Water Supply in Lahore: Public Sector Reform, Not Privatization

Water Supply in Lahore:
Public Sector Reform,

Not Privatization
Rabia Ezdi
Amir Butt
Punjab Urban Resource Centre

September 2008
Punjab Urban Resource Centre
The Punjab Urban Resource Centre (PURC) was established in October

2001 by a group of individuals comprising development professionals,
community activists, architects, sociologists and teachers.
In general, urban development planning in Pakistan is top down and takes

place without consultation with interest groups, especially poor
communities. For this reason, development is often non-representative and
unable to effectively meet the needs of citizens. PURC seeks the

involvement of citizens and communities in the planning and decision-
making process in order to make development more responsive to the

needs of people. Through research we attempt to understand urban and
development-related issues, and with advocacy affect these in light of a
pro-poor approach.
The objectives of PURC include promoting dialogue between the broad
range of urban actors, advocating for the participation of citizens and

academia in all stages of development, encouraging transparency and
accountability of government and private bodies in the development,
planning, and policy making processes, and eventually providing

alternatives to projects which are likely to have adverse environmental,
social, technical or economic effects on the city and its vulnerable
communities.
PURCs current activities include issue-based information collection,

research, documentation and publication, discussion forums, networking
and liaison with the actors of the urban development process,
publications, and monthly newsletter Urban News.
Water Supply in Lahore: Public Sector Reform, Not Privatization
ii
Preface
InOctober2004itwaslearnedthatthePunjabgovernmenthadmadeplansto
privatizeLahoresWaterandSanitationAgency.Intheabsenceofpublic
hearingsandconsultations,throughout2005and2006stepstakenbythe
governmenttowardsthisendswerefollowedbycitizenslargelythroughthe
printmediaandinformalsources.Thelastreportsontheissuewereseeninmid
2006,afterwhichcoverageaboutthegovernmentsplanorthestatusof
privatizationhavefaded.
PURChasattemptedtounderstandtheprivatizationofLahoreWASAwitha
focusontheprivatizationprocess,thecurrentproblemsfacedbyWASA,and
worldwideexperiencesoftheprivatizationofpublicwaterutilities.Thiswas
donethroughdiscussionsandinterviewswithactorsandstakeholders,reports
andpublicationsbygovernmentandNGOs,newspaperarticlesetc.Withthe
objectiveofbringinggovernmentandpeoplecloser,thispublicationisa
compilationoflessonsandconclusionsfromthisprocess.
PURCowesitsthankstoallthosewhohavesharedknowledgeandhelpedusin
understandingtheimpactsofWASAsprivatizationoncitizens,particularlythe
poor.WewouldespeciallyliketothankLahoreWASA,theDepartmentofP&D,
theUrbanUnitP&D,theWASAtradeunion,andtheLahoreWaterAction
Committeefortheirvaluablesupportandcooperation.
iii
Foreword
Allerasareruledbypoliticoeconomicsystemsthatdevelopoutofinterest,
coupledwithpowerstructuresthatpromoteandstrengthenthem.Thefree
marketglobalizationparadigmundoubtedlydominatesourtime,asit
transformsnationalpolicies,economies,andculturesacrosstheworld.In
Pakistan,inkeepingwiththeprinciplesofneoliberalismtheIFIsandMDBs
havedeterminedthecourseofdevelopmentwithdirectivessuchasderegulation
andtheprivatizationofpublicutilitiessincethe1980s.Theimpactsofthese
policieshavebeenwidelycriticized,astheyareseentohaveworsenedthelotof
thepoorindevelopingcountries.
Only2.5%1oftheworldswaterisfreshwater2andduethecontaminationof
waterresourcesonlyafractionofthisremainsdrinkable.Statisticsshowthat
theearthstotalwaterconsumptionisdoublingeverytwentyyears,andwater
resourcesarebeingrapidlypolluted,depleted,diverted,andexploited3.The
UnitedNationsreportsthat31countriesarefacingwaterscarcity,and1million
peopleworldwidestilllackaccesstocleandrinkingwater.
Overthelast200yearsthemajorityoftheworldswaterutilitieshavebeen
publiclyownedandrun.Whilemunicipalisationwasintroducedinnineteenth
centuryEuropeasacureforthecorruptionandinefficiencyoftheprivate
contractor,todaythereismuchhueandcrysurroundingtheperformanceofthe
samepublicsector.Thelastfifteenyearsofdonorpolicyinthedeveloping
worldhavebeenbasedontheprivatizationofstateownedwaterutilities.While
warningthattwothirdsoftheworldspopulationwillsufferfromalackofclean
andsafedrinkingwaterby2025,theIMF,WorldBank,andregional
developmentBankscontinuetopushthirdworldgovernmentstowardswhat
aretermedpublicprivatepartnershipsandprivatesectorparticipation
arrangementsawardingamajorshareofautonomytotheprivatesector.
United Nations Environment Programme, Water Quality for Ecosystem and Human Health
(United Nations Environment Programme Global Environment Monitoring System Water
Programme 2006)
2
Freshwater is drinkable, while seawater is not fit for drinking due to a high salt and mineral
content
P. Raja Siregar, Peoples Resistance and Alternatives to the Privatization of Water and
Power Services (Jubilee South Asia Pacific and Freedom from Debt Coalition, April 2004)
iv
Majorglobalcorporationshavebeenmovingintowhatisnowseenasthewater
market.Giantwater,energy,food,andshippingcompanieshaveplanstobuy
waterrights,privatizepubliclyownedwatersystems,promotebottledwater,
andsellbulkwaterbytransportingitfromwaterrichareastomarkets
desperateformorewater4,reportstheprintmedia.
Greatcontroversyandcontradictionsurroundthesemajorshifts.The
privatizationofpublicwaterutilitiescontinuestocollapseincitiesworldwide,
leadingtochaosandthesufferingofcountlesspoorcommunities.Atthesame
timeIFIbackedinternationalbodiessuchastheWorldWaterCouncilandthe
WorldWaterForumarebeingchallengedbyPeoplesmovementsasthey
becomeknowntopromotetheinterestoftheworldslargewatercompanies.
Ratherthantakingurgentactionandresponsibilitytoprotecttheirwater
resourcesandtheneedsofpeople,governmentsaroundtheworldareretreating
fromtheirduties.Whiletherichpoordividebothattheglobalandlocallevelsis
notanewphenomenon,itisincreasinglyfeltbycitizensthatglobally
determinedactionsandtheirnationalrepercussionsthreatentheirwelfarelike
neverbefore.Whatonecanlearnfromtheexperienceofcountriesparticularly
thosewithanoverwhelminglypoorpopulationisthatitisessentialtojudgethe
impactofalldevelopmentvisionsagainsttheplaintruthtoldbythelivesof
people.
Itremainsthedutyofcivilsocietytoreflectuponrealityandensurethatthe
factsonthegroundareheard.TheaimofPunjabUrbanResourceCentrehas
beentounderstandthebroadimpactsoftheprivatizationofpublicwater
utilitiesoncitizens.Thisstudyarguesthatunlesstheneedsandvoicesofthose
thataredeemedtherecipientsofdevelopmentareheardandrepresented,
developmentwillnotbetothebenefitofthosethataremostinneedofit.
Hamid Ali, Water Works (The News 17.10.2004)
Abbreviations
ADBAsianDevelopmentBank
CDGLCityDistrictGovernmentLahore
GORGazettedOfficersResidences
ICSIDInternationalCentrefortheSettlementofInvestmentDisputes
IFIInternationalFinancialInstitutions
IFCInternationalFinanceCorporation
IMFInternationalMonetaryFund
KWSBKarachiWaterandSewerageBoard
LSWCLagosStateWaterCompany
LDALahoreDevelopmentAuthority
LITLahoreImprovementTrust
MDBMultilateralDevelopmentBanks
NPMNewPublicManagement
OECDOrganizationforEconomicCooperationandDevelopment
P&DDepartmentofPlanning&Development
PRSPPovertyReductionStrategyPapers
PSIRUPublicServicesInternationalResearchUnit
PURCPunjabUrbanResourceCentre
RWARegionalWaterAuthority
SAPStructuralAdjustmentPrograms
TMATehsilMunicipalAuthority
UNUnitedNations
UNEPUnitedNationsEnvironmentProgramme
WASAWaterandSanitationAgency
WDMWorldDevelopmentMovement
WWCWorldWaterCouncil
WWFWorldWaterForum
vi
TableofContents
Preface ......................................................................................................................... iii
Foreword ..................................................................................................................... iv
Abbreviations .............................................................................................................. vi
ListofTables ............................................................................................................... ix
ListofFigures .............................................................................................................. ix
Chapter1:TheContextandChronologyofWaterPrivatization ............................... 1
1.1TheHistoricalDevelopmentofWaterServices............................................... 1
1.2TheStructuralAdjustmentProgramsandthePRSPs .................................... 1
1.3GlobalInterestinWaterIssues......................................................................... 2
1.4InternationalChartersandNationalPolicies .................................................. 7
Chapter2:LahoreWASAandtheMovetowardsPrivatization ................................ 8
2.1UrbanWaterSupplyinPakistan....................................................................... 8
2.2Lahore ................................................................................................................. 9
2.3LahoreWASA ..................................................................................................... 9
2.4Issues&GapsCitedbyWASA ......................................................................... 15
2.5AddressingtheNeedsofCitizens ................................................................... 16
2.6TheMovetowardsPrivatization .................................................................... 16
2.7LahoreWASA:TheSecondAttempttowardsPrivatization ......................... 19
2.8TheStatusofWASAsPrivatizationToday .................................................... 22
2.9TheCruxoftheIssue ....................................................................................... 22
Chapter3:WaterPrivatizationFailuresacrosstheWorld...................................... 23
3.1ContextandBackground ................................................................................. 23
3.2TheNatureofPrivateWaterServices ............................................................ 24
3.3TheMeaningofFailure:CasesfromAcrosstheWorld ............................... 25
3.31Argentina..................................................................................................... 27
3.32ThePhilippines ......................................................................................... 28
3.33Bolivia ........................................................................................................ 28
3.34SouthAfrica ............................................................................................... 30
3.35USA ............................................................................................................. 30
3.36UK............................................................................................................... 31
3.37Tanzania .................................................................................................... 32
3.38 Nigeria ........................................................................................................ 32
3.4Conclusion ....................................................................................................... 33
Chapter4:PublicSectorReform,notPrivatization ................................................. 34
4.1TheChallengesFacedbyWASA ...................................................................... 34
vii
4.2MythsabouttheBenefitsofWaterPrivatization .......................................... 34
4.3AWayForward ................................................................................................ 36
Chapter5:TheResponseofLahoreCivilSociety ..................................................... 41
5.lIntroduction ...................................................................................................... 41
5.2 The Role Played by Civil Society...................................................................... 42
5.3Conclusion .........................................................Error! Bookmark not defined.
Chapter6:TowardsReform ...................................................................................... 46
6.1TheRealIssue .................................................................................................. 46
6.2WaterasaBasicHumanRight ........................................................................ 46
6.3EssentialPrinciplesforReform ...................................................................... 47
Annexes ...................................................................................................................... 50
Annex-I: WASA Area and Boundary ...................................................................... 50
Annex-II: WASA Up-to-Date Achievement/Service Levels .................................. 51
Annex III: WASA Water and Sewerage Tariffs ...................................................... 52
Annex IV: WASA Budget Sources and Expenditure .............................................. 53
Annex-V: List of Members LWAC ......................................................................... 54
viii
ListofTables
Table 1: Lahore Water Supply- Basic Facts ....................................................................................................... 10
Table 2: WASA Water Supply- Detail by Subdivision....................................................................................... 10
ListofFigures
Figure 1: International Water Companies ............................................................................................................ 3
Figure 2: 4th World Water Forum ........................................................................................................................ 4
Figure 3: Protestors at 4th World Water Forum, Mexico City ........................................................................... 6
Figure 5: WASA trucks ........................................................................................................................................ 11
Figure 6 and 7: WASA Drain; WASA Head Office ........................................................................................... 16
Figure 7: Bolivia's Water Wars ........................................................................................................................... 26
Figure 8: Protests in Cochabamba ...................................................................................................................... 29
ix
Chapter1:TheContextandChronologyofWaterPrivatization
1.1TheHistoricalDevelopmentofWaterServices
Thevastmajorityofwaterservicesintheworldtodayareprovidedand
operatedbythepublicsector,theoverallproportionbeingashighas95%5.The
historyandprocessesofwatersupplynetworksinthecountriesoftheNorth
andtheSouthvariesconsiderably.Byandlarge,publicwatersupplynetworks
didnotexistinIndiapriortoBritishannexation.Evenaftertheadventof
colonisationthesewereprovidedonlytoasmallcolonialelite,andit
waswithindependencethattheidealsof
Duringthe19thcentury
developinginfrastructureandpublicservicesfor
waterutilitiesinnearly
all6wereintroduced.InEuropeurbanwatersystems allEuropeancountries
begandevelopinginthe17thand18thcenturies
weretakenoverby
alsoasalimitedservicetoaffluent
municipalities,where
customers7.ThegrowthofEuropeancitiesin
municipalisationwas
the19thcenturysawagrowingdemandfor
seenasawayto
waterconsumptionandwiththese,initial
overcomethe
watersystemswerestartedbyprivate
inefficiencies,costsand
companies.Duringthe19thcenturyhowever,
corruptionofprivate
