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Ethics problems of privatizing water supply services. Paper submitted for Ethics class, with good reseach on Chinese market.
ETHICS PAPER – ETHICAL RISKS IN THE PRIVATIZATION OF WATER SUPPLY SYSTEMS AND ITS IMPLICATIONS FOR CHINA
Privatization of public systems has been going on on both developed and developing countries for many years, maybe with more strength on developing countries in the last decade because of their higher reliance on public companies.
The inefficiency of many public companies and its burden to the countries bearing them has been probably the reason most commonly used to justify them. Other reasons have also been: expertise of the private companies, fewer capital funds needed to start the project (in case of new projects) and less resources needed from the government to control the day-to-day operations from the company.
Water supply systems have also been a target for privatization in many countries, especially in low-mid income countries (see figure 1).
Fig 1: Investment in privatization of water supply systems in millions of dollars from 1991-2005 for low-mid income countries
As we can see in Fig 1 the areas with higher concentration of water supply privatization have been Asia pacific & Latin America.
Nevertheless, why is privatization of water supply controversial? Many countries establish in their constitutions that water is a right to their citizens and according to the United Nations Committee on Economic, Social and Cultural Rights, the access to water is a human right (November 26, 2002, “The human right to water entitles everyone to sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic uses”).
However, how can we ensure that this right is enforced when private companies are the responsible for providing the service? Let us see the theoretical issues that can arise from privatization of water supplies.
MAIN ETHICAL PROBLEMS OF PRIVATIZATION
Privatization as we said is normally linked with financial improvement of the privatized companies. For improving the economic results of a firm there are two possibilities a) reducing costs b) increasing revenues:
Reducing costs: This is normally attained in two ways for water companies, utilizing more efficient modern equipment which per se doesn’t imply any ethical problem (but this has an attached higher investment cost) or reducing labor cost, which could lead to difficult decisions.
Another way of reducing costs, for new projects that require building infrastructure, is by supplying water only to the sector of the people who can afford paying for the services. The layering of the pipe network is a very expensive part of the construction of a new water supply system,