Traditionally, most water resources were owned by governments or municipals councils. There has however been a shift towards privatizing or having a hybrid of the two i.e co-ownership by the public and private sector. Water privatization can be looked at as the transfer of ownership and management from the public sector to private. In other word it involves the transferring of water control and water management services to the private sector. These water management services may include water collection, purification, distribution of water and even waste water treatment.
It is very common in this growing capitalistic world to privatize water provision and sanitation. Many people have been opposed to this idea of privatizing water resource as some people view it as a loss of sovereignty to a people. This is the reason that 90% of water resources are still owned by the public sector. Since most developing countries are still in need of funds for various projects, donors have always encouraged them to privatize some key sectors of the economy in order to raise more funds for investments.
One major factor as to why water resources should be privatized is the speedy nature and quick investment in case it is given to the private sector domain. In this way the private sector has an incentive to complete capital projects within a shorter timeframe as compared to the public especially in the developing countries. Therefore most governments are finding it increasingly attractive to privatize water resources and hand over the risk and responsibilities to someone else.
Over the years it has also been seen that investor-run projects are more efficient than those that are run by the public. This can be determined using various yardsticks i.e payroll per unit of water or using the rate of return on capital, but either way it has been observed that investor-owned and run water utilities are by far more efficient than those in the public domain. The best practice water utilities and resources only compare to the average private-owned utilities. The main reason for this is because privately-owned water resources are well taken care of and run so as to attract clients who will in turn help it in making big profits. This therefore becomes very attractive to people who don’t really mind the cost of getting very good quality of services. Some people would rather pay more but be assured of the quality of the services they receive and this is where privately owned water resources come in very handy.
There are also cases where the public sector has been seen to act in a monopolistic manner in provision of certain services. This occurs when there is jus one corporation that has a role to provide given services in an area which instills the culture of lack of competition and general complacency and carelessness. In case the water sector is privatized, it is very likely that the quality of services would be greatly improved as there would be many options foe the consumer to choose from. Healthy competition would ultimately lead to reduced prices in the long term and consumers would b the greatest beneficiaries of these low prices for good quality.
Technological advancements and more stringent rules from the governments especially the environmental and public health regulatory standards that have been set are making it very unattractive for the public sector to participate in ownership of water resources. This therefore means that only the private sector will be able to raise such capital as the government will concentrate on other more important issues like national security which are hard to incorporate the private sector.
There has been a systematic reduction in funding of various infrastructures in the US by the government. According to a report that was published by the Water Infrastructure Network in April 2000, it shows that there would be an infrastructure funding deficit of about $11bn over the next 20years. This therefore implies that given the fact that federal funding have declined by about 75% in the last few years, it therefore cannot help in sustaining the demand for water in the US in the near future. The private sector must step in and intervene, to fill the gap for mostly replacing the existing infrastructure or building new ones to fulfill the demand by the population as well as that of the ever growing industrial sector.
There has been in the recent past an ideological movement towards wanting o establish a lean government and populists believe that downsizing the government can only happen if only privatization is employed in many areas of the economy. Government policymakers would therefore have to weigh if water service provision is a key government function contrary to which a long term plan should be established to have most of the water projects and services privatized. Most people would agree that the judiciary and court functions are core government functions but when it comes to road repairs and garbage collection, it becomes a very subjective and open to different kinds of interpretation. This therefore opens the room for people to ask if publicly owned water services are accountable to their taxpayers who in this case are the consumers. This utility’s perception will therefore only shape water resource ownership to privatization as well as pricing.
There are also cases where smaller geographical units like small municipalities can find it very cost-ineffective to operate their own water plants hence the need to outsource this. This is because it goes against the principle of the economies of scale and therefore these localities do better in giving out contracts to larger firms that offer their services on a wider scale. Therefore given the large number of services that a municipality should offer, it therefore makes economic sense for them to give out some of their services to other contractors so that they would concentrate on what matters the most to them.
Most governments also are not keen in efficiency of the production process as would be the case for a privately run company. This therefore would lead to a careless use of resources as people might be paid higher than the kind of technical knowhow they are providing. Since privatization even in other areas is mainly focused on keeping the costs down and maximizing the revenue, they are therefore very likely to be very conscious of what kind of labor that would be employed in the production process as it has to be at the most optimal level.
Corruption in public owned corporations is a vice that has always plagued very many sectors, the water sector included. Many have the mentality of robbing from public coffers because there I no sense of ownership of these entities. It is very less likely for this to be perpetuated if indeed an organization were to be owned privately because there is more scrutiny and monitoring of how resources are utilized. It is also very likely that politics would interfere with policy formulation on water resources in case they lie on the government’s domain. It is therefore to find a skewed distribution of resources in some areas than it is necessary. People from certain areas are also likely to receive better services and more promptly than others. This is very common especially in Third World countries where corruption is still rife. Through privatization however, it is only the proprietor who will be the sole decision maker and due to the less wrangles in policy-making, it is very likely that much will be accomplished. There will also be room for other owners to serve in the areas that haven’t been covered therefore giving many people access to these resources.
On a global perspective, it has always been the idea of the World Bank and the IMF to push for the privatization of water corporations because while most water subsidies encourage wasteful practices, commoditization of water resources should allow for market forces (i.e. supply and demand) to be used to set the water tariff, in which case will reduce water consumption and eventually lead to water conservation. In addition to this, it frees the demand for aid to assist in water projects and this would make these organizations concentrate on other important and more pressing issues such as disease in developing and Third World countries.
While there have been many solid reasons for privatization, it is worth noting a few invalid ones. These may be used to explain why privatization has often been viewed as a threat. Firstly, privatization should never be implemented just because of out of intimidation, corruption, or a false and artificial sense of urgency like we often see in the developing countries. Privatization should only be viewed as a means or bridge to achieving many other goals but not as the outright end in itself. In other words, pure rhetoric in itself should not be used to justify privatization of water resources. We therefore only have to privatize corporations if and only if it is very necessary given that due assessment has been done to make it more attractive than what is already in place by the public sector or the government.