Monday, January 7,
2002
Private industries
compete for water rights worldwide
By Joan Lowy
Scripps Howard News Service
Water will be to
the 21st century what oil was to the last - vast fortunes will
be made by controlling it and nations will go to war to preserve
access to it.
In a world in which fresh water is increasingly scarce, that axiom
is being taken to heart in the boardrooms of some of the globe's
most powerful corporations. In nearly every corner of the planet,
international water conglomerates are vying to sign operating
contracts, make deals, buy rights and acquire local water supply
and treatment companies.
It's a worldwide water rush.
Given that less than 1 percent of the earth's water is drinkable,
the corporate betting is that the price of water can only go up.
After all, fresh water is a finite resource for which there is
no substitute.
Estimates of the value of the annual global market for water range
from $300 billion to $800 billion. Already, an estimated 300 million
to 400 million people receive water through privately owned or
operated water companies.
The biggest, most underexploited water market on Earth is the
United States, with estimated annual revenues of $90 billion.
About 86 percent of the municipal water in the United States is
delivered by public utilities, while private companies deliver
13 percent.
Water companies are swiftly expanding their foothold in the United
States through operations and maintenance contracts for water
delivery and wastewater treatment services or by assuming temporary
or permanent ownership of water utilities.
By comparison, 85 percent of French customers get their water
through privately owned or operated water utilities. In the United
Kingdom, nearly all water services have been privatized for more
than a decade.
Major players
The two biggest global water companies are French - Vivendi Environment
and Suez Lyonnaise des Eaux, with more than 100 million customers
each. Over the past three years, both companies have made a major
push to establish themselves in the U.S. market by acquiring American
water companies.
In 1999, Vivendi purchased U.S. Filter Corp. for $6 billion in
cash. The same year, Suez - which built the Suez Canal in the
1860s - paid $1 billion for United Water Resources and bought
two major U.S. water treatment chemical producers, Nalco and Calgon,
for $4.5 billion.
The largest private water supplier in the U.S. is the giant German
utility RWE, with 14 million customers. In September, RWE announced
its purchase of American Water Works, headquartered in Voorhees,
N.J., in a $7.6 billion deal. American, which itself had been
gobbling up smaller water companies, was the largest publicly
traded U.S. water company, supplying water and wastewater service
to 1,400 communities in 23 states. RWE has more than 50 million
customers worldwide.
The only U.S. company that has been a major player in the global
water market is Enron, the Houston-based energy trading company.
Since filing for Chapter 11 bankruptcy in October, Enron has been
trying to sell its water subsidiary, Azurix, in an effort to raise
cash. RWE is one of the companies that have expressed interest
in buying Azurix.
Private water companies contend they can provide water services
more cheaply and efficiently than governments or public utilities.
Their services will be essential, the industry argues, if the
world hopes to stave off the impending global freshwater crisis
that's forecast to occur as water-scarce regions scramble to find
new supplies to quench growing populations.
At least 50 percent of municipal water is wasted through leakage
in developing nations, according to the World Bank. In the Philippine
capital of Manila, 57 percent of municipal water is lost to theft
and leakage. More than two-thirds of irrigation water never reaches
crops in the Third World because of inefficiencies.
The World Health Organization estimates that more than 1 billion
people lack access to clean water.
In the United States, many cities are faced with modernizing an
aging water infrastructure of pipes and pumps that dates to the
early and mid-20th century. New York City's leaky Delaware Aqueduct
has been losing as much as 1 billion gallons a month.
At the same time, water utilities are asked to meet tighter environmental
regulations to protect water quality. The cost to repair, replace
and improve the nation's water infrastructure is estimated at
nearly $1 trillion over the next 20 years, creating a looming
economic crisis for many cities.
Privatizing
Over the past few years, dozens of cities, such as Atlanta, Indianapolis
and Jersey City, have signed long-term contracts with large water
companies to operate and maintain their water services or to assume
ownership of local water utilities on a temporary but long-term
basis.
One of the attractions of privatizing water services is that private
companies often make tough decisions that elected officials would
rather forgo, such as raising water rates or cutting work forces.
"There is a price to be paid for clean, safe water,"
said Kathy Shandling, vice president of International Private
Water Association, an industry trade group. "This is going
on in this country now, where people who are suddenly getting
water bills who didn't get them before are saying, 'Water is an
act of God. I shouldn't have to pay for it.'"
At a 1998 conference in Paris, the United Nations' Economic and
Social Council Commission on Sustainable Development proposed
that governments turn to "large multinational companies"
for capital and expertise, and called for an "open market"
in water rights and an enlarged role for the private sector.
Some environmentalists and labor and human rights advocates sharply
question the wisdom of giving multinational corporations control
over a critical resource. They doubt that private companies will
ensure that water is affordable for the poor, that water quality
is protected and that enough water is left behind for the environment.
Access to clean fresh water should be treated as a human right,
they argue, rather than a commodity bought by the highest bidder.
Other environmentalists, despairing that governments are up to
the challenge of dealing with water scarcity, are taking a middle-ground
approach.
"We do not think the trend toward globalization and privatization
of fresh water can be stopped, nor do we think it has to be,"
global water expert Peter Gleick writes in a report on privatization
to be released next month.
The report says that in some circumstances, letting private companies
take responsibility for some aspects of water provision or management
may help millions of poor people receive access to basic services.
But it adds that a "headlong rush" toward private markets
has failed to address important issues and concerns.
There have been striking examples of private sector failures.
When Cochabama, Bolivia, turned over its water system to a private
consortium led by engineering giant Bechtel, water prices increased
so dramatically that riots broke out. Water services were returned
to public control.
After water was privatized in Puerto Rico in 1995, poor communities
complained they had no water while water giant Vivendi supplied
tourist resorts and U.S. military bases with as much as they could
consume.
In Argentina, when the French company Generale de Eaux got a contract
for water delivery, prices doubled and quality deteriorated. The
company was forced to pull out when people refused to pay their
bills.
"We think people ought to pay a fair price for a resource
that is scarce and valuable," said Jane Kelley of the U.S.
consumer group Public Citizen. "But we don't want to see
them paying amounts that encourage significant profit margins
and CEO salaries that are astronomical."
Contact Washington
bureau writer Joan Lowy at lowyj@shns.com
On the Net: Pacific
Institute for Studies in Development, Environment and Security
- www.pacinst.org
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