Financing the Human Right to Water as a Millennium Development Goal
Attorney of Law,
Development and Human Rights Consultant, Geneva and Islamabad &
PhD Candidate, Friedrich-Schiller-Universität Jena
With a growing world population and the existing lack of access to water and sanitation services on the one hand and the ever-shrinking public budget on the other, there is a need for alternative solutions to financing the required investment. This article begins by describing the global drinking water crisis and the efforts to address this issue in the international arena. In doing so, this article argues that access to water and sanitation is a human right and a Millennium Development Goal. These normative findings aside, the second half of this article focuses on how to finance the increase in demand for infrastructure to meet these goals. Here, the article will question, among others, if the privatisation of water, public-private partnership in water delivery services and foreign direct investment in the water sector can deliver solutions to the increase in demand or if a purely economic perspective on this issue runs the risk that water becomes commercialised in a way which makes it a luxury product, affordable just to those who can pay for an adequate water and sanitation services. Aside from explaining the risks inherent in a purely commercial perspective to the delivery of water services, this article will also focus on other solutions to meeting the increased demand for water, such as efforts to cross-subsidise the provision of water.
Keywords: Basic Needs, Human Rights Obligations, Human Right to Water, Millennium Development Goals, Corporate Social Responsibility
Author Note: This article is based on a contribution to a side event at 60th United Nations Human Rights Commission on 21 March 2004 and an article by the author in Grover, Velma I (ed) (forthcoming) Fresh Water (Oxford: Oxford and IBH Ltd). The normative part of the article about water as a basic need, human right and Millennium Development Goal is partially reproduced from the author’s previous publication: ‘Drinking Water Crisis in Pakistan and the Issue of Bottled Water: The Case of Nestlé’s ‘Pure Life’, SwissCoalition and ActionAid Pakistan (ed), Islamabad: ActionAid Pakistan, April 2005.
This is a refereed article published on: 5 October 2005.
Citation: Rosemann, N, ‘Financing the Human Right to Water as a Millennium Development Goal’, 2005 (1) Law, Social Justice & Global Development Journal (LGD). <http://www.go.warwick.ac.uk/elj/lgd/2005_1/rosemann>
According to figures published by the United Nations (UN), UN subsidiary organisations and other international organisations, 1.1 billion people worldwide are without a sufficient access to water, and 2.4 billion people have to live without adequate sanitation. Under current circumstances, the prognosis is that about 3 billion people of a population of 8.5 billion worldwide will suffer from water shortages by 2025. Eighty-three percent of these people will live in developing countries, mostly in rural areas where, today, only 20 percent of the population have access to a sufficient water supply (Guissé, 2004, articles 4, 5 & 8).
This actual lack of water is opposed to the theoretical conclusion that there is sufficient ground water existing in all regions of the world to guarantee an adequate water supply for all. International law states that in the case of conflicting water users, socio-economic priorities will have to rest on human development and social interests of people.1 However, households use only six percent of global freshwater, while 20 percent is utilised by industry and another 70 percent by the agricultural sector. The conclusion that may be drawn from current conditions is that the shortage of water and the unequal distribution of water are global problem rather than regional problems that require international solutions.
1.2. Water as Basic Need
Without water there is no life. The human body consists of 60 percent water. The World Health Organisation (WHO) estimates a daily need of five litres of water per person (UNESCO / WWAP, 2003, p 121). The lack of water leads to death and the use of insufficient and spurious water causes illnesses and hinders human development.
Insufficient supply of drinking water is the main cause of diseases in developing countries. In 1997, the United Nations Commission on Sustainable Development concluded that 2.3 billion people suffer from diseases rooted in insufficient water provision and quality (UNCSD, 1997, p 39). More than five years later, it was estimated that 2.4 billion people were suffering from water-related diseases, and the World Health Organisation reckons that 80 percent of all infections are traceable to poor water conditions. 5,483 people die daily of diarrhoea caused by water-related diseases, 90 percent of which are children under five. Taking into account all water-related diseases and deaths, international organisations estimated in 2001 that 2,213,000 people died as a result of inadequate water supply – ten times more than the tsunami disaster caused in December 2004 (UNESCO / WWAP, 2003, pp 102-105).
Insufficient water supply is mainly a local issue rooted in national failure to address the needs of the people in an adequate manner. In order to address these issues properly, international advice, cooperation and standard-setting are needed. Global political objectives, such as cooperation and commitments with regard to universal access to water and sanitation are mainly discussed and adopted in the international arena.
