Working Group I Risk Assessment And Water Governance

Chair and rapporteur: D. Brooks

Friends of the Earth Canada (with additions by Tony Jones)

Although the initial remit given to this Working Group was to discuss the possible effects of changing management of water resources from State to private companies, most of the group consisting of delegates from former Soviet countries found that they preferred to discuss more regional issues and to focus on risk assessment. The two are not entirely separate issues, as the facilities of the State for providing early warning of hydrological extremes and for planning emergency response are arguably greater than those of privatised industry. There is also a strong argument for close State regulation of water companies, both in terms of environmental impacts and in terms of costs, profit-making and services to the consumer. Record fines imposed by the UK regulator Ofwat on Thames Water and SevernTrent Water during the first half of 2008 for presenting misleading information and poor customer services emphasise the point. Similarly, the UK environmental regulators, the Environment Agency and the Scottish Environmental Protection Agency, have fined privatised water companies as well as farmers and industries for numerous river pollution incidents. Some of the worst cases of pollution over recent years in the UK have come from privatised water companies.

The chapter by Jones (this volume) discusses further issues of water governance, especially of failures by private companies in Africa and South America and of emerging fears relating to the modes of finance being used by private companies. There are two highly important issues here:

1. States may lose control of their resources - their pricing and equal access-ability for all the population - to foreign profit-making companies. For many poorer States in the developing world, the financial muscle of multinational companies may be greater than those of the State, or greater than the State could afford to risk in any legal challenges.

2. Importing investment from abroad has provided money for developing water infrastructure and "modern" management systems, but it can also expose infrastructure and management systems to less desirable aspects of global finance. These include:

(a) Possible political pressure from foreign interests, such as "sovereign wealth funds" like the China State Investment Corporation (Jones, loc. cit.) or

(b) Exposure to the vagaries of the world financial market. The latter is of particular concern since the credit crisis of 2007. Companies that develop and maintain their systems using highly leveraged loans are now very much more constrained in their operations than beforehand. Again, it is a matter of 'wait and see' to appreciate the full impacts of the downturn in the money markets on privatised water companies and, potentially, on their contractual commitments to national governments.

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