In Third World Countries, Privatization Debate Affects Life, Death, Not Just Policy Merits

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I had two articles emailed to me today arguing that continued improvement in health and wealth in the developing world depends on private development of water infrastructure.

I thought I would share them with you because here in the US we debate privatization mainly on management and policy merits. But in developing countries it is literally life or death. If the private sector is the only realistic way to build infrastructure vital to life, does that change the terms of the debate?


I would think it should, but in fact it does not. Those who argue that markets and private enterprise can never be involved with water infrastructure make no exceptions even for the more than 1 billion people who have no access to clean water.

I take a more practical approach, based on the track record of success of private water utilities, and the fact that in the U.S. we have a mix of public and private water utilities while all citizens have access to clean water. We shouldn’t let anti-globalization, anti-market zealots impede progress towards worldwide access to clean water.

It is much like the many discussions we have here in the US about privatization, outsourcing, competitive sourcing, etc. Do we base decisions on ideology or on a practical examinations of the situation and opportunities to improve services for citizens?

Adrian Moore, Reason Foundation

BOGGED DOWN From The Economist print edition Mar 20th 2003 Why the private sector should play a bigger role in water supply

Last year’s Johannesburg summit set ambitious goals for water in poor countries: to reduce by half, by 2015, the numbers of people without access to clean water or adequate sanitation. Since over a billion lack the first, and over 2 billion the second, this will be costly. At this week’s third world water forum in Kyoto, Japan, a high-level report estimated that investment in water would have to rise from today’s $80 billion-odd a year to nearer $180 billion. Where to find the cash?

Hard-pressed aid budgets cannot do it. So the bulk will have to be private. And here debate in Kyoto has been swamped in controversy. Many lobbyists fiercely resist the notion that private enterprise might improve poor countries’ water supply. Water is too precious to be provided by the market, they argue. Privatization pushes up water charges, does nothing for the poor and boosts profits of water barons. The activists cite Cochabamba, Bolivia, where three years ago riots (resulting in one fatality) forced the cancellation of a contract for a consortium, in which America’s Bechtel Corporation was the highest-profile investor, to supply water.

Water is indeed special: people need it to stay alive, to grow crops and to keep clean, and dirty water spreads disease. As much as 95% of the world’s water is publicly supplied, and most will remain so. But it is wrong to argue that there is no place for private finance or the marketplace in supplying water. It has been public utilities, not private companies, that have failed the poor. Too many are corrupt, inefficient and starved of investment. Half the water flowing through their decrepit pipes leaks. The subsidized water that gets through goes mainly to the better-off; the poorest often have to pay private water carriers ten times as much.

Privatizing the provision of water need not mean higher charges