condition; simultaneously natural, justifying The move to the private sector began in the 1980s;
cost-reflective pricing and the commercialization between 1988 and 1992 alone, US$1.6 billion in
of water, and social, the result of flawed public revenue was obtained by 'developing' countries
management. Both depictions of scarcity may serve from the privatization of public enterprises, one-
as a further justification for water privatization and third of which came from the privatization of infra-
commercialization. structure entities (World Bank 1994, 105).
Proponents of water privatization in both cases These capital flows are being mobilized to stave
rely, if not always explicitly, on the concept of off what the World Bank portrays as the possibility
state failure - the notion that the private sector is of 'severe water shortages' in developing countries,
more efficient than the public sector at delivering and to meet tougher environmental standards in
basic services - supported by evidence from developed countries (McGuinness and Thomas
rapidly urbanizing Third World cities, where most 1997, 329). A significant proportion of this finance,
of the estimated 1 billion people who lack daily insist multilateral credit organizations like the
access to sufficient amounts of clean water live World Bank and bilateral agencies like DFID, must
(WHO 2000). Their arguments converge with come from the private sector; development banks
those who promote the management of water as and other funding institutions are 'increasingly
an economic (rather than public) good in order prescribing the introduction of Private Sector
to promote water conservation. Privatization and Partnerships as a condition of lending' (British Water
336 Urbanizationa nd water privatizationi n the South
1998, 11). The level of investment in water supply is pay a reasonable price for an appropriatel evel of
likely to increase, given a combination of increasing water and sanitation services; the willingness to
pressure on water resources, and increasing pay has to be developed prior to and during [the
demands, particularly in conurbations experiencing introductiono f] Public PrivateP artnerships.
rapid rates of urbanization. DFID1 998, 10
Commercialization of water supply management The underlying assumption in the DFID argument
is that full cost recovery pricing is both possible
Although privatization and commercialization are and desirable. Users should no longer be charged
not dependent variables, private sector participation on the basis of the 'ability-to-pay principle' - the
frequently entails some degree of commercializa- principle which typically underpins water pricing
tion. Whether through a reworking of infrastructure in public, non-commercialized systems which
management goals, or through a redefinition of implies that users should be charged according to
principles underlying the business of water supply, their ability to pay. Rather, users should be charged
water ceases to be a service, supplied at subsidized on the basis of 'economic equity' - the principle
rates to citizens as a right, and is increasingly that users of a utility service should pay, as near as
viewed as a commodity, sold to consumers on possible, the costs they individually impose on the
a profit-making basis of willingness-to-pay rather system (the 'benefit principle'). In other words, a
than ability-to-pay. commercialized system which adopts a 'full cost
Commercialization is often justified by the recovery' pricing policy is the preferable solution
'perversity' of public sector management, which is to the water supply needs of the urban poor. The
most forcefully revealed, as it is argued by private unspoken caveat is that inter-generational equity is
sector participation advocates, in the effects of not considered; no redress is possible for the past
water subsidies, which 'almost always benefit the subsidization of the typically 'non-poor' at the
non-poor disproportionately' (World Bank 1994, expense of the poor. Whereas the connected
80). The under-pricing of water by governments segment of the population - typically more affluent
in order to keep water tariffs low is a widespread - enjoyed both capital and operating expenditure
policy in both 'developed' and 'developing' subsidies, the poor must pay the full cost of
countries. In the latter, however, low penetration connection and supply.
rates imply that only a small, and typically a In practice, this recommendation has not proved
wealthier-than-average proportion of the popula- to be workable, given the low ability-to-pay of
tion are connected to the public water supply many domestic water users in the South. Post-
system. The poor typically rely on private water privatization, a continuation of cross-subsidies
vendors or public standpipes and 'typically end frequently occurs. In Buenos Aires, for example,
up paying much higher prices for infrastructure where the water supply and sewerage systems
services or their substitutes' (World Bank 1994, were privatized by concession in 1993, an initial
81), in some cases indirectly subsidizing the public pricing scheme which charged the full cost of
water supply system (Swyngedouw 1997). The connection to new users was discontinued after
solution is to enlarge the public water supply widespread non-payment or refusal to connect was
system - but not necessarily to decrease the prices found to be occurring in poorer zones of the city.
paid by the poor. Connection charges were replaced by a blanket
By contrast, the high prices paid by those relying charge to all household connections, with the
on the 'informal' water sector are interpreted as proceeds intended to fund network expansion. In
evidence of their 'ability' (or sometimes, and more Chile, water users receive a bill for the full cost of
dangerously, their 'willingness') to pay for water the service, but poor households can obtain a
services, at rates high enough to ensure cost recov- partial rebate on water charges via the municipality
ery, and even profitability of water supply systems. (Serra 2000). In South Africa, an initial attempt at
As one DFID publication notes: implementing full cost recovery pricing policies -
despite the constitutional guarantee to 'sufficient
People in poorer areas where piped supplies are water' - stalled after large cholera epidemics. A
not available usually have to buy their water from 'lifeline' water supply policy, in which a pre-set
vendors. Experiencea round the world shows that the volume of water is provided at minimal or no cost
cost of buying water in this way is far higher, from a to poor users, has now been implemented, but the
low of 4 times up to 100 times more than from public question of allocation of capital costs, and operat-
utilities. This mostly affects the poorer members of ing and maintenance expenses remains unresolved
society who are least able to affordt o pay - but pay in many communities (Bakker and Hemson 2000;
they must, in order to survive. The ability is there to Bond 1998).