Private-sector participation in the water and sanitation sector

Abstract

This review examines experience with private-sector participation (PSP) in the water supply and sanitation (W&S) sector. Common ideological, theoretical, and practical justifications for and objections to PSP in water and sanitation are presented. Review of empirical evidence suggests that where gains in efficiency, investment, and environmental stewardship have been realized through privatization, they have often been achieved through unpopular yet predictable strategies such as retrenchment and tariff increases. Challenges persist regarding ensuring access to and affordability of services for low-income households during privatization, and evidence suggests that PSP will not benefit the majority of the 1.2 billion people who lack access to improved water supply and live in the world's poorest countries. The challenging features of W&S economics, along with mounting public opposition to privatization and globalization in the sector, will likely reduce PSP in the sector over the short term, particularly where the private sector is expected to assume commercial risk as well as responsibility for capital investment in municipal W&S networks.