theseutilitiesweresoontakenoverby
contractors,and
municipalitiesinnearlyallEuropeancountries,
democraticallyelected
wheremunicipalisationwasseenasawayto
citycouncilsbrought
overcometheinefficiencies,costsand
moreeffectivecontrol,
corruptionofprivatecontractors,and
higheremployment,and
democraticallyelectedcitycouncilsbrought
greaterbenefitstothe
moreeffectivecontrol,higheremployment,
localpeople
andgreaterbenefitstothelocalpeople8.
1.2TheStructuralAdjustmentProgramsandthePRSPs
TheInternationalFinancialInstitutionshaveplayedamajorroleinPakistans
developmentdecisionsandprocessessincethe1950s.Thisdonorcommunity
hasconsistedofMultilateralDevelopmentBankssuchastheWorldBank,the
InternationalMonetaryFund IMF andtheAsianDevelopmentBank ADB
, David Hall and Emanuele Lobina, Water as a Public Service (PSIRU, Business School,
University of Greenwich, 2006)
6
Ibid.
Ibid.
Ibid.
whohavebyandlargedetermineddevelopmentinthecountry.TheMDB
drivenStructuralAdjustmentProgramsofthe1980sandthePovertyReduction
StrategyPapersintroducedinthelate1990shavebeenmajorpolicy
determinantsofPakistaneconomicandsocialdevelopmentdecisions.Whileitis
acknowledgedthatgovernmentsindevelopingcountrieshavenotbeenableto
providesufficientcoverageinwaterandsanitation,thepasttwodecadesof
policydirectivesbytheIFIshaveinfactworsenedtheproblem.Behinda
parallelrunningpropoorrhetoric,theMDBshaveadvisedPakistans
governmenttocutspendingonpublicservicesandsocialinfrastructure,inorder
togeneratecapitalfornationaldebtpayments.Thestandardpolicydemandof
theIMFandtheWorldBanktoPakistan,hasbeencutsongovernmentsubsidies,
increasingrevenues,andshrinkingthepubicsectorthroughprivatization,also
oftenasaconditionalityforfutureloans.Thishasmeantsellingpublic
enterprisessuchasthewater,electricity,andcommunicationssectorstoprivate
corporations9.
ThestandardpolicydemandoftheIMFandtheWorldBanktoPakistan,has
beencutsongovernmentsubsidies,increasingrevenues,andshrinkingthe
pubicsectorthroughprivatization,alsooftenasaconditionalityforfuture
loans. This has meant selling public enterprises such as the water,
electricity,andcommunicationssectorstoprivatecorporations1.
1.3GlobalInterestinWaterIssues
1.3.1TheIFIsReformStrategies
Coupledwithchallengessuchaspopulationgrowthandincreasingpoverty,
citizensofalargenumberoftheworldsdevelopingcountriesremainwithout
accesstocleandrinkingwater.The19811990wasdeclaredtheDrinkingWater
SupplyandSanitationDecadebytheUnitedNations.Priortothe1980sthe
methodofimprovingtheperformanceofwaterutilitieswastoprovidethe
necessaryhardwaretoimproveservices,withtheunderstandingthatitwas
gapsofatechnicalnaturethatcausedthehindranceinefficientservice
provision10.
Bythemidnineties,itbecameclearthatconcentratingonthetechnicalaspects
ofserviceprovisionalonewasnotenoughtoimproveperformance11.Attention
Ibid.
10
Klaas Schwartz, Managing Public Water Utilities (UNESCO-IHE institute for Water
Education, Delft, The Netherlands 2006)
11
Ibid.
shiftedfromtechnicalsolutionstomanagerialandinstitutionalsolutionsin
theearly1990s.Themanagerialapproachtoimprovingwaterserviceprovision
followedtwostrategiesappliedconsecutively:firstthatmanagementofthe
publicwaterutilitywouldbedelegatedtotheprivatesectorthroughconcession
contractsandothercontractualarrangements;andfollowingthefailure12of
these,reformsthatkeptmanagementoftheutilitywithinthepublicrealmbut
introducedmanagementpracticesassociatedwiththeprivatesector13.
1.3.2GlobalInterestinSustainability
Waterwasidentifiedasakeyissueamongstglobalenvironmentalconcernsby
theWorldCommissiononEnvironmentandDevelopment Brundtland
Commission in1987inthereportOurCommonFuture.Discussionsonwater
andenvironmentalissuesfollowedintheWorldWaterConferenceinDublinin
1992.In1996,theWorldWaterCouncilandtheGlobalWaterPartnership
wereestablishedwiththejointsupportofvariousinternationaldonor
organizations.
1.3.3TheGrowingInterestofInternationalWaterCompanies
Thecurrentglobaldevelopmentmantra
proclaimsthatthepublicsectorhasfailed
toadequatelyprovidewatertotheworlds
population.Withthepolicy
agendasoftheIFIsrunningparalleltothese
developments,waterbegantobe
increasinglyseenasaprofitablebusiness
bysomeoftheworldslargewater
companies,whosentryinthepublicwater
systemsofthedevelopingworldin
particularhasbeenfacilitatedbytheIFIs
overthelastfifteenyears.Therearea
handfulofmajorinternationalprivate
watercompanies,buttwoFrench
multinational
Figure 1: International Water Companies
12
The Cochabamba (Bolivia) concession and the Buenos Aires (Argentina) concession are
two of the worlds concession contracts known to have collapsed.
13
Klaas Schwartz, Managing Public Water Utilities (UNESCO-IHE institute for Water
corporationsdominatethesector:VivendiSAandSuezLyonnaisedesEaux14.
1.3.4TheControversialWorldWaterForum
Figure 2: 4th World Water Forum
Toachievethegoalsofderegulationandprivatizationofwaterresources,the
WorldBankalongwiththemajorwatercompaniesandgovernment
developmentagencies,hasestablishedarangeofinternationalorganizational
bodies15overtheyears.TheGlobalWaterPartnershipandtheWorldWater
Councilbothfoundedin1996,arethemostnotableofthese.Withaclaimto
supportdiscussionstowardsthesolutionofinternationalwaterissuesinthe21st
centuryandtoformulateproposals,theWorldWaterCouncilproposedthe
WorldWaterForumaninternationalevent16whichreceivesgovernmental
endorsementviathesigningofaMinisterialDeclaration.ThefirstworldWater
ForumwasheldinMoroccoin1997.ThesecondheldintheHaguein2000
broughttogethermanyoftheworldswaterinvestmentandmanagement
organizationsandprivatewatercompanies,andgainedlargescalecriticism
14
Alan Smitow and Deborah Kaufman, The New Economy of Water
15
Public Citizen, The IMF, the World Bank, and the Global Water companies: A Shared
Agenda
16
The World Water Forum is held once in three years, the last one in March 2006 took place
in Mexico City
fromPeoplesorganizations.TheVisionStatementadoptedandendorsedbythe
WorldWaterCouncilatthisForumpromotedamodelforwatermanagement
thatrelinquishesallcontroloverwaterresourcestotheprivatesectorthrough
commercialization,privatization,andlargescaledevelopment17.Atthesame
time,theWorldWaterCouncilgainednotorietyasanunrepresentativeand
undemocraticbodythatderivesitsinfluencefromanexclusivemembershipof
internationalfinancialinstitutions,largemultinationalwatercorporations,and
nongovernmentalorganizationsandclaimstohaveachieveda"consensus"on
thefutureoftheworld'swaterwithoutanyconsultation,discussion,orapproval
bygrassrootsorganizationsthatrepresentthepeoplesoftheworld18.
According to the WDM, the World Water Forum has wrongly gained
legitimacyasarepresentativeoftheinternationaldebateonwater,andin
realityhasnoofficialUNstatusandreportstonoUNbody
In2003,thethirdWorldWaterForumheldinKyotoreceivedextensive
resistanceontheprivatizationofwaterutilitiesinthedevelopingworldwhere
NGOsandothercivilsocietygroupsstagedprotestsanddemonstrationsagainst
aperceivedcorporatetakeoverofwater.ThefourthWorldWaterForumof2006
inMexicowasmarkedbyexclusivity,withthecorporatedominanceofwater,
privatisationandthemarginalisationofcivilsocietyaccordingtoparticipating
PakistanijournalistAounSahi.Notifiedbarriersincludedanextremelyhigh
costofparticipation19andamajorityofstagetimebeingoccupiedbyprivate
companiesandnationalgovernments.Whilegovernmentsarereportedtohave
sessionaftersessionadmittedtheirlapsesandfailure,theprivatesector
advocatedprivatizationarrangementssuchasconcessionsandBuildOperate
Transferschemesassolutions20.
Protestorsopposingtheeventclaimedthattheforumisbeingheldinthe
interestofbigcorporationsandtheirprofits,ratherthanthatofthepoor21.In
thewordsofaconstructionworkerfromtheoutskirtsofthecity,wejustwant
tohaveasayoverourownwaterandmanageitourselves,likewealwayshave.
17
www.waterinfo.net.pk, Pakistan Water Gateway: A Civil Society World Water Vision for
Action
18
Ibid.
19
The participation cost of each day was fixed at $100 or $700 for all seven days at the
Mexico World Water Forum 2006
20
Aoun Sahi journalist The News, participating in the World Water Forum 2006
21
www.bbc.co.uk, Mexico Water Marches Turn Violent (17.3.2006)
Inresponse,analternativewaterforumwasorganisedbycivilsocietyand
MexicanNGOsandtookplacesimultaneouslyinMexicoCity.
Figure 3: Protestors at 4th World Water Forum, Mexico City
1.3.5PopulistMovementsforWater
Withgrowingawarenessofthewaterprivatizationdebacle,variouscivilsociety
initiativeshavebeenlaunchedacrosstheworld,suchastheDirtyAid,DirtyWater
campaignbytheWorldDevelopmentMovement.AccordingtotheWDM,the
WorldWaterForumhaswronglygainedlegitimacyasarepresentativeofthe
internationaldebateonwater,andinrealityithasnoofficialUNstatusandreports
tonoUNbody22.Further,theWorldWaterCouncilwhichisthemainorganiserof
theWWFisknownasathinktankwithastrongproprivatesectorbias.The
PresidentoftheWWCisthePresidentoftheMarseillesWaterSupplyCompany
SEM ,asubsidiaryofSuez.Amongtheassociationsandinstituteswithinits
membershiparemajorwatercompaniessuchasSuezandDegremont23.British
membersoftheWWCincludeSevernTrentandBiwater.Alongsidethewater
utilitiesareothercompanieswithbusinessinterestsinthewaterandsanitation
sector,suchastheinternationalaccountancyandconsultancyfirm
PricewaterhouseCoopers.24Agrowingnumberofwaterforums,manyin
oppositiontotheWorldWaterForumhavetakenplacerecently,suchastheFirst
PeoplesWaterForuminItaly 2003 ,andtheSocialWaterForum 2003 in
Brazil.
22
World Development Movement, Special Briefing: 4th World Water Forum Mexico 2006
23
Suez and Degremont are two major French water companies
24
Trent and Biwater are two major British water companies
1.4InternationalChartersandNationalPolicies
Itisreportedthat95%ofPakistanswaterresourcesareusedforagricultural
purposes25.TreatiessignedbyPakistan,aswellaslawsandlegislationregarding
waterthuspertainmostlytofreshwater,marine&coastalwater,agriculture,
andenergy/hydelpower.
Internationaldonorshavebeenactiveindevelopingandwaterpolicyandwater
relatedinstitutions,withtheADBplayingthedominantroleinwaterresource
managementintheAsia/Pacificregion26.PakistansNationalWaterPolicy
whichisstillinitsdraftformpredominantlyfocusesonthedevelopmentof
waterresourcesandagriculture.Formunicipalwatersupply,amongitsgeneral
aimsarestepstoensureacceptableandsafequalityofwater,andinstitutional
reformstomakemanagingorganizationsmoredynamicandresponsive,with
policydirectivesproposingthepromotionofinvestmentthroughpublicprivate
partnerships.
PakistanisalsoasignatorytotheUnitedNationsHumanRightsCharterandin
2006becameamemberofthenewUNHumanRightsCouncil,whichobliges
countriestorespecthumanrightsandupholdinternationalhumanrights
standards.WhiletheCharterhasnospecificclauseonwaterasabasichuman
right,Article25clearlystates:Everyonehastherighttoastandardofliving
adequateforthehealthandwellbeingofhimselfandofhisfamily,including
food,clothing,housingandmedicalcare,andnecessarysocialservices,andthe
righttosecurityintheeventofunemployment,sickness,disability,widowhood,
oldageorotherlackoflivelihoodincircumstancesbeyondhiscontrol27.
Questionssuchaswhoownswaterhavebecomepartofbothgrassroots
concernsaswellasainternationaldebatesinrecentyears.
25
Ministry of Water and Power, Pakistan Water Sector Strategy (Executive Summary)
26
Pakistan National Water Policy draft
27
Universal Declaration of Human Rights
Chapter2:LahoreWASAandtheMovetowardsPrivatization
2.1UrbanWaterSupplyinPakistan
Followingdevolution,PunjabslargercitiesarerunasCityDistrict
Governmentswheretheresponsibilityoftheadministration,management,and
extensionofwatersupplyandsanitationfallsunderWaterandSanitation
Agencies.LahoreWASAisasuborganizationoftheLahoreDevelopment
AuthoritywhichisheadedbytheCDGL.Devolutionintroducedin2001also
endedtheurbanruraldivide,hencePunjabssmallertownsandvillagesarerun
asTehsilswherewaterandsanitationservicesaredeliveredbytherelevant
TehsilMunicipalAuthority TMA .Byandlargepublicwaterandsanitation
servicesinPunjabarebundled,inotherwordsprovidedandmanaged
collectivelyasoneservice.
Groundwateraccountsfortheoverwhelming
AcrossPakistan,
majorityoftheearthsfreshwater,while
bothgroundwaterand
waterfromriversandlakesamountstoless
surfacewaterareused
thanonepercentofthetotal.AcrossPakistan,
fordrinkingpurposes,
bothgroundwaterandsurfacewaterareused
withgroundwater
fordrinkingpurposes,withgroundwaterbeing
being
thepredominantsourcefallingintheratio70:30 thepredominant
incomparisontosurfacewatersources28.
sourcefallinginthe
Accordingtogovernmentstatistics,
ratio70:30
approximately60%ofPakistanscurrent
incomparisonto
populationhasaccesstomunicipalwatersupply29. surfacewatersources1.
InKarachi,Hyderabad,RawalpindiFaisalabad
Approximately60%of
andseveralsmalltownsandvillages,wateris
Pakistanscurrent
suppliedviasurfacesourceslikerivers,streams
populationhasaccess
andlakes,whilethecountrysremainingurban
tomunicipalwater
areassuchasLahorearesuppliedwithground
supply1.
waterobtainedthroughelectricallyoperated
deeptubewells.
Alargenumberofindividualhouseholdsalsoobtainwaterthroughdugwells
andboreholesequippedwithhandandmotorpumps30.GroundwaterinLahore
is
28
Wateraid UK, Wateraid Country Strategy Pakistan 2007-9
29
85% in urban areas and 55% in rural areas; Pakistan National Water Policy draft
30
Ibid.
availablebetween100and200feet31,howevermuchofthisisnotpotabledueto
thepollutionandcontaminationofLahoresshallowwater32.
2.2Lahore
PakistanisaFederationoffourProvinces,ofwhichLahoreisthecapitalof
Punjabandthecountryssecondlargestcitywithapopulationofover8million.
Pakistanhasacurrentestimatedpopulationof165million,anannualpercapita
incomeofUS$92533 approx.Rs69000 andanaveragefamilysizeof6.6
persons.Thecountrysannualpopulationgrowthrateis2.28percent,whilethat
ofLahoreiscurrentlyat3.32%.PakistanhasalowHumanDevelopmentIndex
HDI ranking138outof173countries34.
ThecountryslargercitiessuchasLahorearerunasCityDistricts,andaresub
dividedintoTownsandfurtherintoUnionCouncils.TheLahoreCityDistrict
has9administrativeTownsandatotalof150UnionCouncils.
LahoreissituatedontheleftbankoftheriverRavionmildlyslopingterrain
approximately213metresabovemeansealevel.ThetotalLahoreMetropolitan
areaspans2,300squarekilometres,andisborderedatitsNorthandWestby
SheikhupuraDistrict,totheSouthbyKasurDistrict,andtotheEastbyIndia.The
cityhasanextremeclimatewithsummerlastingfromApriltillSeptemberwhere
peaktemperaturesreach48degreesCelsius.
2.3LahoreWASA
ThelatecolonialerasawthecreationofImprovementorDevelopmentTrustsin
themajorcitiesofprepartitionIndia.TheLahoreImprovementTrust LIT was
createdin1936,andcontinuedpostindependenceasLahoresprincipalurban
developmentagency.From1966to1976watersupplyinthecityweredelivered
undertheWaterWingoftheLIT.In1975theLahoreDevelopmentAuthority
wascreatedundertheLDAAct1975andreplacedtheLIT,andin1976the
WaterandSanitationAgency WASA wasformedasanAgencyoftheLDA.
31
World Bank standards do not recognize water at this depth as potable
32
According to Azam Arain Sub-division Staff in-charge (Gunj Buksh Town), Defence
Housing Authority is pumping ground water from a depth of 400 feet while WASA tube-wells
are currently pumping from between 700 and 800 feet
33
Finance Division, Government of Pakistan, Economic Performance 2006-07: An Update
34
UNDP Human Development Report 2002
POPULATION IN WASA-SERVICED AREA
4.831 million
POPULATION SERVED
3.280 million (70%)
WATER SOURCE
Tubewells
a)
Presently in Operation
316
b)
Pumping Hours
16-18 Hrs
c)
Water Production
290 MGD
d)
Design Criteria
80 Gallons/Capita/Day
431,366
TOTAL WATER CONNECTIONS

a)
Metered
30%
b)
Un-Metered
70%
Direct Pumping
SYSTEM OPERATION
Table 1: Lahore Water Supply- Basic Facts
NESPAK, Integrated Master Plan for Lahore, (Presentation June 2004)
Sub-Division
Total Houses (000)
Houses Connected Population Served

