A Handful of Corporations Seek to Privatize the World’s Water


(WASHINGTON, Feb. 3, 2003) -- The privatization of public water systems around the world, driven by a handful of European corporations and the World Bank, is dramatically increasing despite sometimes tragic results, according to a new study by the Center for Public Integrity.

The report, by the Center’s International Consortium of Investigative Journalists, shows that the world’s three largest private water utility companies have since 1990 expanded into nearly every region of the world, raising concerns that a handful of private companies could soon control a large chunk of the world’s most vital resource.

While private companies still run only about 5 percent of the world’s waterworks, their growth over the last 12 years has been enormous. The report tracked the operations of the six most globally active water companies and found that operations had grown nearly five-fold.

Key findings include:

* France’s Suez and Vivendi Environnement, and Thames Water, owned by Germany’s RWE AG, dominate the private water market globally. They are joined, to a lesser extent, by Saur of France and United Utilities of England, working with Bechtel of the United States.
* In 1990, private water companies were active in about a dozen countries. By 2002, they were operating in at least 56 countries and two territories.
* The companies have worked closely with the World Bank and other international financial institutions and lobby aggressively for legislation and trade laws to require cities to privatize their water.
* In major cities around the world—such as Buenos Aires, Manila and Jakarta—the World Bank flexed financial muscle to persuade governments to sign long-term contracts with the major private water companies. Of the 193 short-term loans the bank approved from 1996 to 1999, 58 percent had privatization as a condition.


Revenue trends reflect the companies’ global expansion. Vivendi Universal, the parent of Vivendi Environnement, reported earning more than $5 billion in water-related revenue in 1990; by 2002 that had increased to over $12 billion. RWE, which moved into the world water market with its acquisition of Britain’s Thames Water, increased its water revenue a whopping 9,786 percent—from $25 million in 1990 to $2.5 billion in fiscal 2002.



The report also examines the problems many developing countries encounter in privatizing their waterworks. For example, in South Africa, where one township transformed its utility into a profit-driven enterprise, poor who could not afford huge increases in water rates were forced to get drinking water from disease-ridden lakes and streams, resulting in the country’s worst cholera outbreak.

Source: Center for Public Integrity

Comments


“Underinvestment…inefficiency…limited choice…abysmal service records…and mismanagement” On reading these words, one would be forgiven if you thought that these statements were made to refer to the bureaucratic and inefficient state owned nationalised industries that continue to plague governments both in the developed and developing world. All fundamental economic textbooks characterise nationalised industries with these condemning words.

The contrast is privatisation. Privatisation, as the western economists espouse, delivers investment, efficiency, professional management, choice and high levels of service.


Clearly, the matter of putting industries and systems that are crucial to the welfare and interests of the society collectively under privatised hands is a subject that needs to be revisited. The reason for this being the gross mistake that the governments in the Muslim world whether in Pakistan or Sudan are making i.e. privatising key industries and services that are vital to the welfare of their people e.g. energy, telecommunications, health, education, public transport. Many of these decisions are made when these governments take out loans and follow structural adjustment programmes with international institutions such as the IMF and World Bank. To get loans, governments in the developing world are forced to take austere and liberal market measures by selling off nationalised industries to private hands and open their markets to foreign investors and competitors. It is argued as mentioned above that the poor economic state of the developing world is due to the bureaucratic and despotic control that corrupted governments impose over industries that leads to inefficiency, embezzlement, mismanagement and decaying service levels. By privatising these industries and instilling professional management investment will flow into them and by extension into the economy, service levels will improve and the economy will grow.

However the matter is not as simple as this. The reality is that the bankrupt nature of the economies of the Muslim world was and still is the result of the political and economic policies of western governments (donors to the IMF and World Bank) that seek to exploit the huge resources in the Muslim world and access and control the markets. By privatising these industries while at the same time opening up the economy to foreign investors, the killers strike and take their prey from the key industries that are sold off. Suddenly the world caves in for the economy as the newly privatised industries undergo a path of rigorous re-structuring. Costs are reduced by cutting loss making sectors (closure of hospitals, bus routes, bank branches that are not profitable to run – thereby denying the people local access) and reducing the number of employees. Profits are made by matching new levels of service with higher charges and fares, thereby denying the common man on the street access to vital facilities and over a period of time the private company monopolises on many of the routes or services – leaving the person at the mercy of the private investor whose primary motivation is profit not the provision of services. And the profit, even though some is re-invested back into the economy, means that local services are left for the private company to do with as it pleases, whereas previously all revenue generated would be used by the government to theoretically invest in public services and further provision for the society.

The tragedy is that for many people, who have no option but to use that service – fares go up while standards deteriorate. This is the reality for the people not only in the developing world, under such harsh and corrupt economic policies engineered by western states, but also what the British rail user, who has no alternative to rail in order to go to work or study is faced with.

The lies of those who advocate privatisation of the whole economy, particularly the services central to the welfare of the society are essentially two matters:
 

1. That privatisation always brings efficiency, higher service levels, better levels of management, and better cost management than those which are managed by the state on behalf of the society.
 

2. That those industries which are crucial to the welfare of the society and are regulated by the state on behalf of the society always result in mismanagement, nepotism, poor levels of service and inefficiency.

These arguments are flawed and deceitful. The reality of the matter is that any type of business, whether a simple partnership, private company, conglomerate, multinational, state owned, share company etc… has the potential to be efficient or inefficient, produce high service levels or low service levels, to be productive or unproductive or to be managed well or be mismanaged. It is not related to the type of company at all or the economic system but is in fact related to economic science i.e. the ability of a business, irrespective of its type to introduce practices, people and procedures to run the business well.

Therefore the declined state of the privatised British rail network is no different from the declined state of a state owned company in the developing countries. If both British rail and any state owned company had competent managers, sound business practice, investment and guaranteed service levels – then it is evident that they both would be successful.

It should become clear, therefore in the minds of Muslims that the manner that the governments have sold off vital industries to the privatised sector – was not to the benefit of the local man – but to the benefit of foreign investors. It is a privatised lie that will impose further economic hardship upon the Muslim population and extend the control of the foreign powers on our soil.

As regards Islam, there are three types of property: Private Property, Public Property and State Property. The Islamic Shariyah has prohibited industries and commodities that have been made the property of all the Muslims i.e. Public Property, to be in the hands of private ownership. These public commodities come under three main headings:

• Utilities without which the everyday life of the society cannot properly function. Under this category come commodities such as water and oil reserves. Muhammad (Sallallahu Alaihi Wasallam) said, “The people are partners in three: water, pastures and fire.” This hadith also includes the machinery such as pipes, power stations that harness these commodities.
 

• Commodities that by their nature cannot be the property of individuals like seas, rivers, public parks and mosques. Likewise it includes public transport, hospitals, public education or the sewage system.
 

• Natural uncounted minerals in large deposits
And it is the Khaleefah who is made responsible for ensuring the highest standards and practices in the undertaking of looking after these properties.