International conferences dealing with water and water-related issues such as health, environment and development date back to the late 1970s. Cornerstones of these international developments include the Water Conference in Mar del Plata in 1977, which declared that the access to water is a basic need2; the International Decade of Water and Sanitation (1981-1990), the goals of which was to provide universal access to safe drinking water by the year 20003; and the declaration of 21 March as the World Day for Water.4 Although these international efforts did not meet the goal of providing universal access to water, these efforts mobilised sufficient resources to provide an additional 600 to 800 million people with access to water. After decades of international debate on the improvement of water supply, it can be stated that the political declarations, which have been repeated time and again, have been followed only by limited action and minimal improvement of the delivery of water services. Therefore, at the end of the Global Consultation on Safe Water and Sanitation, the conclusion was that some water for all was recognised as being better than sufficient water for a few.
The main shift in perspective came with the Millennium Assembly in 2000 and its declaration of access to water and sanitation as a Millennium Development Goal (MDG).5 Adopting the Millennium Declaration, the international community committed itself to halving the number of people without sufficient access to safe water and to wastewater treatment by 2015. To meet this MDG requires connecting around 275,000 people a day until 2015 globally (United Nations System in Pakistan, 2003, p ix). The Millennium Development Goals share a common motivation and constitute a new and ongoing commitment to sustainable and balanced development (UNDP, 2003a, p 15). While, in the 1990s, development was fast for some nations while underprivileging others, the Millennium Development Goals try to leave no nation behind. But taking recent development and progress into account, the prognoses after the first five out of fifteen years seems to be that the goal of providing access to safe drinking water will be met only in South Asia and Latin America and the Caribbean (UNDP (2004), pp 259ff).
Human rights and human development are two sides of the same coin. A human rights-based approach provides both a vision of what development should strive to achieve, and a set of tools and essential references to achieve it. In 1993, governments acknowledged at the United Nations World Conference on Human Rights that ‘while development facilitates the enjoyment of all human rights, the lack of development may not be invoked to justify the abridgement of internationally recognised human rights’.6 What results from this statement is that a rights-based approach to development distinguishes between inability and unwillingness. If injustices and discrimination in society are the main reasons for poverty, then as an effective operational mechanism, the human rights-based approach to development (UNDP (2003b), p 5) demands transparent and participatory decision-making processes. Through this, participation of concerned groups and individuals become a right, and the obligation of the state to provide an environment that makes the bottom up definition of development objectives possible. Such a framework has to include the empowerment of people to enable them to exercise their human rights in different means, such as through political and legal action or media campaigns. The obligation of the state and other powerful actors with impact on peoples’ ability to develop has, from a rights-based approach, to be framed alongside the accountability of such actors to respect, protect and fulfil human rights. Lastly, the human rights-based approach to development is based on the principle of non-discrimination which implies equity and equality as mainstream for development and poverty reduction.
Despite the minimal practical impact of the great number of world conferences, declarations and action programmes, this discourse has sensitised governments and international actors with respect to the issue of water shortage and the human right to water. Because of this sensitisation, the institutions, bodies and agencies of the United Nations have been discussing the issue of water shortage increasingly from the standpoint of other endangered human rights, such as the right to food, health, shelter, education and development. The final stage of theses political discussion about global commitment for development and cooperation can be seen in the United Nations Millenniums Declaration and the formulation of the Millennium Development Goals. Though the Millennium Development Goal in respect of water and sanitation does not make a specific reference to the human right to water, it does not excludes the consideration of access to water and sanitation as a human right. The Millennium Development Goals places development issues into the context of human rights and development and there is evidence that water management contributes to the achievement of other Millennium Development Goals with clearer basis in human rights law, such as reduction of hunger, child and maternal mortality, universal primary education or gender equality (UNESCO / WWAP, 2003, p 9).
The human right to water can therefore seen as a link between water as basic need for life and access to safe, sufficient and affordable water for human development. McCaffrey (2004) questions the existence of a human right to water and calls for a careful debate on the issue, taking into account the possibility of raising unrealistic expectations (McCaffrey, 2004, p 36). This argument fails to consider the multidimensional function of human rights as conferring legal rights as well as political and moral obligations of the duty bearer. A human right can be seen as a universal and indivisible standard that provides equality and outlaws discrimination. The discourse of human rights calls for participation and inclusion, guided by accountability and the rule of law. The protection of a human right, such as the human right to water, begins with the definition of the normative demand of the right by setting of internationally agreed standards. These norms have to be implemented nationally and may be overseen by the international community. This international monitoring and implementation functions through either the treaty-based, quasi-juridical proceedings and guidance of international treaty bodies, such as the UN Committee on Economic, Social and Cultural Rights,7 or through the Charter-based general mandate of the United Nations for human rights protection. The latter operates through the UN General Assembly and its subsidiaries, such as the Economic and Social Council, Commission on Human Rights and the Sub-Commission on the Promotion and Protection of Human Rights which are all able to make recommendations8 and to encourage the progressive development of international law as part of the Charter-based human rights protection mechanisms.9 It seems, therefore, more appropriate, to consider the human right to water as drawing upon the basic need argument and the argument on the entitlement to water (Salman and McInerney-Lankford, 2004, p 66).
