Remunicipalization

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Remunicipalisation commonly refers to the return of previously privatised water supply and sanitation services to municipal authorities. It also encompasses regional or national initiatives.

Contents

Overview

The concept is broadly used to cover:

Remunicipalisation happens at many levels:

At least 234 cases of water remunicipalisation in 37 countries were recorded between 2000 and March 2015, including high profile cases in Europe, the Americas, Asia and Africa. By then, the total number of people served by remunicipalised water services had grown to exceed 100 million. Cases are more concentrated in high-income countries, where 183 remunicipalisations took place in the last 15 years, compared to 51 cases in middle- and low-income countries. Two countries, France with 94 cases and the US with 58 cases, account for the greatest majority of cases in high-income countries. Analysts also signal that the pace of remunicipalisation has doubled in the 2010-2015 period compared with the first decade of the millennium.

Akteure

Very often, utility managers, bureaucrats and politicians are the ones to recognise problems with water privatisation. Labour involvement is critical for the success of remunicipalisation because frontline workers have important insights into operational challenges and opportunities. Civil society movements have proven key to promoting remunicipalisation as a policy option, as well framing it as an opportunity to build socially desirable and environmentally sustainable public water models to benefit present and future generations. Researchers have been playing a role in international exchange of expertise on how to achieve transparent, accountable and effective public water management following remunicipalisation.

Reasons for remunicipalisation

Direct experience with common problems of private water management has persuaded many communities and policy makers that the public sector is better placed to provide quality services to citizens and promote the human right to water. These problems with water privatisation include:

At the global level, 92 of the 234 cases of remunicipalisation recorded followed contractual termination, while 69 cases were non-renewals of private contracts after expiry. In the great majority of cases private contracts proved to be unsustainable. Local governments, then, opted to remunicipalise even though they knew that they may have to pay compensation, because they evaluated that it would be less costly than continuing with privatisation in the long run.

David McDonald puts remunicipalisation debates in a historical perspective: “Most contemporary water services around the world started as private enterprises (as early as the mid-1800s), but as the inefficiency of private sector providers became increasingly evident, and as private companies denied water services to the poor (contributing to outbreaks of cholera and other illnesses), local governments began to municipalise these services for the first time.”

Benefits

Financially, there have been direct savings from remunicipalisation for most of the municipalities – around €35 million in the first year in Paris, and about C$6 million in the first three years of remunicipalisation in Hamilton, Ontario – some of which was realised immediately when profit-taking fees for private management were removed. As a result, some new public operators significantly increased investments in the water systems, such as in Grenoble (France), Buenos Aires (Argentina) and Arenys de Munt (Spain). In turn, such longer term infrastructure development helps avoid future cost burdens associated with the types of health and environmental hazards experienced under privatisation, much of which was borne by the state in the past.

Further, the social benefits of water remunicipalisation have been visible in Arenys de Munt (Spain), where the local government and the new public operator restructured the tariff system to guarantee equitable access to water for low-income households. In Buenos Aires, Argentina, achieving universal access to water became a top priority for the new public operator AySA. The utility increased investment in infrastructure dramatically, and extended training programmes for employees who work with poor neighbourhood residents to expand services.

Remunicipalisation also allows strengthening accountability and transparency. In Paris and Grenoble (France), the new public water operators have introduced advanced forms of public participation. This allows civil society to partake in decisions on the management of this basic public service, and to make operations responsive to the interests of local communities.

With remunicipalisation, the perspective often changes from a narrow, profit-oriented one to broader social and political objectives. Many remunicipalised water entities have demonstrated their ability to think beyond their sector to be more holistic in their planning and action. Intergovernmental coordination is often essential on issues such as watershed management for example.

Research on Buenos Aires and Hamilton has shown that public water employees became more engaged in the planning and operation of water services than they were in the past and more committed to public water services beyond the narrow financial and technocratic concerns that dominate private water management.

Risks

Successful remunicipalisation requires careful planning and assessment of external risks, even more so for countries of the South which are under the grips of multilateral agencies. Each privatisation experience leaves significant structural, financial and ideological legacies that shape the direction of remunicipalisation and often constrain the potential for public sector success.

Even where political will is strong and financial and technical capacity exists, reverting to public ownership and management is fraught with difficulties. There is institutional memory lost, degraded assets, communication and accounting systems that do not mesh with public sector systems, and so on. The deep asset deficit left by many private water companies means that municipalities are working with decrepit equipment and collapsing infrastructure that can be more expensive to repair than to replace and build anew. Private firms have also demonstrated that they can be politically difficult, sabotaging transition efforts to try and undermine the public provider. In many cases the private companies refuse to release critical operational information, attempt to take the municipalities to court for breach of contract, or initiate PR campaigns in an effort to undercut the credibility of the remunicipalisation initiatives.

