New Water Policy and Practice Volume 1, Number 1 - Fall 2014 | Page 25

New Water Policy and Practice

all? The answer lies partly in the earlier discussion on why business-as-usual approaches have failed. Effective and well-managed
engagement of the business community can
overcome most of the shortcomings of water-related development paradigm. First, and
most importantly, the private sector can put
some much-needed financial capital on the
table. It is clear that neither national governments nor the international donor community can mobilize the capital needed, which according to some early estimates could range
between $1 and $2 trillion a year (UNU and
UNOSD 2013). Second, by default, the private sector can lay claims to better business
management in comparison to any public-sector enterprise (Batley 1996). A sharp
eye on the bottom-line can ensure that water
management and service delivery operations
are run efficiently and economically. Third,
the technical and technological know-how
for almost all solutions and applications exists with the private domain. Fourth, the private sector has ample experience in scaling
up and operational growth, often by orders
of magnitude; in contrast, the public sector
enterprises almost never encounter logarithmic growth and could in part be the limiting
factor in why success stories are not readily
scaled up from local to national levels.

However, such engagement also
comes with its own cautionary tales and
pitfalls.

gument ignores the fact that pumping, treatment, provisioning, maintenance, billing, and
overall management are essentially business
activities and need to be run on a cost-recovery model, its emotional appeal to the general public is considerable. Demonizing the
private sector, and often those who associate
with them, is not difficult given the general
distrust in public and a wide range of online
and social media outlets available. Numerous
case studies of failure of the private sector to
efficiently manage and deliver water services
further exacerbate the situation. That essentially means that any commercial enterprise
that engages in the water sector becomes a
ready target for activist groups.

Another major stumbling block is to
get the right mix of public- and private-sector engagement. The relationship between
the two sectors of economy can range from
the traditional command-and-control approach to a more market-oriented relationship (Paoletto and Termorshuizen 2003).
The latter approach has been shown to be
more successful, but achieving the balance
between regulation and facilitation remains
more of an art form than well-established
science.

Lack of enabling environment, including over-regulation of the sector and
absence of security for capital investments,
is another major turnoff for the private sector. One key indicator of this problem is the
magnitude of venture capital that becomes
available for the water sector. For example,
in North America the magnitude of venture
capital vested in the water “sector” dwarfs
that available to other segments of the economy by at least an order of magnitude. In the
absence of a major political push, the pubic
regulators are quite reluctant to offer leeway
or even due consideration to innovations in
business models, technology applications, or
service delivery. A positive example was set
by the province of Ontario, which in 2010

Stumbling Blocks in Engaging the
Private Sector

T

he largest stumbling block in the
engagement of private sector in water-related enterprises is that of public
perception. There is a public perception that
water is a ‘public good’ and privatizing its
provisioning or its commodification (Barlow
2001) violates the public trust. While this ar23