The advantage of the human rights approach to basic needs, such as water, is that needs must be satisfied while human rights must be respected, protected and implemented by legal means and institutions. It is not absolutely necessary for basic needs to be satisfied by means of (legal) human rights. However, by recognising the access to safe and affordable drinking water and sufficient sanitation as a human right to water, decision-makers and state actors, whose decisions have an impact on the access and accessibility of water, are responsible for satisfying this need to the greatest possible extent. The benefit of constituting the access to water and sanitation as a human right is that it enlarges the political and economic debates about needs to an international discourse of standard-setting and national and international implementation, as well as monitoring.
This socio-economic priority of individual access to water for development and human dignity becomes even more important if different water uses stand in competition. In situations where there are competing uses for water, the human right to water prioritises the people who need access to water and sanitation the most. In other words, the enshrinement of the human right to water shifts the discussion from a merely political decision about socio-economic priorities to one about participation in an economic democracy, with the human being in its centre. The human rights approach deconstructs power relationships, such as economic and political interests, that hinder the satisfaction of basic needs. By recognising a basic need as a human right, political power is legitimized if its objective is the fulfilment of human rights, and economic power is legitimised in so far as it does not obstruct the individual or collective satisfaction of human rights.
The human rights approach to basic needs encourages public authorities to provide a legal framework that serves economic interests as well as socio-economic priorities for human development. In order to enable concerned people to participate in decision-making processes about water issues, the human rights approach, linked with the notion of democracy, calls for the dissemination of information about public and private water policies. Furthermore, citizens have to be empowered to participate actively within public and economic affairs on an equal footing. In addition, the human rights approach introduces accountability and transparency in the allocation of resources. Rights entail responsibilities, and therefore, the human right to water enables calls to hold actors with influence on access to water and sanitation policies accountable.
Lastly, the human rights approach to basic needs enables that the core obligations of the human right to water – which serve as the basic framework that is necessary to provide a minimum standard of living – to be regarded as compulsory norms (jus cogens) of the international law. This means that provisions on human rights become inalienable components of the law applicable universally (erga omnes). Thus, any act or omission violating these obligations are considered null and void.
2.2.2. The Content of the Human Right to Water
The normative demand for the Human Right to Water is derived from the Universal Declaration of Human Rights.10 It recognises the right to drinking water and sanitation in Article 25 (1), which states that ‘everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care …’ It is restated in Article 11 of the International Covenant on Economic, Social and Cultural Rights, as part of the right to an adequate standard of living for each individual and his family.11 In previous comments by the UN Committee on Economic, Social and Cultural Rights,12 as well as in various human rights protection mechanisms, the human right to water is recognised as precondition for other human rights, such as the human right to life, right to appropriate nutrition and the right to adequate medical care.
Apart from constituting the precondition for other human rights, the human right to water has its own substantive content and protective duty. As outlined in General Comment No 15 of the UN Committee on Economic, Social and Cultural Rights13, the Human Right to Water aims to guarantee that all people have the right to fair and non-discriminatory access to adequate, safe and affordable drinking water in order to satisfy their personal needs (such as the preparation of food and the use of water for sanitary facilities and for domestic consumption). Safe drinking water means the water provided must not jeopardise peoples’ health. Affordable water means that the cost of water must not jeopardise the fulfilment of other basic needs that are guaranteed by human rights, such as the right to education and food.
In addition to constituting a precondition for other human rights, further rights are derived from the human right to water, which are considered pre-requisite for the implementation of the right to water. These are, among others, the right to access existing water supply systems without discrimination; the ban on destroying or separating existing water supply systems; the right to have priority over industrial or agro-industrial water use; the right to be supported in case of financial difficulties in accessing water; and the right to information and participation in the drafting of national and local water policies. If water is supplied by private companies, there is also the right to governmental regulation in order to guarantee that these private companies comply with the duties stipulated by the human right to water.
The benefit of defining the basic need for sufficient water as a human right is that general obligations and particular duties ensue from such a qualification. These duties comprise among others:
- the duty of a state to respect, protect and implement the human right to water;
- the duty of a state to respect the human right to water in other countries, that is, the duty not to interfere with the fulfilment of other governments’ duties to respect the right to water;
- the duty of a state to contribute to the fulfilment of the human right to water in other countries by means of international cooperation;
- the duty of a state to prevent and stop violations of the human right to water and to undertake no decisions that jeopardise the fulfilment of the human right to water in one’s own country or in other countries. This can be done within the framework of affiliation in international organisations;
- the duty of international organisations to respect the human right to water and to contribute to its fulfilment by means of international cooperation;
- the duty of non-state actors, such as companies or individual persons, to respect the human right to water and to support its implementation within their own scope of action.
