Memorandum submitted by the World Development
Movement
SUMMARY OF
SUBMISSION
The evidence
— At least 90% of the world's piped
water resources are in public hands.
— Despite the hopes of donors, the
private sector has not provided significant sums of private money
to connect new communities to water and to enable progress towards
the MDGs.
— There is no difference in efficiency
between public and private water and sanitation providers.
— Private sector water and sanitation
provision cannot be a solution to weak government because strong
government is needed to regulate the private sector.
— There are numerous examples of effective
public sector water and sanitation operators in the developing
world but there is currently no international mechanism to support
the sharing/dissemination of best practice between them.
— Successful utilities are those with
good governance. Good governance is found in utilities which are
accountable and transparent to users, are efficient in their operations
and which recycle the revenues generated to make ongoing improvements.
— Good governance and democratising
the decision-making around water and sanitation provision can
tap into the experience and expertise of women, who suffer disproportionately
from the global water crisis.
— DFID is still using aid money to
pay for public relations work to support privatisation.
— DFID is still using UK aid to support
water and sanitation privatisation that is a result of World Bank
or IMF conditionality.
A key issue for the IDSC inquiry to address
is; what are the appropriate uses of aid money in the water and
sanitation sector?
The implications for donors
— Donors should recognise that it is
public money—in one form or another—that will fund
the infrastructure improvements required to meet the water and
sanitation MDGs, and should adapt and scale-up their support accordingly.
— With at least 90% of the world's
piped water resources already in public hands and the very limited
finance available to the private sector, efforts to meet the Millennium
Development Goal (MDG) targets for water and sanitation need to
focus on building capacity within governments and their public
providers.
— Aid allocated to subsidise the private
sector—commonly known as "public-private partnerships"—should
be reviewed.
— All technical assistance in the area
of water utility reform should prioritise the needs of the poor,
should explore all possible options, involve genuine community
consultation, and be transparent and accountable to civil society.
— DFID can fund the dissemination of
good practice, the sharing of experiences between utilities, and
the exchange of technical expertise from well-performing public
utilities, in order to drive up performance. Public-public partnerships
provide a very real opportunity to do this.
— There is no donor-supported international
mechanism for supporting public-public partnerships, which is
a major gap in donor provision in the water and sanitation sector.
DFID should take the lead in funding a major scaling-up of public-public
partnerships across the globe.
INTRODUCTION
1. The World Development Movement (WDM)
campaigns to tackle the root causes of poverty. With our partners
around the world, we win positive change for the world's poorest
people. We believe that charity is not enough. We lobby governments
and companies to change policies that keep people poor. WDM is
a democratic membership organisation of individuals and local
groups.
2. WDM thanks the IDSC for initiating this
inquiry on water and sanitation and for the opportunity to submit
written evidence. In the following pages, WDM concentrates on
the issues within the inquiry's Terms of Reference where we have
most expertise.
3. WDM has worked on the issue of water
and sanitation for a number of years. This work has focussed on
water and sanitation services within trade agreements such as
the General Agreement on Trade in Services; the links between
donor-imposed conditionality and water privatisation policies
in developing countries; and the use of UK government aid money
in the water and sanitation sector.
4. WDM is a member of a range of international
networks that are addressing issues of water and sanitation provision
in developing countries. Most notably, we play an active role
in Reclaiming Public Water, a network which unites public water
managers, academics and activists in researching, advocating and
implementing solutions to the global water crisis.1
THE ROLE
OF DONORS
AND GOVERNMENTS
TO ENSURE
WATER SERVICE
DELIVERY TO
POOR PEOPLE
5. It is the role of governments to ensure
water and sanitation services are delivered to everyone, including
the poor; at least 90% of the world's piped water resources are
already in public hands. Thus, efforts to meet the Millennium
Development Goal (MDG) targets for water and sanitation, for reasons
of practical necessity if for no other, need to focus on building
capacity within governments and their public providers to extend
access to the billion people without clean drinking water and
to the 2.4 billion people without adequate sanitation.
6. Donors—international financial
institutions and donor governments like the Department for International
Development (DFID)—have a major role to play to enable effective
water and sanitation service delivery to poor people around the
world. This submission will concentrate on two specific and key
roles for donors within the sector.
Investment
7. The first donor role is to provide investment.
It is clear that in poor countries, full "cost recovery"
based on user fees generating enough revenue to pay for the infrastructure
required to extend access to water and sanitation, will simply
not be possible. Poor users of services will not be able fund
the required infrastructure at rates which keep water and sanitation
services affordable. Other sources of income will be required.
Subsidy through in-country taxation to the water and sanitation
sector will remain an option for some poor countries, although
again, a limited revenue base makes this option unlikely to provide
all the income required. Investment from donors in the water
and sanitation sector, via aid money, is vital if the MDG targets
are to be reached and exceeded.