(000)
(%)
North
123
85
71
Central
101
68
67
East
112
74
71
227
70
Total
Division
North 336
West
131
96
77
South
105
70
61
QAT
59
39
69
South 295
205
69
631
431
70
Total
Division
Grand Total
Table 2: WASA Water Supply- Detail by Subdivision
NESPAK, Integrated Master Plan for Lahore, (Presentation June 2004)
10
2.3.1FunctionsofLahoreWASA
LahoreWASAisresponsibleforLahoreswatersupply,sewerage,anddrainage
services SeeTables1and2 .Thisincludestheforecastingofdemandfor
servicesofwatersupply,sewerage,anddrainage,&preparationofplansfor
theirextension,rehabilitation,andreplacement;theconstruction,improvement,
maintenanceandoperationofwaterworks,sewerageworks&mainstorm
waterdrainagechannels,andpumpingstations;andthebillingandcollectionof
allrates,fees,andcharges,fortheservicesprovidedtoconsumers35.
ThetotalpopulationservedbyLahoreWASAamountstoapproximately4.8
million36.WASAisresponsiblefortheprovisionofwaterandsewerageservices
toLahore37,withtheexceptionofRailwayColonies,PWDcolonies,GORs,and
privatehousingsocietiessuchasCantonment,DefenceHousingSociety,and
ModelTown.Withintheareasthatfallunderitsjurisdiction,WASAclaims90%
coverageinwatersupplyamountingtoover534,000connections38,and80%
coverageinsewerage.AccordingtotheWASAtradeunion,WASAsmovableand
immovableassetstodayamounttoRs103billion39.Theseincludelandand
buildings,equipmentandmachinery,tubewellsetc.
Figure 4: WASA trucks
35
www.lda.gop.pk, Functions of WASA (Lahore Development Authority, 2008)
36
WASA, Up-to-date Service Levels (2007)
37
See map Annex 1
38
Ibid.
39
Azam Arain, WASA Sub-divisional Staff in-charge (Gunj-Buksh-Town-II) and former

Secretary General WASA Union
11
2.3.2Administration
Inorderofseniority,WASAisheadedbytheChairmanLDA40,theDirector
GeneralLDA,andManagingDirectorWASA.TheAgencyisrunbyaLahore
headoffice,whileitsexecutionfunctionsaredividedintotwentyfourarea
basedsubdivisions,whichcarryoutserviceoperations,maintenance,and
computerizedbilling.Itisalsoherethatcitizensareabletolodgeservice
complaints.Onaverage,eachofLahoreadministrativeTownscontainsfour
WASAsubdivisions.TodayWASAhas4226employeesforbothwaterand
sanitation.
2.3.3WaterDistributionSystem
Asmentionedearlier,Lahoresprimarywatersourceisgroundwaterobtained
throughelectricallyrundeeptubewellsdistributedacrossthecity.TheAgency
currentlyoperatesapproximately400tubewellsandispumpinggroundwater
fromadepthof800feet41.AlargenumberofhouseholdsinLahorealsoobtain
waterthroughindividuallydughandandmotorpumps.WASArunsatotalof
3300kmofwaterpipelineand3700kmofseweragepipeline.Lahoressewerage
iscarriedinto8maindrainsspanningatotalof212km,andisdisposed
untreatedintotheRaviriver.
WatersupplyinLahoreisintermittent,withtwomaintypesofdistribution
system:areabasedtubewellsandoverheadwatertanks.InWASAoperated
areas,waterisdistributeddirectlyfromtubewellstohouseholdsviawater
pipeline.InnonWASAoperatedareas,amixoftubewellsandoverheadwater
tankdistributionssystemsexist.Inthecaseofthelatter,waterispumped
directlyfromtheaquifertotheoverheadwatertank,andthendistributedto
waterpipelinethroughgravityflow.
While the flatrate tariff is calculated on the basis of property size and
value regardless of amount consumed, stepped tariffs are charged per
gallons consumed. Nonmetered Annual Rental Value accounts have not
been revised and continue to stand at the value at which the users
propertystoodattheinception oftheconnection1.
2.3.4Billing&Collection
40
The Nazim (Mayor) of CDGL also functions as Chairman LDA
41

12
WASAscollectionrateislow,wherestaffcitesalargenumberofgovernment
Departmentsandpoliticalofficeholdersaslongtimedefaulters.Waterand
sanitationtariffsarepaidbycitizenscollectivelythroughcomputerizedbi
monthlybills.Connectiontypesincludedomestic,commercial,construction,
andcharitable.CurrentlyWASAhasacombinationofflatrateinthecaseof
nonmeteredconnections,andsteppedbillinginthecaseofmetered
connections.FromJuly1997onwards,allnewWASAwaterconnectionsare
chargedinmeteredaccounts,whileoldernonmeteredconnectionsarealso
beingconvertedtometeredconnections.Whiletheflatratetariffiscalculated
onthebasisofpropertysizeandvalueregardlessofamountconsumed,stepped
tariffsarechargedpergallonsconsumed.Importanttonote,nonmetered
AnnualRentalValueaccountshavenotbeenrevisedandcontinuetostandatthe
valueatwhichtheuserspropertystoodattheinceptionoftheconnection42.A
smallsewerage43feeinthecaseofprivatelyinstalledtubewellsisalso
procuredfromusers.
2.3.5BudgetandDecisionMaking
LahoreWASAisnotautonomousinitsdecisionmaking,withmajordirectives
andplansbeingdeterminedattheCentrallevel,oftenwithpoliticalinterference.
WASAsmainrunningcostsincludepowerandenergy 45% ,payrolland
burden44 31% ,repairsandmaintenance 20% .Thesecostsaremetthrough
WASA officials complain that there has been no staff recruitment within
theAgencyforovertenyears,hencewithgrowingdemandtheAgencyhas
notbeengiventhefreedomtoupgradeitsinstitutionalstrength.
WASAswatersales 47% andsewerage&drainagecharges 34% .

Importantly,thedecisionofanyincreaseinWASAtariffsismadebytheCentral
government.WASAtariffswereincreasedbyapproximately10%in1998and
40%in2004,afterwhichtariffshavenotbeenrevised.AthirdsourceofWASA
fundsis
LahoresannualUrbanImmovablePropertytax,ataxcollectedbytheProvincial
governmentandredistributedinparttoWASAandotherinstitutions45.Other
42
Excise and Taxation Department annually updates the Annual Rental Value of all property
in Lahore. WASA water connections however are not revised in accordance with these.
43
Aquifer charges are not procured from privately-operated tube-wells such as those installed
by industries; instead sewerage charges for amount drained are procured from users.
44
burden: perks and benefits to employees
45
The other recipient of this fund is the CDGL
13
thantheabove,theAgencyreceivesnoallocatedbudgetfromthePunjab
government.Itisonlythroughareabasedschemesforextensionsand
rehabilitation,orprojectswithspecificfocusthatcapitalisprocuredby
WASA,SuchprojectsalsoundergoanapprovalprocessattheCentrallevel.
2.3.6FromRevenueGenerationtoLoss
WhathasmadeLahoreWASAuniqueisthe
factthatuntil2003theAgencywasaprofitmakingwaterprovider,beingthe
onlyWASAinPunjabtobegeneratingitsownrevenueandwiththesemeeting
itsrunningcosts46withoutbudgetaryassistancefromtheFederalorProvincial
government.
Until2003theWASAwasaprofitmakingwaterprovider,beingtheonly
WASAinPunjabtobegeneratingitsownrevenueandwiththese
1
meetingitsrunningcosts .Interdepartmentalchargesmakeupa
significantportionofWASAsrecurringcosts,amongwhichelectricity
providedbyWAPDA.InMay2000howeverrateofelectricitywas
drasticallyincreasedbyWAPDAandledtoWASAsspiralintoloss.56%
ofWASAsbudgetistodayconsumedbyinterdepartmentalelectricity
bills.
WhydidWASAfallintoloss?Duringthefinancialyear20072008WASAs
revenueamountedtoapproximatelyRs2billion,whileitsexpenditure
amountedtoroughlyRs2.8billion;thetotaldeficitbeingRs772.5million.In
relativeterms,thisisnotalargedebtburdenforapublicwaterutility,the
currentdeficitoftheKarachiWaterandSewerageBoardbeingRs2.5billion47in
comparison.
InterdepartmentalchargesmakeupasignificantportionofWASAsrecurring
costs,amongwhichelectricityprovidedbyWAPDA WaterandPower
DevelopmentAuthority andusedintheoperationoftubewellscomprisesa
majorpart.PriortoMay2000WAPDAchargedWASAaninterdepartmental
electricitytariffofRs2.60perunit.InMay2000howeverthisratewas
drasticallyincreasedbyWAPDAto8Rsperunitofelectricity.WASAthenheld
negotiationswithWAPDA,asaresultofwhichacompromisewasreached
settlingthetariffatRs5.89perunit.Todayin2008,thisratestandsatRs6.25
perunit48ofelectricity.FollowingWAPDAstariffincrease,56%ofWASAs
budgetwasconsumedbyinterdepartmentalelectricitybills.Todaythisfigure
46
World Bank Report on WASA (2003)
47
Karachi Water and Sewerage Board, 2007
48
PURC interview with Director Finance, WASA
14
hasincreasedto65%andamountstoRs1228million.WASAnowhasatotal
budgetdeficitofRs770million49.
2.4Issues&GapsCitedbyWASA
WASAofficialscomplainthattherehasbeennostaffrecruitmentwithinthe
Agencyforovertenyears,hencewithgrowingdemandtheAgencyhasnotbeen
giventhefreedomtoupgradeitsinstitutionalstrength.Accordingtoanofficial,
thetotalshortageofstaffindifferentcategoriesisabove1200,aswellasa
shortfallofroughly40engineersand10financeandhumanresource
personnel50.Atthesubdivisionlevel,officials51emphasizeasevereshortageof
groundstaff;whileWASAhasanaverageofonesewermanforevery2kmof
pipeline52,theinternationallyacceptedstandard53forthisistwosewermenper
kmofpipeline.
AnothermajorproblemfacedbyWASAhasbeentheconstantelementof
politicalinterferenceandpressureindecisionmaking.Theinstallationofalarge
numberofnewtubewells,withoutconsiderationofelectricitycostsand
groundwaterdepletion,isarecentinstance54.Also,becausetheAgencyisnot
autonomousindecisionmakingitfacesparallelorganizationalcontrolsunder
theCityDistrictNazim,DGLDA,MinisterHousing,SecretaryHousingandChief
MinistersSecretariat55.AlloftheaboveissuescreateobstaclesinWASAs
efficientperformance,andsignaltheneedforbasicsolutionsandreforms.
Also,accordingtoWASAofficials,amajorpartoftheAgencysrevenueproblems
canbesolvedifitisassistedwiththerecoveryofmorethanRs28billion
outstandinginarrears.Thisincludesarrearsfromover250departmentsofthe
federalandprovincialgovernmentssuchasthePolice,educationalinstitutions,
governmenthospitals,theChiefMinistersHouse,GovernorHouse,Zoo,and
manyotheragencieswhichhaventbeenpaidforthelastseveralyears,with
effortsmadebyWASAhavingfailed.
49
Ibid.
50
Ibid.
51

