2005 - 2006 - Pinsent Masons Water Yearbook 2012

The private sector’s role
PART 4: APPENDIX 2: PRIVATE SECTOR PARTICIPATION
Suez currently serves 46 million people in developing economies and 8.5 million people,
classified as among the urban poor. VE, UU, Bouygues and RWE, among others, also provide
services to the urban poor where there were none prior to privatisation. Suez’s 2002 publication
‘Bridging the Water Divide’, provides a number of case studies. The emphasis lies in developing
a new infrastructure that meets current needs (piped water and sewerage) that can be upgraded
as and when higher standards of service delivery are needed. By mobilising local labour at
street level, the costs of developing these services can be greatly reduced. Finally, PSP has
much to offer in making sure that the greatest benefits can be delivered for a minimal cost.
Cost of extending sanitation and sewage treatment (opex and capex)
New service connection $ per person
Septic tank 160
Sewer (local labour) 175
Conventional sewer 300
Sewerage and secondary treatment 450
Sewerage and tertiary treatment 800
Source: UN Millennium Project Task Force on Water & Sanitation 2005
In fact, for medium to larger cities, the western experience shows that the extra cost of
secondary and tertiary treatment is more likely to be in the range of $150-250 per population
equivalent (PE), rather than the $250-400 range implied here. Much of the disparity is due to the
relentless drive for lower costs in countries such as the UK. In Europe, using the private sector
to develop sewage treatment assets has driven down capital costs by 15-40% since the early
1900s.
In per capita terms, improving urban water, sewerage services and wastewater treatment ought
not to exceed US$100-140 per capita, while providing these services from scratch should not
cost more than US$300-450 per capita, less US$120-160 without full wastewater treatment.
Suez has been able to provide basic water and sewerage services in Latin America for US$100
per capita. Rural service provision is appreciably cheaper, concentrating on the ready
availability of water a short distance from each house, along with sanitation and effluent
recovery and composting systems.
Dealing with corruption
There have been several highly publicised cases of corporate malpractice relating to the World
Bank supported Lesotho Highlands Dam project. While no companies directly involved in the
water and wastewater sector have been included in the World Bank’s listing of proscribed
entities, the perception of corporate corruption in the procurement of private sector participation
in the sector has been relentlessly exploited by the various anti privatisation bodies.
At the same time, the private sector’s response to these allegations has been reactive in nature.
A number of wide ranging statements, commitments and charters have been launched, but
these have tended to avoid directly addressing the complaints raised by the various anti
privatisation lobbies. As is the case with most research on the performance of Public Sector
Participation (‘PSP’), investigations into corruption have chiefly been carried out by academics
attached to anti-privatisation lobbies and a range of NGOs, principally in North America. This
gives the anti-privatisation lobbies a great advantage when communicating ideas to the media.
In consequence, anti-PSP polemics are effectively unchallenged.
In terms of perception, it is fair to say that the international media, politicians and NGO lobbies
see the private sector in general and privatisation in particular as causing corrupt practices to
take place in the provision of water and sewerage services. In reality, corruption tends to be
endemic under public ownership and operation. This is because water and wastewater per se
are exposed to corrupt practices at a number of operational levels due to the nature of the
382 Pinsent Masons Water Yearbook 2005-2006