It is 7 a.m. and you are all set for a good hot shower. You turn on the mains but not a drop squirts out. Does this sound familiar? If no, consider yourself lucky but if a resounding yes is the answer then blame it on your water utility provider!!

Situations like these are common in most developing nations. The Earth is 70-75% water yet only about 2.5% consists of fresh water. To add to this, the ever-growing global population is making water a much sought after component in this time and age. For decades, water has always been seen as a public good and most water utilities around the world have been publicly owned. This trend however is changing with countries now embracing the idea of privatization. Will that help? Perhaps.

Well, water privatization often refers to an increased participation of private companies in the provision of water. Privatization can be Public-Private Partnership (PPP), partial or even total. In Public-Private Partnership (PPP), the idea is that water itself is not deemed as a commodity and is not privatized. Instead, only the services and the job of supplying water are, while the government plays a regulatory role. In other sorts of privatization, depending on the agreement, water can be owned by a private enterprise and be offered for sale.

Some hard facts:

• There are about 1.2 billion people who lack clean and affordable water globally
• The government (Public utilities) have been slow and ineffective in providing access to safe drinking water to all
• In Indonesia, only half of its urban residents have access to safe drinkable water while 80% do not even have it supplied directly to their residential homes
• High incidences of water losses due to leaky pipes and mismanagement of water in most developing countries

With privatization, there will likely be a higher level of competency, efficiency and much needed expertise to mobilize the implementation of the water delivery network to places inaccessible at the moment. Also, privatization is expected to bring in the much needed financing and investments to the sector.

Water observers around the world believe that privatization may be the one answer to all water dilemmas and problems. With governments across nations failing to address water issues it may be a better approach to let private companies manage this resource. Nonetheless, with governments (public governance) still playing the biggest roles in managing water utilities and approx 95% market share, there is no doubt that the transition may not be a smooth sail.

On the other hand, privatization may bring in its own pains:

• With large multi national companies dominating the market, monopolistic trends may set in. Under such scenarios local operators are often sidelined for lack of resources, experience and scale to compete with the giants
• The negotiating power between local governments and the multinationals are often lopsided. Furthermore, countries that are in dire need of improving their water distribution systems/network are mostly the ones that have little or no experience in negotiating and hence end up being on the disadvantaged end. This may further impair the regulatory structure to oversee the implementation of the system

Over in Indonesia, PT Pam Lyonnaise Jaya (Palyja) and PT Thames Pam Jaya (TPJ) worked together with the Jakarta Water Supply Enterprise (Pam Jaya) to manage and maintain Jakarta’s water system in 1998. After sevens years of privatization, residents of Jakarta city were still experiencing water disruptions and even no supply for days, at times. The privatization was seen as a failure with consumers complaining of price hikes of as much as 30% without noticeable improvements to the service provided.

Similarly, privatization began about 18 years ago in Malaysia but there have not been any major improvements in the supply, quality, distribution and management of water. Water is lost due to theft or pilfering, from worn out pipes and through inaccurate billing systems. Privatization was embraced in certain states to overcome these problems but the increase of privatized bulk water BOTs (Build-Operate-Transfer) has affected the financial situations of the distribution companies which are owned mostly by the state governments.

The largest privatization of water utility took place in the Philippines back in 1997 with the privatization of Manila’s Metropolitan Waterworks and Sewerage System (MWSS). The aims of privatization were to reduce the rates for water, increase the infrastructure, widen the coverage to 100% by 2007, decrease the amount of unaccounted water loss, provide round the clock water supply, improve pipe networks and generate new investments. These were however not met. Instead, it became a fiasco which left MWSS with a much heavier debt than before and with consumers ending up having to pay more.

Droughts are a common problem in Australia so water is always a prime issue here. In general, most water utilities are government-owned with Sydney Water Board (government owned) being the largest utility in the country. Back in the mid 90s, when there was an urgent need for construction of new treatment plants the government approached private sector and offered BOOTs (Build-Own-Operate-Transfer) concessions (25 years) for construction of the plants. The concessions were however divided into three segments to ensure competition and also to protect the city’s water supply if one of the segments were to fail. The unforeseen happened in 1998 when the city’s water supply became contaminated and caused a deterrent to other municipalities to approach the private sector.

Apart from Sydney, South Australia has turned its operation of water utilities to the private sector fully, back in 1995 to United Water. Plans are in place by the state government to shift the role of water management from the state to the community level.

The Picture is not so Dismal after all!!

In 2003, Singapore joined the line up of countries embracing privatization by awarding Singspring to design BOO (Build-Own-Operate) the first desalination plant in the country. As of now, this has been a fine model for a successful form of water privatization in Asia Pacific. Following this success, Public Utilities Board has linked up with Keppel Integrated Engineering Ltd. (KIE) earlier this year to form another PPP to design BOO Singapore’s biggest NEWater factory in Ulu Pandan. The reason for the link up was to enable the private sector to participate in Singapore’s water management.

Like other developing nations in Asia Pacific, South Korea faces a water crisis even though it receives adequate rainfall. To address the crisis and upgrade the water systems in the country, the government strengthened water privatization. The key players in South Korea are Suez (Ondeo) which has two bulk water supply BOTs there and Vivendi Water which joint ventures with local companies for constructing and operating treatment plants in Inchon and Chilgok. Privatization is still in its early stages in South Korea and with the ongoing government support the potential sure looks promising.

The policy of privatization does look promising if carried out in an ideal sense with participants upholding their goals to provide water to everyone, decrease the price of water and address all problems related to water mismanagement. Majority do not empathize with the economically deficient population who are deprived of safe, clean, and inexpensive drinkable water.

The element of moral responsibility is not prevalent among private entities and thus the other prevailing issues such as no regards for protection of environment or little concern about how the whole water system would affect other smaller communities/ecology have not helped at all. The goals of privatization have fallen short of the original noble intentions but more so for the sole purpose of profit-seeking.

Privatization may work if the following were observed:

• Governments conduct fair and transparent regulatory frameworks
• Private enterprises ensure fair pricing with factors of supply and demand taken into account coupled with thorough financial analysis
• Enterprises work out ways to increase savings by minimizing wastage and increasing productivity through its implementation of best business practices
• Private Enterprises adopt a Pro-Poor policy and work out a way to benefit the socially disadvantaged group
• End-users compromise on any price increment which could be due to various reasons such as inflation
• International financial institutions and international organizations with expertise in the field pitch in and help those interested in embracing privatization

Looking at the brighter side, in spite of the plenty hiccups in the process with reports of failures, pull-outs, angry mobs and ones highlighting the failure of privatization in meeting its goals, one must realize however, that only a small number of nations have adopted water privatization. This necessarily means that not only do we have a small sample to derive conclusions from but also there is a huge potential for growth.

So is privatization really a boon or a bane? It all depends on the end-user, private enterprise or government to answer that at the end of the day. But if we want uninterrupted showers forever, privatization might get us just that!