Over at “social enterprise” website NextBillion, Jemima Sy of the World Bank’s Water and Sanitation Program posted an interesting article debunking “Five Myths About the Business of Sanitation“. While I hardly disagree on some of the debunkings – for instance, it is true that poor people don’t see much value in minor upgrades, and instead want to go the whole nine yards when they pay for water and sanitation – the overriding conclusion that water and sanitation can and should be more of a business just ruffled my feathers. As a response, here are my Five Myths of the World Bank’s Approach to Water and Sanitation:
1. “Water and sanitation are untapped business opportunities.” Myth. Most of the privatisation efforts under Structural Adjustment went badly. Networks usually weren’t expanded, many companies didn’t even manage to make a profit. Water and sanitation work badly as businesses.
2. “Water and sanitation are private problems.” Myth. Clean water and environments are actually a public good. They have large public benefits which households cannot privately capture, and therefore are best tackled through public interventions.
3. “Networks don’t exist, and network operators aren’t monopolies.” Myth. Private investments in water and sanitation normally require public networks, underlying them, to work. How these networks come to be is usually ignored in “market-based” approaches. There’s no use in a household building a toilet without a network supplying water. That such a network is a natural monopoly creates huge potentials for exploitation and exclusion of the poor, especially when privately managed, because the network provider will want to recover the full cost despite the low usage by the poor.
4. “The public sector fails.” Myth. Wherever you are reading this, if you have landline Internet access, you’re also likely to have a public sector operator delivering clean water through pipes to your house. (Check your bill, if in doubt.) That’s how water and sanitation have worked in most rich countries since the industrial revolution. And elsewhere, too (see Porto Alegre). The issue is not to bring the private sector in, but to make the public sector work where it isn’t working. That might require accountable politics and capacity-building to collect taxes and use them to fund public goods. Ah, but where’s the business opportunity in that?
5. “The poor can and should pay.” Myth. Even if poor people can pay for water and sanitation (which is not generalisable), as this article acknowledges, their spending priorities are otherwise. Assume they have good reasons for that. Survival, jobs, education, etc. are their priorities. Plus, approaches focused on cost recovery from each end user actually require the poor pay more per unit of water (or unit of sanitation service), because they use less per head than the rich or the middle classes. The result is unjust, and likely ineffective. See microfinance for water and sanitation as an extreme case where the poor even have to pay additional interest.
6. Truth: There’s no more efficient way to stop the spread of diseases, clean up a neighbourhood, free children from water-fetching to go to school, etc. overnight, than a one-off public investment. Now that’s supply chain defragmentation. If the poor themselves have to pay private firms, one the other hand, the benefits are piecemeal and exactly the sort of market failure the IFC is still trying to fix is a likely outcome.
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