8. DFID's recent announcements of a doubling
of aid to sub-Saharan Africa on water and sanitation by 2008 and
then to double it again by 2011, are welcome. The 2006 White Paper
"Making governance work for the poor" identifies water
and sanitation, alongside health, education and social security
as essential public services; overall, the present Secretary of
State appears to have made water and sanitation a higher departmental
priority than his predecessor and that it is to be welcomed. However,
substantial new injections of funding are still required if sub-Saharan
Africa is to have a hope of getting on-track with the MDGs.
Capacity-building
9. The second key role for donors is in
enabling capacity-building within the water and sanitation sector.
Many government providers are clearly failing to extend access
and are failing their users. Building capacity within the sector
to turn around these weak providers and drive up performance will
be critical if we are to meet the MDGs, and donors have an important
role to play here. WDM believes that public-public partnerships
can play an essential role in building water and sanitation capacity
in the public sector, in order to meet the MDGs.
10. This submission will primarily concentrate
on these two areas—investment and capacity building through
public-public partnerships.
SECURING THE
RIGHT BALANCE
BETWEEN DIFFERENT
ASPECTS OF
SERVICE PROVISION,
INCLUDING PUBLIC/PRIVATE
SECTOR INVOLVEMENT
11. Deciding upon, and then securing, the
right balance between public and private sector involvement in
the water and sanitation sector in developing countries has been
a hotly contested issue within national and international debates
for over a decade.
12. In March 2006, the UN World Water Development
Report said that, in Cote d'Ivoire, Guinea and Senegal, following
water privatisations: "increased tariffs had made water
supplies unaffordable for many of the poorest sections of society,
which led to people getting disconnected from water supply due
to inability to pay. It was also unclear to what extent poor people
had benefited from water network connection expansions. Experiences
confirmed that very poor sections normally tend to be excluded
from being part of a privatized service extension. To provide
the poorest section of society with adequate water services is
typically viewed as a high-risk enterprise that largely lacks
opportunities for economic return. Similar experiences have also
been found in other places, such as in greater Buenos Aires, Argentina
and in Bolivia." 2
13. Two particular claims are made of water
privatisation and its potential benefits for developing countries—boosting
efficiency and boosting investment. On the efficiency argument,
a paper prepared for the International Monetary Fund (IMF) has
concluded: "It cannot be taken for granted that PPPs [Public-Private
Partnerships] are more efficient than public investment and government
supply of services... Much of the case for PPPs rests on the relative
efficiency of the private sector. While there is an extensive
literature on this subject, the theory is ambiguous and the empirical
evidence is mixed."3 Meanwhile, research for the World
Bank Economic Review says that studies on water utilities in Asia,
"show that efficiency is not significantly different in
private companies than in public ones."4
14. On the claim that private sector participation
is required in the water and sanitation sector as the private
sector will bring new financial resources to the sector, WDM's
recent report Pipe Dreams showed that collectively in the
areas of greatest need—sub-Saharan Africa, South Asia and
East Asia (excluding China)—only 600,000 new household connections
have been made as a result of investment by private sector operators
since 1997, extending access to around three million people.5
One billion people in these regions are estimated to need connecting
to a clean water supply between 2006 and 2015 in order to meet
the MDG: a rate of 270,000 people a day.6 Over the last nine years,
the private sector has connected just 900 people a day.7
15. This is not to say that private companies
have no role to play in the water and sanitation sector. Away
from the management of the water service, is a long tradition
of public utilities subcontracting non-core tasks to the private
sector in many countries and the private sector can be tapped
for building up the financial and operational capacity of public
services, especially in urban areas. Procurement contracts in
other countries have included computer services, engineering works
and repair, maintenance and rehabilitation of a network. In all
such cases, control of the provider remains outside of the private
sector's hands.
16. Based on the above evidence, WDM's view
is that public provision—with its intrinsic ability to
prioritise social over pure economic concerns and to recycle revenues
back into the utility to the benefit of users—is the best
use of donor money to ensure access to affordable water and sanitation
for the poorest communities.
ENHANCING ACCOUNTABILITY
AND OVERALL
WATER GOVERNANCE
17. Accountability and water governance
are absolutely key in the water and sanitation sector. As one
of the most basic public services which is essential for life,
health and well-being, ensuring that water and sanitation services
are meeting the needs of the people is critical.
18. There are a number of strong public
water and sanitation providers around the world where good governance
and strengthened accountability to users are central to their
operational ethos.
19. In Tamil Nadu, South India, a project
to democratise the utility serving rural areas has transformed
its relationship with the communities it serves. The utility workers
have shifted from thinking of themselves as purely engineers concerned
with infrastructure, pipes and taps, to thinking about the people
using the system—their needs and demands. In this way, the
utility has become accountable to users and far more "demand-led".
