Friday, 21 June 2013


New works by Serge from Accra, Ghana

Feature: Water wars and water woes
Water privatization is often portrayed as morally wrong but if we look beyond ideology and sentimentality this doesn't add up. Poor countries, where lack of water and sanitation kills nearly two million people a year, need to get water supplies right.

One billion people lack clean drinking water but only three percent of the world's water is privately managed, so the campaign against privatization conceals many public failures.

The prime example is the so-called Cochabamba Water Wars, when residents of this large Bolivian city took to the streets in 2000 to throw out the private water consortium when prices rose.

For activists, it has everything: World Bank involvement, higher prices, angry citizens and the happy ending where water is "returned to the people." But it was actually a story of political corruption and poor governance, with a tragic but largely ignored ending.

In 1997, the World Bank gave Bolivia US$20 million, on condition of privatizing SEMAPA, Cochabamba's heavily-indebted municipal water network. SEMAPA supplied only 60 percent of the population with water and only 50 percent with sewerage. While industries and the wealthy got preferential treatment, the poorest areas had bad water and sanitation and had to pay three to five times more for water from vendors. After a decade of underinvestment, the system was leaking about half its water.

In addition to privatizing SEMAPA, the World Bank wanted Bolivia to get Cochabamba's extra water from the existing Corani Dam. This would have cost US$70m and had to come from private funds.

But the Mayor of Cochabamba preferred creating a new reservoir, in the Misicuni Project, costing US$175m, needing about half from public subsidies.

While the World Bank said Corani was cheaper and quicker, other interests prevailed and the Misicuni Project went into the privatization contract. There was only one bid, from the Aguas del Tunari (AdT) consortium which, after difficult negotiations, got a 40-year contract in September 1999.

AdT's complicated new prices favored the poor but still raised prices for everyone, from about 10 percent for the poorest to more than 100 percent for others.

Protestors under the Coalition for the Defense of Water and Life took to the streets and, following widespread protest and several deaths, the AdT contract was cancelled in April 2000 and handed back to SEMAPA.

To its detractors, this case embodies all that is wrong with privatisation. Cochabamba was indeed a failure but not for the reasons put forward by anti-privatization activists.

Firstly, the sharp increase in water prices was not just a rip-off. The company needed to cover the high costs of the Misicuni Project, repair derelict infrastructure and extend to new areas. In fact, many higher water bills were due to households using more water as a result of better service. AdT also had to charge the real cost of providing water.

Poor governance laid the foundations: SEMAPA had charged ridiculously low prices, falling US$35 million in debt, while municipal authorities failed to explain the changes to the public.

Dissent was already high before privatization. The eradication of coca plantations had forced many farmers to migrate to Cochabamba, adding to high unemployment.

In addition, the Water Services Law of 1999 posed a threat to long-established "irrigators," private well owners and water cooperatives. It would have given AdT control over any local ground water and made private trading illegal.

Then there were vested interests. Aguas del Tunari included four Bolivian companies, all involved with construction and engineering. Outwardly, it was the Mayor who opposed the Corani project but the pressure came from these politically-influential firms expecting lucrative contracts from the Misicuni Project.

What anti-privatization activists also avoid is Cochabamba´s water today. Around half the city's 600,000 inhabitants remain unconnected, while the rich still get preferential treatment and SEMAPA goes from one corruption scandal to another.

The lesson here is not about privatization: it is about corruption and vested interests.

Using Cochabamba as the poster-child of anti-privatization is counterproductive. It has discouraged private investors in regions which badly need technical assistance and investment to create essential services for the poorest.

Events like the tri-annual World Water Forum, held in Istanbul this month, seek real ideas for really helping the poor. Shamefully, this gathering of common sense is overshadowed by noisy activists who oppose private solutions to the world's water woes. Cochabamba shows we need more pragmatists and less rhetoric.

By David Bonnardeaux
David Bonnardeaux is a freelance consultant on rural development and natural resource management for the World Bank, USAID, CARE and others in many parts of the world. 

Source: David Bonnardeaux

Libya -- Oil, Water, Gold Are the Real Issues

Posted: 04/15/11 10:20 AM ET

The oil price has skyrocketed over the past few months. The finger has been pointed at the troubles in Libya and claims of supply disruptions have dominated the press. However, are these claims grounded in fact or are we watching yet another sentiment driven bubble? What are the issues we should be aware of and how should we best invest in the face of such turmoil?
Expectations are often more damaging than reality
Libya's contribution to global oil production is in stark contrast to the column inches it has been awarded in the press. As quoted by the National Journal, the country produces around 2% of the world's oil. OPEC (Organization of the Petroleum Exporting Countries) has claimed that they have managed to "accommodate most of the shortfall" and instead attribute the rise in the oil price to fears of a shortage rather than any genuine supply issues. Oil reached a 2.5 year high last Friday . This is against a flattish demand side dynamic. Paris-based International Energy Agency and the U.S. government's Energy Information Administration left fuel demand growth for this year unchanged and OPEC only raised their forecast by a relatively small amount (to 87.9m b/d from 87.8m b/d) .
EU Sanction: A further boost for the oil bulls
On Tuesday, the EU extended sanctions against Libya to include energy companies, freezing assets in an attempt to force leader Muammar Gaddafi to relinquish power. Phrased another way, by the German Foreign Minister, this is a "de facto embargo on oil and gas" . Approximately 85% of exports are for delivery to Europe and importers will now have the task of finding potentially more distant and/or expensive alternative sources.
The pent-up downside risk
Nevertheless, many are not paying attention to the downside risk to the oil price as we move forward. Libya has Africa's largest proven oil reserves but 75% of the country's petrol needs are met with imports because of limited refinery capacity . Any improvement on this front, if a regime change is eventually secured, could therefore significantly reduce imports and boost global supplies.
Is water the next oil?
In addition to oil reserves, one asset belonging to the Libyan government which is rarely mentioned is an ability to bring water to the desert. With the largest and most expensive irrigation project in history, the $33bn GMMR (Great Man-Made River) project, Libya is able to provide 70% of the population with water for drinking and irrigation . The United Nations estimates that by 2050 more than two billion people in 48 countries will lack sufficient water, making this an enviable asset indeed .
How can the US pay for the Libya intervention?
It is interesting to note, with all the claims being made that the intervention is oil motivated that, Libya has another form of 'liquidity'. According to the International Monetary Fund (IMF), the country's central bank has nearly 144 tonnes of gold in its vaults ...
How to best invest: Retain context
The tide is starting to turn, Goldman Sachs has called the top for commodities in the near-term and oil fell by 4.5% on Monday and Tuesday alone (Source Bloomberg) . With this amount of volatility, short term noise can sometimes overwhelm. For a long term investor, looking for steady and stable returns, an ability to cut through the sentiment (whilst acknowledging it's importance in driving returns in the shorter term) is valuable. Often many factors are at play and it will 'pay dividends' to be well-informed as they become wider known and priced in by the markets. Knowledge may be king but preparation will come up trumps.

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