When a private contract is terminated before its expiry date, private companies can sue local governments to receive compensation for the full profits granted under the contract. A private concessionaire in Arenys de Munt, Spain obstructed fiercely the remunicipalisation process by filing complaints against the city council. The city of Indianapolis, US was forced to pay a $29-million fee to French multinational Veolia to terminate the 20-year contract over a decade early. Berlin residents have had to accept very high costs to buy back the shares held by two private operators. Private concessionaires sued Tucuman and Buenos Aires, Argentina before an international arbitration tribunal to obtain compensation. The risk of having to pay hefty compensation can distort the decision-making process of local governments who are considering termination and remunicipalisation (e.g. Jakarta, Indonesia; Szeged, Hungary; Arezzo, Italy). But in other cases the potential benefits are so clear that local authorities are ready to face such risks.

Finally, donor funding cannot be relied on for remunicipalisation efforts. After decades of generous (and ongoing) political and financial support for privatisation from international financial institutions and bilateral donors, these development organisations have effectively ignored the remunicipalisation trend. Support for the implementation of remunicipalisation is practically non-existent (with the exception of limited funding for public-public partnerships from UN-Habitat ). In some cases international donors even have attempted to undermine remunicipalisation efforts, making the transition to public services an even more difficult one (such as the World Bank’s attempts to block remunicipalisation in Dar es Salaam and Lagos).

Innovative public models

Experiments with public participation in water services planning, worker cooperatives, community water systems and other innovative models of service delivery are challenging older models of public water delivery. Proponents argue that remunicipalisation cannot be an unquestioned return to what was offered before privatisation; it must be an improvement on what is meant by public and an expansion of the democratic terms of engagement. Nonetheless, entrenched neoliberal beliefs in market-based incentives, ring-fenced accounting, cost-reflexive pricing, and competition within and between government departments (commonly defined as corporatization) has transformed the ways in which people think about and manage public services, raising questions about the potential for deep reform in the public sector.

Public-public partnerships

Public water operators and national or regional associations are increasingly helping each other through the remunicipalisation process. In Spain, the regional public company Aguas del Huesna (Andalusia) facilitated remunicipalisation for 22 municipalities. The remunicipalised water operators from Paris and Grenoble played a key role in helping other local authorities in France and elsewhere to remunicipalise and improve their water services. French local authorities and public water operators have benefited from the exchange of experience and knowledge on remunicipalisation that has been facilitated by associations of local governments and public enterprises. The regional institution CONGIAC in Catalonia also played a key role in Arenys de Munt’s remunicipalisation process from decision making to implementation. There are other such examples across boundaries. After failed public-private partnerships (PPPs), the Mozambican government entered into a not-for-profit partnership with a Dutch public water company focusing on local capacity building. Cooperation between public water companies as part of public-public partnerships is a viable alternative to costly PPPs and the most effective way to assist public water authorities in improving services.

Other sectors

Hospitals and electricity services have also been taken back into public hands, at all levels of government, and there are vibrant debates around the world about how various services can be returned to public ownership and control. Each service sector offers its own managerial, technical, geographic and political challenges, but there is much to be learned from inter-sectoral debate and dialogue.

Remunicipalisation Tracker

Corporate Europe Observatory and the Transnational Institute have jointly developed a tracker to showcase cities, regions and countries that have rolled back privatisation and embarked on securing public water for all. This initiative mirrors the private water industry practice of listing upcoming privatisations and public-private partnerships as opportunities for commercial expansion. Cases focus on understanding why and how the remunicipalisation process took place as well as the obstacles encountered and the results achieved. In many cases, more detailed information is available through links. To provide a more realistic overview of the trend, the tracker also includes ongoing campaigns advocating for the remunicipalisation of water services.

See also

Related Research Articles

Corporatization is the process of transforming and restructuring state assets, government agencies, public organizations, or municipal organizations into corporations. It involves the adoption and application of business management practices and the separation of ownership from management through the creation of a joint-stock or shareholding structure for the organization. The result of corporatization is the creation of state-owned corporations where the government retains a majority ownership of the corporation's stock. Corporatization is undertaken to improve efficiency of an organization, to commercialize its operations, to introduce corporate and business management techniques to public functions, or as a precursor to partial or full privatization.