Amongst other results, 90% of households in the pilot areas are
undertaking rainwater harvesting while communities have helped
to revive 150 traditional water bodies.8
20. In Brazil, a recent survey came up with
over 80 case studies of good practice in water and sanitation
provision around the country. These include a number of examples
where "social control" mechanisms ie democratising decision-making
within the utility to ensure it better meets the needs of users
have led to impressive results. In Porto Alegre, the communities
have assumed part of the responsibility for the quality of services:
users have promised the utility that they will help to prevent
clandestine water connections, conserve the supply network, control
consumption and combat the loss of water.9
21. In Uganda, the utility has boosted service
coverage from 48% in 1998 to 68% in 2005. In these seven years,
the utility has gone from producing a loss to tripling its turnover
and producing a surplus which is recycled to finance network expansion
and maintenance programmes. The customer complaint procedures
have been transformed and managers are evaluated on the customer
feedback. Customer satisfaction surveys are used to gauge user
observations and the surveyors may visit customers to get detailed
feedback which is then passed back to the utility's managers for
action.10
22. In each of these three examples, in
different ways, making the utility more accountable and improving
its governance have been part and parcel of a wider reform process
which has made the utility more effective in getting water and
sanitation to poor communities.
23. DFID as a donor cannot and should not
micro-manage water sectors in developing countries. However,
through its capacity-building role, it can fund the dissemination
of good practice, the sharing of experiences between utilities,
and the exchange of technical expertise from good-performing public
utilities, in order to drive up performance. Public-public
partnerships provide an opportunity to do this.
CO-OPERATION,
CO-ORDINATION
AND CAPACITY-BUILDING
BETWEEN AND
WITH WATER
OPERATORS, GOVERNMENTS
AND DONORS
(INCLUDING PUBLIC-PUBLIC
AND PUBLIC-PRIVATE
PARTNERSHIPS)
24. Public-public partnerships or PUPs represent
one way in which expertise, good practice and success within public
utilities can be shared with other providers in order to build
capacity within the sector and to make progress towards the MDGs.
25. PUPs enable individual utilities to
work together—sometimes as a short-term arrangement to solve
particular problems, or on a longer-term basis—to learn
from each other and to spread good practice. PUPs see a public
utility (the offerer) which is strong in one particular area of
performance, brought together with another utility (the recipient),
which is keen to gain knowledge and experience in that particular
area. PUPs are able to cover the full range of water and sanitation
issues—from a technical detail of a particular type of pump
or filtration system, to sharing experiences and processes around
becoming more accountable to users.11
26. There are benefits on all sides of such
arrangements. For the recipient, the benefits of PUPs are obvious:
advice and support from knowledgeable engineers and managers working
in the sector, at a minimal cost, in what should be a supportive/sharing
environment. For the offering utility, the benefits can include
promoting their own utility, fulfilment of a motivation to help
others, as well as a personal learning experience too.12
27. Critically PUPs must operate on a not-for-profit
basis. Whilst travel expenses and labour costs must be recouped
by the offering utility so that it does not lose money by taking
part in a PUP, partnerships cannot be seen as a money-making,
revenue-generating operations; indeed such an approach would jeopardise
the public sector ethos of the offering utility and the goodwill
of the recipient utility. As a result, PUPs can be cost-effective,
operating in the absence of a profit motive, unlike much of the
technical assistance through private consultants, currently funded
by donors.13
28. PUPs are focussed on getting specialist,
sometimes heavily technical advice, into a utility. Those offering
the advice and expertise will have years of practical experience
of solving similar problems within their own utility. They will
understand the complexities of delivering water and sanitation
on the ground and will be able to liaise sympathetically with
those requiring advice and assistance.14
29. An important emphasis of PUPs should
be promoting and sharing the expertise found in developing countries.
This is important, especially in the context of extending water
and sanitation networks to unconnected communities, where resources
are low and expensive technologies may not be appropriate. Extending
networks is a problem that some developing country utility engineers
and managers grapple with on a daily basis, and they will have
genuine knowledge of affordable and appropriate technologies and
processes which could be applicable to the recipient utility.
The potential for such south-south capacity building has been
over-looked by donors, so far.15
30. PUPs are not about investment, they
are about capacity-building within utilities and the sharing of
good practice to drive up performance. But a potential benefit
of PUPs is that they may lead to an overall reduction in investment
needs as systems and processes become more efficient and new technologies
are shared. For example, in Tamil Nadu, the overall need for investment
has fallen as a result of the reform process which prioritised
improved governance. In the 472 villages where the reforms were
initially rolled out, households contributed 10% of the cost of
projects in either cash or labour. The overall investment required
has fallen by 40-50% as previous plans have been revived, appropriate
technology used, and alternatives looked at.16
31. The challenge of meeting the MDGs is
to build the capacity of public providers to expand services to
meet the needs of those without access to water and adequate sanitation.
