2004 July - David Hall - Privatising Other People's Water - The Contradictory Policies of Netherlands, Norway and Sweden
2004 July - David Hall - Privatising Other People's Water - The Contradictory Policies of Netherlands, Norway and Sweden
org
by
July 2004
1. INTRODUCTION ..................................................................................................................................................... 2
2. NETHERLANDS....................................................................................................................................................... 2
2.1. NEW LAW FOR NETHERLANDS OWN WATER ........................................................................................................ 2
2.2. FUNDING PRO-PRIVATISATION PROGRAMMES ..................................................................................................... 2
2.3. IHE DELFT – SPONSORED BY SUEZ ..................................................................................................................... 3
3. NORWAY .................................................................................................................................................................. 4
3.1. NORWAY’S OWN WATER...................................................................................................................................... 4
3.2. NORWEGIAN GOVERNMENT FINANCES PRIVATE SECTOR INFRASTRUCTURE ........................................................ 4
4. SWEDEN .................................................................................................................................................................... 5
4.1. WATER IN SWEDEN ............................................................................................................................................. 5
4.2. SUCCESSFUL INTERNATIONAL SUPPORT ROLE: PUPS .......................................................................................... 5
4.3. FUNDING PRIVATIZATION INITIATIVES ................................................................................................................ 5
4.3.1. Public-Private Infrastructure Advisory Facility (PPIAF) ......................................................................... 5
4.3.2. Supporting WUP ........................................................................................................................................ 6
4.3.3. Funding research for Suez’ private concession......................................................................................... 6
4.3.4. Global water Partnership (GWP) .............................................................................................................. 6
5. DISCUSSION............................................................................................................................................................. 7
1. Introduction
The Nordic countries, including Norway and Sweden, are famous for their strong welfare state and public
services. Stockholm’s public sector water company host the world’s leading annual conference of water, in a
week that celebrates its achievement of cleaning the waters of Stockholm harbour. The Netherlands is
equally famous for its water services, managed and financed through a network of public authorities, banks
and managements. In all three countries, not surprisingly, there has been almost universal resistance to the
idea of allowing private water companies to run this public service – in the Netherlands, a proposed law to
make private sector water supply illegal has received backing from nearly all parties.
Yet in all three countries, the agencies responsible for aid to developing countries are financing and
supporting programmes that are promoting water privatization in developing countries. This paper presents
the details of these aid policies, and discusses the problems raised by the policies themselves and the
contradictions with their domestic water supply policies.
2. Netherlands
Under the proposed law (Art. 3i, 3j), it will be forbidden for anybody to produce drinking water for
consumers, or to deliver drinking water to consumers, except for a water company which is a controlled
directly or indirectly by a public authority – state, province, municipality or water board (Art 1f.,g.). This is
interpreted as outlawing even privately run BOT treatment plants.
The BNWP does a range of work, but includes promotion of privatization structures that could be illegal in
the Netherlands itself under the new law. For example, a January 2004 discussion paper, funded by the
BNWP, advocates the use of franchising for water services in developing countries, using a private business
model. The report points out that franchising is most used in retail food outlets, like Kentucky Fried Chicken
(KFC), and advises that: “Potential franchisors and franchisees require an entrepreneurial spirit that is
focused on actively developing new business opportunities”. 4
Other BNWP products include two projects aimed at developing markets for private water companies in
Europe and central Asia. One (project no 57) called “Market Development for Private Water Utility
Management in the Europe and Central Asia Region” 5, an ongoing project which
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“aims to initiate better access to water supply and sanitation (WSS) services for the poor through
outsourcing, management, or lease contracts” …[by] “Assessing the possibilities of how to increase
the number of players in the market, risks for the private sector and consumers”.
A second project, called “Potential for Domestic Private Sector Participation in Water Supply Service
Delivery in the Europe and Central Asia Region” (project no 77) 6, describes its aim as:
“Exploring innovative methods for increasing private management of water supply and sanitation
utilities that may open the domestic market for local players”.
The BNWP is also active in Brazil, where the current government has a clear policy, on which it was elected,
of developing water and sanitation through public sector provision. Nevertheless the BNWP is financing
project no. 60 “Improving Efficiency and Competition of Water Supply and Sanitation Provision in Medium
and Small Municipalities in Brazil” 7 which says it has the:
“overarching objectives of (i) increasing the level of knowledge regarding PSP[private sector
participation] options, benefits, and processes in water and sanitation among key players at the
municipal level in Brazil; and (ii) strengthening the quality of PSP contracts….”