These duties should all be stipulated in a national water strategy. This strategy ought to be based on human rights in general and on the human right to water in particular. It should assign governmental and institutional responsibilities to the duties mentioned above.
With respect to governments’ fundamental freedom of choice regarding when to take steps or to develop political approaches, the human right to water has core obligations which are not subject to this principle of free choice. These core obligations must be met even in times of scarce resources or in a state of emergency. Core obligations include the most basic forms of the human right to water, such as:
- the non-discriminatory and regular access to a minimum of safe drinking water for personal and domestic use; and
- access to simple – yet hygienically acceptable – wastewater disposal and sanitary infrastructure.
As described above, a benefit of describing the basic need of access to safe water as a human right is the relationship between the rights holder and the duty bearer. The rights of the one correlate with the obligations of the other. If the specific duties which arise from the general obligations are not fulfilled, the clear definition of the rights and the duties under the human right to water makes it easy to describe violations of the human right and to hold the relevant actors responsible.
From this perspective, countries violate the human right to water when they do not act in good faith and when they fail to explain why they do not comply with their core obligations. A decisive factor in determining whether such a violation has taken place is an assessment of how resources have been deployed. If a state has not deployed a maximum of available resources to guarantee a basic supply of drinking water, to ensure that access to the existing systems is non-discriminatory, or to prevent private companies from establishing an unfair pricing system and excessive charges for water supply and sanitation services, the human right to water has been violated. Violations of the human right to water on part of the state may also be manifested indirectly. Among these indirect violations are the absence of laws to regulate corporate interests in the water sector, the insufficient enforcement of existing laws, or the lack of a national water strategy. The state violates its protective duties if it fails to stop individual persons, groups, companies or other non-state actors from interfering in the universal access to water. The state’s duty to respect the human rights in other countries is violated if there are no regulations concerning the use of water resources by corporations investing in third countries, and, which results in these resources being used for the benefit of business. The duty of international cooperation is violated if developed countries do not aim at reducing the developing countries’ debt burden in order to improve their water supply and sanitary infrastructure.
The corporate obligation to respect the human right to water is violated, if it interferes directly with people’s access to and use of water. Furthermore, any collaboration with governmental agencies that jeopardises the right to water of the individual or a group constitutes a human rights violation. Finally, corporations that do not protect or contribute to the fulfilment of the right to water within their respective spheres violate this human right.
As demonstrated above, the human right to water aims at guaranteeing that all people have the right to non-discriminatory and fair access to safe, sufficient and affordable drinking water in order to satisfy their personal needs (such as the preparation of food, the use of water for sanitary facilities and for domestic consumption). Given the above-mentioned figures on the lack of access to water, it is obvious that the implementation of the human right to water and the fulfilment of the internationally-agreed Millennium Development Goals aimed at the improvement of drinking water and wastewater infrastructure require considerable funding.
3.1. Water – Issue for Public Funding
From a historical perspective, central governments and local authorities have played the major role in financing the water and wastewater supply system. In developing countries – where the most need for investment lie – 90 percent of water and wastewater treatment infrastructure is held in public ownership and 65 to 70 percent of investment in such infrastructure is financed by public funding, 10 to 15 percent by development assistance and transnational corporations and five percent by local business (UNDP, 2003a, p 105).
To achieve the Agenda 21 objective of integrating international water policy will require additional resources of USD 20 billion per year. However, in reality, international development assistance in water and wastewater projects stagnated at USD 3 billion a year in the 1990s. Although this figure rose to USD 3.5 billion between 1996 and1998, it dropped again to USD 3.1 billion between 1999 to 2001. Compared to the overall share of development assistance – regardless of whether water was an international priority or not – the share of water and wastewater projects in national development budgets were kept at four to five percent of the overall budget.
Recent studies (United Nations High Commissioner for Human Rights, 2003, p 20ff; UNDP, 2003a, p 103f) showed that between 1990 and 2000, a total of only six percent of households without water services worldwide received access to a water supply system. In terms of sanitation, the figure amounts to only four percent. Until now, only twelve percent of multilateral and bilateral development assistance flow into projects in regions where 60 percent of the people have access to water. But 40 percent of multilateral and bilateral development assistance is directed into projects where 70 percent have access to water (UNDP, 2003a, p 106). This demonstrates that development assistance mainly flows into areas and sectors where infrastructure already exists instead of to areas where there is a real need. Furthermore, overall bilateral development aid dropped by twelve percent since 1996, while the share of water and wastewater projects in national development budgets remained at four to five percent. Therefore, the investment in water and sewerage services projects funded by bilateral development assistance is decreasing.