Whilst PUPs have had a relatively low-profile up to now, the potential
scale of them is enormous, and expected demand is high with hundreds
or even thousands of public utilities around the world likely
to be interested in both offering and receiving expertise via
PUPs, were an easy-to-access system available.
32. PUPs offer the possibility for the involvement
of a range of stakeholders, including civil society and trade
unions, in reform processes. While PUPs may primarily be between
utilities, PUPs between utilities and communities can also be
effective in increasing access to water. Meanwhile, partnerships
between utilities and trade unions, or amongst trade unions, could
also promote good practice in areas such as workforce restructuring,
training etc Building good relations with civil society, users,
and trade unions and becoming a more participative and accountable
utility, are all potential issues that PUPs could seek to address,
and areas in which good practice is already available from good
public providers.
33. PUPs offer an opportunity to tap a key
source of expertise and experience—existing successful public
providers—in order to build capacity in other parts of the
public sector so as to accelerate progress towards the MDGs.
HOW DFID CAN
SUPPORT REPLICATION
AND SCALING
UP OF
"BEST-PRACTICE"
WATER AND
SANITATION PROVISION
34. Several barriers towards the scaling-up
of PUPs exist, including the lack of a central source of information
or a mechanism whereby public utilities can find out about other
public utilities and be matched with potential partners; lack
of resources within poor country utilities to pay for visits from
offering utilities, even at subsistence rates; restrictions on
the financial remit of offering utilities that prevent their own
funds from being spent on PUPs outside their geographical area.
35. Despite all these real and potential
benefits, there is currently no donor-led scheme to develop PUPs
in the water and sanitation sector in developing countries. Donors—including
DFID—have been too slow and too reluctant to recognise the
existing good practice within current public utilities in both
the North and the South, and to consider how this source of expertise
could be shared.
36. There are a number of ways in which
donors could give their political and financial support to support
PUPs. DFID should take the lead in setting up an international
facility to support PUPs. Such a facility would seek to create
a global network of PUPs, by offering a "matching service"
and funding to enable PUPs to take place. The facility would also
disseminate good practice on the provision of public water and
sanitation. The matching service could take place via an internet-based
platform which would allow participating utilities to establish,
through their own choice and initiative, the basis for particular
PUP arrangements.17
37. Additional to the facility itself, a
funding stream should be created to support emerging PUPs, especially
where the offerer is short of funds or is unable (perhaps for
legal reasons) to allocate funds to PUPs work. However, the not-for-profit
principle (whereby no side sees PUPs as an income stream) must
be preserved. A low level of funding could be made available to
the recipient utility, on occasions, if that were to mean that
they could maximise the opportunities offered by the PUP.18
38. All PUPs arrangements, especially those
receiving funding from the facility, would need to be monitored
and evaluated to ensure that they were taking place in a way which
was legitimate, transparent, beneficial to the recipient's water
and sanitation sector, and offered good value-for-money. Once
the facility was operational, and facility-sponsored PUPs were
underway, emerging needs or proposals for investment in infrastructure
which followed from the capacity-building in recipient utilities,
should be looked upon favourably by donors, such as the World
Bank.
39. During the Fourth World Water Forum,
held in Mexico in March 2006, the United Nations Secretary-General's
Advisory Board on Water and Sanitation (UNSGAB) proposed the creation
and implementation of a global mechanism to promote water operator
partnerships.19 Water operator partnerships are not dissimilar
to PUPs, the difference being the possibility of participation
of the private sector as a partner, (although also on a not-for-profit
basis).
40. It is very significant that a body like
the UNSGAB has now formally recognised the principle of not-for-profit
co-operation between utilities. UN-Water and United Nations Department
of Economic and Social Affairs (UNDESA) have been tasked with
developing a database and internet-interface to operate the matching
mechanisms. Relevant donors will be asked to provide financial
and technical support to the programme too.
41. While there is much to welcome in the
water operator partnership proposal, the inclusion of the private
sector as possible partners is a disappointment. This inclusion
may cause more confusion and problems than real benefits. Nonetheless,
the proposal is exciting and worthy of support, as long as the
focus on not-for-profit is maintained. Donor governments like
DFID should look to give it their full political and, if required,
financial support.
42. Donors need not restrict themselves
to only funding PUPs through international facilities. Country-to-country
or bilateral technical assistance offers a way for donors like
DFID to fund PUPs. Once a poor country government approaches a
donor for assistance to reform a struggling public utility, the
donor could explore with the government whether there are public
utilities elsewhere in that country or in the wider region which
could offer expertise and help, as opposed to immediately resorting
to the approach offered by traditional private sector consultants.
