Isnin, Januari 17, 2005

Economist: Water privatisation policy requires transparency

Yoon Szu-Mae

If the government believes that privatisation leads to cheaper supply and more efficient use of water resources, then such plans, including proposals on water tariffs, must be made transparent, said economist Charles Santiago.

Speaking at a national dialogue on water in Kuala Lumpur yesterday, he said there is currently little open debate on water policies, while the tender process for utilities is not transparent.

He said the controls placed over information, coupled with lack of consultation over decision-making, has raised concern as to whether privatisation is truly more efficient and cheaper than government-led implementation of projects.

Santiago was presenting a lead paper at the eight-day First Malaysia Water Form, on community views in relation to Malaysia's move towards water privatisation.

The national dialogue is jointly organised by the government and Global Water Partnership - a multi-sectoral body funded by the World Bank and United Nations Development Programme.

It has brought together representatives of the corporate sector, government agencies and non-governmental groups to discuss the future of integrating water management in Malaysia, with the aim of ensuring sustainable use.

Exclusive rights

Inevitably, the discussion touched on the most crucial and controversial component - the treatment and supply of water and the government's role given privatisation of the sector.

State governments, as well as businesses vying for exclusive rights, have argued that public-private partnership will optimise the industry’s potential.

Two key proposals, 'private management' and 'full cost recovery', are expected to bring about cost reduction, greater management efficiency, better delivery, and allow governments to split investment risks with businesses.

However, Santiago argued that the government's focus on ‘full cost recovery’ has resulted in supply of, and access to water, being no longer seen as a public good and human right.

"In a privatised environment, access to water will be a function of affordability and no longer a need or a right to sustain life and livelihood," said the economist, who is also Co-ordinator of the Asia-Europe Water Justice Network.

Privatisation, but more specifically full privatisation of water management, he said, will give businesses the right to exercise control over who gets water, and how much.

"For one, I know that at least one factory in Ipoh is using prepaid cards as a method of making water payments in Malaysia," he said.

"Think about it. If the poor can no longer pay for water, chances are high that they will resort to obtaining water from other (untreated) sources, making them vulnerable to being hit by various water borne diseases."

With businesses essentially driven by the profit motive, he asked where water conservation – another reason for privatising supposedly wasteful public-managed utilities – fits into the equation.

"Privatisation is being put forward as the solution to resolve the problem of scarcity and to promote efficient use. This is an absurd claim. The need to create profits, and conserve water resources at the same time, is a conflicting proposition," said Santiago.

However, the push to privatise is also driven by external forces. Foreign corporations could end up managing domestic resources if the General Agreement on Trade in Services, currently being negotiated at the World Trade Organisation, allows foreign acquisition of water treatment and distribution rights.

All this entails a possible loss in political and economic control of domestic natural resources, he said, as decisions affecting water pricing and distribution may come from some corporate boardroom in France of Germany.

'Remember IWK'

Santiago conceded that privatisation does not necessarily project a completely negative picture – there have been instances where the private sector can improve delivery.

"But it (decision as to whether or not to privatise) should involve a thorough evaluation of the failure of existing (public) policies before the next course of action is identified," he said.

He reminded participants of the "colossal privatisation failure" of sewerage company Indah Water Konsortium, which the government was forced to buy back to the tune of RM200 million in 2000 due to irrecoverable losses. By then, it had pumped about RM1 billion into the company.

While Santiago said certain aspects of water delivery could be privatised, this should remain open to public scrutiny and under government control, he said.

"All documents relating to water privatisation have to be made public as a way to ensure people's participation and transparency....privatisation contracts must be placed before Parliament and the state assemblies for debate, discussion, and scrutiny."

‘Unrealistic suggestion’

Santiago's call for greater scrutiny of public awards was questioned by a government sector participant at the meeting.

Department of Irrigation and Drainage deputy director Ahmad Fuad Embi said the tender process for awarding water concessions is already governed by a standard procedure that is applied at all levels of government.

"It is simply unrealistic to suggest that tender contracts should be tabled in Parliament. It is a mistake. There are already enough control mechanisms (to ensure that tender processes are clean)," said Ahmad Fuad, whose department oversees water resources and management under the Natural Resource and Environment Ministry.

He said it was unfair of Santiago to suggest that the tender system and awarding of public concessions are kept secret.

Participants however, also noted that there has been at least one case of improved delivery following privatisation.

Prof Chan Ngai Weng, president of Penang Water Watch, said the state’s privatisation move has resulted in the cheapest water tariff nationwide, better service delivery, and greater profits for the state government, which owns a majority stake in concessionaire Penang Water Supply Corporation.

Chan said this could be because Penang, prior to privatisation, had already taken the lead as the country's most efficient water provider.

The important aspect of the Penang case is not privatisation alone, said Chan, but the fact that even after privatisation, the government continued to maintain strong controls over decision-making – therefore ensuring that the public interest took priority.

In any case, if Malaysia's aim is to ensure a steady supply of water, its main task should focus on preventing wasteful use, he said.

So while the government is calling for a review of existing water tariffs in order to raise more funds to replace old pipes and build new catchment areas, the changes must encourage conservation of water use.

A simple way to achieve this, he said, is by implementing a sliding scale tariff that charges consumers progressively higher prices for every cubic metre of water used above a standard of say, 20 cubic metres per household.

"We need to penalise wasters, not users," he added.

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