These observations are in contrast to the commitments of the Millennium Development Goals and the human right to water. Through the Millennium Declaration, the international community pledged itself to halving the number of people without sufficient water access and wastewater treatment by 2015. With the increasing world population, an additional 100 million people will have to be provided with access to water every year and another 125 million people will have to be supplied with sanitation services (UNESCO / WWAP, 2003, p 110).
The conclusion of these calculations for investment in infrastructure and water supply differ. UN agencies calculate an additional need of USD 50 billion in order to reach the MDGs, included in this sum is USD 12.6 billion for water and sanitation services (UNESCO / WWAP, 2003, p120). The World Panel on Financing Water Infrastructure submitted its final report at the 3rd World Water Forum in Kyoto in 2003. The Camdessus Report, as it is known, established the need for an additional investment of USD 10 billion a year for rural standards of water access and USD 17 billion a year for urban standards of water access. Furthermore, an urban standard of sanitation would need additional USD 32 billion a year (World Penal on Financing Water Infrastructure, 2003, p 12).
The question that arises from this gap between the need for resources and the actual allocation of resources is, where this money should come from. Different approaches can be developed to response to this question. The first possibility is to acquire more domestic resources through cross-subsidising the water sector with tax resources. In this scenario, socio-economic objectives should be formulated in a national water policy with the focus on availability of water to people most in need of it. As examples from developing countries – such as Pakistan – have shown, most developing countries suffer from a lack of sufficient tax revenue as well as a national water policy (Rosemann, 2005a, p 8f).
The second possibility is to acquire additional resources by raising prices for the supply of water itself. In these cases, the type of water use — for example, household, agricultural or industrial — may serve as indicators for the economic value of water. While this approach places a commercial value on water, it might encourage a more sustainable and environmentally friendly use of water. On the other hand, a purely economic consideration may jeopardise the availability of water for the poor if it is not affordable. In these cases, the government, again, has to support lower income households with either a certain free amount of water or by subsidising the cost. A second risk inherent in this approach is the fact that the allocated price of the service has to reflect the cost of future investment and must therefore be calculated to include more than just the full cost recovery for the existing service. Experience has shown that private and public water services lack resources for investment in service enlargement and are very often deficit in terms of long-term investment. In other words, as both private and public water services are far from reaching full cost recovery, one has to question this approach.
Both the first and second means of financing water services domestically are premised on the fact that the necessary resources are available domestically. In many cases, states are either highly indebted or have very low economic growth so that investment in social and economic sectors cannot be served without foreign assistance. This assistance comes through either bilateral or multilateral development assistance or foreign direct investment. This leads us to the third, and most contested, means of financing water services: the full or part-privatisation of water and sanitation services at the local level (usually to cooperatives) or at the national level to private business. The arguments about private sector participation arise from the conditions which are often attached to the privatisation contracts, including conditions to provide a safe investment climate, risk guarantees for private companies, and provisions for full cost recovery that treats water as a commodity. Due to these conditions, governments are subject to international credit terms, investment treaties and private sector agreements which all reduce the national policy space in terms of water and sanitation services.
Aside from the underlying problem of financing access to water and sanitation based on the human right to water, an additional problem which arises is that of who is defines development goals and investment objectives? As demonstrated above, the three approaches to financing water supply with national or international public resources should be addressed in a national water policy. From the perspective of the human rights-based approach to development , such a policy would have to be drafted in a participatory and transparent manner. Case studies on Pakistan and Philippines have shown that if national water strategies or policies exist at all, they have been not been developed with participation from the ground (Rosemann, 2003, ch 11; Rosemann, 2005a, chs 3-4) . In addition, bilateral and multilateral development assistance policies and projects seldom include the participation of concerned people and local communities. It is common for development goals and standards to be agreed upon between governments and donors or between governments and corporations. This top-down approach results in the problem of local and traditional knowledge about water treatment and use not being included in national water strategies.
4. The Problem of Foreign Direct Investment and Private Sector Participation
As discussed above, public resources at the national and international level are insufficient to meet the demand for investment in water services. The unavailability of resources and/or the lack of political will to provide more capital are camouflaged by the call for private sector participation. The two main approaches to private sector participation in water services are privatisation or Public-Private-Partnerships (PPP). In the latter, the state (or another public body) remains a stakeholder with a certain degree of control in the sector. The involvement of the private sector ranges from assuming the management of the sector to obtaining concessions to build, operate and transfer ownership of the service infrastructure to long-term concessions to supply the services. In the water and sanitation sector, concession agreements to private businesses for supplying services are the usual form of PPP. During the negotiation of these contracts, the level of influence by the state or a regulatory office will determine the fulfilment of the afore-mentioned human rights obligations. However, it has been argued that since PPPs operate at the micro-level, it may not serve as the appropriate forum for meeting the objectives of development cooperation which needs to be focused at the macro-level.