43. Other opportunities for donor support
for individual PUPs could include working with national-level
organisations like ASSEMAE (the National Association of Municipal
Sanitation Services in Brazil), PERPAMSI (the Association of Indonesian
Water Utilities), or the External Services Unit in the National
Water and Sewerage Corporation in Uganda, which are already working
to develop good practice models and PUPs within their own countries
and beyond, on a not-for-profit basis.
44. More research is required in this area
too. Some donors appear sceptical about the idea of PUPs because
of bad experiences with "twinning" policies in the 1980s.
It is possible to learn from all experiences—good and bad—and
more research is needed to find out why the earlier twinning experiences
failed and what pitfalls should be avoided now as more PUPs are
developed. Equally, more research is needed to explore the conditions
and factors in successful and not successful PUPs.
45. The Public Service International Research
Unit, in their report "Public-public partnerships in health
and essential services", came up with a variety of areas
where more research was required. These included: which specific
components of PUPs contribute most strongly to improved service
delivery; the long-term effects of PUPs; an assessment of structures
that involve the community most effectively; and the issue of
funding by comparing the total cost of funding a PUP with the
total cost of restructuring through public-private partnerships.20
46. Undertaking such research should not
be an excuse for donors to sit on their hands for three years
and not move forward with more concrete proposals for PUPs, whilst
the research is completed. But it is clear that PUPs can play
an important role, they need to be effective too, and research
can help to identify how to maximise their value.
47. There is no donor-supported international
mechanism for supporting PUPs which is a major gap in donor provision.
Donors like DFID should take the lead in funding a major scaling-up
of PUPs across the globe.
ENSURING INTERNATIONAL
FINANCING AND
AID INSTRUMENTS
FOR WATER
AND SANITATION
ARE FIT
FOR PURPOSE
48. The lack of support for water and sanitation
PUPs can be contrasted with the relatively large amounts of support
given by donors to support public-private partnerships. Donors'
rationale for public-private partnerships has been to stimulate
private sector investment in poor countries' infrastructure, at
least partly to fill the gap left by cuts in donors' own expenditure
on water and sanitation. The total invested by all the development
banks and donors in infrastructure fell by one-third between 1996
and 2002.21 The World Bank, according to its infrastructure review
paper in 2003 cut its infrastructure investment lending by 50%
between 1993 and 2002, from about US$9.5 billion to US$4.8 billion.22
49. So what has been the investment contribution
of public-private partnerships and other privatisation schemes
to water and sanitation provision in developing countries? WDM's
Pipe Dreams report shows that the reality of private investment
in water and sanitation has been very disappointing. Overall,
there is little evidence that private companies have brought in
extra capital on better terms to significantly boost the number
of connections for the poor to the water distribution system.
50. The reasons for this are several-fold.
Some types of privatisation contracts (management contracts) contain
no private investment requirements at all, while others (leases)
involve private investment in renewing the existing system but
not in extending the system. Only concession contracts have requirements
on private companies to bring investment in to extend the system.23
But the record of concession contracts has been very poor.
51. Only five concessions for water services
have been implemented in sub-Saharan Africa. Three of these covered
water and electricity in Cape Verde, Gabon and Mali. The only
two concessions for water and sanitation services alone are both
in South Africa and both have cut their investment plans—by
60% at Dolphin Coast, and by a complete halt to all investments
in Nelspruit since 2001. Meanwhile, Mali has terminated the concession
and renationalised the electricity and water services, and Cape
Verde is threatening to do the same, in both cases on the grounds
of failure to make the necessary investments. In Gabon, as of
2005, the new investment programme of the privately-controlled
utility is being financed by an international public sector bank,
and the savings of the residents of Gabon.24
52. Once a privatisation contract is in
place, a company might seek to re-negotiate itself out of some
of its commitments. Eight months after starting operations in
Buenos Aires in 1993, Aguas Argentinas a subsidiary of Suez, requested
an "extraordinary review" of tariffs, due to unexpected
operational losses. Despite tariff increases, 45% of projected
investments were not implemented in the first three years of the
concession. The concession agreement was subsequently renegotiated
so that little remained of the initial covenant. In September
2005 Aguas Argentinas' private shareholders decided to terminate
the 30-year contract.25
53. Furthermore, the only form of finance
uniquely available to the private sector is equity finance from
private shareholders. All the other funding sources such as finance
from donors, development banks, commercial bank loans, bonds and
operating surpluses are available to either public or private
sector operators. Privatisations that do deliver investment to
connect new communities are mostly dependent upon public finance.
As a result, private companies have not helped reduce government
borrowing and risk by taking on the burden of making investments
to connect new communities to the water network.26
54. In Senegal, the privatisation (lease)
contract is frequently quoted as a success story, with a substantial
increase in the number of connections—35% from 1996 to 2001.
However, these new connections were not financed by or through
the private company, but largely through the public water authority.
