Water, a precious tradable commodity

Henry Heyneardhi, Coordinator, Indonesian Forum on Globalization Researcher, Business Watch Indonesia, Jakarta, heyneardhi@watchbusiness.org

The global trend in the water industry, predicted Fortune magazine in May 2000, was that "Water promises to be to the 21st century what oil was to the 20th: The precious commodity that determines the wealth of nations".

Water, the report said, has became one of the biggest businesses at a global level. The annual revenues of the water industry was estimated at that time by Fortune at some US$400 billion, 40 percent of the oil sector and one-third larger than the pharmaceutical sector.

The revenues are from only 5 percent of world's population that receive their water supplies from corporations. Thus the potential for water market growth is very high, estimated in 1998 by the World Bank to grow to $800 billion; last year the Bank revised the projection to $1 trillion.

Four transnational corporations (TNC) in the water industry -- RWE, Vivendi, Suez-Lyonnaise and Enron -- are in the Global Fortune 500, with Vivendi and Suez Lyonnaise as the market leaders. Vivendi has 110 million customers worldwide, with annual revenue of more than 13 billion euros. Meanwhile, Suez Lyonnaise, another French-based TNC, generates 10 billion euros in annual revenues from its worldwide customers.

Monsanto, a giant chemical TNC, also sees this emerging market, and intends to expand its business to the water sector starting from India and Mexico, since both face water shortages. Monsanto planned to earn revenues of $420 million and net income of $63 million by 2008 from its water business in India and Mexico, wrote the environmentalist Vandana Shiva in 1999.

Although these giant water TNCs are competing with one another to create their share in the lucrative market, they are also pursuing the same goal: To establish a global water market where water can be treated as a commodity, sold and traded freely.

"Put water on sale, and let the market determine its future," they seem to say. This goal could be achieved by legitimizing the trade of water through free-trade instruments like GATS/WTO.

In terms of the free market, water supply is put into the same category as education, healthcare, banking, tourism, transportation and waste management, and trade in it is governed in the General Agreement on Trade in Services (GATS) 1994, which is part of the World Trade Organization (WTO).

GATS intends to liberalize the trade in services by lifting all trade barriers, of which public ownership is one, and restraining national regulations.

The agreement prohibits discrimination against a foreign supplier in all covered areas, notwithstanding the conditions under which services are provided and regardless of the human rights or environmental record of the provider. Parties have also agreed that some rules apply "horizontally", whether or not the area has already been listed under GATS.

One horizontal rule, one writer notes, is "most-favored nation," which says that once corporations from one country are operating in your market, you must allow the corporations from all countries in as well. This rule applies to all services, even ones still protected.

In the water sector, GATS thus implies that all countries should open their market for water supply services without reserve and transfer water management to the private sector. As liberalization requires the confinement of the role of the state to mere facilitator, the transfer of public ownership of water services to the private sector is a practical consequence.

Proponents of GATS are very much convinced that water privatization and the institution of the global water market will benefit rich and the poor alike. But also, more and more civil society organizations have become aware and voiced criticism and objections to water services being put under legally binding trade agreements like GATS. These criticisms and objections concern two main issues.

First, as stated above, GATS is helping the private sector, especially giant water TNCs, to expand their operations all over the world. But from experience, water privatization creates many new problems. When corporations sell water for profit, the quality, access and safety of water supplies are endangered and the future of water resources is threatened.

These situations have arisen in Canada, Rio de Janeiro, Panama, Jakarta, Trinidad and Tobago, Budapest. South Africa, Manila and Buenos Aires to mention a few.

In 2000 the Bolivian government sold off the city's public water system to a U.S. water corporation. Soon, people of the Cochabamba area found out that price of water had increased dramatically, a situation that had never occurred previously.

Therefore, the Cochabambans joined in demonstrations against water privatization. The government was forced to return the city's water system to public control and kick out the private corporations, but not before one 17-year-old boy who had participated in a demonstration was killed, and hundreds injured.

The second issue concerns a very fundamental principle. Water is undeniably an essential resource for every living being. Thus, decisions on this resource should be made democratically at the local, national and global level, based on people's fundamental right to safe and affordable water.

We believe the institutions of WTO/GATS are undemocratic, unfair and unaccountable. GATS supporters say that the agreement has been negotiated by the governments. But the GATS terms were negotiated between a few powerful governments behind closed doors. And most governments were told to sign up to the done deal or be left out of the trading system.

Any policy on water should be discussed and debated democratically so that ordinary people, indigenous communities, community-based organizations and all global citizens can participate and voice their opinions and ideas.

We should encourage our government not to make any commitments regarding GATS before carrying out a comprehensive assessment of its impact on our shared life.

The assessment should then be followed by an extensive public discussion and debate involving all citizens, in order to reach participatory and responsive decisions. Therefore, indirectly, we would make our government accountable for its trade policies, and hopefully in the end it could stand up to powerful governments imposing water privatization in the GATS negotiating process.