Alternative financial options widen Kyoto debate

Strong protests against private companies profiting from water and sanitation projects followed "Water Financing for All" report at 3rd World Water Forum.

By Pamela Wolfe

Six months after water and sanitation issues gained global attention at the World Summit on Sustainable Development in Johannesburg, South Africa, critics contend that the much anticipated Third World Water Forum held in Kyoto, Japan, (16-23 March) failed to deliver concrete plans to meet ambitious water and sanitation goals agreed upon in Johannesburg.

Ironically, three months into the UN Year of Freshwater, the ministerial declaration even failed to call attention to the conservation of freshwater ecosystems.

Last September in Johannesburg more than 100 government leaders agreed to reduce by half the number of people not connected to drinking water and without sanitation by 2015. More than 400,000 new connections to water and sanitation must be made per day to meet this goal. Questions of finance, scale of infrastructure, community-based or "top-down" initiatives, etc, addressed throughout the forum, focused on how effectively government leaders can use limited funds to meet the 2015 goals.

More than 24,000 participants from 182 countries, including 101 ministers from 96 countries, attended the Kyoto Forum. Ministers did agree that "prioritising water issues is an urgent global requirement" but did not make any financial commitments towards solving water and sanitation issues. Worldwide three million deaths of mostly women and children occur each year from the lack of hygiene, sanitation and water supply, according to the Water Supply and Sanitation Collaborative Council (WSSCC). Why doesn't this constant tragedy compel government leaders to take decisive action immediately?

Financing water infrastructure remains a key point of contentious debate. Strong protests followed the report "Water Financing for All," which emphasised the role of private investment to fund water supply and sanitation for the poor. Michael Camdessus, the former managing director of the International Monetary Fund (IMF) and chairman of the World Panel on Financing Water Infrastructure, presented this report. It claims that private investment should be one of the ways that governments finance the US$ 100 billion dollars annually to build necessary water infrastructure and achieve UN goals. He explained that the report was misinterpreted; the report also calls for improved accountability, transparency and capacity-building in the public sector.

WSSCD Director Sir Richard Jolly, however, says that the private sector report focuses on "big scale hardware, the massively fancy chrome and complicated projects," which are beyond the standards of what are needed to provide safe water supply and sanitation in the poorest countries. Basic water and sanitation needs can be met with already available annual funds of US$ 30 billion, according to WaterAid, the UK non-governmental organisation (NGO). The WSSCD cited examples of low-cost "new-style" water and sanitation programmes that stimulate and support community-based initiatives, such as in Karachi, Pakistan; Brasilia, Brazil; Kumasi, Ghana and rural villages of Midnapur, India.

Alternative financing options that provide systemic support to public - not private - institutions, such as municipalities and rural cooperatives that provide water supply, was advocated by David Hall of Public Services International, a UK-based NGO. "Private finance and investment is declining in the water sector, not growing, he explained. For this reason, international and regional lending institutions should not impose privatisation through financial leverage. "They continue to ignore the reality that the public sector contributes 85% of the finance and operates more than 90% of water systems," while the private international sector accounts for less than 10%, he explained. PSI advocates supporting and improving the effectiveness of the greatest source of finance, the public sector.

Indeed, large water companies are backing away from delivering to the poor through public-private partnerships because of the financial risks, such as currency losses, and lower than expected savings. The French utility giant Suez SA abandoned its water concession in Manila, Philippines in December 2002, and one month later it lost a major contract in the US city of Atlanta, Georgia, which was one of the biggest water concessions in the USA.

Yet creative models of public-private partnership can work. According to Jean Lemierre, president of the European Bank for Reconstruction and Development (EBRD), "Public entities can either work alone to deliver water, or in partnership with private companies by encouraging commercial development that is closely regulated." Notably, EBRD water projects have saved the equivalent to water usage by six million people just by fixing leaks and managing demand. Now that's results...

Pamela Wolfe, Managing Editor

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