The leap in new connections came after 1999, when a new injection
of public finance—including a World Bank loan—was
provided through the public water authority.27
55. All of this evidence illustrates that
it is an illusion to think that private companies either have
in the past, or will in the future, be able to make a significant
contribution towards financing the massive investment required
to connect new communities to water networks. The World Bank has
noted that, contrary to its own expectations, private sector investment
in all infrastructure including water has declined by over 50%
between 1997 and 2002, and it concluded that "the recent
decreases in private sector interest in infrastructure show that
reliance on the private sector alone will not be sufficient to
guarantee a scaling-up of infrastructure service provision".28
56. But donors' emphasis on the private
sector has hampered progress towards meeting the MDGs. Private
companies have prioritised the continents, regions and cities
where they wish to work, dictating where the follow-up investment
should go. Because of their need to make a profit, companies and
the accompanying donor-funded investment have not concentrated
on the areas of greatest need: cities where the poorest live and
rural areas.29
57. Latin America includes a number of middle
income countries, and contains a relatively small proportion of
the population who need to be connected in order to achieve the
MDGs (9%). The region has nevertheless been the target of most
of the activity by the water multinationals, clearly because of
its perceived relative profitability. Many of these concessions
are now terminated or in crisis, either as a result of popular
opposition, or as a result of economic crisis (as in Argentina)
or both.30
58. Meanwhile, in the entire South Asia
region, including India, Pakistan, Bangladesh and Sri Lanka, there
has not been a single concession or lease contract for the private
sector operation of water or sanitation services. In a region
with 1,400 million people (23% of the world's population) no investments
have been made by private operators of water services in extending
the water distribution systems. This is perhaps the most dramatic
illustration of how corporate decisions on where to operate are
based on commercial judgments which may bear no relation to the
relative needs of populations.31
59. To conclude, WDM's Pipe Dreams
report estimates that the net contribution of 15 years of privatisation
has been to significantly reduce the funds available to poor countries
for investment in water and sanitation. This is because of
the parallel processes of donors reducing their water infrastructure
spend, while at the same time assuming that the private sector
would provide most of the investment needed. While it is impossible
to be exact about this figure and to disaggregate water and sanitation
spending from overall infrastructure expenditure, it is likely
that the accumulated figure for donor funds "missing"
from the water and sanitation sector runs into billions.32
60. WDM agrees with the Committee's recent
report on Private Sector Development which stated, "It
is crucial that the mistakes of the 1990s—assuming that
the private sector will shoulder the burden of responsibility
for infrastructure investments—are not repeated."
61. There are very serious questions as
to whether the political and financial support given to promoting
water privatisation over recent years has delivered sufficient
results to justify itself. WDM argues that if this political and
financial support had instead been allocated to building capacity
and investment within the public sector, more progress could have
been made towards the MDGs. It is not clear that the aid used
to facilitate public-private partnerships and to subsidise private
sector participation in water and sanitation services and infrastructure
benefits the poorest communities or is the most effective way
to spend public funds.
THE ROLE
OF AID
IN SUPPORTING
THE PRIVATE
SECTOR'S
INVOLVEMENT IN
WATER AND
SANITATION
62. WDM has four additional, specific concerns
about the ways in which DFID has used aid to support private sector
participation in water and sanitation services: support for public-private
partnerships through facilities like the Public-Private Infrastructure
Advisory Facility; support for consensus-building work to promote
water privatisation; particular contracts within DFID's bilateral
technical assistance; and the use of conditions by donors to push
water privatisation.
Public-Private Infrastructure Advisory Facility
63. In 1999, DFID created, along with the
World Bank, the Public-Private Infrastructure Advisory Facility
(PPIAF)—a fund which pays consultants to facilitate privatisation
in water supply and sanitation services, along with other infrastructure
sectors: energy, telecommunications and transport. PPIAF funds
consultants to advise on the process of introducing public-private
partnerships, as well as to "build consensus" for these
reforms from members of governments, parliaments, business, trade
unions, civil society and citizens. PPIAF does not itself fund
the infrastructure projects for which it is recommending privatisation;
it is purely an "advisory facility".
64. Since being one of the founding partners
of the PPIAF, DFID has been its largest annual funder, donating
over 50% of its resources; for each of the next three years, DFID
has allocated $9 million. Up to 20% of PPIAF's work is in the
area of water and sanitation.33
65. WDM's research shows how PPIAF plays
a significant part in eliminating the choice of poor country governments
to decide their own development path. It does this by collaborating
with conditions imposed by international financial institutions,
failing to consult on all possible reform options for the sector,
and undertaking pro-privatisation consensus-building work (see
below). PPIAF can also work to ignore the good practice in public
water provision already underway in developing countries and its
operations are un-transparent, despite it being responsible for
spending public money.34 DFID's funding for the development
of public-private partnerships in the water and sanitation sector
through multilateral organisations like the PPIAF should be urgently
reviewed.
