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Thirsty for water justice: Does privatizing a nation’s water supply leave its citizens high and dry?

By: Alana Roscoe

 Credit: Alana Roscoe

Filipino school children fill up with privatized tap water Credit: Alana Roscoe

Although proponents for both sides of the water privatization debate ostensibly share many of the same goals, they hold irreconcilably clashing views on the means to reach them.

Recognizing this conflict, Ferdinand Gaite, national president of the Confederation for Unity, Recognition, and Advancement of Government Employees (COURAGE) in the Philippines, began his talk: “Some people say water is a good, some say it is a service, and some say it is a human right. I think you know where I stand.”

Gaite was speaking about water privatization in the Philippines at the 25One Community collaborative workspace on Oct. 28 as part of a cross-Canada tour last month. The tour was conducted in partnership with the Canadian Union of Public Employees (CUPE), which has also engaged heavily with the issue of water privatization in Canada and internationally in recent years.

In the early to mid-90s, efforts to privatize water in Manila were resisted by labour unions, including COURAGE, as well as a number of politicians concerned with backlash from their constituents and an active civil society.

However, in 1995, Gaite explained, “there was a crisis because of the lack of water, the dams were drying up, we had water rationing, and they were able to conjure a law which justified eventually the privatization of water.”

This law, the Water Crisis Act, laid the groundwork and the legal basis for the privatization of Manila’s Metropolitan Waterworks and Sewerage System (MWSS).

According to Gaite, President Fidel V. Ramos’ administration used “divide and conquer tactics,” such as harassment, public relations manipulation, and “purported pay-offs” to convince other unions to cease their resistance to privatization.

Ultimately, it was pressure from the International Monetary Fund (IMF), the World Bank, and the Asian Development Bank (ADB) following the Water Crisis Act of 1995, said Gaite, that provided the final push for the transition to private water. These multinational development organizations have been promoting private over public water development in the Global South for the last couple of decades. Claiming that commodification and private management of water is crucial for maximizing efficiency and access, they set conditions on their loans accordingly.

When the MWSS ceased to be state-owned and operated in 1997, it was the world’s largest water privatization project to date.

Ensuring private water tariffs would be lower than existing MWSS ones would be crucial for gaining public and political support for water privatization, wrote Mark Dumol, former chief of staff for the Secretary of Public Works and Highways of the Philippines, in an account of the privatization process.

According to Dumol, lower tariffs enabled by the “higher efficiency of the private sector” are one of the most attractive aspects of privatization.

The initial water rates were lower than they had been prior to privatization and the people’s immediate reaction to the change, according to Dumol, was “overwhelmingly positive.” But this was not to last.

Far from keeping rates below the original levels, the two winning bidders have increased rates by 550 and 860 per cent since 1997, according to the non-profit development organization IBON. These rates are three to four times the rate of inflation, and paying for water under the privatized regimes costs between seven to 22 per cent of poor household budgets. Currently under arbitration is a dispute between the two private MWSS concessionaires and the MWSS independent regulatory unit over the corporations’ recent attempts at raising rates again by as much as 28 per cent. One of these companies, Manila Water, was co-owned by Bechtel until 2003. Bechtel was famously driven out of Bolivia’s water business in 2000 when people revolted against the corporation’s unaffordable water rate hikes and overarching control over water systems.

Proponents of water privatization point to the inability of many governments to provide their people with access to clean, safe water as justification for private sector participation. The truth is that many poor and marginalized people worldwide, including in Manila, now have such access because of infrastructure made possible by private investment, although IBON notes that accessibility is not as high as promised or as reported by the MWSS water companies.

The fact that private corporations have often succeeded where public management failed may seem like an argument for privatization, but a more critical analysis points to the need to address a broader set of root causes that form the basis for this unfortunate reality.

Water was recognized as a human right by the UN in 2010, a hard-won victory that was resisted by corporations and some governments for its implications for trade agreements, national responsibilities to citizens, and opportunities for privatization.

It seems, however, that this human right inevitably clashes with the “right” of corporations’ to maintain profitability as embedded in many privatized water arrangements. Private corporations will not tolerate losses or even decreased profits when faced with unexpected scarcity or extra costs. This is simply not their function, and the cost of shortfalls is often passed on to consumers, even if the consequence is that they are priced out of a basic necessity for life.

A case in point is Buenos Aires, frequently referenced in Dumol’s July 2000 report as a glowing example of successful water privatization. In 2006, the Argentinean government revoked Aguas Argentinas’ private concession in favour of reverting to public management. The government cited the concessionaire’s failure to keep its quality and expansion obligations. Aguas Argentina countered with an accusation that the government’s refusal to allow water rate hikes in proportion with the Argentinean peso devaluation during the 2001 economic crisis was unfair and grounds for entitlement of up to $1.2 billion in damages to cover their investments and lost profits. The World Bank’s arbitration tribunal ruled in their favour.

In the Philippines, resistance to existing and potential water privatization arrangements across the country continues among human rights groups, people’s movements, and water workers.

In connecting and combating the reasons why privatized water control continues to be pushed as the only option in many regions, Gaite calls for mass action and education across sectors and nations: “We have to be more critical, and we have to differentiate the human right [to water] as defined by multinational corporations as opposed to the human right as proposed by the people.”

This article first appeared in the Leveller Vol. 6, No. 3 (Nov/Dec 2013).


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