Countries have different attitudes towards water. In some it is simply a service, albeit an important one, to be provided as efficiently and economically as possible. Other countries take a far more socially oriented position. The chairman of the VerbandkommunalerUnternehmer, the Association of Municipal Authorities in Germany described his position: “Water is not a tradable commodity but a highly sensitive and valuable foodstuff. Supplying water is an elementary duty not a business.” This has coloured the way countries address the task of providing water and how they are approaching the need to raise capital investment for improvement and modernisation.
Of all public utilities, WSS was the sector in which the formal private sector was least active and in developing countries, was almost non-existent. However, this is changing rapidly as many developing countries involve the private sector, usually European or North American companies in partnership with a local firm, in the provision of WSS, mainly in urban areas.
The increase in PSP has been driven in a large part by a desperate need for increased capital investment in WSS in many cities. In the majority of developing countries experiencing rapidly growing urban populations and a reduction in assistance for WSS from international development agencies, public sources of finance are no longer able to bear the costs of system rehabilitation and expansion. In addition, it is often considered that public authorities have been unable to manage urban WSS efficiently. A number of closely related reasons have been frequently cited in the literature as being responsible:
Conflicts of Interest: Public water and sewage utilities will tend to be inefficiently managed since governments have multiple objectives but limited financial resources. With the government as both owner and provider, the utility’s management is subject to a number of conflicting influences which it may not be able to balance if clear priorities are not established
Flexibility and Autonomy: At the level of operations, public utilities are often constrained by bureaucratic requirements which do not affect private firms. For instance, there is often considerable inflexibility in the management of human resources within public utilities
Absence of Competitive Discipline: Since public utilities are not usually subject to the disciplines of the market they have fewer incentives to minimise costs (and maximise tariff collection rates) and provide services in the manner customers demand.