<span class="mw-page-title-main">Public sector</span> Public part of the economy

The public sector, also called the state sector, is the part of the economy composed of both public services and public enterprises. Public sectors include the public goods and governmental services such as the military, law enforcement, infrastructure, public transit, public education, along with health care and those working for the government itself, such as elected officials. The public sector might provide services that a non-payer cannot be excluded from, services which benefit all of society rather than just the individual who uses the service. Public enterprises, or state-owned enterprises, are self-financing commercial enterprises that are under public ownership which provide various private goods and services for sale and usually operate on a commercial basis.

<span class="mw-page-title-main">Public–private partnership</span> Government/private company partnership

A public–private partnership is a long-term arrangement between a government and private sector institutions. Typically, it involves private capital financing government projects and services up-front, and then drawing revenues from taxpayers and/or users over the course of the PPP contract. Public–private partnerships have been implemented in multiple countries and are primarily used for infrastructure projects. They have been employed for building, equipping, operating and maintaining schools, hospitals, transport systems, and water and sewerage systems.

<span class="mw-page-title-main">Public service</span> Service(s) provided to all members of a community

A public service or service of general (economic) interest is any service intended to address specific needs pertaining to the aggregate members of a community. Public services are available to people within a government jurisdiction as provided directly through public sector agencies or via public financing to private businesses or voluntary organizations. Other public services are undertaken on behalf of a government's residents or in the interest of its citizens. The term is associated with a social consensus that certain services should be available to all, regardless of income, physical ability or mental acuity. Examples of such services include the fire brigade, police, air force, and paramedics.

Water privatization is short for private sector participations in the provision of water services and sanitation. Water privatization has a variable history in which its popularity and favorability has fluctuated in the market and politics. One of the common forms of privatization is public–private partnerships (PPPs). PPPs allow for a mix between public and private ownership and/or management of water and sanitation sources and infrastructure. Privatization, as proponents argue, may not only increase efficiency and service quality but also increase fiscal benefits. There are different forms of regulation in place for current privatization systems.

<span class="mw-page-title-main">Concession (contract)</span> Grant of rights, land or property

A concession or concession agreement is a grant of rights, land or property by a government, local authority, corporation, individual or other legal entity.

<span class="mw-page-title-main">Water supply and sanitation in Argentina</span>

Drinking water supply and sanitation in Argentina is characterized by relatively low tariffs, mostly reasonable service quality, low levels of metering and high levels of consumption for those with access to services. At the same time, according to the WHO, 21% of the total population remains without access to house connections and 52% of the urban population do not have access to sewerage. The responsibility for operating and maintaining water and sanitation services rests with 19 provincial water and sewer companies, more than 100 municipalities and more than 950 cooperatives, the latter operating primarily in small towns. Among the largest water and sewer companies are Agua y Saneamientos Argentinos (AYSA) and Aguas Bonarenses S.A. (ABSA), both operating in Greater Buenos Aires, Aguas Provinciales de Santa Fe, and Aguas Cordobesas SA, all of them now publicly owned. In 2008 there were still a few private concessions, such as Aguas de Salta SA, which is majority-owned by Argentine investors, and Obras Sanitarias de Mendoza (OSM).

Water privatisation in South Africa is a contentious issue, given the history of denial of access to water and persisting poverty. Water privatisation has taken many different forms in South Africa. Since 1996 some municipalities decided to involve the private sector in water and sanitation service provision through short-term management contracts, long-term concessions and contracts for specific services such as wastewater treatment. Most municipalities continue to provide water and sanitation services through public utilities or directly themselves. Suez of France, through its subsidiary Water and Sanitation Services South Africa (WSSA), and Sembcorp of Singapore, through its subsidiary Silulumanzi, are international firms with contracts in South Africa. According to the managing director of Silulumanzi "the South African water market is still in its infancy and municipalities are unsure of how to engage the private sector."

Water privatization in Brazil has been initiated in 1996. In 2008 private companies provided 7 million Brazilians - 4% of the urban population - in 10 of the country's 26 states with drinking water. The private sector holds 65 concession contracts in the states of São Paulo, Rio de Janeiro, Espírito Santo, Mato Grosso, Mato Grosso do Sul, Santa Catarina, Minas Gerais, Paraná, Pará and Amazonas. Private companies have committed to invest 4.5 billion reais in the sector. The bulk of Brazil's population receives water and sanitation services from public municipal or state-level utilities.

The privatization of water and sanitation services in Argentina between 1991 and 1999 under the government of Carlos Menem was part of one of the world's largest privatization programs. Water and sanitation concessions with the private sector were signed in 28% of the country's municipalities, covering 60% of the population.

