Providing access to clean water is critical to solving global water security. Access to water is greatly dependent on the success of the water distribution system and thus method of management.
There are at least four major option for management of water:
- Privatization of water
- A Government (national and local) -controlled water distribution
- A cooperative where individuals pool resources
- An integrated plan that uses some combination of the preceding three options. Each of these options has both benefits and drawbacks. We feel that the key is the fourth option: finding some combination of the first three options that optimizes both efficiency of funds and water distribution while ensuring people’s rights are protected.
Privatization
In this discussion, privatization refers to what is called a divestiture model where private companies permanently owns and runs the entire water business including the water infrastructure [1] in a given city or region.
Ideally, privatization of the water supply offers the benefits of capitalism and a market economy where efficiency is maximized. In areas where water scarcity is an issue, efficient use and distribution of water can be extremely beneficial. From an economic standpoint, private companies are incentivized to research and implement new technologies that decrease costs and increase efficiencies in order to increase profits. Private companies often charge customers more than publicly run systems for water, however, burdening the poor and in certain cases denying some people access to water. Charging more for water where people can pay for it [2] leads to higher profits, which theoretically means there is more capital available to maintain and improve infrastructure leading to a higher quality of service. In reality, companies may just use additional revenue to increase company profits and shareholder payments.
Privatization has additional downsides. Privatization can cause regulatory problems, in water quality, for example. Even if the government regulates water quality, companies form lobbies and put pressure on legislators to change standards [3]. Often private companies focus on urban centers, places with larger economies and larger populations, because this is where there are more profits. Yet out of the 1.1 billion people who lack access to improved drinking water and 2.4 billion people who lack access to improved sanitation, 80% live in rural, unserved areas [1]. Private companies have no monetary incentive to serve these people. After all, act foremost for the good of the company. Companies are often more worried about their shareholders than their customers [3] and care more about making a profit than basic human rights such as the right to water.
One case study is Manila, Philippine. In 1995, the government struggled to provide water access at suitable cleanliness to 3.6 million residents [2]. So a privatization scheme was designed based on regulatory oversight by the government that ultimately promised to expand water connections in both rich and poor neighborhoods. Two separate companies controlled east and west Manila. In east Manila, the company was successful in increasing water access and efficiency; low-income household connections to water went from 0 in 1997 to 141,000 in 2005 while employees per 1000 connections decreased from 6.3 to 2.2 [5]. In west Manila, however, water access worsened as the company increased rates and people who could no longer afford water stole it instead. Profits of the company decreased and the privatization ended in a law suit over water rates [2]. This case study shows both the potential of privatization to improve water systems and the potential dangers of privatizing a water system that would need to be addressed.
Government
Another water management option is governmental control of water supply. The government distributes water to everyone at an affordable cost. However, government-run systems can be plagued by inefficiencies [1]. Often governmental costs don’t have rate structures that actually reflect the true cost of a service [2], making their service unsustainable. Without profits, the government lacks the revenue to improve or even maintain infrastructure. When building new infrastructure, small governments often lack the capital needed. In addition, public utilities are slow to implement new technologies or even improve and extend service because of the bureaucracy involved [1]. Despite the failures of governmental control of water supply, the government, unlike a private company, is responsible and thus must ensure that people’s human rights are not violated. One relevant human right that Mission 2017 recognizes is the human right to water. Governments can ensure that this right is not violate by providing water access to everyone, even if it is not profitable.
A case study of governmental control of water is Nairobi, Kenya. Under the government, Kenya’s water system was financially unsustainable and in debt. There was low, unreliable coverage and inefficient management [7]. Although Kenya has a population of 33.5 million people, only 1.6 million were served by the water system. The government is currently in the process of overhauling the water distribution system through privatization in an attempt to increase water access [7].
Cooperative
A third water management option is a cooperative. In a cooperative, members of a community pool their resources to build the water infrastructure. This is a common solution in rural areas where the costs of building the infrastructure to bring water outweigh the potential revenue for either a private company or government and make it not worth their while to invest. A group of people living in a community can come together and pool their resources to build the infrastructure (the initial capital cost) and share the operating costs through member fees. A cooperative works best when all the members of the community participate because then there are more resources available to build infrastructure. However, cooperatives are completely voluntary and open to everyone. The incentive to join is the access to fresh clean water at low rates.
