Issue 2 - How can the private sector help provide access to drinking water in developing countries?

Issue 2 - How can the private sector help provide access to drinking water in developing countries?

Editorial

By Luc Rigouzzo , Proparco's Chief Executive Officer

One of Proparco’s core mandates is to meet the basic infrastructure needs of populations in South countries via the private sector. Developing countries suffer from serious deficits in that field. Access to drinking water, in particular, is far from being widespread and sanitation services are scarce. We have thus decided to devote to that theme this second issue of Private Sector and Development – a bimonthly magazine that compares the opinions of our community of investors with those of academic experts and members of civil society.

Sub-Saharan Africa is the continent that faces the biggest challenges: under one inhabitant in six has running water at home, and over 40% of inhabitants do not even have access to an improved water source. The international community is aware of the scale of these problems and has mobilized for the Millennium Development Goals (MDGs) by focusing its efforts and resources on a series of measurable objectives to be met by 2015 (for example, halving the number of people without access to safe water). Yet official development assistance, however generous it may be, will not be able to provide all the resources required to meet these ambitious goals. For instance, the annual investments required in the water and sanitation sector in order to reach the MDGs are estimated at some 80 billion dollars, whereas global development aid for all sectors put together amounts to roughly one hundred billion dollars.
 
Moreover, “classic” private financing does not spontaneously target fragile economies. It is consequently urgent to promote efficient partnership between public and private players that can meet the huge investment requirements, improve project management, and also mobilize savings over the long term.
 
Public-private partnerships (PPPs) can improve public service management, provide private capital for projects in the public interest, and promote the implementation of basic services at a cost that is affordable for the vast majority. The responsibility of public authorities consequently lies in guaranteeing the general interest by focusing on functions that give impetus, regulate and control, for it is ultimately the populations that are supposed to benefit from the new services provided. Development finance institutions must focus on creating leverage on private resources, using the range of available financial tools, in order to promote the emergence of PPPs that are sustainable, i.e. economically efficient, financially profitable, socially and environmentally equitable.
 
PPPs have been widely implemented in industrial societies and are now playing an increasingly important role in emerging and developing countries. It is however true that the recent history of PPPs has been punctuated by widely-publicized failures that have tended to eclipse the growing number of successes.
I would really like to thank the authors of this issue who must especially be given credit for dissipating a number of conventional beliefs and demonstrating that paradoxically the water sector – despite its long-term profitability – is one of the sectors which has seen the most successes, particularly in Africa where there has been a sharp increase in the number of water sources under private management. This has provided over 100 million people with access to water and has, in most cases, led to a substantial reduction in water losses. It also shows that PPPs often involve partnerships built with local mediumsized enterprises, while monopolies held by major international groups are becoming less and less common. Finally, the type of services (production, distribution…) is also tending to be diversified.
 
PPPs are, of course, not a panacea, but the contributions in this issue show that when political and social realities are fully integrated and a sound regulatory framework implemented, private investment can play a key role in access to water for the poorest and, more generally, to all essential services.
I hope you enjoy reading this second issue. Please do not hesitate to subscribe to this free magazine and pass the word around!