In addition to the conceptual and operational arguments on PPP, private international capital flows, particularly foreign direct investment (FDI) is seen as a vital complement to national and international development efforts. FDI should contribute toward financing sustained economic growth but to attract and enhance inflows of productive capital, a transparent, stable and predictable investment climate, including proper contract enforcement and respect for property rights is required.14
By this, it is meant that the right of business to seek profit should have the side effect of sustainable development and poverty reduction. The question remains whether business activities — in which the main objective is profit-maximising and market enlargement — have the side effect of contributing to development goals, such as the access to water.
Figures by the United Nations Conference on Trade and Development (UNCTAD) have shown that the stock of outward FDI increased from USD 1.7 trillion to USD 6.6 trillion from 1990 to 2001 (United Nations High Commissioner for Human Rights, 2003, p 4). However, in spite of this, Africa remains a marginal recipient of FDI, and, although inflows did rise from USD 9 billion in 2000 to over USD 17 billion in 2001, the majority of this increase has been concentrated in large projects in Morocco and South Africa. Similarly, FDI in the 49 least-developed countries (LDCs) was small in absolute terms. While levels rose to USD 3.8 billion over 2002 in spite of an overall economic slowdown, LDCs remain marginal recipients of FDI, accounting for only two percent of all FDI to developing countries or 0.5 percent of the global total. Of these figures, only five percent of all investments in the water and sanitation sector were made by the private sector.
This leads us to question if private sector participation and FDI is an appropriate means of financing water infrastructure and wastewater treatment as by the year 2025, three billion out of 8.5 billion people in the world will suffer from water shortages. Eighty-three percent of this population will live in developing countries where 80 percent of the population are currently living without access to a sustainable and sufficient water supply.
Another problem is that private sector participation through FDI requires the establishment of property rights for private investors. It is seen in public services, like water, electricity or telecommunication that FDI caused at least a partly privatisation of this services. By privatising water services, states – which continue to be the main bearers of human rights obligations – are narrowing their possibilities to meet their human rights duties.
Furthermore, privatisation shifts the burden for investment in essential services. The responsibility for investment is shifted from the public sector to private business and can therefore be easily transferred from the (water) service provider to the consumer. Because FDI is commonly denoted in foreign currency, the consumer bears the risk of fluctuations in foreign exchange rate, which may cause rate increases, such as those which occurred in Manila , Philippines (starting in 2001) (Rosemann, 2003, ch 11.4.4). These concerns are the main reasons for opposition to private sector participation in water services, as demonstrated by protest cases in Buenos Aires, Argentina, Cochabamba, Bolivia, or recently, in Lahore, Pakistan.
Examples such as Manila have shown that the burden of currency devaluation risk is shifted from the public to the private in cases of privatisation. In the private sector, the private water provider transfers the risk of the investment in a foreign currency to the consumer who has to pay the bills in domestic currency, resulting in an increase in the domestic prices for water services. Since privatisation in 1997, the cost of water, calculated in the Filipino peso, rose by 525 percent in the West-Zone (operated by Maynilad Water Service Inc. a joint venture with Suez-Lyonnaise des Eaux) and 560 percent in the East-Zone (operated by Manila Water a joint venture with Bechtel and RWE) in 2003 (Rosemann, 2003, p 92). However, taking into account the exchange rate and calculating the water prices in US dollars, the water price rose in the West-Zone by up to 290 percent and in the East-Zone up to 310 percent (Rosemann, N (2003) p 92). These features are quite common within a period of seven years of service and are in fact consitent with the price increase in rates during the period when Manila had a public service.
As examples, such as the case of Manila, have shown, FDI carries a high risk that the improved water service through privatisation can become less affordable. The concept of full cost recovery for services and investment shifts the burden from the investor to the consumer. If the devaluation risk of local currencies in relation to the FDI is not covered the investment agreement between the private companies and the state under FDI contracts, changes in exchange rates will result in price hikes. Higher prices will jeopardise the satisfaction of the basic need to water and the meeting of other human rights obligations by the duty bearers, such as the right to health, food or education. In light of this, privatisation might become a threat to the human right to water.
Another dilemma emerges if the participation of the private sector, particularly that of foreign direct investment, is encouraged by deregulation policies. Many international or bilateral investment agreements require states enshrine certain corporate rights, such as the right to property, and provisions for public risk management, such as investment securities. Corporate freedom, enabled through deregulation of the water sector, conflicts with the right to a regulation of water services. As discussed above, public-private partnerships (PPP) need to be regulated to minimise the risks of price hikes for the satisfaction of the human right to water and other human rights. Deregulation of the water sector may conflict with the state’s obligation to regulate private actors in fulfilment of their duty to respect human rights. In addition, deregulation endangers the fulfilment of human rights, if it limits the ability of states to define their own socio-economic objectives in order to meet their human rights obligations, such as the provision of access to safe and affordable water.