The project’s active promotion of a pro-private policy in Brazil includes the distribution of detailed
materials:
“recent discussions with mayors have revealed a low level of knowledge regarding options for
PSP …..The activity addresses the above knowledge gap in order to enable mayors and
municipalities to make informed decisions regarding WSS alternatives, including PSPs. To this end
an existing Toolkit for PSP in water and sanitation is being updated and a workshop is being
developed and conducted.”
The BNWP is also being used to advise the Argentinean government on renegotiation of the privatised utility
concessions (project 51) 8. It is a matter of political controversy whether these contracts contributed to the
economic crisis, but the aims of the project are clearly to rescue the privatised concessions, of which it takes
a very benign view:
“Private sector participation (PSP) arrangements in Argentina have been successful in extending
coverage of water and sanitation to the poor. The success of the renegotiations has critical influence
on this extended coverage as well as future extensions.”
In the most recent review of progress, the Dutch government is reported as having given a favourable
evaluation of the BNWP, observing that the support from the Netherlands is crucial to the projects: “They
are innovative and additional in the sense that it is unlikely that they would be financed with WB
resources”.9
In the next two years this institute accepted funding from water multinational Suez, in the form of general
financial support, then of specific funding for a professorship; and it signed a bilateral agreement with Suez
that it would aim to use Suez executives as lecturers on its courses.
In October 2002 Suez and UNESCO announced that the IHE will receive 300,000 Euros from Suez11; and on
17 Jul 2003 UNESCO-IHE accepted an unspecified amount of money from Suez to finance a professorship.
According to the memorandum of understanding:
“Suez committed to financing a Professorial Chair relative on the topic of "Public-Private
Partnerships" (PPP) in the field of Water and Sanitation. This Chair will be established at UNESCO-
IHE on the basis of an average one day per week formation, and focuses on aspects related to the
management and business administration of private utilities…”
In addition IHE will use speakers from Suez in their education programme:
“Both organisations will also identify opportunities to involve experts of the SUEZ group as guest
lecturers in the educational programmes of UNESCO-IHE.” 12
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3. Norway
There are few conditions and little accountability in the agreement. The WB is allowed to use the funds to
support its emerging strategy on ‘Private Sector Development and Infrastructure’, including paying for a
secretariat within the WB’s infrastructure division; and can “commingle” the money with other funds; it has
to exercise the same care as it does with its own money, but otherwise the WB “shall have no further liability
to the donor”. 15
The programme covers water, energy, urban development, and transport and private sector development,
with two main ‘windows’. 16 The first window concerns “the creation of a sound investment climate as a
prerequisite for private sector development and market-led growth”. The second window concerns
‘infrastructure service delivery to the poor’ – which, despite acknowledging some problems with the private
sector, in its specific headings makes uncompromising reference to the WB’s private sector development
strategy:
“The Bank Group's Private Sector Development Strategy calls for more extensive use of private
sector solutions in infrastructure -- through concession arrangements with private companies, private
participation in infrastructure projects”.
On the water sector, the programme is explicitly entirely concerned with the private sector and conscious that
it is promoting the interests of the private companies:
“Over the next three years we see expanded lending and non lending services emphasizing water
concessions for the poor (private sector management of water supply), small-medium enterprise
initiatives in water and sanitation (urban, small town, rural), and community based approaches. The
global trust funded Water and Sanitation program is a vital partnership and has broad Bank regional
participation. It is closely aligned with corporate goals in the water sector.”17
Up to February 2004, Norway has put $15m into the NTFPSI. Nearly $7m of this has been ‘commingled’
with existing projects, including, in respect of water, the WB’s Public-Private Infrastructure Advisory
Facility (PPIAF).
