Private sector role in 'Safe Water for All'

GENEVA, 13 March 2012 - The private sector is making significant contributions to the delivery of reliable and safe water worldwide, providing services to around 160 million people in emerging markets, according to a journal from the World Bank Group's private arm, the International Finance Corporation (IFC).

Private sector participation in water projects has expanded threefold during the last decade, notes the IFC in Handshake, a quarterly journal on public-private partnerships. "With an average of 50 projects and $2-3 billion investment commitments per year, 535 water projects benefiting from private participation have reached financial closure during the last 10 years. Commitments to water projects with private participation totaled about $34 billion in that period of time."

The journal is timely as thousands gather in Marseille for the 6th World Water Forum which opened yesterday and the Alternative World Water Forum which opens tomorrow. United Nations Special Rapporteur Catarina de Albuquerque warned on Friday that the right to safe drinking water and sanitation would be sidelined at the Forum, a key global gathering of delegates from 140 governments, international organizations, civil society and the scientific community, representing more than 180 countries.

"It comes as an unwelcome surprise that the draft ministerial declaration of the 6th World Water Forum: Time for Solutions still does not recognize the human right to water and sanitation that has been explicitly recognized at the UN," said the expert charged by the Human Rights Council with promoting, monitoring and reporting on the human right to safe drinking water and sanitation.

In the face of opposition to private sector involvement in the supply of water, IFC Environment and Social Development Director, Greg Radford, believes that "to meet the Millennium Development Goal for safe water, improved access in low-income countries can be enhanced significantly though creative deployment of the financial and other resources of the private sector."

According to the IFC, during the last decade, more than 55 percent of water private public partnerships (PPPs) were signed by private firms from low- and middle-income countries. The opening of China to private participation in water infrastructure and its emergence as the first water PPP market among low- and middle-income countries was one of the most important changes of the decade.

"And although price increases are often used as an argument against private public partnerships (PPPs) in the water sector, this is not necessarily borne out by the facts. In a sample of 1,200 water and energy utilities in 71 developing and transition countries, no systematic change in residential prices occurred as a result of PPPs", observes the IFC.

Nelson Beete, Chairman of Fundo do Investimento e Patrimonio do Abastecimento de Agua (FIPAG) in Mozambique, believes that in developing countries, there is a school of thought that involving the private sector in such a basic service like water is controversial.

"Water can be managed professionally. There is an industry behind the tap you have at home. What is important is the arrangement. It should be made in such a manner that the service will be efficient and that the water will reach as many people as possible."

"In the final analysis it's business that can push the critical actions as we can see here with water management," says Margareta Wahlström, the UN Disaster Risk Reduction Chief.

"Water is critical in the efforts to eradicate poverty. Issues of supply, conservation and management are therefore key issues of sustainable development. The world is beginning to wake up to the idea that the private sector is a major driver of development while the private sector itself is becoming more attuned to its wider societal responsibilities. PPPs such as these are encouraging and hopefully the forerunners of more to come in other critical areas", she adds.

According to the IFC, China, with 309 projects and $8.2 billion in investments over the last 10 years, accounted for 58 percent of all private water projects in low- and middle-income countries. Most were potable water and sewage treatment plants - 278 since 2000 -- with 200 implemented under build-operate-transfer (BOT) agreements.

Latin America was the second most active region in terms of PPPs in water with 113 projects totaling $9.7 billion in 17 countries over the last decade. Most projects were concessions, followed by water and wastewater treatment plants BOTs.

Europe and Central Asia were also active in implementing new water PPP projects during the last decade. Fourteen countries signed 44 projects involving $3.1 billion in investment. Eighteen of those projects were in the Russian Federation. Countries in East Asia and the Pacific signed 22 projects with a total investment of $9.5 billion.

"It is an absurd paradox that millions who lack access to water live in areas where there is plenty of rainfall or freshwater. Improving the way we conserve, manage and deliver water is fundamental to solving the water crisis. The private sector has a critical leadership role in this," states the IFC.

The UN's Water for Life Decade (2005-2015) warns that by 2025, "1.8 billion people will be living in countries or regions with absolute water scarcity, and two-thirds of the world's population could be living under water stressed conditions. And, with the existing climate change scenario, almost half the world's population will be living in areas of high water stress by 2030."