Furthermore the concept of deregulation can only work where market forces can balance corporate power. But due to the substantial investment costs for water supply networks and the nature of water, water supply is a natural monopoly which does not operate in accordance with market principals. The absence of market forces to regulate the supply of water therefore calls for strong regulation of corporate conduct. The increasing privatisation could therefore lead to a private monopoly of water services.
In order to avoid these risks, different forms of privatisation, should be considered. This would include consideration of a different privatisation options, ranging from full and partial privatisation of public enterprises to PPPs, such as those involving concessionary contracts, build-operate-and-transfer contracts, and outsourcing.
Secondly, the PPP-model should only be considered in particular fields such as water provision, day-to-day management, extension of pipelines, monitoring of the water quality and the run of the administration, were experiences have shown that it can contribute to a better access to water and sanitation. Same is to FDI where it is allocated to substitute public investment. The normative demand of the human right to water should be considered as the precondition for PPP and involving FDI. This would mean, that decision making processes about private sector involvement should be taken in an open and transparent way with the involvement of affected stakeholders, such as actual and potential costumers.
Thirdly, the human right to water should be incorporated in any international investment agreement (IIA) Countries have increasingly entered into IIAs, whether bilateral, regional or incorporated as investment aspects in trade agreements. Many of these also include provisions on services and foreign investment. However, there are several considerations to be taken into account when considering IIAs as a mechanism to meet the challenge of lack of funds. Firstly, IIAs are only one determinant in an investor's decision to invest in a country. Others are economic and local determinants, such as the availability of infrastructure, human resources, internal and export market conditions, political stability and also a country's policies on FDI. Opening up markets and signing IIAs can have an important signaling effect for an investor but, that in itself, does not always bring about FDI. Secondly, the overall goal of the IIAs is not only that of attracting (or attracting more) FDI, but also that of benefiting from FDI and addressing concerns about it. UNCTAD has addressed these concerns by referring to the need for government regulation in order for countries to benefit from foreign direct investment (UNCTAD, 2003, ch V). This is particularly important in light of the human right to water where governments have the obligation to put in place the necessary domestic policy framework and a regulatory framework to ensure that the human right to water is fulfilled.
Taking the risks associated with PPPs and FDI as a means for satisfying the human right to water into account, the challenge here is to use the signalling effect of deregulation and IIAs as a mechanism for attracting investment, but maintain the regulatory freedom to put in place the necessary policy measures at the national level to ensure that a country and, most important, its citizens, to benefit from FDI and PPPs. In anycase, a participatory and transparent regulatory framework has to be established in order to enable concerned groups and individuals to address and demand their human right to water and related human rights. Again, a national water policy seems the sufficient mechanism to address these demands.
4.3. Tradable Water Services
Aside from the additional allocation of resources through private sector participation, another challenge faced by efforts to meet dwindling local water supplies is that of the globalization of the water sector. The European Union is lobbying for water services to be recognised as a new sub-sector on ‘water for human use and wastewater management’ under the provisions on environmental services within the General Agreement on Trade and Services. (GATS)15 If the European Union is successful, services in water and sanitation would become tradable and bound under rules in the World Trade Organisation (WTO). The WTO national treatment provision would prohibit domestic policies which favour local or domestic water suppliers. As a result transnational water corporations will be able to dismantle functioning, profitable domestic markets without the corresponding regulation to invest in non-profitable sectors.
As shown above mainly rural areas and urban slums in LDCs with a very fragile potential for economic growth are affected by water shortage. In addition, these regions are less attractive for private sector participation. It is estimated that the MDGs require low-income countries to increase its investment in public services by four percent; based on an estimate that five percent is already spent in these sectors (UN Development Project, 2005, p 239, 245). It is estimated that a yearly increase in investment of five to eight percent is needed although the global economic growth rate is estimated at 1.3 percent (Semts, 2004b, p 3). However, economic growth is necessary but not sufficient for human development. In the case of Pakistan, an assessment of the United Nations Development Programme (UNDP, 1995, pp 123-124) from 1995 has shown, that Pakistan’s uneven distribution of income and assets has meant that high growth rates have failed to translate into improvements in peoples’ lives.