Norway has also hosted and promoted the PPIAF’s activities on at least one occasion. In 2002 the
Norwegian Regional Adviser for Private Sector Development 18 organised a workshop for embassy staff in
south Asia, which included a speaker from the PPIAF urging the need for private sector participation in
developing water supply services in the region: one participant questioned whether the private sector was so
necessary, and referred to the example of water in Norway itself. 19
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4. Sweden
SIDA itself, like others, regarded these partnerships as great successes. The SIDA review of its overall
municipal twinning programme described it as “a successful experiment”; the review of the Kaunas
experience in 1998 described it as “overwhelmingly positive” 20; the evaluation of the twinning with three
smaller cities in the three Baltic states stated that “the water enterprises have gone through an enormous
change,. …Water companies have learned to manage their businesses according to western standards”,
though suggesting that twinning depends on the commitment of individuals. 21 The review of the Riga
twinning set out a striking summary of major technical, environmental, financial, managerial and
governance achievements: “SWC [Stockholm Water Company] has assisted RW [Riga Water] in the
preparation and implementation of an investment programme (RWEP) for improving the city’s water supply
and wastewater treatment. The RWEP has promoted/will promote environmentally sustainable management
and improved municipal infrastructure in the Baltic region. The effluent load from Riga to Daugava River,
and further to the Baltic Sea, has been essentially reduced. As a direct result of the project, the quality and
reliability of water supply and wastewater services has improved in Riga. The twinning arrangement has
essentially stimulated and supported the process of transforming RW into an autonomous, self-financing and
self-governing enterprise. There is a better understanding and appreciation on a political level of the
requirements for arriving at an administratively and financially independent water company. RW is very
satisfied with the twinning arrangement and wishes to continue close cooperation with SWC beyond the
current twinning agreement. RW currently complies with all the covenants of the financiers.”22
This shift towards support for privatised water, outside Sweden, can be seen in SIDA’s support for a number
of key global initiatives.
The PPIAF necessarily supports the private sector option: it is “aimed at helping developing countries
improve the quality of their infrastructure through private sector involvement.” The PPIAF uses
privatization as a simple measure of success. For example the 2003 annual report states that: “As a result of
PPIAF-funded strategy recommendations, 11 countries have adopted or are now implementing 14 different
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sector reforms in water, power, gas, telecommunications, or transport. These policies involve core strategies
for private provision of infrastructure…”25
Some current and recent projects illustrate the impact of PPIAF projects. In India, PPIAF:
“Presented a seminar on best practice in private infrastructure, necessary legislation and regulation,
and financing options to jump- start private infrastructure contracts. Some 250 key decision makers
from national, state, and local governments and the private sector attended”
The seminar concluded that private participation needed: “Strong and sustained political support from the
highest authorities”; expert studies - which would need financing from donors; a further series of regional
seminars around the country “to encourage private participation for better efficiency and service quality.”;
and the formation of “a core group in the Government of India with representatives from States,
cities, investors, operators, bilateral/multilateral agencies be constituted to accelerate the reform in water
supply and sanitation sector”. 26 Similar projects in Kenya provide simple statements of objectives:
“Preparing a strategy for the privatization of the water supply and sewerage in Nairobi and build consensus
among stakeholders on the preferred option” (this project involved $490,000 from the PPIAF) 27;
“Developing a road map for privatizing water supply and sewerage in Mombassa and the coastal region and
building consensus on preferred options that would expand services to the poor” ($441,000) 28.
One PPIAF project is in Lithuania, “Reviewing options and recommending an approach for the structure and
development of private sector participation in water and wastewater service provision.” (at a cost of
$288,000). 29 Ironically, SIDA is now co-financing a project to introduce privatisation into one of the
countries whose water sector has been run efficiently as a result of the SIDA-financed twinning.
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France 54
SDC, Switzerland 196
DfID, UK 221
Denmark 123
SIDA, Sweden 982
Total 2 916
Prepaid Contributions -75
2 841
Source: GWP Annual Report 1998
5. Discussion
These policies are part of an increasingly coordinated and globalised system of aid, which involves not only
these three countries, but all the major donors and development and financial agencies. An increasing
proportion of aid is channelled through special vehicles of the World Bank such as the PPIAF, or
coordinated through international bodies such as the EU and OECD. This flow of aid shares common policy
conditionalities, often linked to private sector participation in sectors such as water and energy, with the
policies laid out by the IMF and the World Bank in PRSP and CAS reports playing a central role. The
World Bank’s policy and aid processes are still driven by strategies which make the private sector central –
like the Private Sector Development Strategy (PSD) – and by the growing importance of the International
Finance Corporation (IFC), the bank’s division which lends only to the private sector, and the Multilateral
Investment Guarantee Agency (MIGA), which insures private companies against political risk.33
There are three key reasons for concern with these policies.
