Innovative practices in the Drinking Water Supply in The
Netherlands
--Private Business, Public Owners--
UNEP/GMEF
Jeju, Republic of South Korea
March 29-31, 2004
by Pieter van Geel,
Netherlands’ State Secretary of Housing, Spatial Planning and the Environment
- The challenge facing many developing
countries and countries with an economy in transition nowadays is how to
supply sufficient water of good quality at a reasonable price? On the one
hand, demand for water is rising exponentially due to continuing population
growth and rising standards of living, while on the other hand water supply
companies frequently have to cope with watershortages or pollution of water
resources. Furthermore, many water supply and sanitation systems are in a
deplorable state due to insufficient upkeep.
- Discussions on competition and
private sector involvement in the Dutch water sector are not only influenced
by similar discussions concerning other services, but also by developments in
the water sector in other countries. For this reason the issue of drinking
water supply in public or in private hands is an outstanding one. Especially
private sector involvement is at this moment very much on the agenda in
countries where drinking water supply and sanitation as a public service is
still not developed or where ownership of management has resulted in
inadequate or even failing services.
- In many countries watersupply is a
public service controlled by the government. There is a lot to be said for
this, even if it is only that good watersupply and sanitation is in the public
interest. The other side of the coin is that government-operated utilities are
not always a ‘shining example of efficiency’. In recent years privatisation
and liberalisation of the watersupply sector has therefore been advocated as
the favoured option. Market forces must ensure that supply and demand are
efficiently matched. Private business however has tended to focus on areas
where demand is backed up by purchasing power. That means that there are still
sections of the population who do not have access to affordable, good quality
water. Another important concern is the lack of assurance of continuity of a
high quality water supply in a cost driven private operation of water
services. Privatised water supply companies operating on a commercial basis
have the risk of creating a tension between costs and quality and a strain on
necessary investments in infrastructure and innovation.
- On one hand there is the objective of
having sufficient water for all at an affordable price, on the other hand
water should also be treated as a scarce commodity and has a price. Customers
should pay a reasonable price for the cost of service provision, the water
supplier is obliged to keep his costs as low as possible by improving
operational efficency. How to come to an optimum solution?
- Both government and water supply
companies consider drinking water quality and reliability of supply as the
most important indicators for the level of services. This relates to the whole
process of extraction, purification, transport and distribution of water,
including investments in infrastructure and innovation.
- Drinking water is considered in the
Netherlands a public service. The governments
view is that drinking water supply being a natural monopoly should not
be privatised and drinking water policy is aimed at guaranteeing a high
quality drinking water for everyone at a reasonable price for now and in the
future. The discussions on the new Water Supply Act in the Netherlands have
been very much triggered by the ongoing political debate on efficiency,
competition, liberalisation and privatisation in other public service domains.
Services like public transport, health care,
energyproduction and the collection, treatment and disposal of waste.
- The Dutch Water Supply Act combines
in reality the best of both worlds: Public ownership married with operation
according to cost effective business principles. It is an organisation
that is a cross between a public owned utility and a private company: the
PLC’s (governments owned public limited companies). Public Water PLC’s are
incorporated as private companies and are also subjects to the rules and
regulations governing commercial business. The majority
of their shares are owned by local or national governments.
These PLC’s as such are relatively common in the water
supply business. Examples can be found in Europe, as well as in North America,
Asia and Africa but must not be confused with corporatised parastatal
utilities.
- Public Water PLC’s can be an
interesting alternative for water supply in developing countries combining the
best of both worlds. This combination offers all the necessary advantages. As
a public limited company, it is required to provide optimum watersupply
services for everyone in its service area. The fact that it operates on a
commercial basis means that the cost of services provided have to be recovered
from the users. Another advantage is the financial transparancy of a Public
Water PLC, which is required to open its annual accounts to public scrutiny.
- Since water companies have a
(regional) monopoly on the supply of drinking water, attention needs to be
given to efficiency. To guarantee an efficient water supply the instrument of
benchmarking is used in the Netherlands. In this benchmarking the
performance of water companies is compared, using performance-indicators on
water quality, customer service, environment and finance & efficiency. The aim
of the benchmark is threefold: 1) increase transparency, 2) give account to
the public, shareholders and the Board of Directors and 3) generate
information to improve performance. Two benchmark studies have been carried
out so far. In the near future the benchmark study will be compulsory.
In
summary: the issue of drinking water supply in public or in private hands is an
outstanding one in many countries. Public ownership married with operation
according to commercial business principles as used in the Netherlands can be
applicable to other countries and other regions of the world. In a nutshell it
can contribute to realise WSSD targets as they relate to water directly as well
as indirectly relate to finance and governance. Lessons can be drawn from the
Dutch national experience. Of course the Netherlands is willing to share its
experiences with others active in the field of national drinking water policy
and national legal frameworks.