52
Ibid.
53
World Bank standard for sewerage pipeline
54
Hamid Ali, Water Works (The News 17.10.2004)
55
Ibid.
15
Figure 5 and 7: WASA Drain; WASA Head Office
2.5AddressingtheNeedsofCitizens
Itcannotbedeniedthatcitizensarenotsatisfiedwiththequalityandgeneral
characteristicsofwatersupplyinLahore.Commoncomplaintsrangefromthe
shortcomingsofintermittentwatersupplyandlowwaterpressure,to
contaminatedwaterbeingsuppliedatthetap.Basicanalysispointstotheneed
fortherehabilitationofoldinfrastructureandtheextensionofnew
infrastructuretonewareasandsettlements.Investmentinseweragetreatment
plantsisalsotheneedofthehour.Whiletheseproblemsarenotnew,the
governmentcoupledwithpressurefromMDBshashadtolookatprivatization
asareformoption.Thequestionhoweveriswhetherthisisinrealityarealistic
andfeasiblesolutionforboththeAgencysgapsanditsserviceusers,
particularlythepoor.
2.6TheMovetowardsPrivatization
AsdiscussedinChapter1,thepolicyshifttowardstheprivatizationofpublic
utilitiesinPakistanbeganwiththeIFIpushedStructuralAdjustmentPrograms
andhascontinuedintheformofthePovertyReductionStrategyPapers.These
policydirectivesbytheIFIshavebeenconcurrentinthedevelopingworld,with
theWorldBankandAsianDevelopmentBank ADB playingthedominantrole
intheprivatizationofstateownedwaterutilitiesinPakistan.
2.6.1TheWorldBanksWaterPrivatizationPolicy
16
WhattheWorldBankhascalledreformsinPakistanswatersectoraim
primarilyatprivatizingwaterutilitiesandcommercialisingwaterresources.A
1992policypaperentitledImprovingWaterResourcesManagement,isbased
ontheideathatmakingwateravailableatlowornocostisinefficientand
uneconomical,andthateventhepoorshouldpay56.InitsCountryAssistance
Strategy CAS theWorldBankhasalsostatedwaterprivatizationasoneofthe
conditionsthatwillallowPakistantoaccessfutureloans.
Asasolutiontothemuchhypedfailureof
TheWorldBankpolicypaper
servicedeliverybythepublicsector,the
wasbasedontheideathat
Bankvigorouslypusheswater
makingwateravailableatlow
privatizationarguingthatincreasedcost
ornocostisinefficientand
recoveryandprivatizationwillactually
uneconomical,andthateventhe increaseaccesstocleanwaterand
poorshouldpay1.TheWorld
sanitation,evenforthepoor.IntheWorld
Bankhasalsostatedwater
Banksvieweffectivewaterresource
privatizationasoneofthe
managementrequiresthatwaterbe
conditionsthatwillallow
treatedasaneconomicgood,andprivate
Pakistantoaccessfutureloans.
participationinwaterandwastewater
utilitieshasgenerallyresultedinsharp
IntheADBsview,watermust
efficiencygains,improvedservice,and
beutilisedbythosewhorender
fasterinvestmentinexpandingservice.In
themosteconomicadvantage.
turn,governmentofficialssuchasthoseof
AmemobyavisitingADB
theDepartmentofP&DhaveinvitedWorld
missionalsostatedwater
Bankassistance,citingcorruption,
privatizationasaconditionfor
inefficiency,lackoffunds,andinabilityto
extendingfurtherfinancial
providepipedwateraccesstothepoor.
assistance to Pakistan1.
Meanwhile,theblaringexperienceof
developingcountriesthattheprivatizationofpublicserviceshasreducedthe
poorsaccesstobasicssuchashealthcare,water,power,andeducation
continuestobeignored57.
2.6.2TheADBsNewWaterPolicy
TheADBhasalonghistoryofinvolvementintheAsianwatersectorintheform
ofprojectinvestmentloans58howeverinterventionsinwaterpolicyreformare
morerecent.InJanuary2001theADBdevelopedacomprehensivewaterpolicy,
inwhichwateruseefficiency,fullcostrecovery,institutionalstrengthening,and
56
P. Raja Siregar, The World Bank and ADBs Role in Privatizing Water in Asia (Jubilee
South Asia/Pacific, April 2004)
57
58
Ibid.
17
privatesectorparticipationarekeyinstrumentsfortheAsiaandPacificregion.
IntheADBsview,watermustbeutilisedbythosewhorenderthemost
economicadvantage.AmemobyavisitingADBmissionalsostatedwater
privatizationasaconditionforextendingfurtherfinancialassistanceto
Pakistan59.
2.6.3TheCaseofPakistan
Inthemid1990s,theWorldBankandPakistangovernmentdecidedinfavourof
privatizingwateraspartofthepushtowardstheprivatizationofservices,
startingwiththeprivatizationoftheKarachiWaterandSewerageBoard
KWSB .Itisgenerallybelievedthatduetopublicoutcryandprotestonthe
detailsofthescheme,theplanwascancelled60.
InJuly2001atthebehestoftheADB,thegovernmentofPakistaninitiatedthe
WaterResourcesStrategyStudyundertakenbytheMinistryofWaterand
Power.ThestudyfundedthroughtheADBsTechnicalAssistanceProgramme,
hadtheobjectiveofpreparingaroadmaporstrategyforthedevelopmentofthe
watersectortowardsmoreefficientservicedeliveryandoptimumutilisationof
resourcestomeetthecompetingdemandsofallwaterusersinthecountry.The
StrategyandMediumTermInvestmentPlan MTIP argueinfavourof
institutionalmanagement,financialsustainability,andinfrastructure,allof
whichmeanprivatizationatfullcostrecoveryofwaterutilitiesandwater
resources61.
Inmorerecenttimes,thegovernmentsplansofprivatizingwaterhave
resurfaced.Thesearediscussedbelow.
2.6.4TheAttemptedPrivatizationofKWSB
KarachisWaterandSewerageBoard KWSB wasthefirstpublicwaterutilityin
Pakistantoundergoprivatizationattemptsbythegovernment.Thisprocesswas
initiatedin1994withtheWorldBankstudyentitled"PrivateSector
Participation PSP forKarachiWaterandSewerageBoard KWSB ,andby
January1998seveninternationalcompanieswereshortlisted asmanagersof
thecityswatersupply.Themovewhichwasmetwithlargescaleresistance
fromcivilsocietyandpressurefrominterestgroups,finalizedinadecision
59
60
P. Raja Siregar, Peoples Resistance and Alternatives to the Privatization of Water and
Power Services (Jubilee South Asia Pacific and Freedom from Debt Coalition, April 2004)
61
18
againstprivatizationbytheSindhHighCourtinApril1999.ByJune1999the
WorldBanksuspendeditssupporttotheKWSBforprivatization.
2.6.5TheAttempttoPrivatizeLahoreWASA
TheproposalfortheprivatizationofLahoreWASAwasfirstintroducedin1997
duringthegovernmentofPrimeMinisterNawazSharifinaclimateofrelative
secrecy62.Theplanswereneitherannouncedpubliclynorwastheprocess
leadingtotheircancellationopenlydocumented.ResistancebytheWASAUnion
includedprotestsandawritfiledinMay1999butdismissedbytheLahoreHigh
CourtinJuly1999.Theprocessfinallyendedinthetopplingofthegovernment
ofNawazSharifinOctober1999.
2.7LahoreWASA:TheSecondAttempttowardsPrivatization
2.7.1ThePrivateSectorParticipationFeasibilityStudyandtheStrategic
OptionsReport
ItisnowforasecondtimeduringthetenureofGeneralPervaizMusharrafthat
plansforLahoreWASAsprivatizationhaveresurfaced.InJune2004ameeting
washeldbetweenofficialsoftheWorldBankprivatesectorlendingarmIFC
InternationalFinanceCorporation andkeyofficialsofthePunjabgovernment
includingthePunjabChiefMinisterPervaizEllahi,DistrictNazimLahore,andthe
ChairmanPlanning&Development P&D BoardPunjab,inwhichprospectsof
LahoreWASAsprivatizationwerediscussed.InthewordsofthePunjabChief
Minister,WASAneededtobeprivatizedbecausetheprovincialandlocal
governmentscouldnotprovidethelargefundsneededforimprovingwaterand
seweragefacilitiesinLahoreandothercitiesoftheprovince 63.Similarly,
officialsofIFCPakistanemphasisedhowLahorepresentedanattractivecasefor
theprivatesector,andcitedtheprivatizationofManilaswaterutilityacase
whichcollapsedandendedincontractcancellationin2002onlyfiveyearsafter
itsinitiationasarolemodelforLahore64.
Inthelastquarterof2004,theWorldBanksprivatesectorlendingarmIFC
InternationalFinanceCorporation ,signedacontractwithitstwopartners
fromtheGovernmentofPunjabtheDepartmentofPlanningandDevelopment
62

63
Hamid Ali, Water Works (The News on Sunday 17.10.2004)
64
Ibid.
19
andtheLahoreCityDistrictGovernmenttocarryouta$1.5millionstudy.The
objectiveofthestudywastoassessthepotentialtoattractprivatesector
participationthroughpossiblelongtermconcessionsinthewaterdistribution
systemandseweragenetworkinthedistrictofLahore65.AspecialcellorUrban
UnitwasalsosetupattheP&DdepartmentwithaWorldBankloan,toenable
theprocess.EntitledPrivateSectorParticipationFeasibilityStudyitsoutcome
wastobeaStrategicOptionsReportunderliningtheformsthatthe
privatizationofWASAmaytake.Neitherofthetworeportswasmadeopento
public.UntilMarch2006uponenquiringaboutthereport,citizensweretoldby
governmentofficialsthatthedocumentwasintheprocessoffinalisation.
InOctober2004,afivememberWorldBankdelegationheldmeetingsinLahore
todiscussprivateinvestmentopportunitiesinthewaterandsanitationsectors,
priortowhichmeetingswithofficialsoftheProvincialandDistrictgovernment,
WASA,LDA,andtheSolidWasteManagementDepartmenthadbeenheld66.
2.7.2NewspaperReportsandGeneralDevelopments
InDecember2005,newspapersreported67thegovernmentsdecisionto
privatizeWASAby1stJuly2006,withInternationalbiddinginwhichlocal
companieswouldbeallowedtocompete.Priortothis,thetaskofrecovering
WASAarrearsworthRs1140millionhadalreadybeenallocatedtotheprivate
sector.
InJanuary3rd2006,thePunjabMinisterforHousing&UrbanDevelopment
announcedthataFrenchcompanywillinvest4millionEurosinwatersupply
projectsforbigcitiesinPunjabasgrantinaid.ThisincludedEuro1millionin
Lahore,andEuro3millioninMultan,Gujranwala,Rawalpindi,andFaisalabad
collectively.AmonthlaterinFebruary,itwasannouncedthatanInvestigative
reportonLahoreswaterandsanitationbyaFrenchcompanyhadbegun,tobe
completedwithin6months.On3rdFebruarynewspapersreportedthat
machineryworthRs78millionforsewerageanddrainagehasreachedLahore
fromJapan,forwhichanofficehasbeenconstructedinSabzazar.On14th
FebruaryofficialsofFrenchcompanyMSSeurecawerereportedtohavesetup
anofficeintheWASAheadquarters.
Accordingtonewsreports,LahoreWASAsprivatizationwasbeingplannedasa
modelfortheprivatizationofwaterandsanitationagenciesacrosstherestof
Punjab.
65
A letter by IFC-Washington investment analyst inviting private companies for consultancy

on the Lahore WASA project (The News, 17.10.2004)
66
Hamid Ali, Water Works (The News on Sunday 17.10.2004)
67
Due to the governments reluctance in sharing basic information with citizens, press
clippings and news reports acted as a major information base and timeline.
20
Meanwhile,waterprivatizationfailurescontinuedtoreceiveattention
worldwide.On22ndMarch2006,UKnewspaperTheGuardiancoveredtheUN
SecondWorldWaterReportwhichrevealedthatduetopoliticalandhighrisk
operationsmanymultinationalwatercompaniesaredecreasingtheiractivities
indevelopingcountries.
2.7.3TheWorldBanksRecommendationsforWASA
InNovember2006,aworkshopontheWorldBanksrecommendationsfor
WASAwasjointlyheldbytheWorldBankandP&DUrbanUnitatRoyalPalm
CountryClub68,aprivateandexclusiverecreationalclubinLahore.Participation
totheworkshopwasbyinvitationonlyandforthelargepartcomprised
governmentofficials.
Theobjectiveoftheworkshopwastosharethereportsandrecommendationsof
WorldBankconsultantsforthePunjabwaterandsanitationsector.The
recommendationsforWASAweretermed"privatesectorparticipation"forthe
improvementofwaterandsanitationservices.TheDepartmentofP&Dalso
stressedonprivatesectorparticipationandreassuredofficialsfromtheWorld
BankthatpeopleresistingWASAsprivatizationaresmallinnumberandthat
theiractivitieswouldnothampertheprocessinitiatedbythegovernment.
ApresentationwasmadebyFichtneraconsultingfirmworkingwiththeUrban
Unit,basedonthestudyconductedbythemineightcitiesofPunjabincluding
Faisalabad,DeraGaziKhan,Gujranwala,Multan,Bahawalpur,Sargodha,Sialkot
andRawalpindi.Thebroadfindingsofthestudywerethattherearenoquality
standardsavailableinwater,watersupplyisinsufficient,thereiswater
contaminationduetooverlappingofsewerageandwatersupplylines,and
industrialwasteandopendrains.Administrativeissueshighlightedwere
incompleteofficerecordsandinsufficientstaffsalaries.
Atthesameevent,anotherpresentationwasmadebyaWorldBank
representativeoutliningremedialmeasuresforWASAbasedonthewaterand
sanitationstudy.ThecruxoftheserecommendationsforWASAwasthatwater
supplyshouldbetreatedasabusiness.Directivesincludedtheunbundlingof
waterandsanitationservices,restructuringoftheWASABoardofDirectorssuch
thatitscompositionbecomesbusinessoriented,andthehiringofprofessionals
fromthemarketonfixedtermappointment.Itwasalsoadvisedthattariffs
shouldbefixedaccordingtoWASAcosts69,shouldbelinkedwithinflation,
68
A private golf club in Lahore used exclusively by upper income clients on the basis of
membership
69
Including both running costs and investment costs
21
regulartariffadjustmentsshouldbemadeaftereverysixmonthsoroneyear,
andthatdirectandindirectsubsidiesreceivedbyWASAshouldbereduced.
2.8TheStatusofWASAsPrivatizationToday
Surprisingly,approximatelyaftermid2006,presscoverageofWASAsexpected
privatizationfaded.Oflate,ithasbeenlearnedthattheStrategicOptions
Reportwasinfactfinalisedinearly2007,andrecommendationsbeingsilently
carriedoutincludeprivatizationorcorporatizationintheformofunbundling.
ThisinvolvesapublicmanagementoftheAgency,withanunbundlingof
functionssuchasbilling&collectionsandoperations&maintenance,whichare
tobedividedandhandedovertoseparateprivatecorporations70.
2.9TheCruxoftheIssue
TheDepartmentofPlanning&Developmentcitesgravegapsinboththe
performanceandinvestmentneedsofWASAinproposingitsprivatizationasa
solution.MostcriticalistheviewheldbytheDepartmentthatthereisno
capacitywithinWASAtohealitself.Independentresearchandanalysisonthe
otherhandhighlightadifferentscenario:WhileLahoreWASAisnodoubtin
needofreform,privatizationisneitheradesirablenorfeasibleoptionfor
citizensintermsofanequitableaccesstoaffordablewatersupply.Reasons
behindthisfundamentalfindingarediscussedinthefollowingchapters.
70
See Chapter 3, 3.38 Nigeria
22
Chapter3:WaterPrivatizationFailuresacrosstheWorld
3.1ContextandBackground
Itiswidelyagreedthatinthe200yearhistoryofmunicipalwatersystems71,
publicwaterutilitieshavebeenahighlysuccessfulmodelfortheextensionof
waterandsanitationservicestourbanandevenruralpopulations.Itis
estimatedthatonly310%oftheworldscurrentpopulationisservedbyprivate
waterutilities,ofwhichthemajorityresidesinhighincomecountries72.France
andtheUKaretheonlytwoOECDcountrieswhosewateroperationsaremostly
runbyprivatecompanies.Ontheotherhand,theprivatizationofwatersupply
haswasmadeillegalintheNetherlandsandUruguayin2004.
Indevelopingcountriestoday,thetrendofIFIdirectivesregardingthe
privatizationofwaterservicesisareflectionofthestrongeconomicandpolitical
demandsofinternationalagenciesanddonorsonwaterservices 73,where
ironicallytheMDBshaveusedpropoorrhetorictobacktheirpolicies.
3.1.1FormsofWaterPrivatization
Formsofwaterprivatizationhavehadtheconsistentelementoftransferring
controlandmanagementofoperationstoprivatecompanies74.Withthe
exceptionoftheUKwherethecompletewatersystemwassoldtoprivate
companies,inmostcasesprivatizationhasbeenbasedonconcessions,leases,
managementcontracts,andBuildOperateTransfer BOT schemes.Theword
privatizationhasbeenunpopular.Theearlierattemptsofwaterprivatization
duringthe1990sinvolvedlargescaleinvolvementoftheprivatesector,and
werecommonlyknownasPrivateSectorParticipationorPSPs.Inmorerecent
yearsthePSPjargonhasbeenreplacedwithtermssuchasPublicPrivate
Partnerships PPPs ,andPrivateSectorParticipation PSP ,whichreferto
71
Approximately 200 years in Europe, 60 years in South Asia
72
Klaas Schwartz, Managing Public Water Utilities (UNESCO-IHE Institute for Water
73
David Hall, Water as a Public Service (PSIRU, Business School, University of Greenwich
2006)
74
Public Citizen, Broken Promises and Social Turmoil: Water Privatization Fiascos from
Across the World (March 2003)
23
thesamebroadconcept.InthecaseofLahoreWASAtoo,thePublicPrivate
Partnershipterminologyhasbeenusedindocumentsfavoringprivatization.
3.1.2AcknowledgementofFailure
TheearlierofthePSPsinthe1990sincludethemuchpublicizedconcession
contractsofwaterutilitiesinBuenosAires,Jakarta,andManila.Withthe
collapsingoftheseschemesandaterminationofcontractsinthelate1990s,
evaluationsinitiallypromotingprivatizationacknowledgedthatprivatesector
participationtoincreaseefficiencyandinvestmenthasbeenmuchlesseffective
thananticipatedandthereforehavecontributedlittletoameliorating
performanceproblemsofurbanwaterandsanitationsystems75
Inrecentyearsthus,thegospelofprivatesectorinvolvementinthewater
supplyandsanitationsectorhasfaded,andledtoapolicyshiftintheWorld
Bank76.From2003onwards,theBankreengageditselfwithpublicservice
providersofthedevelopingworld.Thistimethereformstrategyintroduced
institutionalarrangementsandmanagementpractisestypicaloftheprivate
sectorwhilekeepingthewaterutilitywithinthepublicrealm.Thereformmodel
alsoknownastheNewPublicManagement NPM ,demandsanincreaseinthe
autonomyofstateownedutilitiesandashiftintheirmanagementtoamore
commercial,marketorientedandoutputbasedapproachasanalternativetothe
traditionalbureaucratic77modelofpublicadministration.
However,despiteanapparentshiftinstrategyandterminology,theWorldBank
strategiesofthe1990sand2000sarenotsubstantiallydifferentfromeach
other,astheyarebothbasedonthefundamentalpromotionofamarket
orientedmanagementofwaterutilitiesoncommercialbasis.Whilethereisno
clearannouncementofprivatizationperse,abusinessorientedmanagementof
thewaterutilityisstillbeingpursued,suchasinthecaseoftheLagosState
WaterCompany Nigeria aswellasLahoreWASA See2.7.3WorldBank
RecommendationsforWASA .
3.2TheNatureofPrivateWaterServices
Alongwithfoodandair,waterisabasicneedforhumanlife.Itisaroundthis
factthatthemaincriticismofwaterprivatizationhascentred:theprivatewater
75
Klaas Schwartz, Managing Public Water Utilities (UNESCO-IHE Institute for Water
76
Ibid.
77
The Bureaucratic model was influenced largely by Webers writings, and is characterized
by an apolitical and institutionalised civil service, hierarchy and rules, permanence and
stability, internal regulation, and equity.
24
companyrespondstopurchasingpower,notneed.Thesurvivalorlifeline
needsofthelargelyunderservicedpoorhenceremainunaddressedbythe
commercialinterest.Becausewaterisnecessarytosurvivalandisdemandedat
anycost,thewatercompanyhaslittlereasontorespondtotheconcernsofits
users.Asdocumentedcasesshow,poorcommunitieshavesufferedmiserablyat
thehandsofthemarketmechanismwhichhasturnedablindeyetotheir
minimumdrinkingwaterneeds.
Secondlyandveryimportantly,watersupplyisasectorinwhichbyitsvery
designcompetitioncannotbeintroduced.Unlikeaservicesuchas
telecommunicationswherearelativeamountofcompetitionexistsdueto
multipleprovidersandthemobilenatureoftheservice,waterservicesare
boundinspacebyinfrastructure,makingthewateruseracaptiveconsumer.
Thewaterproviderpublicorprivatehenceoperatesinrelativemonopoly,and
theonlywayinwhichsomecompetitionmaybeintroduced,iswheredifferent
citydistrictsaremanagedbycompetingwaterutilitiesandwherecitizenscan
votewiththeirfeetbychoosingaresidentiallocalitybasedonthequalityof
watersupply.Thishoweverisseldomanoption,particularlyforthepoor.Also,
inthecasethatitispractised,itisalwaysthepoorwhoareleftwiththelower
orsubstandardendoftheservice.
Anoftenoverlookedcriticaldetailisthatthepriceofwaterinmanyofthe
worldsprivatizedutilitieshasbeensetatthemarketrateagainsttheUSdollar.
ThiswasalsoamongWorldBankdirectivesinthecaseofKWSBsattempted
waterprivatizationamovewhichifimplementedwouldhaveleadtotariff
increaseswitheveryincreaseintherateofthedollaragainsttheRupee.The
WorldBankdirectivesforLahoreWASA78alsoproposetheadjustmentofwater
tariffswithinflation.Needlesstosay,suchtariffincreasesborderonthe
inhumaneintheirblindoversightoflifelineneeds,particularlyofthepoor.
Further,themajorityofcountriesofthethirdworldwhereprivatizationhas
beenattemptedhavebeenruledbydictatorshipsandcorruptregimes,where
thereiscontemptforhumanrights,undemocraticprocesses,&alackof
accountabilityandtransparency.Itistoalargeextentthisfactorthathas
providedfavourableclimatesfortheprivatefirmasexperiencehasshown.
3.3TheMeaningofFailure:CasesfromAcrosstheWorld
Waterprivatizationhasfailedinmorethan90%ofattemptedcasesworldwide.
Intangibletermsfailurehasmeanteitheracancellationofthecontractbythe
company,orunrestbycitizensforcingthecompanytocancelitscontract.The
vastmajorityofthesearecitiesofthedevelopingworld,suchasBuenosAires
78
World Bank presentation at Royal Palm Country Club, Lahore, November 2006
25
Argentina ,Atlanta,Georgia USA ,Manila Philippines ,Cochabamba Bolivia ,