The first is that they are promoting policies which are certainly unbalanced and arguably unwise - they
exclude or downplay the option of public sector provision, despite the fact that the public sector provides
95% of the world’s drinking water, and that historically the development and extension of public water and
sanitation has been successfully carried out by public authorities – as in the cases of Netherlands, Norway
and Sweden. 34 The limitations of the private sector in water and energy are now recognised even by the WB,
which acknowledges in its 2003 infrastructure review that: “the recent decreases in private sector interest in
infrastructure show that reliance on the private sector alone will not be sufficient to guarantee a scaling-up of
infrastructure service provision.” 35
The second is that it undermines national sovereignty, and provides resources that are tied only to the private
sector option, or promote only the private sector option. This is the more important because the policies are
highly contentious.
The third problem is one of transparency and accountability of donor organisations. When aid is channelled
through international joint funds, there is less public accountability. The SIDA water strategy paper has no
mention of the PPIAF, nor of its support for the Suez concession in Bolivia; it does mention the support for
the African Water Utility Partnership – but not the fact that at least some of it is intended to make public
utilities more attractive purchases for the private sector. Yet in countries like Norway, Sweden and the
Netherlands, which all retain water within their own public sector, it is not clear that these conditional aid
policies would have public support.
The contributions of Sweden, Netherlands and Norway have been highlighted not because they are the major
players in supporting private sector expansion in water – the aid programmes of the UK and France remain
of greater importance – but because of the stark contrast between these countries domestic policies, founded
on the central role for public authorities, and their aid policies, based on funding the development of private
activities.
The contradictions between these positions all exacerbate the three problems identified:
• If public water is the best system for these three countries – why are they advocating a worse option
for developing countries?
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• If nations are free to decide their own policies, why are countries tying aid to one set of policy
options – especially when those options are rejected at home.
• And is it possible to assume public support for aid funds which are channelled through indirect
‘trusts’ and promotions, especially when these are promoting a policy so at odds with the publicly
supported municipal systems sustained by the environmental ministries of the same governments?
1 For a detailed account of the Dutch water system see Private Business, Public Owners : Government Shareholdings in Water
Companies (ed. Maarten Blokland, Okke Braadbaart, Klaas Schwartz), International Institute for Infrastructural, Hydraulic and
Environmental Engineering (IHE), Delft, 1999
2 28 339 Wijziging van de Waterleidingwet (eigendom waterleidingbedrijven) http://www.tweede-kamer.nl/images/22_28198.pdf
3 Now expected to happen in September 2004.
4 Water Supply And Sanitation Sector Board Discussion Paper Series paper No 2 January 2004: Can The Principles Of Franchising Be
Document
6http://wbln0018.worldbank.org/bnwp/portfolio.nsf/58606b1be4c6e90485256c1b00712556/8f97257c0589e1fb85256d43006a8170?Open
Document
7http://wbln0018.worldbank.org/bnwp/portfolio.nsf/58606b1be4c6e90485256c1b00712556/9c2bd39b6f4491f585256c14007b2e72?Open
Document
8http://wbln0018.worldbank.org/bnwp/portfolio.nsf/f8ec9bd08459781e85256c1b00670dfd/bf95806d8611f5ef85256c14007b2e71?OpenD
ocument
9 BNWP Progress Report: Second Quarter, 2003 - April 1 to June 30, 2003
http://wbln0018.worldbank.org/water/bnwp.nsf/files/BNWP2003Q2.pdf/$FILE/BNWP2003Q2.pdf
10 Paris signature ceremony clinches deal for a new UNESCO-IHE Institute for Water Education in Netherlands 18-03-2003
http://unesdoc.unesco.org/images/0013/001306/130669e.pdf ; see also Report On The Unesco-IHE Institute For Water Education June
2003 http://unesdoc.unesco.org/images/0013/001306/130669e.pdf
11 SUEZ : Water for all Koïchiro Matsuura, Director- General of UNESCO, and Gérard Mestrallet, Chairman and CEO of the company
SUEZ, have signed a cooperation agreement to improve access to water for all.
