Problems with Private Water Concessions: A Review of Experiences and Analysis of Dynamics

Abstract

Based on empirical evidence, this paper looks at experience with privatized water supply and sanitation concessions and operating contracts in transition and developing countries, with particular reference to Latin America. The paper is an attempt to address the complexity of issues affecting private sector participation in the water sector from a dynamic point of view, taking into account how the interests, objectives and resources of private sector operators continuously shape their relationships with local stakeholders, citizens and local governments alike, and how the interaction between multinational companies and other actors affect the developmental impact of private sector participation. It is argued that the introduction of commercial considerations into the system and the profit-seeking behaviour of private water operators are major determinants of the economic, social, political and environmental results of public–private partnerships (PPPs). Such factors may explain the discrepancy between the theory pointing at private sector participation as the way forward and the results of private sector participation in practice.

Notes

See also http://lnweb18.worldbank.org/eap/eap.nsf/Attachments/water3

French transnational corporations in particular have used various names for both the groups and the water sections since 1990. Throughout this paper, for the sake of clarity, the two largest groups will be referred to as ‘Suez’ and ‘Veolia’, even when referring to dates before these names were formally used. The principle names associated with these groups are: Suez = Lyonnaise des Eaux; Ondeo. Veolia = Générale des Eaux; Vivendi.

Source: PSIRU database; Tim Webb, Vivendi weighs up AWG's £270m arm, The Business, 15 December 2002, p. 4.

Source: PSIRU database, News Item 3717, Azurix and Wessex face problems of failing to capture water market. Available at http://www.psiru.org/newsitem.asp?newsid=3717; Jenalia Moreno, Azurix testing the waters—Company competing against giant foes in Latin America market, The Houston Chronicle, 9 January 2000.

Source: PSIRU database, News Item 4481, Azurix to be broken up. Available at www.psiru.org/newsitem.asp?newsid=4481; Sophie Barker, Wessex Water parent plans major surgery, The Daily Telegraph, 19 April 2001; Micheal Davis, Water under the bridge; Enron will take Azurix private, sell its assets, The Houston Chronicle, 16 December 2000.

Source: PSIRU database, News Item 4416, RWE to take over Thames Water. Available at http://www.psiru.org/newsitem.asp?newsid=4116; Andrew Taylor & Uta Harnischfeger, RWE acquires Thames Water in £4.3bn deal, The Financial Times, 22 September 2000.

Source: PSIRU database; IDB, Aguas del Gran Buenos Aires Water and Sanitation Project, Project Summary. Available at http://www.iadb.org/exr/doc98/pro/aar0282.pdf; OSBA receives 1 bid for 6th sub-region—Argentina, Business News Americas, 8 July 1999.

Source: PSIRU database; Thames wins ESSAM, no bids for ESSAR – Chile, Business News Americas, 13 November 2001; Thames Water, Thames Water announces new Chilean concession, Press Releases, 13 November 2001. Available at http://www.thameswater.co.uk.

Source: PSIRU database; IDB, IDB Approves $40 Million to Improve Water, Sanitation in Guayaquil—New resources for system through private sector concession, Press Release 164/97, 16 July 1997. Available at http://www.iadb.org/exr/PRENSA/1997/cp16497e.htm; International Briefs, Global Water Report, 26 September 1997; International Water Services, Guayaquil concession confirmed—Ecuador, Business News Americas, 8 January 2001. See also Acosta (2002) .

Source: Available at http://www.legifrance.gouv.fr/WAspad/UnTexteDeJorf?numjo=PRMX9200148L.

Source: Available at http://www.legifrance.gouv.fr/WAspad/UnTexteDeJorf?numjo=ENVX9400049L.

Nice work cuts costs, Global Water Report 144, 19 April 2002, p. 3.

Informe De Pricewaterhousecoopers Valencia Pagara A Avsa 54 Millones Si Rescata La Concesion, Expansion, 17 January 2001.

Alfonso, J. (2001) Aguas de Valencia gana el concurso de suministro local, Cinco Dias, 3 October 2001, p. 6.

Enron preferred bidder for Mendoza: Argentina/Project, Global Water Report FT Bus Rep: Energy, 26 May 1998.

Source: PSIRU database; Iskandar, S. & Taylor, A. (1999) Franco-Spanish group wins bid for Emos, Financial Times, 15 June, p. 36.

Source: PSIRU database; CHENGDU Generale des Eaux-Marubeni Waterworks Company Limited, ADB Private Sector Project Profiles. Available at www.adb.org/Work/Projects/Profiles.