Private sector participation in water supply and sanitation in Colombia has been more stable and successful than in some other Latin American countries such as Argentina or Bolivia. According to the World Bank, between 1996 and 2007, more than 40 water and sanitation service provision contracts have been awarded to private or mixed companies in Colombia, serving a combined population of 7.3 million or more than 20% of the urban population. According to the Colombian water regulator, there were even more public-private partnerships for water and sanitation in Colombia in 2004: 125 private and 48 mixed public-private water companies, including large, medium and small companies. Most of the contracts were awarded in poor municipalities with highly deteriorated infrastructure. They relied mainly on public funding, complemented by limited private funding. The design was based on the central government providing grants in the start-up years to rehabilitate deteriorated systems and to expand access, while the contracting municipal governments also made budgetary transfers on an annual basis to complement revenues. Colombia thus departed from the standard concession approach, which requires private concessionaires to finance investments with their own resources.

<span class="mw-page-title-main">Water privatisation in England and Wales</span>

The water privatisation in England and Wales involved the transfer of the provision of water and wastewater services in England and Wales from the state to the private sector in 1989, through the sale of the ten regional water authorities (RWA). The potable water supply as well as the sewerage and sewage disposal functions of each RWA were transferred to privately-owned companies.

Water privatisation in Ghana has been discussed since the early 1990s as a reaction to poor service quality and low efficiency of the existing urban water utility. The World Bank supported the process of private sector participation in the urban water sector from the beginning. After many tribulations a 5-year management contract was awarded in 2006. When the contract expired in 2011, the government decided not to extend it, saying that the private operator had not lived up to expectations.

Water supply and sanitation in the Netherlands is provided in good quality and at a reasonable price to the entire population. Water consumption is one of the lowest in developed countries at 128 litres per capita per day and water leakage in the distribution network is one of the lowest in the world at only 6%.

Public water supply and sanitation in Scotland is characterised by universal access and generally good service quality. Water and sewerage services are provided by a single public company, Scottish Water. The economic water industry regulator is the Water Industry Commission for Scotland. It "promotes the interests of water and sewerage customers in Scotland by making sure that householders and businesses receive a high-quality service and value for money by setting prices, monitoring Scottish Water's performance and facilitating competition in the water industry". The environmental regulator is the Scottish Environment Protection Agency. Drinking water standards and wastewater discharge standards are determined by the EU.

A public–public partnership (PuP) is a partnership between a government body or public authority and another such body or a non-profit organization to provide services and/or facilities, sometimes with the goal of transferring technical skills and expertise within international development projects. Partners can include other local, regional, state, provincial, first nations or aboriginal governments, national or federal governments, school boards, parks boards, non-governmental organizations, unions, pension funds, professional organizations, and governments, labour, non-governmental organizations and community groups in developing countries.

Water supply and sanitation in Malaysia is characterised by numerous achievements, as well as some challenges. Universal access to water supply at affordable tariffs is a substantial achievement. The government has also shown a commitment to make the sector more efficient, to create a sustainable funding mechanism and to improve the customer orientation of service providers through sector reforms enacted in 2006. The reform creates a modern institutional structure for the water sector, including an autonomous regulatory agency, an asset management company and commercialised state water companies that have to reach certain key performance indicators that will be monitored by the regulatory agency. The government has also stated its intention not to embark on new private sector contracts for water provision, after a bout of such contracts during the 1990s showed mixed results.

Water privatization in France, in the form of public–private partnerships, goes back to the mid-19th century when cities signed concessions with private water companies for the supply of drinking water. As of 2010, according to the Ministry of Environment 75% of water and 50% of sanitation services in France are provided by the private sector, primarily by two firms, Veolia Water and Suez Environnement. In 1993 the Loi Sapin strengthened competition in the sector by limiting the duration of contracts to 20 years, among others. In 2010 the lease contracts for Paris with Suez Environnement and Veolia Water expired and the water system returned to public management.

Water remunicipalisation is a process in which the state of privatised water and sanitation management is changed into one that falls back under public control. In recent years water remunicipalisation has grown into a global trend and can be seen as a response to failing cases of privatisation.

<span class="mw-page-title-main">Transnational Institute</span> Think-tank based in Amsterdam, Netherlands

The Transnational Institute(TNI), is an international non-profit research and advocacy think tank that was founded in 1974, Amsterdam, Netherlands. According to their website, the organization promotes a "... just, democratic and sustainable world."

References

A global list of remunicipalisations (as of October 2014) is available at: http://www.tni.org/briefing/here-stay-water-remunicipalisation-global-trend

This participatory initiative allows water campaigners to update cases and add new ones: http://www.remunicipalisation.org

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