http://portal.unesco.org/en/ev.php@URL_ID=10541&URL_DO=DO_TOPIC&URL_SECTION=201.html
12 SUEZ Co-operation in Education and Research in the field of Water and Sanitation Initiated. 17 July 2003
http://www.ihe.nl/vmp/articles/News/NEW-MoU_SUEZ.html
13 The agreement is at http://wbln0018.worldbank.org/infrastructure/ntfpsi.nsf/files/ntf-psi.pdf/$FILE/ntf-psi.pdf
14 See Norwegian Trust Fund for Private Sector and Infrastructure http://wbln0018.worldbank.org/infrastructure/ntfpsi.nsf
15 See agreement at http://wbln0018.worldbank.org/infrastructure/ntfpsi.nsf/files/ntf-psi.pdf/$FILE/ntf-psi.pdf
16 See ‘Description of NTF Windows of Funding and Potential Activities or Programs’
http://wbln0018.worldbank.org/infrastructure/ntfpsi.nsf/pages/Description+of+NTF+Windows
17 See ‘Infrastructure Services for the Poor Window’
http://wbln0018.worldbank.org/infrastructure/ntfpsi.nsf/pages/Infrastructure+Services+for+the+Poor
18 See http://www.newdelhi.mfa.no/Embassy/Consulates+and+Offices/Office+of+the+Regional+Adviser/default.htm
19 For the workshop see http://www.newdelhi.mfa.no/NR/exeres/3D9AF498-B8C7-463D-B349-9033D59051DB.htm ; for the PPIAF
presentationsee http://www.newdelhi.mfa.no/NR/rdonlyres/3D9AF498-B8C7-463D-B349-
9033D59051DB/2754/T2e2PPIRegionalPSDSeminarDelhifinal.ppt .
20 Sida Evaluation 98/19 Twinning Cooperation between Kaunas water Company, Lithuania and Stockholm Water Company” August 1998
21 Sida Evaluation 00/41 Water and Environment Project in Estonia, Latvia and Lithuania
22 Sida Evaluation 00/7 Twinning Cooperation between Riga Water Company and Stockholm Water Company” May 2000
23 Sida Strategy for Water Supply and Sanitation Jan 2004 http://www.sida.se/content/1/c6/02/44/24/SIDA3592_web.pdf . It is
instructive to compare the previous policy paper on Management and Use of Water Resources (1999), which had little mention of the
private sector and a more prominent account of the Baltic twinnings.. http://www.sida.se/Sida/jsp/polopoly.jsp?d=1265&a=13754
24
PPIAF Quarterly Report: (October 1- December 30, 2002) http://www.ppiaf.org/Reports/FY03Q2%20cover.pdf
25 PPIAF Annual Report 2003 http://www.ppiaf.org/Reports/PPIAFAR2003.pdf
26 Private Sector Participation In Water Supply And Sanitation Seminar Conclusions
http://wbln0018.worldbank.org/ppiaf/activity.nsf/files/A091599-S-WTS-CS-IN-FR.pdf/$FILE/A091599-S-WTS-CS-IN-FR.pdf
27 http://wbln0018.worldbank.org/ppiaf/Activity.nsf/DocByUnid/7D36D9D8FB81415A8525696B005F6202?Opendocument
28
http://wbln0018.worldbank.org/ppiaf/Activity.nsf/DocByUnid/771561E1E011D47885256A220049D8BF?Opendocument
29
http://wbln0018.worldbank.org/ppiaf/Activity.nsf/DocByUnid/9F106EF081C2B02F85256AA20055C34D?Opendocument
30
SIDA evaluation 02/22 Water Utility Partnerships Project for Water Utility Management and Unaccounted for Water, Phase 1.
31
Water And Sanitation Program: Economic And Financial Evaluation Of El Alto Pilot Project: Condominial Water And Sewerage
Systems And Related Innovations Vivien Foster The World Bank Group April 2001
http://lnweb18.worldbank.org/eap/eap.nsf/Attachments/Water-Informe/$File/InformeFinalApr09.pdf
32 The technical advisory committees (TACs). GWP: Annual Report for the Financial Year 1998
33 For a longer discussion of these issues see the PSIRU/War on Want report on
34 For a general discussion of global historical experience with public services, see: ‘Public Services Work’ September 2003
http://www.psiru.org/reports/2003-09-U-PSW.pdf
35 Infrastructure Action Plan.
http://wbln0018.worldbank.org/UrbanCalendar/urban.nsf/0/b009a39793dc8ca885256d5c00789761/$FILE/ATTNKULV/Infrastructure%20
Aciton%20Plan%20-%20June%2019.doc
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