Source: PSIRU database; Lippens, G. & Dang, K. M. (2001) Market maker; Asia Focus—Vietnam, Project Finance, 1 December, p. 41.

Source: PSIRU database; Demand shortfall triggers Eurawasser price rises in Rostock, FT Energy Newsletters—Water Briefing, 22 February 1995, p. 11.

Source: PSIRU database; Bernard Simon, Municipal partnership pioneer in a squeeze, Business Day, 6 June 2001.

Source: PSIRU database; Government of Belize, Privatization of WASA—Joint Media Release, Press Release, 23 March 2001. Available at http://www.belize.gov.bz/features/wasa/ministerstatement.html.

Source: PSIRU database; Cutlack, M. When the dollars run out, New Statesman, 4 March 2002.

Source: PSIRU database; Interaguas Allocates US$144mn for Campo Grande—Brazil, Business News Americas, 20 July 2000; Guariroba to Invest US $ 7.6mn in 2002—Brazil, Business News Americas, 5 November 2001.

NRW stands for Non-Revenue Water and is a synonym for UFW (Unaccounted-For-Water).

Source: PSIRU database; Bernard Simon, Municipal partnership pioneer in a squeeze, Business Day, 6 June 2001.

Source: Available at http://www.worldbank.org/icsid/cases/pending.htm.

Source: PSIRU database; Hudson, P. Muddy waters—Overview of troubles with Argentina's water infrastructure, Latin Trade Business & Industry: 5 March 1999.

See also: Argentina companies must settle dispute with govt locally before arbitration -report, AFX European Focus, 5 July 2002.

Source: PSIRU database; Aguas del Tunari resorts to World Bank's ICSID arbitration and claims US$25 million compensation, News Item 4983. Available at http://www.psiru.org/newsitem.asp?newsid=4983.

Sources: PSIRU database; Buenos Aires government asks for Azurix pledge to improve water service, News ID 4439; Azurix provides low pressure water in Buenos Aires, News ID 3867; Buenos Aires Guarantees Water Supplies—Argentina, Business News Americas, 5 November 2001; Available at http://www.worldbank.org/icsid/cases/pending.htm; SOSBA (Sindicato de Obras Sanitarias); Empresa estadounidense de agua Azurix continuara prestando servicio en Argentina, Agence France Presse—Spanish, 1 January 2002; BA to file US$600mn claim against Enron, Business News Americas, 12 August 2002; Argentine Province Sues Enron, The Oil Daily, 13 August 2002.

Sources: Potsdam Management Award: Germany/Privatization, Global Water Report, 8 January 1998; GERMANY/Companies—Vivendi spells out its strategy, Global Water Report, 10 November 2000; Berliner Morgenpost, 27 July 2000; Potsdam City Council, Press Release No. 42/01, 31 January 2001.

Source: PSIRU database; News Item 4777, WSSA South African water contract nullified. Available at http://www.psiru.org/newsitem.asp?newsid=4777.

Source: PSIRU database; Vivendi Water reaches agreement with Szeged council, MTI Econews, 12 February 2001.

Source: Democracy Centre, Cochabamba, Bolivia.

Agreement for Management, Operation and Maintenance of the Water and Sewage Systems of Fort Beaufort and Associated Customer Management, 5 October 1995, p. 6.

NEPSZABADSAG: 7 December 1998.

Source: Le Monde, 28 January 1997.

Issues paper, NIS Ministerial Conference on water management and Investment, Almaty 16–17 October 2000.

Source: PSIRU database; Cecille S. Visto & Ruffy L. Villanueva, Rate hike to boost water services, BusinessWorld, 12 November 2002, p. 1.

Source: PSIRU database; Ruffy L. Villanueva, MWSS-RO readying higher water tariffs, BusinessWorld, 14 November 2002, p. 1.

Jugement de la 7°chambre de la Cour d'Appel de Lyon du 9 juillet 1996; Cour de cassation chambre criminelle du 27 octobre 1997. No 96-83.698.

Chambre régionale des Comptes Rhône-Alpes, Observations définitives de la gestion des services de l'eau et de l'assainissement de la commune de Grenoble (Isère): 24 novembre 1995, p. 21.

Source: PSIRU database; News Item 4777, WSSA South African water contract nullified. Available at http://www.psiru.org/newsitem.asp?newsid=4777.

Source: PSIRU database; Private operators to refinance sell-off costs—Paraguay, Business News Americas, 28 July 2000; WB delays clearance of Corposana rules—Paraguay, Business News Americas, 13 November 2000.