Jakarta Indonesia ,Nelspruit SouthAfrica ,UK,Tanzania,Mozambique.
Referred to by citizens as the W ater

Wars, the case of Bolivias water
privatization
failure
has received
extensive media coverage. In reaction to
unrest, the Bolivian government then
imposed military takeover of the city,
with clashes resulting in 175 injured
people, two blinded youths, & three
deaths. A popular phrase capturing the
sentiment of citizens in the case has been
they will buy our rainfall too.
Figure 6: Bolivia's Water Wars
Shortfallsseenacrosstheboardincludedrasticincreasesinwatertariffs,alack
ofpromisedinvestmentininfrastructurebythefirm asthisdoesnottranslate
intodirectreturnsforthecompany ,joblosses,healthproblemssufferedby
citizens,andenvironmentalpollution.Importantly,despitetheprivatesectors
claimoftransparency,weakregulationoftheprivatewatercompanybythelocal
regulatorybody,aswellascorruption,bribes,andsecretdealshavebeennoted.
Failuresharshesttruthisthatitcharacterisesrepeatedleaksfromthecitizens
pocket,intensifyingalreadyexistingpoverty.Whentariffsareinitiallyraised,
peoplepayexpectingbetterserviceandquality.Whentariffsareincreasedin
followingrounds,peopleeitherpayup,orgetsupplycutatthetap.Andonce
watercontractsarecancelled,companiestakelegalactionagainsthost
governments,demandingcompensationforlostfutureprofits,forwhich
residentsagainpayintheformofdirectandindirecttaxes.
LatinAmericawasamongthefirstregionsofthedevelopingworldtoundergo
privatization,startingwithArgentinascityBuenosAiresin1993,followedby
Manila Philippines in1997.Withoutexceptionitwasseenthatwithinaperiod
of13years,privatizingcontractswerecollapsing.
MultinationalwatercompanieshaveretreatedfromLatinAmericainthelast5
years.Thetwokeyreasonshavebeenpublicopposition,andfailuretomake
26
largeenoughprofits79.ThelargestoperatorofprivatewatercontractsinLatin
America,announcedthatitwouldwithdrawfromoperationsindeveloping
countriesunlessthereturnoncapitalwasatleast13%.In2007,Suezannounced
thatitswithdrawalwascomplete,andthatitnolongerhasanyemployeesin
waterinLatinAmerica.DavidHallofPublicServicesInternationalreportsthat
fewmultinationalcompaniesfromoutsidetheregionnowremaininpossession
ofwateroperatingcontractsinLatinAmerica.Thosewhichdoremainhaveno
intentionofexpansion,andhaveevenattemptedtosellsomeoftheirremaining
holdings.
Highlightedbelowarethegeneralfeaturesofbroadlyselectedwater
privatizationfailuresacrosstheworldandtheirnegativerepercussionson
citizens.
3.31Argentina
Argentinaprivatizedwaterservicestoagreaterextentthanothercountriesin
LatinAmerica.TheprivatizationofthepublicwaterutilityofBuenosAiresin
1993waswidelycelebratedbytheWorldBank,andcarriedoutbyAguas
Argentinas,asubsidiaryoftheFrenchwatercompanySuez.Thefirst8yearsof
thecontractwerecharacterizedbyweakregulatorypracticesandcontractre
negotiation.Mostshockingly,thecontractpermittedSueztolinkwaterpricesto
USdollarleadingtogrosstariffincreases80.Thisprovidedthecompanywitha
20%profitrate,whichisfarhigherthanacceptableornormalforthewater
industryinothercountries81.Residentialwaterratesincreased88.2%between
May1993andJanuary2002althoughtherewasnorelationshipbetweenthis
rateandtheinflationrate.Servicecutoffswerecommon,andUnionresistance
wascrushedbypromisingfinancialreturnsandpayoffs.
In1997thecompanyhadfailedtomeet45%ofitscontractcommitmentsfor
improvementandexpansionofservices,resultinginmassivepollution.Aguas
Argentinaswentbackonitscontractualobligationtobuildanewsewerage
treatmentplant.95%ofthecitysseweragewasstilldumpeddirectlyintothe
river.OntopofgreatlossessufferedbycitizensinJuly2003AguasArgentinas
filedaninternationalarbitrationsuitinfrontoftheWorldBanksICSID
79
David Hall and Emanuele Lobina, Water Privatization and Restructuring in Latin America,
(PSIRU, Business School, University of Greenwich, 2007)
80
81
Profit rates considered very reasonable in USA: 6-12.5%, UK: 6-7%, France: 6%
27
InternationalCentreforSettlementofInvestmentDisputes ,claimingUS$1.7
billioninlossescausedbycurrencydevaluation82.
AsthecaseinotherwaterprivatizationfailuresinLatinAmerica,BuenosAires
waterutilityisnowundergoingaprocessofrenationalization.Followingthe
ArgentinegovernmentsdecisiontoterminatetheAguasArgentinasconcession
inMarch2006,stateownedwateroperatorAYSA AguasySaneamientos
Argentinos wasappointedtooperatewatersupplyandsanitationservices.
AYSAwas90%ownedbytheArgentinegovernmentand10%ownedbythe
tradeunion83.
3.32ThePhilippines
AdvisedbyIFC,ManilaprivatizeditsMetropolitanWaterworksandSewerage
System MWSS in1997.The25yearleaseagreementswerethenthebiggest
waterprivatizationsin1997.MWSSgrantedtheprivatecompanynamed
Mayniladrightstooperateandexpandwaterandsewerageservices84.
6monthsintothecontract750workerswerelaidoffandoneyearintothe
contract,Mayniladaskedforthefirstrateincrease.Becauseoftheguaranteeof
highertariffreturns,Mayniladwasmoremotivatedtocarryoutdevelopmentin
alreadyaffluentareas.Investmenttargetswerepostponedandpromisesof
investment,suchastreatmentplantsandnewinfrastructurewerenotmetas
thesearenotlucrativeventuresfortheprivatecompany.Theexpectationof
regulationwasmetwithweakmonitoringandoversightpracticesbylocal
regulatoryinstitutions.MeanwhileMayniladcontinuedtoseekcontractre
negotiations.Theprivatewatercontractwascancelledin2002,fiveyearsinto
itsinitiation.ThewatercompanythensoughtUS$303millionincompensation
fromthePhilippinegovernment85.
3.33Bolivia
Boliviaisoneoftheworldspoorestandmost
indebtedcountries.In1999,theBolivian
governmentgranteda40yearconcession
contracttoAguasdelTunari,asubsidiaryofthe
giantcorporationBechtel.Theprivatizationof
waterwasthelatestintheWorldBankbacked
82
For details see Hall and Lobina, Restructuring Water Services in Latin America (2007)
83
Ibid.
84
85
Ibid.
28
proposaltosellBolivianpublicenterprisestoprivateinvestors,includingthe
airline,thetrainsystem,andtheelectricutility86.Tariffswerealsoindexedto
theUS$,meaningthatevery
Figure 7: Protests in Cochabamba
timethelocalcurrencyfellagainstthedollar,watertariffsincreased.The
averagewaterbillwasestimatedtoequal22%ofthemonthlypayofaself
employedmanand27%ofthatofawoman87.Familieswereeventuallypaying
onefifthoftheirincomeforthewaterservice88.ShockinglyBechtelconvinced
thegovernmenttopassalawthatobligedresidentstoobtainapermittocollect
rainwater,hencetheoftenquotedsentimentoftheBolivianpeopletheyhave
privatizedourrainwatertoo!.
Unabletobeartheburdenofincreasedwaterratesafterprivatizationwhichin
somecaseswentupto300%,citizensofCochabambawheretheminimumwage
islessthanUS$100permonth,beganacampaigntodriveoutthewater
company.ReferredtobycitizensastheWaterWars,thecaseofBoliviaswater
privatizationfailurehasreceivedextensivemediacoverage.Inreactionto
unrest,theBoliviangovernmentthenimposedmilitarytakeoverofthecity,with
clashesresultingin175injuredpeople,twoblindedyouths,&threedeaths.
InApril2000aftersevendaysofcivildisobedienceandprotest,thepresidentof
Boliviawasforcedtoterminatethewaterprivatizationcontract.Inreturn,the
watercompanyBechtelfiledsuitagainsttheBoliviangovernmentdemanding
$25millionincompensationforlostfutureprofits,withtheWorldBank'sICSID.
InJanuary2006AguasdelTunaridecidedtodropthecaseagainstatoken
paymentofUS$0.3million.Continuedpressurebyinternationalandlocal
citizenswascitedbysourcesasthereasonforthecompanysdecisiontosettle89.
LikethewaterutilityofBuenosAirestheCochabambawaterutilityisnow
undergoingaprocessofrenationalization90.
86
David Hall and Emanuele Lobina, Water Privatization and Restructuring in Latin America
87
Ibid.
88
www.democracynow.org, Interview with Oscar Larivera (5.10.2006)
89
90
Ibid.
29
The privatizationofthewater utilityofNelspruit SouthAfrica ended in

tragedy. When the citys poorest residents could not afford to pay
increased rates, water supply was cutoff, forcing people to find water in
streams, ponds, and lakes polluted with manure and human waste. This
resultedinthecountrysworstcholeraepidemicin2002, admittedbythe
governmenttobethedirectresultoftheprivatizationofthewaterworks.
3.34SouthAfrica
In1999,BritishwatermultinationalBiwaterwasawardeda30yearwater
concessioninNelspruit,SouthAfrica.Biwaterhaddifficultyinraisingmoney
anddependedonfinancefromthepublicsector.Arangeofproblemswere
reportedbycitizens:peoplecouldnotusetoiletsatnightbecausewaterwas
switchedoff,whencommunitiesreportedbrokenwaterpipesitgenerallytook
Biwatermorethan4daystorepairthem,waterbillsweregrosslyinflatedand
inaccurate,whiteareasinNelspruitweregettingmuchcheaperwaterthanthe
townships91.Alsocommunitieswerenotgettingthe6000litresoffreewater
theyareentitledtounderthenationallaw,andtherewasanincreaseinwater
disconnections,whichwereperformedillegallywithoutpriornoticeto
households.
Waterprivatizationsmosthorrificconsequenceonthepoor,waswhenthe
countryspoorestresidentscouldnotaffordtopayincreasedrates,andwater
supplywascutoff,forcingpeopletofindwaterinstreams,ponds,andlakes
pollutedwithmanureandhumanwasteaccordingtoanewspaperarticle.This
resultedinthecountrysworstcholeraepidemicin2002,admittedbythe
governmenttobethedirectresultoftheprivatizationofthewaterworks.
3.35USA
Contrarytogeneralperception,itisnotonlyincitiesofthedevelopingworldbut
alsothedevelopedworldwherewaterprivatizationhasfailed.
In1998theCityGovernmentofAtlantasigneda20yearcontractwithUnited
Water,asubsidiaryofFrenchcorporationSuez.InJanuary2003thecontract
wasterminated.ItwasopenlyreportedthatUnitedWaterwasbillingthecityfor
workitdidntdo:$37.6millionforserviceauthorizations,capitalrepairand
91
Black majority areas in South Africa, largely comprising the urban poor
30
maintenancecosts,andthecitypaid$16millionofthesecosts.Further,routine
maintenancewasbilledascapitalrepairsandmuchneededinfrastructure
rehabilitationwasneglected.Seweragebillratesrose12%annually,andUnited
Watercutthenumberofemployeesfrom700tojustover300.Ironically,trustin
thecompanyerodedtothepointthatthecitygovernmentspent$1millionto
hireinspectorstoverifyUnitedWatersreports!
3.36UK
The RWA privatization was summed by British newspaper The Daily
MailinJuly1994:thewaterindustryhasbecomethebiggestripoffin
Britain.Waterbills,bothtohouseholdsand industry,havesoared.And
the directors and shareholders of Britains top ten water companies
havebeenabletousetheirpositionasmonopolysupplierstopulloffthe
greatestactoflicensedrobberyinourhistory..
PrivatizationofUKswaterutilitieshavebeenamongthemostcontroversialof
thedevelopedworld.InitiallyproposedbytheThatchergovernment,in1998ten
RegionalWaterAuthorities RWAs intheUKweretransformedintoprivate

