Védegylet - The privatisation of water utilities is a very problematical step

"Access to water is a basic human right (5), and the provision of basic human rights is the task of the state set out in the Constitution. (...) Besides this the IMF states (6), that often the state and self-governing bodies can access development funds easier and cheaper than private individuals, hence the often quoted opposite argument is not true."
/Letter to Gábor Fodor Minister of Environment./

Letter to Gábor Fodor Minister of Environment

Budapest, 25th September 2007

Dear Sir,

The State President has signed the second version of the property legislation, which removes the regional public water utilities from the group of companies remaining in long-term state ownership. (1) The president of the Association of Hungarian Water Utilities has spoken about the expected privatisation of water utilities in recent days. (2) We are asking you, as the chief director of the sector that only well considered privatisation steps are taken, which do not cause further social inequalities and uncertain environment.

The privatisation of water utilities is a very problematical step in light of international experiences. (3) Opening the market in water utilities (as generally during reduction of state participation in supplying public services), the disadvantaged sections of society can loose their access to the particular service. Though access is regulated by law in this country, the continual scandals in connection with the partially privatised Budapest Water Board emphasise the extent of the problems. (4)

Access to water is a basic human right (5), and the provision of basic human rights is the task of the state set out in the Constitution. The water administration under your control is in charge of setting up the legal framework to guarantee access, availability and necessary quality. These requirements can be directly controlled in case of companies under the control of the state or self-governing bodies. After privatisation this opportunity is lost, the only remaining tool is the definite public regulation, which is undertaken in international agreements by the state, but no steps have been made to set up this framework. This can also cause environmental problems as well, because the private companies are interested in increasing consumption, the self-governing bodies on the other hand because of the water privatisation contracts cannot easily implement independent environmental policies for protection of the water base. Another important problem is that the privatisation contracts cannot be accessed, so democratic control is becoming defunct and the conditions of involving the private sector are shrouded in mist.

The privatisation of water utilities is not essential from the economical point of view either: water utility is a natural monopoly, competition is missing and it cannot be created either, and water consumption cannot be avoided. Besides this the IMF states (6), that often the state and self-governing bodies can access development funds easier and cheaper than private individuals, hence the often quoted opposite argument is not true. It is gravely irresponsible to take steps of such weight without undertaking an examination of the social consequences of the alternative privatisation methods, and the task of independent and strong control is not yet established. While the shortcomings of the market are unambiguous in the field of water supply, the decision makers are not considering the development of the public utility, i.e. through public public partnership, participatory budgeting or possibilities of alternative technologies. (7)

Dear Sir! It is your responsibility that the public policies created in this country are fulfilling the requirements of sustainable ecology and social needs. Your responsibility is even more grave if you are declaring the values of sustainability with the support of such a party, which is forcing irrational privatisation policies as part of its new-liberal social policies. So we are asking you to do the utmost to:

1) create an overall evaluation of the social and environmental effects of privatisations undertaken so far, before any irrational steps to privatise water utilities;
2) consider seriously the public policy alternatives of privatisation;
3) prepare social support to replace state subsidies and make certain that water supply reaches the most disadvantageous settlements as well;
4) draw up as soon as possible legislation regulating the private sector, access, availability and quality and set up the public water utility authority.

Without these the abyss between sustainability and justice, which you yourself subscribe to, will deepen further.

With best regards,

Zsolt Boda
Spokesperson for Védegylet