Water Governance

Water Governance

An Evaluation of Alternative Architectures

Edited by Asanga Gunawansa and Lovleen Bhullar

This insightful book explores urban water governance challenges in different parts of the world and highlights the advantages and disadvantages of publicly run, privatized, and public–private partnership managed water facilities.

Chapter 12: Risks in urban water reforms: a challenge to public–private partnerships

Claude Ménard

Subjects: economics and finance, environmental economics, environment, environmental economics, environmental governance and regulation, water


Despite their slow pace, reforms based on public–private partnerships (PPPs) are gradually making their way into the urban water sector. In an extensive study of reforms in water and electricity distribution over the period 1973 to 2005, Gassner et al. (2009) showed the significant impact of private sector participation on 977 utilities in the water and sanitation sector, with 141 reforms, mostly concentrated in Latin America and the Caribbean over that period, involving PPPs and the remaining 836 being operated as state-owned enterprises. More recent data from the Public–Private Infrastructure Advisory Facility (PPIAF) confirm the trend, although there is a clear shift in PPP from Latin America to Asia, particularly China. Forces pushing public authorities to reform their water sector are relatively well identified (Ménard and Shirley, 2002, pp. 4–8). Reform of utilities in the urban water sector is attempted due to a combination of three factors: (1) unmet demand and service problems in the water system, so that a significant number of actual as well as potential users would benefit from reform; (2) macroeconomic crisis characterized by growing public deficits, public debt and inflation creating major financial pressures on public authorities; and (3) a regime change or coalition shift bringing to power a governing group that perceives net political benefits from reform.

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