profitmakingventures.TheRWAsweresoldas25yearconcessionsbyissuing
sharesinthestockmarket,creatingprivatemonopolies.Theseprivate
monopoliesweregrantedarangeofgovernmentsubsidies.Thisresultedin
profitsofthe10watercompaniesrising147%between1990and1997.
Forcitizens,thedisconnectionratetripledinthefirstfiveyears.A1994study
showedcasesofdysenteryrisinginmosturbanareas.Watercompanies
installedprepaymentmeterswhichsuppliedwaterwhencustomershadpaid
throughaplasticcard.Whentheusersaccountwasempty,supplywascutoff.
DuetopublicoutragetheParliamenthadtopassaWaterIndustryAct1999
forbiddingdisconnectionsfornonpaymentandtheuseofprepaymentmeters.
Othertransgressionsbytheprivatecompaniesincludedalackofconservation
measures,seweragebackflow,waterwaypollution,andpoordrinkingwater
quality.TheRWAprivatizationwassummedbyBritishnewspaperTheDaily
MailinJuly1994:thewaterindustryhasbecomethebiggestripoffinBritain.
Waterbills,bothtohouseholdsandindustry,havesoared.Andthedirectorsand
shareholdersofBritainstoptenwatercompanieshavebeenabletousetheir
positionasmonopolysupplierstopulloffthegreatestactoflicensedrobberyin
ourhistory..
31
3.37Tanzania
InMay2005atenyearcontractbetweenUKwatercompanyBiwaterandthe
GovernmentofTanzaniawasterminatedafterjusttwoyearsofthecompanys
operation.TheTanzaniangovernmentclaimedthatnodomesticpipeworkhas
beeninstalled,thecompanyhasnotspentthemoneyitpromised,waterquality
hasdeclined,andrevenuehasdecreased.
3.38 Nigeria
ThewaterandsanitationsectorinNigeriaisinneedofbothextensionand
improvement.Between60%and70%ofthepopulationiscurrentlywithout
eitherwaterorwastewaterservicesbutthatstillleaves4055millioncustomers
receivingsuchservices,agreaternumberthananywhereelseinAfrica92.
Likeinotherdevelopingcountries,privatisationpoliciesinNigeriaswater
sectorhavebeendevelopedinresponsetoconditionalitiesfromexternal
agencies,primarilytheWorldBank.AlthoughtheWorldBankregardedallits
waterprojectsinNigeriafrom1979to2004asfailures,awaterprivatisation
planfortheLagosStateWaterCompanywasinitiatedbyIFCin1999.TheLagos
waterprivatisationwasoneofmanyIFCprojectsinNigeriaatthetime,andwas
coupledwiththeprivatisationofthenationalairline.Privatisationwasexpected
toreducethecostofwater,enableinvestment,andimprovepublichealthand
economicgrowth.InternationalwatercompaniesThamesWater,SevernTrent,
VeoliaandSuezprequalifiedasbidders,howeverlostinterestfollowingtheir
globalwithdrawalfromdevelopingcountries,andtheIFCplanforaprivate
concessionwasabandoned93.LiketheWorldBanksproposalforLahoreWASA,
thecurrentpositioninLagosisthatthewatercompanyhasbeencorporatised
alongcommercialprinciples,butthereremainsmuchconfusionaboutexactly
whatformofprivatisationisnowenvisaged94.Anewlawwaspassedin2004
andcreatedaholdingcompanywithanumberofsubsidiaries.Thepolicyofthe
companyisnowtoselltheLSWCitselfonthestockmarket,aswellastotarget
domesticNigeriainvestors.whileequallyencouragingthemtoseek
partnershipwithinternationalwatersectoroperators.
SimilartothecaseofLahore,amajorcriticismfacedbytheLagoswater
privatisationhasbeenthattheprivatisationpolicywasneverexposedto
populardebate.Nigeriandevelopmentexpertshavealsopointedoutthatthe
WorldBanksinvolvementinwaterandsanitationprojectsinNigeriaiswholly
92
David Hall, Water and Electricity in Nigeria (PSIRU, Business School, University of
Greenwich, 2007)
93
Ibid.
94
Ibid.
32
externallyinducedanddrivenwithalackofdemocraticprocessandlearning
fromlocalexperiences95.
3.4Conclusion
Waterprivatizationfailuresandcontractcollapsescontinue.Interestingly,many
oftheformerlyprivatizedwaterutilitiesofthedevelopingworldarebeingre
nationalised.Further,thecelebratedprivatesectormodelofwatercompaniesin
Paristooarenowsurprisinglybeinghandedbacktothepublicsector.
Anoverviewoftheworldsmanyfailedcasesofwaterprivatizationestablishes
severalfundamentalcausesoffailure,fromthehostcountrylackingaclimateof
transparencyandaccountability,toweakregulation,andthedisablingofthe
practiseofequitybythemarketmechanism.Itisclearthattheprivatizationof
publicwaterutilitieshasbeentothedetrimentofpeopleswelfare,particularly
thepoor;becausetheyarethegovernmentsonlyrealtreasury,allcostsborneby
theutilityarefinallyextractedfromthecitizenspocketintheformofdirectand
indirecttaxesandtariffs.Failurethereforeisntmerelyariskfactororsimplya
matterofcivilunrest,butaguarantorofincreasedpoverty,bothintermsof
financialcostsaswellaspeoplesdecreasedaccesstoaffordableandsafe
drinkingwater.Also,thefailureshaveproventheclaimofthewater
corporationsandtheirsupportingMDBsthattheprivatesectorismore
efficient,costeffective,competitiveandbringstheneededfinancingisinfact
nottrue.
95
David Hall, Water and Electricity in Nigeria (PSIRU, Business School, University of
Greenwich, 2007) Report by Babatope Babalobi 2004
33
Chapter4:PublicSectorReform,notPrivatization
4.1TheChallengesFacedbyWASA
Arguinginfavourofprivatization,thePunjabgovernmentcitesalackof
efficiencyinWASAsperformance,ascarcityoffundsfortheextensionofits
servicestootherareas,highlosses,andanonavailabilityofinvestmentfor
treatmentfacilities96.Intruth,theproblemsfacedbyLahoreWASAareno
enigma,noraretheyanydifferentfromissuestypicalofutilityprovidingstate
institutions.ThereisnodoubtthatWASAswaterandsewerageinfrastructureis
obsoleteandneedsrehabilitation,theAgencyhasbeenrunninginlossforthe
past45years,Lahoreneedsseweragetreatmentplantsandextended
infrastructuralcoverage,waterconservationmeasuresneedtobeintroduced
intothesystem,andfundsareneededforalloftheabove.Unbiasedanalysis
demonstratesthattheanswerliesnotinanargumentfororagainst
privatization,butanunderstandingofthereformneedsofWASAandthe
misconceptionthattheprivatecompanywillbeabetterproviderofwaterto
citizensatlarge.
4.2MythsabouttheBenefitsofWaterPrivatization
Ultimately, all investment is
paid for by people either
through charges for the use of
water, or through taxes of
somekind1.Allexpenditureon
watersupplyorsanitationwill
costthecitizen,whetherthisis
procured from government
accounts, or those of the
privatefirm.
4.2.1InvestmentforExtension
Internationaldonorshavepromotedtherole
oftheprivatesectorasinvestorsinwater.
Thefactisthattheprivatewatercompany
investsonlyifandwhenthelocalwater
utilitycanbeaclearsourceofprofit.The
perceivedexpectationofinvestmentis
henceamajormisconception,asfewnew
connectionshavebeenmadeinregionsof
theworldwheretheneedisthegreatest.
CollectivelyinSubSaharanAfrica,South
Asia,andEastAsia excludingChina only
600,000newhouseholdconnectionshavebeenmadeasaresultofinvestment
byprivatesectoroperatorssince199797.
96
PURC interview with Chairman P&D, December 2004
97
David Hall and Emanuele Lobina, Pipe Dreams (World Development Movement, 2006)
34

