Urban Environmental Problems - Water

Privatization has achieved neither the scale nor the benefits anticipated. Sub-Saharan African countries have in general been unable to attract companies that are willing to invest in the region, as it is regarded as too risky (Why too risky? )(Isn’t it a governance problem, then?). Other reasons: First, contracts are short-term, non-investment management and lease contracts. Second, contracts drew up in US dollars to protect companies from local currency devaluation (It means that local governments should draw up contracts in their local currency? What if their economy is not economically stable and their currency is highly volatile impeding investors to safely plan and recoup investments? Isn’t it a macroeconomic issue rather than water?). Third, water utilities are commonly bundled with electricity in order to create more attractive commercial opportunities (This issue arises from the different uses of this resource. It is not the private company that sets the priorities on how to best use water but the local government stating the strategic economic, social, and environmental needs of the local communities). Fourth, multinational companies have stated that African countries do not represent attractive investments due to the very poor state of water utilities and because most consumers cannot afford tariffs that are high enough to generate adequate returns. (From a profit-driven perspective, this argument makes sense; however, local governments do not need to restrict their investment possibilities to companies interested solely in reaping benefits in the short-term. The main challenge of local governments with modest resources is writing contracts that allow companies to reduce investment risks by working under a contract that is enforced in the long-term and acts in accordance with local constraints to avoid social disruptions.) Budds, J; McGranahan, G. “Are the debates on water privatization missing the point? Experiences from Africa, Asia and Latin America”, Environment&Urbanization, vol. 15, no. 2, October 2003. This paper studies how ‘‘governance failure’’ affects urban water supply to poor households. The main reason for “governance failures” is the disincentives for utilities to connect poor households and for poor households to connect. The solution suggested is a reform of the networked water supply by monopolistic providers -- public or private. (This passage implies that providing incentives and breaking up monopolies would improve water supply systems. Therefore, the questions that arise are: What are the downsides of incentives (demand vs supply, equilibrium price, tax burden)? What are the benefits of monopolies (price influence, cost structure, scale, bulk buying -- costs down, R & D, wages)? What are the negative aspects of market competition over an essential basic need and a commodity that requires a large investment and scale to become profitable?) The concept of governance failure suggests that decision-making structures and related institutions may contain systematic biases against poor households despite pro-poor policies and the independent ownership status of the water supply network and management. (This passage implies that is not enough to hold a pro-poor policy rhetoric and that management independency does not necessarily translate into policies that benefit low-income families; thus, what is needed to poor policy rhetoric into action and ensure that management independency prioritize the basic needs of the poor?) State failure: 1. Rent-seeking (by officials), 2. Unincorporated externalities, 3. Poacher–game keeper problem (if both supplier and regulator are public), and 4. Regulatory capture (if supplier is private). (It is not clear) Market failure: 1. Imperfect competition, 2. Asymmetric information, 3. Unincorporated externalities, 4. Public good Governance failure: 1. Absence of consumer entitlements to basic services, 2. Political disenfranchisement (lack of ‘‘voice’’ on the part of poor households), 3. Culture of governance (elite-focused, top-down), 4. Economic disincentives for connecting poor households. Individual households may be subject to institutions, incentives, or other factors, which undermine their capability to connect to the water supply system: 1. Tenure system (lack of clear property rights), 2. Lack of skills (literacy) facilitating interaction with service provider, 3. Cultural beliefs (appropriate water treatment protocols), 4. Tariff structure (high connection fees) Why water utilities choose not to connect poor households? Reason: the rising block tariff structure creates a strong disincentive for the water supply utility to connect the poor Why poor households choose not to connect? Reason: connection fees; transaction costs; housing and residence status; security of water supply; and perceptions of water quality Bakker, K; Kooy, M; Shofiani, N; Martijn, E. “Governance Failure: Rethinking the Institutional Dimensions of Urban Water Supply to Poor Households”, World Development, vol. 36, no. 10, pp. 1891–1915, 2008 Neither centralized supply policies nor large-scale profit-making enterprises are able to meet the poor water and sanitation needs. The key to structural improvements in water and sanitation lies in the recognition of informal and “needs-driven” practices and their articulation to the formal system under new governance regimes. (What does the author mean by “recognition”? Once recognized, how to incorporate these practices in a formal system? At what social, political, environmental, economic cost?) The evidence shows that the options available to cover the deficit in basic services rarely rely exclusively on the extension of formal infrastructural networks but on more decentralized, more flexible forms of service provision. (By formalizing the informal, does the system lose its flexibility?) Municipalities are entrusted with the responsibility of formulating territorial and land use policies that seek a balance between individual property rights and collective social and environmental rights. (How to achieve this balance between individual, social and environmental balance? How long does it take how much does it cost to achieve this balance? Is balance forcibly the answer? What are the roles of central planning and market forces in finding the balance between the demand and supply of water?) Allen, A.; Dávila, J.; Hofmann, P. “The peri-urban water poor: citizens or consumers?”, Environment and Urbanization, vol. 18, pg 333, 2006. Bechtel raised water rates so high and so fast and the government magnified the street anger by sending out police to break the protest. (Questions: If a signed contract does not make any reference whatsoever regarding price hikes, can a private company not increase prices freely? Who should the residents of Cochabamba blame for, Bechtel or the local authorities who neglected the interests of their people? Is the role of the police not to guarantee the social order? What are the historic, regional, and cultural contexts of these revolts? Who would finance the foreign company profit? What are the social costs of financing this profit? Who would directly pay for this profit? How much political support had the Cochabamba local authorities from other Latin American leaders? Is this practice of tapping into external resources for capital investments in basic infrastructure restricted to Bolivia? If a location needs to build basic infrastructure but does not have the resources to do so, how should they act to ensure that this basic service is provided based on a win-win situation between the local population and the investor? Had the people of Cochabamba paid higher prices gradually and largely perceived better water and sanitation systems –I in addition to job creation and investments public health issues -- , would they have gone to the streets? Had the foreign company not been from the US, would the revolts have had the same outcomes?) Shultz, J. “The Cochabamba Water Revolt and Its Aftermath”