Consensus-building
66. PPIAF funds consensus-building work,
to build support in-country for the proposed privatisation. Once
water privatisation plans are underway, there may well be some
form of resistance from within the government, the national parliament,
media, local business, civil society, trade unions or citizens.
PPIAF's consensus-building work seeks to overcome opposition to
privatisations, including those in the area of water and sanitation.
67. In October 2003, PPIAF funded a national
seminar with 80 participants in the Democratic Republic of Congo
(DRC) in order "to build a national consensus... to involve
the private sector in the management of water supply services".35
The actual plans for privatisation are only expected to start
to be created in March 2007, when both the World Bank and PPIAF
are due to fund studies to propose options on introducing private
sector participation to the Congo water sector. In this instance,
the people of the DRC are being "warmed up" to accept
water privatisation, even before concrete plans for the sector
have been developed.36
68. Such consensus-building and public relations
work is not only undertaken by multilateral institutions such
as PPIAF. In Ghana, DFID funded a "public awareness raising
programme" about the benefits of water privatisation, not
withstanding the significant concerns about the programme as expressed
by civil society.37 In Tanzania, Adam Smith International received
£273,000 of UK aid money to run a public relations campaign
in Tanzania, using a national comedian in a series of TV adverts
as well as producing pop songs and videos—all promoting
the country's privatisation programme, which included the privatisation
of water in Dar es Salaam.38
69. WDM believes that this is an inappropriate
use of aid money. It is wrong to use aid money to interfere in
legitimate debates within developing countries about the direction
of public service provision. There should be no role for donor
funds—either bilateral or multilateral—to be used
to fund consensus-building and public relations work on the privatisation
of water and sanitation services.
Technical assistance
70. DFID's technical assistance budget funds
consultants to advise poor country governments on water sector
reforms, and of course, there is an important role for technical
assistance. WDM believes that all technical assistance in the
area of water sector reform should prioritise the needs of the
poor, should explore public sector reform models and not just
private sector reform models, involve genuine community consultation
(as opposed to public relations exercises), and be transparent
and accountable to civil society. However, WDM is not convinced
that this is always the case.
71. DFID has recently awarded £2.6
million to PricewaterhouseCoopers Africa to advise the Sierra
Leone government on privatising 24 state-owned enterprises including
the public water company in the capital, Freetown. The terms of
reference for this contract required the water adviser within
the contract to have experience "of advising a privatisation
agency, preferably in Africa... familiarity with the entire restructuring
and privatisation lifecycle, from sector strategy through to transaction
completion". The contract also includes a public relations
component, of which the original terms of reference said it would
seek to overcome "public resistance to the divestiture
of enterprises seen as a `public good', together with fear for
the implications of the cost of the service."39
72. WDM's concerns about this contract are
several-fold and include the clear preference in the terms of
reference for privatisation knowledge and experience (but not
public reform expertise), plus the public relations component
which was seemingly designed to undermine the expression of legitimate
concerns and debate. Furthermore, WDM research has demonstrated
that the World Bank and International Monetary Fund have been
attaching privatisation conditions to their aid and debt relief
to Sierra Leone in recent years; there is no evidence of any study
being conducted to demonstrate that privatisation is the right
solution for Freetown's water company; whilst civil society awareness
of these plans was low amongst the NGOs that WDM has been in touch
with.40
73. After WDM raised its concerns with DFID,
it subsequently clarified that the public relations work in the
contract should be "consultation" rather than a campaign
to promote privatisation.41 DFID also says that while PricewaterhouseCoopers
Africa will be working with the Sierra Leone's National Commission
for Privatisation, privatisation for the water company is not
a pre-determined outcome. WDM remains highly concerned about this
project and its awarding to PricewaterhouseCoopers Africa, a company
which WDM believes has an ideological attachment to water privatisation.
A representative from PricewaterhouseCoopers recently told this
Committee that: "Over and over again in Africa you will
find that when private sector participation starts to happen in
public utilities those utilities become much more efficient, much
more effective and that either the price goes down or the quality
of service goes up and they sell a range of services."42
Conditionality
74. Finally, it is important to discuss
the links between conditions and aid to the water and sanitation
sector. WDM's view is that attaching economic policy conditions
such as water privatisation to donor assistance—debt relief,
cheap loans, aid—is wholly inappropriate, as it undermines
a country's right to determine for itself its own development
path.
75. The UK government's policy that it will
no longer attach damaging economic policy conditions, like water
privatisation, to the aid that it gives direct to poor country
governments, is welcome.43 So is the more recent announcement
that it will withhold up to £50 million of its annual allocation
to the World Bank, pending adequate implementation of the Bank's
conditionality review.44
76. Nonetheless, the UK could go further.
DFID continues to use bilateral aid to fund the water privatisation
processes that stem from the conditions imposed by the World Bank
and other international financial institutions eg in Sierra Leone.45
Also, DFID continues to argue that if a policy is included in
a Poverty Reduction Strategy Paper (which is normally heavily
influenced by the Bank and Fund) then it is legitimate to use
conditionality to ensure the policy is implemented, even though
this undermines domestic political processes that might end up
changing or even reversing the policy.
