Since the 1980s, there has been increasing pressure from donors and International Finance Institutions (IFis) – chiefly the IMF and World Bank – for governments to privatize and decentralize state-rum functions. In 2002, the World Bank introduced the Private Sector Development (PSD) Strategy, aiming to advance privatization in health care, education and water. The World Bank encouraged developing countries to incorporate privatization and trade reforms into their Poverty Reduction Strategy Papers (PRSPs). These IFI demands were compounded by pressure to liberalize services under the auspices of the General Agreement in Services (GATS), as patt of the Doha Development Round. As the 6th WTO Ministerial in Hong Kong drew near, and now in its aftermath, these issues have provoked intense scrutiny and debate, particularly the issue of water privatization.
The arguments surrounding the privatization debate are largely polarized between those who view water as a social good and see its privatization as inevitably resulting in reduced access for poor and vulnerable people, and those who promote the market benefits of water liberalization, seeing water as a source of profit for private capital. The move toward privatization of water services raises many concerns, and in some places, even violent opposition. Although there has been general agreement that public utilities have been inefficient in extending access to services, increasing private sector involvement to address these problems remains very controversial. For many, the question of how water should be provided goes to the heart of the appropriate role of government. Moreover, while the debate is ostensibly about matters of high public interest, what makes the conflict between privatization and its alternatives so contentious are the conflicting vested interests of some key actors. The advocates of private sector involvement range from international financial institutions (IFIs), bilateral agencies, and transnational corporations (TNCs), while opposition to privatization proposals has resulted from local community groups, unions, and human rights organizations.
Following a history of privatization, this brief reviews the polemic debate surrounding private sector participation in water services, examining the arguments mobilized for and against its implementation in developing countries. It will conclude with a discussion on alternative methods to privatization.