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. Private sector participation in water supply and sanitation is controversial. Proponents of private sector participation argue that it has led to improvements in the efficiency and service quality of utilities. It is argued that it has increased investment and has contributed to expanded access. They cite Manila, Guayaquil in Ecuador, Bucharest, several cities in Colombia and Morocco, as well as Côte d'Ivoire and Senegal as success stories. Critics, however, contend that private sector participation led to tariff increases, and privatized water systems are incompatible with ensuring the international human right to water, with the belief that public water will no longer be public. Aborted privatizations in Cochabamba, Bolivia, and Dar es-Salaam, Tanzania, as well as privately managed water systems in Jakarta and Berlin, are highlighted as failures. In 2019, Austria forbade the privatization of water provision via its constitution. Water privatization in Buenos Aires, Argentina and in England are cited by both supporters and opponents, each emphasizing different aspects of these cases. Figures outlining the accessibility of water from the private sector also display the controversy of private water sources: one source claims that 909 million people were served by "private players" in 2011 globally, up from 681 million people in 2007. This figure includes people served by publicly owned companies that have merely outsourced the financing, construction, and operation of part of their assets, such as water or wastewater treatment plants, to the private sector. The World Bank estimated the urban population directly served by private water operators in developing countries to be much lower at 170 million in 2007. Among them, only about 15 million people, all living in Chile, are served by privately owned utilities. Privately managed but publicly owned companies serve the remainder under concession, lease, and management contracts.
History
Privately owned water utilities were common in Europe, the United States, and Latin America in the mid and late 19th century. Their importance gradually faded away until the early 20th century as they proved unable to expand access and publicly owned utilities became stronger. A second global dawn of private water utilities came in the early 1990s in the aftermath of the Thatcher privatizations in England and Wales, the fall of communism and the ensuing global emphasis on free market policies. The World Bank and the International Monetary Fund played an important role in this process through the conditionality of their lending. In England and Wales, the emergence of the first private water companies dates back to the 17th century. In 1820, six private water companies operated in London. However, the market share of private water companies in London declined from 40% in 1860 to 10% in 1900. In the 1980s, their share all over England and Wales was about 25%. The tide turned completely in 1989 when the conservative government of Margaret Thatcher privatized all public water and sewer companies in England and Wales. In Scotland local governments dominated by the Labour party kept water systems in public hands.
Meanwhile, the water sector in France has always been characterized by a coexistence of public and private management, with their respective shares fluctuating over time. The two largest private companies are Veolia Environnement, formerly the Compagnie Générale des Eaux and then Vivendi Environnement, and Suez Environnement, formerly Lyonnaise des Eaux and then Ondeo. The Compagnie Générale des Eaux was founded in 1853 and Lyonnaise des Eaux in 1880. In the late 19th century, municipal governments, dissatisfied with high tariffs and the lack of expansion of networks to poor neighborhoods, did not renew private concessions and created instead municipally owned utilities. The share of private water operators declined to 17% in 1936. The share of the private sector gradually increased to 32% in 1954, 50% in 1975, and 80% in 2000 using a new model. Instead of the concession contracts, which gave the responsibility to finance investments to the private company, the new lease contracts (affermages) made the private operator only responsible for operation and maintenance, while major investments became a responsibility of the municipalities. The French water companies also escaped the nationalizations after the war and later under President François Mitterrand, because the central government did not want to interfere with the autonomy of municipalities and was unwilling to finance heavy investments. The water supply of Paris was privatized in 1985 when a conservative mayor awarded two lease contracts, each covering one half of the city. In 2010, a socialist mayor remunicipalized the water system of the French capital.
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