The case of sub-Saharan Africa illustrates the need for additional resources to fund the Millennium Development Goals as it is the region facing the most difficulty in reaching the MDGs (UNDP, 2004, p 132). In order to meet the MDG for water in 2015, investment in water supply and sanitation in southern Africa has to be doubled from USD 3 billion per annum to USD 6 billion per annum. Another calculation by Smets suggests that users who are already connected to the public or private water supply have to provide additional 57 percent through cross-subsidisation, up from USD 2.3 billion to USD 3.6 billion a year (Smets, H, 2004b, p 3). In addition foreign assistance has to be increased by 200 percent a year from USD 0.6 billion to USD 1.8 billion a year and the revenue generated by newly-connected users has to be increased by 500 percent from USD 0.1 billion to USD 0.6 billion per annum. Smets suggests that the poor users themselves could – in addition to the running costs – be made to provide one percent of their income in order to finance 18 percent of the required investments (Smets, 2004a, p 30). Other citizens who are already connected to the water system must agree to pay an additional 30 percent of the cost of the water they consume in order to subsidise water for the poor. Additional grants from abroad would serve to subsidise 35 percent of the investment in water services for the poor. The remaining 17 percent of investment would either have to come from private investors, banks and multinational corporations or from additional charity money. Instead of relying on private investors, banks and multinational corporations as a source for investment the enhancement of grants from foreign governments, multinational bodies, gifts from charitable bodies, NGOs, municipalities and the money which is sent home by migrant workers in industrialised countries has been suggested as alternative forms of financing. In practice the needed investment could be shouldered by the citizens of 15 western European countries if each person were to give USD 4.8 per year. This contribution is comparable with three cents per cubic meter of water or by saving 4.4 litres of water per day – which is less than the amount of water used in a single toilet flush. In other words, the Millennium Development Goals and the human right to water can be broken down from a normative ideal to a practical tool for human development, if people with water access are willing to subsidise the water access for people without. This aim could be guided by an International Water Convention.
To define the basic need to water and sanitation as a human right is one thing. The other is the allocation of sufficient resources to meet the global challenge of local water shortages. Both sides of the same coin depend on political will. The acceptance of a human right and the distribution of satisfactory resources are questions of accountability of the actors with influence to the global financial architecture as well as the local and domestic water and sanitation systems. Since the Millennium Development Goal to halve the number of people without sufficient access to safe water and to wastewater treatment by 2015 is a political declaration, it falls on everyone’s hands to hold governments accountable for their commitment. But this request for accountability should be guided by the request of a national and international framework that enables a clear pledge from people with access to water and sanitation to people without. The political will to face this challenge is especially needed from people in Europe who spend the yearly as much for ice-cream or in north America who pay yearly as much for pets as is needed in order to meet the Millennium Development Goal on water and sanitation (Ziegler, J, 2001, p 12).
1 Article 5, 10 of Convention on the Law of the Non-Navigational Uses of International Watercourses, adopted by UN General Assembly Resolution 51/229 of 21 May 1997, U.N. Doc. A/RES/51/869.
2 Mar del Plata (March 14.-25, 1977) Programme of Action, U.C. Doc. E/CONF.70/29.
3 General Assembly Resolution 35/18, ‘ Proclamation of the International Drinking Water Supply and Sanitation Decade’, 10 November 1980, U.N. Doc. A/RES/35/18.
4 General Assembly Resolution 47/193, ‘Observance of World Day for Water’, 22 December 1992, U.N. Doc. A/RES/47/193.
5 United Nations Millennium Declaration, General Assembly Resolution 55/2, 8 September 2000, U.N.Doc. A/RES/55/2, Para. 19.
6 Article 10 (Part I) of Programme of Action, Vienna Declaration and Programme of Action, World Conference on Human Rights, Vienna, 14-25 June 1993, U.N. Doc. A/CONF.157/24 (Part I) at 20 (1993).
7 Set up by Economic and Social Council Resolution 1985/17 of May 28, 1985, U.N. Doc. E/RES/1985/17; approved by General Assembly Resolution 40/114 of December 13, 1985, U.N. Doc. A/RES/40/144.
8 Charter of the United Nations (adopted on 26 June 1945 and entered into force on 24 October 1945) 557 U.N.T.S 143, Article 62, Para. 2.
9 Ibid, Article 13 lit. (a).
10 Universal Declaration of Human Rights, adopted by General Assembly Resolution 217A (III), 10 December 10, 1948; U.N. Doc A/810 at 71 (1948).
11 Adopted by General Assembly Resolution 2200 A (XXI), 16 December 1966; The International Covenant on Economic, Social and Cultural Rights (ICESCR) entered into force on 3 January 1976 U.N. Doc. A/RES/2200 A (XXI).
12 See among other the General Comment No. 12 (1999) with regard to the right to food and No. 15 (2000) with regard to the right to health; U.N. Doc. HRI/GEN/1/Rev.5.
13 Adopted on November 26, 2002, U.N. Doc. E/C.12/2002/11.
14 See: Monterrey Consensus, A/ CONF/189/11.
15 WTO: EC-Communication S/CSC/25 of 28 September1999.
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