4.2.2Funds
Themyththatwithinthepackageofprivatizationtheprivatefirmbringsready
toinvestcapitaltotherecipientcountry,standsinurgentneedofcorrection.
Ultimately,allinvestmentispaidforbypeopleeitherthroughchargesforthe
useofwater,orthroughtaxesofsomekind98.Allexpenditureonwatersupplyor
sanitationwillcostthecitizen,whetherthisisprocuredfromgovernment
accounts,orthoseoftheprivatefirm.Thefactisthattheprivatecompany
borrowsmoneyfromInternationalbanksandfinancialinstitutions,justasthe
publicwaterutilityborrowsfromtheStateandStatebanks.Thedifferenceis
thatwhiletheStatewillchargeforitscosts,theprivatefirmwillchargeforcosts
plusthemaximumpossibleprofitmargin.
Withprivatization,thecostsbornebytheUtilitywhethercomprisingcapitalor
runningexpenditurearemerelytakenoffthegovernmentsbooks,butcostthe
citizenjustasmuchifnotmore.
4.2.3CorruptionvsTransparency
Criticismsurroundingcorruptioninthepublicsectorhasledtothegeneral
notionthatpublicsectororganisationsarecorruptbytheirverynature.The
truthhoweveristhatintheabsenceoftransparencyandaccountability,
corruptioninanyorganisationismerelytheoutcomeofacorruptionfriendly
climate.Contrarytopopularbelief,experienceshowsthatnotonlyareState
institutionsintheirgivensetupcorruptionprone,butsoaretheprivatefirm
andtheindependentbodyregulatingit99.
Acrosstheworld,publicwaterhasbeenimprovedthroughincreasedpopular
control and democratic reforms. Water utilities in the Netherlands have
workers on the supervisory board, and representation of users interests
through locally elected bodies. The renationalized water utility of Buenos
Aires is 90% owned by the Argentine government and 10% owned by the
trade union. The restructuring of one of Hondurass stateowned water
companieswasbasedonjointworkingwithtradeunions through a process
aimedatinvolvingtheworkforce.
98
David Hall and Emanuele Lobina, Pipe Dreams: The Failure of the Private Sector to Invest
in Water Services in Developing Countries (World Development Movement, 2006)
99
According to the Department of P&D, regulatory capacity will be created within the city
government to monitor the private firm
35
4.3AWayForward
4.3.1FromInefficiencytoEfficiency
Until2003oneofWASAsstrongestclaimstosuccesswasthatunlikeits
counterpartsinothercities,ithadmetallitsoperationalcoststhroughself
generatedrevenue,withoutanysubsidyorannuallyallocatedbudgetfromthe
government.Inanagewheregreatscepticismsurroundstheperformanceofthe
publicsector,thisisnosmallfeat.
AscitedbybothWASAofficialsandunionists,themaincausefortheAgencys
spiralintofinanciallosswaswhenitsinterdepartmentalcostsfacedasudden
increaseasWAPDAincreasedapreviouslysubsidizedrateofelectricityby
almost200%100.
Theinferencethatchangingtheownershipofwaterandwastewateroperations
willsignificantlyreducethesecostsisfalse.Anyownerwillhavetomeetthe
costsofinterdepartmentalcharges.Andalthoughaprivatecorporationwill
takecapitalfinancingoffthegovernmentsbooks,itwillcostresidentsfar
more101.
Acrosstheworld,publicwaterhasbeenimprovedthroughincreasedpopular
controlanddemocraticreforms102.Amotivatedworkforceisessentialforan
efficientlyfunctioningpublicutility.SuccessfulreformsinmanyStateowned
utilitiesacrosstheworldhavebeencentredaroundaninvolvementofthe
workforceinthestakesoftheorganization.ThoseinFranceandBritainareone
example.IfapercentageofdirectbonusesandsharesintheprofitsofWASAis
reservedforitsmanagement,employees,andunionasincentives,the
performanceofemployeesandhenceoftheagencyfromtheincentivetolook
forcreativesolutionsforrevenuegeneration,tostrategizingforbillingand
recoveryisboundtoimprove103.
Thisensuresanunderpaidworkforcefinancialgainsasadirectresultoftheir
performance,andallowsfortheirempowerment,inturnrefuellingtheself
esteemconducivetoproductivity.Thishasbeendoneinwaterutilityreformsin
theNetherlands.
100
See Chapter 2
101
Toronto Civic Employees Union, Water and Wastewater Utility Study (Submission to the
Chief Administrators Office, City of Toronto, April 2002)
102
Corporate Europe Observatory (CEO) and Transnational Institute (TNI), Reclaiming Public
Water: Achievements, Struggles, and Visions from Around the World (March 2005)
103
PURC interview with Arif Hasan, March 2005
36
InrealitycorruptionisnotaninbornqualityofStaterunservices.Rather,itis
enabledbyunrewardingsalariesandopportunitiescreatedbyanabsenceof
transparency.
4.3.2CounteringCorruption&EnsuringAccountability
TheimpressionthatStaterunservicesarecorruptbytheirverynaturehas
becomecommonlyacceptedinPakistan.Inrealitycorruptionisnotaninborn
quality;rather,itisenabledbyunrewardingsalariesandopportunitiescreated
byanabsenceoftransparency.Malpracticeiscommonintheprivatesectortoo,
whereexecutivesofwatercompanieshavebeenconvictedforbribing
governmentofficialstoobtaincontracts104.TheDepartmentofP&Darguesthat
followingprivatizationregulatorycapacitywillbecreatedintheCity
Governmenttokeepchecksontheprivatefirm.Butprivatizationexperiencesin
ManilaandcitiesacrosstheUKhaveshownthatregulatorybodiescreatedto
imposechecksontheprivatefirmandensuretheminimumstandardsin
protectingthepublicinterests,havealsobeencorrupt.
Essentially,itisaclimateofaccountabilityandtransparencythatcounter
corruption.Theanswerhenceisnotintheformationofabodyalone,butinits
composition.IftheWASABoardofDirectorsisrestructuredsuchthatit
comprisesinthemajorityofLahorecitizensandwaterrelatedinterestgroups,
thepractiseoftransparencyandfairplaywillbeenabledbytherepresentation
ofabroadcrosssectionofrealitiesanddirectinterests.Waterinterestgroups
wouldincludedomesticwaterusers,bigandsmallindustrialusersofwater,
lowincomecommunities,environmentalassociations,groupsandorganizations
responsiblefortherunningofWASAsuchastradeunionists,itsrangeof
workers,anditsmanagement,aswellasbanksfromwhomWASAborrows
moneyortowhomitisindebt.
ReformssuchasthesearecommoninmanyoftheworldsStateownedwater
utilities.ThemunicipallyownedwatercompaniesintheNetherlandsfor
examplehaveworkersonthesupervisoryboard,andrepresentationofusers
intereststhroughlocallyelectedbodies.Therenationalizedwaterutilityof
BuenosAiresis90%ownedbytheArgentinegovernmentand10%ownedby
thetradeunion.SimilarlytheBoardofDirectorsofCochabambasre
104
37
nationalisedwaterutility105hasbeenrestructuredtoenablebroader
stakeholderparticipation.106.TherestructuringofoneofHondurassstate
ownedwatercompaniestoo,wasbasedonjointworkingwithtradeunions
throughaprocessaimedatinvolvingtheworkforce.
Further,waterandwastewaterassetsandoperationsneedtobeaccountableto
publicandopentocompletepublicscrutiny.Allproposalsforimprovementor
developmentundertakenbyWASAshouldbefinalizedthroughaprocessof
publichearings.Allcitizensshouldalsobeprovidedtherightofaccesstopublic
documentsproducedbyWASA,andWASAaccountsinparticular.Thisisa
practiseinIndiasstateKerala,andwellasmanycitiesoftheUSA.
Thirdly,asinglegovernmentservantshouldbemadeinchargeandheld
responsibleforeachdevelopmentprojectundertakenbyWASA,fromdayone
untilcompletion107.Thiswillensurethedelegationoffullresponsibilityand
accountabilitytoasingleofficial,contrarytothecurrentpractisewhichis
characterisedbyconstanttransfersofofficialsandhenceashiftingof
responsibilitiessuchthatnooneindividualisintheendresponsible.
Contrary to the myth that the private firm brings finances and capital, the
privatewatercompanymerelyborrowsmoneyfromInternationalbanksand
financialinstitutions,usuallyagainsthigherinterestratesthantheState.
4.3.3TheNeedforFunds
JustaseveryRupeethatgoesintogovernmentspendingispassedontocitizens
astariffsortaxes,theprivatefirmrecoversallitscoststhroughthepriceofits
product.Butwhilethepublicsectorwillchargeforinvestment,theprivate
sectorwillchargeforinvestmentplusprofitmaximization.Theactualcostsof
fundingwaterandsanitationservicesthereforefallonusersandbecome
criticaltopublicwelfare.
TheDepartmentofPlanning&DevelopmentquotesafigureofRs20billionas
thetotalamountoffinancesneededtomeetLahoresgrowingwaterand
sanitationneeds.Theonlysourceforthesefinancesitsaysisforeignfunds.
105
The new composition of the Board includes Cochabambas mayor acting as the Board
chairman, another representative of the municipal administration, 3 representatives of
Cochabambas consumers, one trade union representative and a representative of the
Association of Professions
106
Hall and Lobina, Water Privatization and Restructuring in Latin America (2007)
107
PURC interview with Arif Hasan March 2005
38
Contrarytothemyththattheprivatefirmbringsfinancesandcapital,the
privatefirmmerelyborrowsmoneyfromInternationalbanksandfinancial
institutions,usuallyagainsthigherinterestratesthantheState.Further,
developmentworkparticularlythatpertainingtoinfrastructure,ismost
effectivelyexecutedwhenphasedout.Itthereforefollowsthatthetotalfinances
neededforWASAarealsonotallrequiredatonetime.
FundsforWASAsimprovementcanhenceberaisedfromPakistanibanksand
leasingcompaniesovertime.WASAcanalsoutilizeitsassetstoraisefunds,
whichaccordingtoitsunionareworthapproximatelyRs81billion.
ThegoalofWASAspricing
policy should be to
encourage domestic water
usage of a minimum per
capita standard per day,
and to discourage water
usewhereitisinexcessof
a certain per capita
standard per day. Cross
subsidy in which the poor
are subsidized by charging
rich users more, has been
introduced across the
world to protect the needs
of poor communities by
ensuring a basic minimum
water supply. The re
nationalized water utility
of Buenos Aires has
introduced a social tariff
policy in favour of low
income residential users.
4.3.4TheProblemofPricingandtheNeedfor
Conservation
toanaccelerationintherateofdrawdownof
Lahoresaquifer,forwhichuncheckedwater
consumptionofbothdomesticandindustrial
usagesisamajorcause.Whileontheonehand
WASAneedstodevelopawaterconservation
strategy,ontheotheraprotectionofthebasic
waterneedsofthepoorisalsooneofitsduties.
ThegoalofWASAspricingpolicyshouldbeto
encouragedomesticwaterusageofaminimum
percapitastandardperday,andtodiscourage
waterusewhereitisinexcessofacertainper
capitastandardperday.AreportonSouth
Africaswaterauthorityrecommendstheseto
be50lcd litrespercapitaperday and200lcd
respectively.
Crosssubsidyinwhichthepooraresubsidized
bychargingrichusersmore,hasbeen
introducedacrosstheworldtoprotectthe
needsofpoorcommunitiesbyensuringabasic
minimumwatersupply.Inthecurrentpractise,
WASAcrosssubsidisesdomesticwatertariffsthroughcommercialtariffs.A
higherdegreeofprogressivecrosssubsidizationcanbeintroducedbyWASA
fordomesticwatertariffs.AySAtherenationalizedwaterutilityofBuenosAires
hasintroducedasocialtariffpolicyinfavouroflowincomeresidentialusers
unabletoaffordwaterbills.BytheendofDecember2006thispolicyhadover
114,000beneficiariesandimpliedacostofPeso4millionperyear108.
108
2007 (PSIRU Business School, University of Greenwich, 2007)
39
Secondly,toensureaccountabilityandwaterconservationinusagepatterns,
meteringofwatersupplyfordomestic,commercial,andindustrialconsumption
isnecessary.Regularandtransparentmonitoringofuncheckedwaterusage
mustalsobeintroduced.Thepractiseofwatermeteringwasintroducedby
LahoreWASAinJuly1997,afterwhichallnewconnectionsreceivemetered
bills.Oldconnectionsarealsograduallybeingconvertedintometeredaccounts
accordingtoWASAofficials.Watermeteringchargesforquantityofwater
consumedasopposedtopreviousAnnualRentalValueslabrateswhichdidnot
takeconsumedquantityintoaccount.Also,meteringenablesthecheckingof
bothtechnicalandillegalleakagesonwaterpipelines.
ArichknowledgebaseexistswithinWASAintheformofalargenumberof
experienced,longservingprofessionalsandstaff,whohaveafardeeper
understandingofissuesthanisassumed.ItisimperativethatWASAofficials
attheoperational,managementanddesignlevelsaregivenasayinthe
decisionmakingoftheAgency.
4.3.5ListeningtoWASA
Byandlarge,majorWASAdecisionsaremadeattheFederalorProvinciallevel,
throughpoliticalinterference,orbyhighpaidconsultantsofforeigndonor
organisations.ArichknowledgebaseexistswithinWASAintheformofalarge
numberofexperienced,longservingprofessionalsandstaff.Themajorityof
WASAemployeeshaveafardeeperunderstandingofissuesthanforeign
consultantsandshorttermadvisors.ItisimperativethatWASAofficialsatthe
operational,managementanddesignlevelsaregivenasayinthedecision
makingoftheAgency.Unfortunately,theclimate,structure,andprocessesofthe
bureaucracyarenotconducivetoutilisingthisknowledgebasetoreacheffective
andcreativesolutions.Also,ingeneralthereisalackofcoordinationbetween
GovernmentDepartments,andtheaddeddrawbacktermedbysome
governmentofficialsasinterdepartmentalrivalry.Anenvironmentof
interaction,learning,anddynamismiscrucialtotheWASAsdevelopment,
contrarytothecurrentstructureofrigidhierarchy.
40
Chapter5:TheResponseofLahoreCivilSociety
5.lIntroduction
ThefirstdetailedpressreportofWASAsprivatizationappearedinLahores
dailyTheNewsinOctober2004,andwasmetwithbroadpublicoutcry.The
responseofcivilsocietyactorsconsistedofvariousvalidconcerns,themajor
questionbeingwillcitizensespeciallythepoorhaveaffordableandequitable
accesstowaterafterWASAisprivatized?Whileintheauthenticdemocratic
tradition,publichearingsandbroadbasedpublicconsultationsbygovernment
areapartofanydecisionaffectingcitizens,thiswasabsentfromtheprocess.
Withtheexceptionofsomecoveragebytheprintmedia,citizenswerekept
largelyuninformedregardingtheprivatizationinitiative.
Theprivatizationofpublicutilitiesisgenerallyseenasundesirablebycivil
society,astheprivateinterestprimarilyseeksitsowninterestandnotthatof
citizens.Particularlyinthecaseofthebasicnecessitiesoflife,leavingtheseupto
thewillofmarketforcesspellsdanger.Thisconcernwasconsolidatedata
seminarheldbyNGOActionaidinDecember2004,whichbroughttogether
citizens,media,somegovernmentofficials,nonprofitorganisations,and
developmentprofessionals.
LWACsprimarydemandfrom
governmentwasaccessto
informationandtherightful
participationofcitizensinthe
decisionmakingprocess.The
committeesstrategyinvolved
attemptsatdialoguewith
government,andnetworkingacross
thevarioussectorsofcivilsocietyto
generatedebateandarriveatan
informedunderstandingofthe
impactsoftheprivatizationofthe
waterutility.
Withafocusonresearchbased
advocacy,PunjabUrbanResource
Centrebeganaprocessof
understandingWASAsprivatization
beforeforminganypositiononthe
issue.Thesimpleobjectiveofthiseffort
wastoanalyzethepossibleadvantages
anddisadvantagesofprivatizationfor
Lahorescitizens.
Soon,thecollectiveconcernofcitizens
translatedintoajointeffortbycivil
societythroughtheformationof
LahoreWaterActionCommittee109,
witharangeofrolesplayedby
membersincludingresearch,activism,andadvocacy.LWACsprimarydemand
fromgovernmentwasaccesstoinformationandtherightfulparticipationof
citizensinthedecisionmakingprocess.Thecommitteesstrategyinvolved
attemptsatdialoguewithgovernment,andnetworkingacrossthevarious
sectorsofcivilsocietytogeneratedebateandarriveataninformed
109
See Annex-V for List of Members LWAC
41
understandingoftheimpactsoftheprivatizationofthewaterutility.The
methodsadoptedatparallellevelsarediscussedbelow.
5.2 The Role Played by Civil Society

5.2.1Networking
LWACworkedwiththecommonconcernforcleanandaffordableaccessto
drinkingwaterforallcitizens,withparticularemphasisonsafeguardingthe
needsofthepoor.Networkswerecreatedacrosscivilsocietyinorderto
consolidatetheeffort,facilitatecommunication,andstudytherepercussionsof
waterprivatizationoncitizens.LahoreWaterActionCommitteemembers
includedcommunityactivists,unionists,lawyers,journalists,NGOs,andone
politicalparty110.
RegularmeetingsofLWACensuedandactedasanimportantplatformforaction
andknowledgesharing.InthefollowingmonthsLWACplayedanactiverolein
demandingaccesstoinformationonWASAsprivatization,anddenouncingany
decisionwithoutthebroadconsentofcitizens.Publicmeetingswereheldin
threeofLahoresthensixadministrativeTowns111,organisedbymembers
LabourPartyPakistanandNGOEcowatch.Animportantmilestoneinthe
campaignwastheinvolvementofpractisinglawyers,culminatinginapublic
meetingheldbyLWACinthehistoricKarachiHallofLahoreHighCourtBar.
ThismeetingwaspresidedbysomeofPakistanskeysocialandhumanrights
activistssuchasChairpersonHRCP112,andlawyerandformerPresidentofthe
SupremeCourtBarAssociation113.LWACalsoheldapressconference
emphasisingtherisksinprivatizingWASA,attheLahorePressClubinJune
2005.Simultaneously,LWACmembersattemptedregulardialoguewith
governmentthroughtelephonecalls,letters,andemailstoWASAandIFC,and
meetingsandvisitstoWASAandtheDepartmentofP&D.
5.2.2InformationCollection&Research
Thebasisofunderstandingthewaterprivatizationissuewasinformation
collectionandliaisonwithrelevantactorsandstakeholders.Thesewerethe
DepartmentofP&D,WASAtradeunionists,waterconsumers,development
professionals,andWASAofficials,withwhomdiscussionsandinterviewswere
heldregularlyoveraperiodoftwoyearsandcontinuetodate.Variousattempts
110
Labour Party Pakistan, which was among the key activists in the campaign
111
Lahore now has nine administrative Towns
112
Asma Jahangir
113
Hamid Khan
42
atdialoguewiththeLahoreCityDistrictNazimwerealsomade,butfaileddueto
alackofresponse.Animportantpartoftheresearchprocesswasthestudyof
waterprivatizationfailuresacrosstheworld,followedbythedisseminationof
lessonsandanalysis.Further,contactwasmadewithnationalandforeign
organisationsworkingonwaterissues,suchastheUKbasedNGOPublic
ServicesInternational,andtheNetworkforConsumerProtectionIslamabad,as
wellasinternetbasedactivistsgroups,allofwhichactedasamajorresource
base.
5.2.3TheGenerationofDebate
InDecember2004afternewsofLahoreWASAsprivatizationhadbecome
widespread,aseminarwasorganisedbyNGOActionaidinordertoopenly
discussthebroadaspectsoftheissue.Keynotespeakersattheseminarincluded
developmentconsultants114andtheFederalMinisterforPrivatization115.While
developmentprofessionalsrepresentedthebroadcivilsocietyviewandspokeof
thenegativerepercussionsofwaterprivatization,governmentstressedits
argumentinfavourofprivatization,largelytothedissatisfactionofcitizens.
Aseriesofmonthlyandbimonthlydiscussionforumsonwaterissueswas
initiatedbyLWACmemberPURCandactedasplatformsfordebateand
dissemination.Theforumscoveredthebroadrangeofmunicipalwaterissues,
andweresupportedbymediacoverageintheformofpressreleases,reports
andeditorials.
AtaforuminOctober2004,developmentprofessionalandactivistProfessor
NaumanAhmedwasinvitedtospeakaboutlessonslearnedfromtheattempted
privatizationoftheKarachiWaterandSewerageBoardin1999.InFebruary
2005PresidentWASAUnion116discussedtheproblemsfacedbyWASA.Thiswas
followedbyathirdforumonwatermeteringpresidedbythePublicHealth
EngineeringDepartment.SeveralinvitationswereextendedtoWASAofficialsto
speakoftheirplansfortheAgency,butweredeclined.FollowingtheFourth
WorldWaterForumheldinMexicoCityinMarchthesameyear,participating
journalistAounSahidiscussedhisexperienceandobservations,highlightingthe
dominanceoftheMDBsandlargewatermultinationalsintheglobalwater
sector.PURCpresenteditsfindingsontheworldsfailedcasesofwater
privatization,atforumsheldinLahoreandIslamabad.AdiscussiononLahores
waterissueswasheldinSeptember2007,presidedbydevelopmentprofessional
RezaAliandattendedbyWASAofficials,wherechallengesfacedbytheAgency
114
Kaiser Bengali
115
Hafeez Sheikh
116
Amjad Butt
43
Astudyofcasesfromacrosstheworldshowedthatwaterprivatizationhas
ledtoincreasedpovertyanddecreasedaccesstoaffordablewatersupply,
andthattheprivatesectorhasnotdeliveredaspromised.
werediscussedatlength.Finally,basedontheneedtounderstandWASAswater
andsewerageOperationsandMaintenance,WASAsubdivisionin
chargewasinvitedasSpeaker117,andemphasizedthataninappropriatenumber
ofgroundstaffisamainshortfallfortheAgencyinmeetingOperationsand
Maintenancedemandadequately.
5.2.4ConclusionsbyCivilSociety
ResearchandinvestigationledtotheconclusionthattheprivatizationofWASA
wouldbetothedetrimentofLahorescitizens,particularlythepoor,andis
henceunacceptable.ThestudyofWASAanditscurrentgapsmadeitclearthat
theAgencycanberepairedwithpublicsectorreforms.Studyofdocumented
casesirrefutableevidenceofthefactthatwaterprivatizationhasleadto
increasedpovertyandadecreasedaccesstoanaffordablewatersupply,andthat
theprivatesectorhasnotdeliveredaspromised.Withinthegiveninstitutional
conditionsofdevelopingworldcities,andthenatureoftheprivatefirmandthe
marketmechanism,itbecameclearthattheprivatizationofLahoreWASAwould
fail.Finally,theWorldBanksrecommendationsforWASA October2006
spelledoutformsofmanagement,billing,andownershipstarklyalongthelines
ofabusinessrunoncommercialprinciples.Themostappallingofthesewas
regulartariffreadjustments,andthelinkingofwatertariffswithinflation See
Chapter2,2.7.3 .Thisresearchbasedapproachhenceenabledcivilsocietyto
presentastrongerfactbasedargumentinitsresolveagainsttheprivatization
initiative.
5.2.5Advocacy&Dissemination
Lessonslearnedwerethenwidelydisseminatedtorelevantgroups,
organisations,andindividualsintheformofleafletspublishedbyLWAC,
newspaperarticles,discussionsandpresentationsbyLWACmembers,internet
networking,liaisonandsoon.Thetargetaudiencecomprisedbothgovernment
andcitizens,civilsocietygroups,media,CBOsandNGOs,independent
professionals,andpoliticalparties.DialoguewithWASAandtheDepartmentof
P&Dintheformofformalmeetingswasalsocarriedoutbyseveralcitizens
groups.
117

