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A New Breed of Private Sector: Entrepreneurs and Urban Water

Julia Bucknall's picture

“Nothing is softer or more flexible than water, yet nothing can resist it.” Lao Tzu

In the film Quantum of Solace, James Bond battles a corrupt environmentalist to prevent a company from taking over Bolivia’s water supply. The company planned to enrich itself by creating a monopoly and charging excessive rates for water. Fortunately, Bond foils the plot, and the people of Bolivia do not lose affordable access to their water resources.

The film taps into some commonly held fears about the water supply. Some think private companies will make profits at the expense of poor people who will have no choice but to use their services. Others think that we are inviting trouble, by allowing companies to control these essential services. Many people are simply uncomfortable with the idea of large, multinational corporations managing water services.

I get a lot of questions about this, since the World Bank has often facilitated private sector engagement in developing and managing infrastructure, including water. We have learned a lot about how governments can manage the private provision of public services. And, the private sector itself is changing in fundamental ways. In recent years we’ve seen a new trend: the emergence of domestic private sector in the water sector.

Moving from Niche-Market to Mainstay

Previously, private provision in water was dominated by international companies who served the largest cities. But today, domestic private providers do much more than that.

A World Bankstudy in 2009 noted that recent public-private partnerships in urban water have attracted regional and developing country investors, not only the handful of international investors it once relied upon.

Domestic private sector expansion beyond major urban areas into smaller cities and towns, where the poor are increasingly concentrated. Seeing private operators emerge to serve rural populations is particularly exciting. In Sub-Saharan Africa, governments such as Benin, Niger and Rwanda have made strategic policy decisions to delegate the management of rural water supply schemes to local private entrepreneurs. In seven African countries, the Bank’s Water and Sanitation Project (WSP) estimates that 25 percent of small piped schemes are now under contract to private operators.

Fortunately, there will be no need for James Bond’s services in these cases. Small, domestic firms are helping to expand access to affordable water, not take it away.

Reading related to this trend:

 

     Small-scalePrivateServiceProvidersofWaterSupplyandElectricity: AreviewofIncidence, Structure, PricingandOperatingCharacteristics (2005)

     Public-PrivatePartnershipsforUrbanWaterUtilities: AReviewofExperiencesinDevelopingCountries (2009)

     Public-PrivatePartnershipsforSmallPipedWaterSchemes: AReviewofProgressinSevenAfricanCountries (2010)

     ImprovingRuralWaterServiceinRwandawithPublic-PrivatePartnerships (2010)

     SustainableManagementofSmallWaterSupplySystemsinAfrica: PractitionersWorkshopReport, October 6-8, 2010 (November 2010)

     TappedOutIssue #1 ofHandshake: IFC'sQuarterlyJournalonPublic-PrivatePartnerships (March 2011)

Julia Bucknall is a Manager of the World Bank’s Water Anchor. Upcoming posts will cover evolving business models, expansion of services to the poor, and persifying financing sources in water.

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