2005 - 2006 - Pinsent Masons Water Yearbook 2012

PART 4: APPENDIX 2: PRIVATE SECTOR PARTICIPATION
Mozambique and Kazakhstan. It can be argued that these in turn stem from contacts made with
private sector construction and engineering companies over a long period of time as in Egypt
and South Africa.
Major city concession awards. This is the most abrupt approach, designed to channel private
sector investment and management towards infrastructure that has been unable to meet the
demands of urban expansion. This approach is popular in developing economies (for example,
Casablanca in Morocco and Buenos Aires in Argentina), with city contracts being on occasion
divided into zones (Jakarta in Indonesia) or into water and sewerage services (Budapest in
Hungary). These contracts typically concentrate on capital cities because they are seen as
having a lower risk profile than other areas and can thus attract private sector funding more
easily. Such is the impact of these contract awards that they often result in countries by-passing
the second stage of the market penetration criteria as outlined below.
Outside city-states such as Macao, national contract awards remain distinctly the exception.
Indeed, the only example to date has been for urban sewerage services for Malaysia. Regional
contract awards tend to concentrate on rural regions and their provincial towns as in the Czech
Republic. The only example of a regional privatisation including major cities to date was the
water and sewerage services privatisation in England and Wales.
Secondary markets (second wave)
While cases such as the Czech Republic or Malaysia experienced a far-reaching initial wave of
privatisation awards, the initial impact of privatisation is typically of a more piecemeal nature.
Secondary markets are defined as countries where less than five contract awards have been
made to date and less than 10% of the population receive either water or sewerage services via
the private sector. Normally one or two water companies would provide these services.
Tertiary markets (third wave)
Tertiary markets are defined as countries that have between 10% and 50% of their population
served by the private sector, usually via six or more separate contracts provided by at least two
companies. Such a market share can be attained via a single major city concession award as in
the case of major city contracts, via a single award. Examples of the former include Spain and
the USA, while examples of the latter include Argentina, Mozambique and Bulgaria.
Mature markets
This covers countries where more than 50% of the population is served by the private sector.
Opportunities exist as new markets are developed in response to environmental compliance (for
example, sewerage services in France) or through a specific regulatory exercise (for example,
inset appointments and MOD privatisation in England and Wales). Otherwise, apart from
acquiring extant companies, most opportunities are to be found in rural areas and small towns,
placing the emphasis on developing economies of scale and integrating a large number of small
contracts into a coherent management structure. To date, the only examples are to be found in
France, the Czech Republic, Chile and England and Wales.
Differing levels of private sector involvement
Commercialisation
Commercialisation calls for the municipal water and/or sewerage entity to be operated as a free
standing concern that does not involve cross subsidies with other municipal services and runs
on a self-financing basis. A commercialisation strategy has been adopted in a wide number of
countries, either as an end into itself or as a prelude to more extensive private sector
participation. Madrid’s Canal Isabel II, has operated as a commercialised entity since 1853,
without any firm plans for privatisation to date. In Australia, Sydney Water has been
commercialised, with bulk water provision services being handed over to the private sector.
Prior to the current privatisation programme, Chile has used commercialisation allied with shortterm
service contracts, delegating responsibility to the private sector for a narrow range of
375 Pinsent Masons Water Yearbook 2005-2006