Saturday, August 11, 2007

Private assets

Privatisation of water assets have long been mooted as a solution to the Middle East’s water issues.

Privatisation of water utilities would not be disastrous but it is important not to pursue the policy simply because it’s fashionable, and history suggests that creating a win-win for all parties over the long term is far from assured.

The private operator has few economic incentives to promote water conservation because a corporation’s chief goal is to maximise profits, which often means encouraging increased consumption.

"Private water companies also have little reason to leave sufficient water for ecological needs, endangered species and other downstream uses.

Privatisation agreements may also result in reduced water quality because private water companies make decisions based on profitability rather than public health. Especially in the case of asset sales, there is concern about land that may be subject to development.

When a private operator purchases a municipality’s water-related assets, they may include the municipality’s watershed areas as well as industrial equipment.

Since preservation of watershed lands does not generate revenue, the operator may either want to develop the watershed area or sell it off to others for development.

In many US communities where water has been privatised, there has been an increased risk of rate hikes, inadequate customer service and reduced local control.

Therefore, governments in the Middle East embracing the path of privatisation should ensure that the terms include employing clear and consistent standards, strong public oversight and strict scrutiny of any deals by independent organisations."

a good overview of the expected demand on water in the gulf.

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