HOW DFID CAN
SUPPORT WOMEN
AS DRIVERS
OF CHANGE
FOR WATER
AND SANITATION
77. It is women who are primarily responsible
for running the household and who therefore need water for chores
such as cooking, cleaning and washing. Women take primary responsibility
for childcare and thus need water for their children to wash in,
drink and for toilet purposes. Women have specific sanitation
requirements and women who are pregnant or who have just given
birth are especially vulnerable to water-borne diseases. Women
make up 60-80% of the producers of food crops, and need access
to water to irrigate their crops. All of these reasons and more
serve to explain why women and girls are disproportionately affected
by the global water crisis.
78. But while women play a critically important
role as the "water manager" for their family or household,
this domestic role does not always translate into a role outside
the household, in wider society, when decisions are being made
about water and sanitation provision which will affect them. Senior
Deputy UN Resident Representative Maurice Dewulf has said that
much remains to be done to give women an equal say in decisions
about water, including the location of water sources, rules for
their use and penalties for misuse, and distribution of water
among competing interests.46
79. But where public water providers have
sought to ensure that women are enabled to play an active role
in water provision, the results have been striking. Brazil's pioneering
participatory decision-making processes have offered women a real
chance to expand their natural roles as household water managers,
from the home, into the wider community.
80. In Tamil Nadu state in south India,
the reform process undergone by the publicly-owned state utility
has transformed its ability to respond to the needs of its users,
especially women and those from the scheduled castes ("untouchables").
The priority of the utility is now to "reach the unreached"
and women have been much more heavily involved in debate and decision-making
about water supply issues than before; as a result, the response
of women's groups to the process has been very positive.
81. 76% reported that the water engineer
visited the village regularly, met and interacted with them while
84% reported that the engineer behaved as a community member.47
48% of women asked felt that they had representation at meetings
(4% in non-pilot areas) and 50% of women asked felt they were
participating in decision-making on issues such as tariff-setting
(compared to 8% elsewhere).48 This way of working has been so
successful in the pilot areas of Tamil Nadu, that the process
will be rolled out state-wide, to reach tens of millions of people.
82. A study by the International Water and
Sanitation Centre of community water and sanitation projects in
88 communities in 15 countries found that projects designed and
run with the full participation of women are more sustainable
and effective than those that do not.49 Women are still massively
under-represented in the external "water world", with
careers and training in water management dominated by men. If
water management is to be democratic and transparent—and
represent the needs of the people—men and women must have
an equal say.50
83. DFID, in its role as a funder of capacity-building
initiatives, could help to enable the active and systematic participation
of women in decision-making on issues of water and sanitation.
Public-public partnerships represent one possible way in which
utilities with positive experiences in this area could share them
more widely with other providers.
CONCLUSIONS
84. To conclude, as this submission has
demonstrated, governments have the primary and essential role
to provide water and sanitation to their people. Donors such as
DFID have two primary roles, to assist with capacity building
within the water and sanitation sector, and to supply funds for
investment.
85. Public-public partnerships offer an
innovative, exciting and cost-effective way to build capacity
within utilities. PUPs start from the common-sense recognition
that progress towards the MDGs can only be achieved if efforts
are concentrated on building capacity where it is needed—within
public utilities. DFID can play a positive contribution at the
international level by giving political and financial support
to a mechanism to support PUPs.
86. The lack of current DFID support for
public-public partnerships is surprising when compared to the
support given to public-private partnerships. The private sector
has shown so little interest in providing the substantial investment
required to meet the MDGs that support for public-private partnerships
must be reviewed. Donors including DFID, but also the World Bank,
should be clear that it is public money—in one form or another—that
will fund the infrastructure improvements required to meet the
water and sanitation MDGs, and should adapt and scale-up their
support accordingly.
87. DFID's aid should enhance the choices
open to developing countries to develop their water and sanitation
sector. Technical assistance contracts that only explore private
sector options for reform, and the funding of consensus-building
or public relations work around privatisation, serve to reduce
the options available to poor countries and represent an inappropriate
use of aid money.
88. Successful public utilities are those
which have good governance. Good governance can be found in utilities
which are accountable and transparent to users, are efficient
in their operations and which recycle the revenues generated to
make ongoing improvements. Democratic decision-making around water
and sanitation provision can make utilities far more responsive
to the needs of their users, and can tap into the experience and
expertise of the group in society who suffer disproportionately
from the global water crisis—women.
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October 2006
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