Defending global essentials: Notes from Kyoto<\/p>\n
Yanuar Nugroho, Director, The Business Watch Indonesia,
\nSurakarta, Central Java, yanuar-n@unisosdem.org<\/p>\n
While 1.1 billion people do not have access to safe drinking
\nwater and almost 2.4 billion do not have adequate sanitation,
\naccording to the United Nations Development Program (UNDP), only
\n1.6 percent of development assistance is spent on providing water
\nand sanitation services. Over 2.3 billion people suffer from
\nwater-related diseases, and it is the leading cause of death in
\nthe world.<\/p>\n
The Third World Water Forum (WWF) in Kyoto, Japan, from March
\n16 to March 23, failed to address the most important issue in the
\nwater crisis: Providing populations, especially the needy, with
\naccess to water.<\/p>\n
The main message from various related fora prior to Kyoto was
\nclear: The most essential component in harnessing water's
\npotential is to implement reforms in water-related sectors --
\nwater resources management, water supply and sanitation,
\nirrigation and drainage, hydropower and water\/environment -- and
\nof course, to increase investments from the private sector. What
\ndoes this imply?<\/p>\n
To the private sector, the gloomy arithmetic of water -- as
\nhighlighted at the second World Wild Fund for Nature (WWF)
\ngathering in the Hague in the Netherlands -- is also the "gloomy
\narithmetic of water financing".<\/p>\n
The proposal of the chairman of the World Panel on Financing
\nthe Global Water Infrastructure, Michel Camdessus, titled
\nFinancing water for all, was released at the end of the third WWF
\ngathering to finalize the sequel.<\/p>\n
The proposal, however, was rejected strongly by non-
\ngovernmental organization (NGO) activists at a massive
\ndemonstration during and after the international panel. They
\naccused Camdessus, the former managing director of the
\nInternational Monetary Fund, of being a liar. Why?<\/p>\n
First, Camdessus argued that there was widespread agreement
\nthat the flow of funds for a water infrastructure had to roughly
\ndouble in size, with the increase to come from all sources.<\/p>\n
Yet this is difficult when public agencies such as governments
\nhave not really prioritized their water sectors because the
\nsector tends to be decentralized. Hence the need for reforming
\nwater-related institutions if they are to absorb increased
\nfunding.<\/p>\n
Sustainable cost recovery is essential, both from generating
\nmore internal funds and creating a stable framework for future
\nrevenue transfers.<\/p>\n
Second, to reach this goal, responsibilities for water have
\nindeed been delegated to local bodies, but without conferring
\nenough power, human resources and funds to make it work. Thus,
\nlocal community organizations and local businesses, vital to the
\ntask of improving services, need resources and the power to do
\nthis.<\/p>\n
Third, although international loans and equity investment in
\nwater have been low and falling, banks and private companies are
\nmore aware than ever of the risk-reward tradeoff. Official aid
\nfor the water sector has also been falling, but there are good
\nprospects for reversing this.<\/p>\n
The sovereign risk of projects, including the foreign exchange
\nrisk, is a key disincentive that has to be addressed if water
\nprojects in emerging markets are to attract international loans
\nand equity.<\/p>\n
The three basic notes in the proposal look very moderate, but
\nthe implication would entail the following issues: (a) central
\ngovernment action, (b) local government and water authorities,
\n(c) promoting local capital markets, (d) sustainable cost
\nrecovery, (e) increasing managerial capacity, (f) corruption and
\nethical practices and (g) the legal and regulatory environment --
\nas quoted from Camdessus' proposal.<\/p>\n
And these following schemes -- which are imperative -- are the
\nvery core of the idea on how to finance the projects. These
\ninvolve: (1) official development assistance, (2) multilateral
\nfinance institutions, (3) international commercial lending, (4)
\nexport credit agencies, (5) private investment and operation and
\n(6) community initiatives.<\/p>\n
All these schemes assume a mutual public-private partnership.
\nBut since water in this context is treated as a commodity, the
\nmarket logic would easily undermine the water sector itself.
\nPublic and private partnerships would mean reinforced
\nprivatization.<\/p>\n
A quick analysis of Camdessus' proposal shows that if those
\nschemes are to apply, the main thing imposed would be opening up
\nthe water sector with schemes 1, 2, 3 and 4, so that the private
\nsector would be able to take over in schemes 3, 4, 5 and 6.
\nAgain, the classic arguments would be that the state has been
\ncomparatively inefficient, ineffective, bureaucratic and corrupt.<\/p>\n
The argument that the private sector would reduce the price of
\nwater because of competition -- the main themes of b, d and g --
\nfails to recognize that the real competition is absent. What is
\npresent is the concession among private players to share the
\nmarket, such as in the main themes of c, e and g.<\/p>\n
To understand this proposal one has to seek the answers rooted
\nin the General Agreements on Trade in Services (GATS).<\/p>\n
In GATS, all public services -- communication, water, health,
\nenergy, transportation, education, housing and tourism -- are
\ntreated according to market rules. Here lies the fundamental
\nproblem, as not all such services are commercial.<\/p>\n
Water, health, education and energy are essential to life.<\/p>\n
Minister of Settlement and Regional Infrastructure Soenarno
\nsaid Indonesia had won a US$15 million debt-for-nature swap from
\nGermany during the Kyoto forum. This was part of a $321.89
\nmillion debt-for-nature swap that Indonesia was seeking from
\nGermany, France, Canada, Italy, Spain and Finland during the
\nforum.<\/p>\n
The debt swap is to be used to assist water-related projects,
\nsuch as environmental conservation and food security programs. In
\nparticular, it is to be used for coping with water pollution in
\nGarut, West Java and in Pekalongan, Central Java, rural
\nirrigation development and the improvement and rehabilitation of
\nground water pumps in several other regions.<\/p>\n
We should welcome this achievement in securing the debt swap,
\nbut this is just one aspect. The biggest loss for common people
\nis that Indonesia will be opened up to private sector management
\nof water resources. This was done without the government putting
\nup any defense, as if there were no other alternatives to
\nprivatization.<\/p>\n
The key alternative would be public participation, in addition
\nto transparency and accountability of water resource management
\nfor the sake of efficiency. The most important principle is that
\npeople should not be treated merely as consumers of water -- and
\nthat water provision is the role of public agencies, such as the
\ngovernment and state-owned firms. Low public confidence in these
\nagencies is understandable given their lack of transparency, and
\naccountability and widespread corruption so far.<\/p>\n
Yet there are alternatives to privatization. There are
\nsuccessful cases of people's participation in water resource
\nmanagement in Porto Allegre and Cochabamba of Latin America, and
\nin Bangladesh and Ghana. Local examples include the provision of
\nwater in communities along the riverbanks of the Sungai Serayu,
\nwhich flows through Central Java, or the model of the Subak
\ntraditional irrigation system in Bali.<\/p>\n
As such, we can understand the words of the activists as they
\nshouted at Camdessus, "Water is for life, not for profit!"<\/p>\n
The writer attended the recent Third World Water Forum in
\nKyoto. He also lectures at the Sahid University in Surakarta and
\nis a researcher at Uni Sosial Demokrat, Jakarta.<\/p>",
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