2005 - 2006 - Pinsent Masons Water Yearbook 2012

…while the real cost of conflict remains unappreciated
xiv
INTRODUCTION
Five years on from the ‘people’s victory’ in Cochabamba and the only sign of movement is the rustle of
unread declarations as the NGOs wax in the hubristic comforts of their home countries. The only hope
for investment in new assets in the Bolivian city lie in aid funding, as it is seen as an unacceptable risk
by all mainstream funding sources. As a result, the poor continue to depend on water vendors for
overpriced water while the better off receive subsidises supplies courtesy of the municipality. All agree
that the contract as awarded was a mess, but its fallout has created an even worse one.
This has in turn poisoned what was an effective contract delivering genuine service extension to the
poor in La Paz and El Alto. The bitter irony here is that for all criteria from service delivery to
affordability, La Paz and El Alto outperformed Cochabamba by some distance during 2004. When
people do battle on others’ behalf, they do not necessarily do it with their welfare in mind.
So much to say…
The launch of the UN Water Decade for Action and the monitoring of the Millennium Development
Goals’ progress resulted in a notable number of reviews, studies and papers. These have also been
notable for the relative absence of hard numbers as to the progress towards these goals since 2002 or
to the costs of achieving them.
…so little said…
Perhaps many organisations have been aiming to release their latest findings at the Fourth World
Water Forum in Mexico City over the fourth week of March 2006. These, along with the second edition
of the UNEP’s Global Water Assessment, also due to be released in March 2006 ought to provide a
better idea of what has happened during the first five years of these initiatives.
…and a lot to look forward to
The shift from a seeming tide of global consolidation a few years ago to more local approaches has
continued to develop and looks set to make further progress, prompting a new diversity of corporate
and financial approaches. While this raises concerns about corporate and operational experience and
the need for suitable financial backing, the complexity and subtlety of the private sector’s new
contribution to water and sanitation service extension is becoming ever more fascinating.
New financing mechanisms are being developed, especially by the World Bank and the IFC in relation
with national ODA agencies to encourage new sub-sovereign funding of municipal and private sector
projects by high net worth individuals as well as companies. Many of these are currently for small
projects (typically for US$ 8-15 million), but are set to emerge as a significant source of funding. What
is most attractive about some of these developments is that they will enable private investors in
developing economies to invest in their home economies rather than resorting to the ‘safe havens’ of
Europe and North America.
New issues, especially in Chile (Suez and Agbar aim to place some of their holding in Aguas Andinas
and RWE Thames is considering a market flotation of its Chilean companies) mean that the
emergence of local players is set to continue, along with their influence. The latter may result in the
recently floated Manila Water acquiring part of Maynilad Water’s equity. The cash flows that attract
private equity financiers are also attractive to local companies looking to invest in concessions and as
seen in China and Argentina over the past two years, have brought new funding to the sector.
The hope of a new realism in the relationship between the private sector and anti-corporate bodies
remains a fragile one. While the anti-private sector lobbies are already seeking to take the initiative in
Mexico City next March, the real extent of the need for new sources of management and finance may
yet result in more pragmatic approaches either during the Forum or in its aftermath. The need for this
cannot be in doubt.
Finally a couple of pointers for the future of water supplies, both from Australia, where water resource
issues are becoming pressing, to say the least. The Australian newspaper noted that demand for
water is set to outstrip population growth by up to 35% over the next 25 years in the country’s major
cities in particular due to the growth of single and two person households at the expense of the
traditional family unit. Studies in Melbourne have shown that the average water use for the first
occupant is 220 litres per day, 176 for the second and 110 for the third and subsequent occupant.
Pinsent Masons Water Yearbook 2005-2006