44
Further,theresearchprocessundertakenbyLWACactedasaninformationbase
foractivistssuchasthosewithintheWASAUnion,whousedvalidatedfacts,both
fromlocalsourcesandfromcasesacrosstheworld,tofurthertheircause.One
suchinstancewasaletterwrittenbythethenChairpersonWASAUnion118tothe
UnitedNationsheadquarterinIslamabad,advocatingthatwaterisabasic
humanrightaccordingtotheHumanRightsChartertowhichPakistanisa
signatory,andthatitsprivatizationwouldhinderitsaccesstocitizens.Onthe
basisofthisletter,anotherletterwasthenwrittenbytheUNtotheMinistryof
ForeignAffairsadvocatingthesamepointandhencetheirreservationstowards
theprivatizationofWASA.Inasimilarwayinformationonwaterprivatization
failureswerequotedinpressreleasesbytheUnion.
5.3Conclusion
Throughtheprocessofdebateandinvestigationitwasconcludedthat
theprivatizationofLahoreWASAisunacceptable,andthatwaterisa
basichumanrightwhichmustbeguaranteedtoallcitizensunderall
circumstances.
ThesuccessoftheLahoreWaterActionCommitteeandcivilsocietyinitiatives,
wasinmakingtheproposedprivatizationofWASAanissueofpublicconcern,
andestablishingopenconsultationwithcitizensasafundamentalright.
Throughtheprocessofdebateandinvestigation,itwasconcludedthatthe
privatizationofLahoreWASAisunacceptable,andthatwaterisabasichuman
right,whichmustbeguaranteedtoallcitizensunderallcircumstances.The
chaosandlossessufferedbycitizensacrosscitiesofthedevelopingworldwhere
publicwaterutilitieshavebeenprivatized,bearoverwhelmingtestimonytothe
factthatwithinthegivencontextofpoverty,nontransparentpractises,and
weakinstitutionalstructuresindevelopingcountries,waterprivatizationleads
toincreasedpovertyanddecreasedaccesstoaffordabledrinkingwater.
Thecomingtogetherofcivilsocietyactorscanbetermedaformofactive
citizenship,wherebythedemandofcitizenswassimplytohaveasayinthe
decisionsthataffecttheirlives.Whiletheacceptanceandencouragementof
citizensparticipationindevelopmenthasbeenlargelymissingfromthe
scenarioinPakistan,itiswidelypractisedintheworldsdevelopedcountries
andincreasinglyinthedevelopingcountriesofLatinAmerica.
118
Ibid.
45
IntheresponseofcivilsocietytotheproposedprivatizationofWASA,withthe
inclusionofvariousactorsatmultiplelayersandcapacities,achainofactionsis
createdandgainsmomentum,intheendcompletingacycle.Itisthroughsuch
processesofcommunicationandknowledgesharingthatpeoplearebetter
informed,andthegapbetweengovernmentandpeoplemaybefilled.
Chapter6:TowardsReform
6.1TheRealIssue
Ontheonehand,reforminWASAisneededinordertoimprovewaterquality
anddelivery,andextendservices.Ontheotherhand,potablewateritselfis
becomingscarce,aswaterconsumptionisincreasingmanifoldandwater
resourcesarebeingpolluted.Underthesecircumstances,itbecomesessentialto
securethebasicwaterneedsofvulnerablegroupssuchasthepoor,aswellas
protectthenaturalaquiferandregulatewastefulpatternsofwaterconsumption.
Whilecriticsrefertowaterprivatizationasanewandfailedsocialexperiment,
andthetestimonyofbitterexperiencesacrosstheworldprovesthatwater
privatizationfailstodeliveritspromise,WASAsprivatizationcontinuestobe
promotedasasolutiontotheabovegaps.Researchclearlydemonstratesthat
theAgencysprivatizationisinadvisablefromthepublicinterestperspective,
whichshouldessentiallyformthebackboneofanyinterventioninWASA.Itis
alsoclearthatprivatizationissimplynotnecessary,andthattheAgencyis
reparablethroughbasicpublicsectorreforms.
Amongthedecisions
thatwillguidethe
impactandtypeof
reformsinmunicipal
watersupply,is
whetherwateris
treatedasapublictrust
oramarketable
commodity
6.2WaterasaBasicHumanRight
Amongthedecisionsthatwillguidetheimpactand
typeofreformsinmunicipalwatersupply,is
whetherwateristreatedasapublictrustora
marketablecommodity119.Bothwisdomandsocial
justicepointtotheneedtotreatwaterasabasic
humanrightandhenceascaredpubictrust.
Governmentsandcitizensworldwidearerealising
theneedtoformalisethisrelationshipbetween
119
Following the broad marketing and promotion of bottled water, many argue that drinking
water has already become a commodity
46
peopleandtheirrighttowater.InOctober2004areferenduminUruguay
proposedaconstitutionalamendmentonwater,whichwasapprovedby62%of
voters.Theamendmentincludedthestatementthataccesstopipedwaterand
sanitationarefundamentalhumanrights,andthatsocialconsiderationstake
priorityovereconomicconsiderationsinwaterpolicies.In2004theNetherlands
parliamentalsopassedalawwhichstatesthatdrinkingwaterservicesto
consumersmayonlybeprovidedbyentitieswhichare100%publicorpublicly
owned.
Further,severalwaterutilitiesinLatinAmericascountrieswhereprivatization
wasattemptedandfailedareintheprocessofrenationalisation,suchasin
Brazil,Bolivia,andArgentina.Muchhasbeenwrittenandresearchedonthe
reformofpublicwaterutilitiesbydevelopmentprofessionalsandgrassroots
groups.Thesevaluablelessonsfromtheexperiencesofpeopleacrosstheworld
needtobeunderstoodanddisseminated.
6.3EssentialPrinciplesforReform
BroadrecommendationsforthereformofLahoreWASAhavebeendiscussedin
Chapter4.Asteppriortoframinginstitutional,managerial,andtechnical
aspectsofreformhowever,istheestablishmentofapeoplecentredorientation
basedonseveralessentialprinciplesforreform.
6.3.1OpennessandTransparency
Asaprincipleofdemocraticreform,acultureandprocessofopennessand
transparencyisfundamental.Allpeoplebyvirtueofbeingcitizensand
stakeholdersofbasicurbanserviceshavearighttoinformationregarding
WASA,fromitsdevelopmentdecisions,toitsaccounts.Anexampleofthe
currentlackofacultureofinformationsharing,wasthebyinvitationonly
workshopheldbytheWorldBankandthePunjabgovernmentinOctober2006,
highlightingtheBanksfindingandrecommendationsfortheAgencyintheform
ofPrivateSectorParticipation.Needlesstosayallcitizensarestakeholdersofa
municipalwaterutilitysuchasWASA,andtheirexclusionfromsuchaplatform
isinexcusable.
6.3.2IndependentResearch
DevelopmentinPakistanisdeterminedforthelargepartbydecisionsandloan
conditionalitiesimposedbydonorssuchastheWorldBankandADB.Any
successfulreformforWASAneedstobedeterminedonthebasisofindependent
andunbiasedresearch,asopposedtothecurrentpractiseofloandriven
research,whichisoftengearedtowardsthejustificationofpredetermined
policydecisions.Institutionsandprocessesforindependentresearchcanbe
47
developed,suchasthelinkingofeducationalinstitutionswithinstitutionsof
servicedelivery.Thisindependentresearchmustalsolookatwatersupply
issuesfromtheusersend,aswellastechnical,administrative,andother
bottlenecksfacedinmunicipalurbanwatersupply,andeventuallyformthe
backboneofPakistansNationalWaterPolicy.
6.3.3GivingWASAEmployeesandUnionistsaGreatersayinDecisionMaking
AsdiscussedinChapter4,WASAhasalargenumberofexperiencedand
competentworkersatalllevels,includingofficialsaswellasoperationsand
maintenanceworkers.Itneedstobeacknowledgedthatthediversebodyof
WASAemployeeshasamorepracticalandexperiencebasedunderstandingof
issuesthanforeignconsultantsandshorttermadvisors,whoareironicallygiven
priorityintheAgencysdevelopment.Often,simpleissuesandbottlenecksfor
whichsolutionsareobvioustoWASAofficialsandworkersareoverriddenby
complexstudiesandinappropriatedecisionsmadebyshorttermforeign
consultants,whointheendalsocostcitizensmore.WASAofficials,workers,and
unionistsmustbemadeapartoftheAgencysdecisionmaking.Theclimate,
structure,andprocessesofthebureaucracymustalsobemadeconduciveto
utilisingthisknowledgebasethroughadministrativereform.
6.3.4AnIndependentRegulatoryBody
AnyreforminWASAmustbeaccompaniedbythecreationofabroadbased
regulatorybody,thegoalofwhichshouldbetomonitorandregulatethe
performanceoftheAgencyandensureitsfairplay.Often,regulatorybodies
inappropriatelyrepresentwaterrelatedinterestsduetoaflawedcomposition,
comprisingonlyselectedstakeholders120.Theregulatorybodymustinclude
andgiveauthoritytoabroadrangeofcitizensrepresentatives,waterusers in
particularpoorcommunities andwaterrelatedinterestgroups.Onlywhena
regulatorybodyrepresentsdiverseneedsandinterests,canitbeensuredthat
throughacrosscheckingtheAgencysperformancemeetsthedesirable
standardsandtransparencyandfairplayareensured.
6.3.5CreatingForumsfortheRepresentationofCitizensandInterestGroups
Inordertomergetheobjectivesofpolicymakerswiththoseofthepeopleatthe
grassroots,platformsfordiscussionandinformationsharingbetween
governmentandcitizensmustbecreatedandmadebroadlyavailable.Through
120
Narrowly-composed or non-representative regulatory bodies have been known to overlook

cases of negligence and mal-practice by water providers, usually at the paying of bribes by
the regulated entity
48
suchmechanismstheneedsofinterestgroups121andthegapsindrinkingwater
provisioncanbeaddressed.
6.3.6NationalWaterPolicy
BothPakistansdraftNationalWaterPolicyandDrinkingWaterPolicymust
undergoaprocessofwidedisseminationandcritiquepriortotheirfinalisation.
Otherthantheknowledgeandviewsofexpertsandprofessionals,itisnecessary
tolearnfromwaterusers,WASAstaff,environmentalgroups,andlowincome
communitieswhoareusuallyatthereceivingendofsubstandardwatersupply.
Needlesstosay,acleardefinitionandarticulationofdrinkingwaterasahuman
right,andanemphasisonsecuringthebasicneedsofvulnerablegroupssuchas
thepoor,arefundamentalinPakistansnationalpolicyonwater.
6.3.7PoliticalWillandaGenuineAspirationtoServethePeople
Inadditiontotheaboveprinciples,afundamentalcornerstoneofreformisthat
ofpoliticalwillandthegovernmentsgenuineaspirationtoservethepublic
good.Acultureofhonestytocitizensandthecouragetoalterprevailing
detrimentaldevelopmentmechanismsandsystems122,areessential.Onceatruly
peoplecentreddevelopmentorientationbasedonthedesireforequity,welfare,
andinclusionisinplace,appropriatesolutionsandpracticeswillautomatically
follow.
121
Interest groups for water include domestic, commercial and industrial users of water,
environmental associations, and banks to whom WASA is currently in debt
122
The dominance of international donors in Pakistans development policy and decision

makinghasdeterredatrulyneedbasedpeoplecentreddevelopment
49
Annexes
AnnexI:WASAAreaandBoundary
CourtesyLahoreWASA
50
AnnexII:WASAUptoDateAchievement/ServiceLevels
CourtesyLahoreWASA
51
AnnexIII:WASAWaterandSewerageTariffs
CourtesyLahoreWASA
52
AnnexIV:WASABudgetSourcesandExpenditure
CourtesyLahoreWASA
53
AnnexV:ListofMembersLWAC
HumanRightsForum,Lahore
PunjabUrbanResourceCentre,Lahore
UmeedTrust,Lahore
ActionAid,Lahore
ActionAid,Islamabad
Ecowatch,Lahore
GreenCircleOrganisation,Lahore
WorldWildlifeFund,Lahore
LaboutPartyPakistan
Asr,Lahore
PunjabLokSujaag,Lahore
TheNetworkforConsumerProtection,Islamabad
54

Water Supply in Lahore: Public Sector Reform, Not Privatization

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Water Supply in Lahore:

Public Sector Reform,

Punjab Urban Resource Centre

Punjab Urban Resource Centre

The Punjab Urban Resource Centre (PURC) was established in October

community activists, architects, sociologists and teachers.

In general, urban development planning in Pakistan is top down and takes

unable to effectively meet the needs of citizens. PURC seeks the

making process in order to make development more responsive to the

The objectives of PURC include promoting dialogue between the broad

range of urban actors, advocating for the participation of citizens and

accountability of government and private bodies in the development,

planning, and policy making processes, and eventually providing

PURCs current activities include issue-based information collection,