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Among the UN’s Millennium Development Goals (MDG’s) are targets to reduce by half the numbers of people in the developing world without access to clean water and waste water systems by 2015. Although brave in their moral ambition, they were weakened by not having a clear plan as to how the reductions were to be achieved. It was expected that the private sector would play a key role; in fact, we may look back on 2000 as the high water mark of private sector activity.
The “Big Three” (Veolia, Ondeo and RWE Thameswater) began reducing their non-European activity in 2002. The French are now focusing on China, and to a lesser extent India, while RWE is exiting completely. Each has its own reasons for rationalisation, but wider experience ( Manila, Buenos Aires or Tanzania, the collapse of Azurix and withdrawal of Anglian) raises questions about the viability of the market itself.
Meanwhile, the MDG’s are unlikely to be achieved until well into the century – despite significant amounts of money now being made available by intergovernmental and multilateral agencies for water projects.
All of this raises three key questions:
- Is private sector involvement necessary if the world is to satisfy its water needs efficiently and equitably?
- Is there in fact still such a thing as a “world water market” to attract the private sector?
- What form could future private sector involvement take?
Clearly the answers to these are complex and lengthy – and interrelated; but we’d like to offer some fundamental principles of the current status quo.
Firstly, private sector activity in emerging economies’ water sectors was even at its height modest - well under 10%, by population served.
So the emphasis will always be on publicly owned systems. The issue is whether private sector know - how can transform that public sector through some form of flywheel effect - one acceptable to all stakeholders.
Secondly, there probably never was a world water market. There is rather a series of regional sectors, each requiring variants of the standard business models. In addition, the much greater sensitivity of consumers to the product makes global branding a far more delicate proposition than for (eg) electricity. Water is a commodity used entirely in situ, and thus also operates in a context that is very local, very public and very political.
Lastly, the successful future players in each regional market are likely to be those already well established in that region in a related business, rather than current global players in other sectors or existing water players in other regions. We believe that the next generation of major regional players will be family-owned construction concerns – such as those already active in China, Malaysia, Thailand and the Philippines. They have the core skills, they understand the politics, and they can deploy significant resources relatively easily. They have in many cases been partners to western firms, and have learned from their experience – good and bad.
Interested in discussing these ideas further? Contact us... |
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