TWN Briefings for WSSD No.16

The Water Crisis: Analysis and Proposals

By Celine Tan

Water and sanitation is the first of five priority action areas under the WEHAB plan for the post-WSSD implementation of sustainable development.  The challenge of providing safe and clean water and sanitary conditions for an increasing world population, in the face of rising inequities, is phenomenal.

Forty percent of the world’s population, in 80 countries, currently suffer from serious water shortages. A billion people worldwide lack access to safe drinking water and 2.4 billion people lack access to adequate sanitation (Global Economic Outlook 2002).

Yet, the biggest threat to universal access to clean water and adequate sanitation is not mother nature but corporate globalisation. Privatisation of water is aggressively exported to the developing world under the rubric of poverty reduction and debt relief strategies, free trade and economic development. By turning a scarce resource into an economic commodity, the world’s economic leaders and policy planners claim that existing water resources can be managed and consumed efficiently in accordance with competitive market principles. These claims are not only misguided, they are deceitful. There are two myths being projected: first, that placing a price on water will encourage conservation and wise water consumption. Secondly, that market competition will lead to more consumer choice and better services. In reality, the water sector is monopolistic when placed in the hands of the market. It is thus alarming that the commodification of water resources is now heralded as the answer to the world’s water woes.

Monopoly and subsidies for corporations

Water is a US$400 billion global business, controlled by a handful of European transnational companies and consortiums, namely French multinationals Vivendi and Suez Lyonnaise, SAUR and British water companies Thames Water, Anglia Water and United Utilities. The global drive towards privatisation of water services is thus pursued not by a collective of democratically elected governments acting in the interest of the world’s population, but by a cartel of corporations motivated by profit and market conquest.

To make matters worse, these companies are subsidised by their governments (and invariably their taxpayers) through support from domestic export credit agencies, and by multilateral development banks, such as the World Bank and the African Development Bank. They are also subsidised by developing countries who raise credit from international financial institutions to upgrade their water systems prior to private takeover. This corporate subsidy comes at the expense of consumers, most of them in developing countries, who are made to pay for what is a necessity of life. For the poor this means no access to water.

Additional loans to facilitate the privatisation process are raised by developing country governments from multilateral and bilateral sources. Often, these loans are also used to finance the creation of an ‘enabling environment’ for foreign water and wastewater investors. This includes the drafting of local investor protection legislation to guard against re-nationalisation of the water industry and to provide for hefty compensation for any attempt to renege (for good reasons) against the privatisation contracts.

In many cases, corporate access to a developing country’s water system is paved by a loan or debt relief conditionality requiring the poor or indebted country to privatise its water and sanitation services. For example, the IMF insisted that Tanzania privatise its Dar es Salaam Water and Sewerage Authority (DAWSA) as a condition of its debt relief package under the Heavily Indebted Poor Countries (HIPC) Initiative. 

Fallacy of privatisation

Experience shows that the privatisation of water services cannot ensure universal delivery of safe water and efficient sanitation. Privatisation imposes additional financial obligations on governments. They may have to bail out failed privatisation project, and also shoulder the costly legal risks of rescinding a privatisation contract with a wealthy transnational, even if the company’s performance is unsatisfactory. Argentina, Hungary and Bolivia have found that the legal claims for compensation by private water companies in Tucuman, Szeged and Cochabamba respectively, have made terminating contracts prohibitively expensive. 

The dominance of foreign water companies and the liberalised investment climate - mostly facilitated by structural adjustment, and now under trade agreements including those under the WTO Ð in developing countries will also ensure that a large portion of profits from water privatisation will not accrue to the countries themselves but are repatriated abroad instead.

The imposition of full-cost water pricing as a result of privatisation will only deprive more and more people of access to clean and safe water by forcing poor communities to seek alternative sources of water for consumption, such as untreated well water and water from sewage-ridden urban rivers.

Forced upon rich and poor, consumers and industrial producers, similar rates for water use will also result in greater income disparity and deeper social cleavages, leading to higher risks of civil unrest. In 2000, martial law was declared in the Bolivian city of Cochabamba as a result of city-wide riots precipitated by high water prices. A private consortium led by International Water doubled the water prices to city residents. Water bills went up by 35% and some, twice that. The World Bank supported full-cost water pricing and prohibited any use of its structural adjustment loans to subsidise water services for the poor.

Future fears and WSSD outcomes

There is no agreement on the text in the WSSD Draft Plan of Implementation that commits governments to supporting the UN Millennium Development Goal of halving, by 2015, the proportion of people unable to reach, or afford, safe drinking water and access improved sanitation (paragraphs 7 and 7[alt]).

However, the most pressing concerns over universal coverage of water and sanitation services are not expressed in these bracketed paragraphs. Rather, they are reflected in the  general lack of political will demonstrated by developed countries to address the systemic issues leading to a crisis of sustainable development in the south, and the alarming emphasis placed on public-private partnership funding and implementation of sustainable development programmes. The relinquishing of responsibility by developed countries is marked by their reluctance to commit to specific disbursements of ODA and by repeated references to voluntary partnerships and initiatives as a means of financing WSSD programmatic outcomes.

In the absence of firm commitments by governments, Type II partnerships on water and sanitation services will only increase private sector involvement in this crucial area. The private sector is already identified as a key implementer of the ‘Water, Sanitation and Hygiene (WASH) for All Initiative’ involving 28 countries, six UN agencies, the World Bank, and the Asian and African Development Banks.

Another major threat to universal access to water and sanitation is liberalisation under the WTO’s rules. Although Member countries have the right to liberalise at their own pace, and even choose not to open up a sector under the WTO’s General Agreement on Trade in Services (GATS), there is tremendous pressure especially on developing countries to liberalise. Thus in the ongoing negotiations at the WTO, developed countries are submitting extensive ÒrequestsÓ that seek access to every sector in the developing world, including water services and sanitation.

If developing countries succumb, privatisation of water services initiated under World Bank and IMF structural adjustment programmes could become permanent under the binding rules of the WTO. Once a country is locked into the GATS regime, the right of its government to regulate liberalized service sectors will be diminished, paving the way for foreign transnationals to enter the domestic market. Any attempt to reverse the situation would be subject to WTO disciplines and penalties.

Any real effort to achieve the Millennium Development Goal must therefore include commitments to review loan conditionalities that impose privatisation and countries must not be pressured to offer water services under GATS liberalisation. Essential services should be exempted from GATS.


Privatisation does not address the deeper economic and ecological issues of water shortages. Questions of why there are water shortages in countries not under water stress are not resolved by shifting responsibility of service provision to private companies. Water management and water distribution are also key factors in determining water supply and universal coverage. Until and unless rich countries fulfil their commitment to provide resources for developing countries to build solid, cost-effective water delivery systems which support the needs of the world’s population equitably and ecologically, the water woes of the world will not go away.

At the same time, all governments need to recognise and support the diversity and replication of community water management systems and practices. These have proven in many countries to be the most sustainable approach to rural water management for rural populations. The WSSD process and the last 10 years of the work of the CSD have called for good and best practices in sustainable development. However, where water resources are concerned the trend and emphasis are privatisation which has proven destructive.

Firm commitments must be made at the WSSD to reverse the trend of corporate takeover in the water and sanitation sector, rather than to accelerate the process of privatisation and corporate monopoly. Undermining the sovereign power of governments to regulate supply of water in their countries and passing the bucket onto private transnationals to steward the world’s water resources would probably be a most anti-development and anti-ecological step.