One benefit of this system is that it helps grow a region’s economy by keeping money and resources local. Cooperatives also keep political power and control local. The customers have a say in the management of their utilities. In general, cooperatives provide reliable access to clean fresh water to those who need it [4].
One challenge with a cooperative is getting sufficient capital from the members. Another challenge is educating members so that they know how the cooperative operates. This is important because the members of the cooperative must be content and want to be a part of the cooperative because the entire system is based on their membership [4]. In addition, the members must be educated enough to make informed decisions regarding the running of the cooperative.
An example of a successful cooperative is Avra Water Cooperative in Tucson, Arizona, United States. This non-profit organization services over 6,500 people with clean fresh water [4]. The people living in Tucson pooled their resources and bought the infrastructure to provide water to their homes. The cooperative is run by a board of elected volunteer governors. The entire system is democratic such that all the members vote on decisions. Since the cooperative is non-profit, water is provided at lowest sustainable cost [4].
Cooperatives have been extremely successful around the world. In Uganda the number of cooperatives has jumped from 554 in 1995 to 7,500 in 2009 [6]. About one billion people are members of cooperatives worldwide, and over 100 million people actually work in cooperatives [6].
Mission 2017’s Recommendation:
The key to a successful water management system is optimization – in other words, striking a balance between public and private participation. Mission 2017 recommends a Private Public Partnership (PPP). In this system, the private company is responsible for the upfront capital investment, commercial risk, and operations/ maintenance. The government controls rates, areas of service, and quality of water in addition to giving payments to the company for the upfront capital with an understanding that the company expects a certain agreed upon profit level but also taking into consideration the rights of the citizens. While corruption is likely always a problem, checks and balances can minimize this issue [SB1]. After 25-30 years, once the government has essentially paid back the loan and the company has made a profit, the system is signed over to the government. This system will be efficient, because it was designed and used by a company trying to maximize profits. The private company will make a profit and thus will be incentivized to participate. At the same time the government will be incentivized to participate because it won’t have to worry about finding the large upfront capital and will have an efficient system that it can use already in place.
PPPs depend on a company being able to make profits off of water and water infrastructure. In rural areas, where it is too costly for the above PPP to build infrastructure, Mission 2017 recommends cooperatives. Each cooperative allows every member getting a voting say in all decisions and will be run by an elected board of governors. Under the control of a non-profit, water prices would be at their lowest possible levels because no profit are required beyond costs of maintenance. Thus, participants get the benefit of access to water, low water rates, and a say in issues that will directly affect them.
Adapting current water management systems into PPPs will extend water access and expand the efficiency of water distribution in both developed and developing countries. In the areas where PPPs can’t provide service because of insufficient profits, cooperatives offer an alternative solution for water access. With proper management of water systems every country in the world can put into place a system to provide clean water to all citizens.
References:
1. Budds, J., & McGranahan, G. (2003). Are the debates on water privatization missing the point? experiences from africa, asia and latin america. Environment and Urbanization, 15(87), 87-114. Retrieved from http://eau.sagepub.com/content/15/2/87.full.pdf+html
2. Ruben-Salama, C. (2008). Thirsty for change: Considering water privatization in developing nations. Columbia University, Retrieved from http://water.columbia.edu/files/2011/11/Siegfried2008ThirstyForChange.pdf
3. Water For All. (n.d.). Top 10 reasons to oppose water privatization. Retrieved from http://www.citizen.org/documents/Top10-ReasonsToOpposeWaterPrivatization.pdf
4. Young, M. M. (2002). Cooperative infrastructure for small water systems: A case study. Virginia Water Resources Research Center, Retrieved from http://vwrrc.vt.edu/pdfs/specialreports/sr222002.pdf
5. Comeault, J. (2007). Manila water company: Improving water and wastewater services for the urban poor.Growing Inclusive Markets, Retrieved from http://growinginclusivemarkets.org/media/cases/Philippines_Manila Water_2008.pdf\
6. Schimmel, C., & Henry, H. (2011). Cooperatives for people-centred rural development. ILO Cooperative Branch, Retrieved from http://www.ilo.org/wcmsp5/groups/public/@ed_emp/documents/publication/wcms_158998.pdf
7. Fugelsnes, T. (2009). Water utilities in africa: Case studies of transformation and market access. Water and Sanitation Program – Africa, Retrieved from http://www.wsp.org/sites/wsp.org/files/publications/Water_Utilities_Africa.pdf