Source: PSIRU database; Holly Williams, Sanchis scoops Paraguay privatizations, PR Week, 15 June 2001; Sanchis & Asociados informe sobre privatizaciones en Paraguay, Expansion, 5 June 2001.

Source: PSIRU database; IDB, IDB Approves $40 Million to Improve Water, Sanitation in Guayaquil—New resources for system through private sector concession, Press Release 164/97, 16 July 1997. Available at http://www.iadb.org/exr/PRENSA/1997/cp16497e.htm; International Briefs, Global Water Report, 26 September 1997; International Water Services, Guayaquil concession confirmed—Ecuador, Business News Americas, 8 January 2001. See also Acosta (2002) .

Source: PSIRU database; France/Companies—Suez results, Global Water Report, N. 130, 2 October 2001, p. 8.

Source: PSIRU database; France/Companies—Suez AGM, Global Water Report, N. 145, 3 May 2002, p. 8.

Source: PSIRU database; France/Companies—Vivendi share doubts, Global Water Report, N. 127, 3 August 2001, p. 5.

Source: PSIRU database; Anglian Water takes controlling interest in Chile water concession, News Items, No. 3384. Available at http://www.psiru.org/newsitem.asp?newsid=3384; Esval awards contract to Anglian Water's Purac, News Items, No. 4443. Available at http://www.psiru.org/newsitem.asp?newsid=4443.

Source: PSIRU database; Degremont awarded major contract by EMOS, News Items, No. 4427. Available at http://www.psiru.org/newsitem.asp?newsid=4427.

Source: PSIRU database; Aguas Argentinas, water pricing, contractual flexibility and the Argentine crisis, News Items, No. 4995. Available at http://www.psiru.org/newsitem.asp?newsid=4995.

Source: Observatório Social; Famílias usam água de chuva, Gazeta do Povo (PR), 19 November 2002.

Source: Observatório Social; Consumidores da região metropolitana de Curitiba não contam com tarifa social de água, Paraná Online (PR), 08 January 2003.

Sources: No.5083: Business Day 17 November 1999, Will the World Bank halt corruption and cancel debt? Patrick Bond and David Letsie. No.5084: SAPA 26/09/2000, KZN cholera outbreak spreads, death toll rises. No.5085: Mail and Guardian 13 October 2000, More government confusion on privatization?. No.5086: SAPA 13/10/2000, FREE WATER IS FEASIBLE: KASRILS. No.5087: SAMWU 17/10/2000, Cholera epidemic would not have happened if there was free water! No.5090: Mizanet/IPS 18/10/2000, Govt promises free water to curb cholera epidemic. Available at http://www.iclinic.co.za/oct00/cholera18b.htm/LS#. No.5111: The Lancet 27/01/2001, Prevention fails to halt South Africa's well-treated cholera epidemic. No.5112: Beeld 23/01/2001, 23/01/2001. No.5113: The Star 23/01/2001, Squatters on ’cholera river’ to be moved. No.5114: SAMWU press statement 23/01/2001, Union highly concerned about events in Johannesburg, including cholera in Jukskei River. No.5115: Daily Dispatch 19/01/2001, Cholera found in Alexandra's Jukskei River. No.5116: Sapa 15/01/2001 GOVT RUNNING LOW ON FUNDS: PEOPLE MUST BUILD THEIR OWN TOILETS. No.5117: Business Day 11/01/2001, Cholera cases now more than 17000. No.5118: BuaNews 06/11/2000, Safe water and sanitation still elude cholera-plagued KZN. No.5119: Financial Mail 03/11/2000, LEARNING TO PADDLE UPSTREAM. No.5120: SAMWU and RDSN 26/10/2000, The Cholera Epidemic in South Africa and the Government's attack on the Working Class. No.5121: Beeld 25/10/2000, Supply cuts caused cholera. No.5122: Sapa 29/01/2001, Cholera death toll hits 85.

Mail and Guardian 13 October 2000.

Free water is feasible, 13 October 2000, Sapa.

SUEZ introduces its 2003–2004 action plan: refocus, reduce debt, increase profitability, Suez Press Releases, 9 January 2003. Available at http://www.suez.com/upload/up970.pdf.

See http://rru.worldbank.org/.

See also http://www.water-2001.de/outcome/BonnRecommendations/Bonn_Recommendations.pdf.

See the Implementation Matrix, Annex I, Private Sector Development Strategy—Directions for the World Bank Group, 9 April 2002. Available at http://rru.worldbank.org/documents/PSDStrategy-April%209.pdf.

Biwater wins Dar es Salaam concession, Global Water Report 162, 15 January 2003, pp. 1–2.

See Camdessus (2003), p. ii .