multinational corporations - are they always bad for the sector?

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  • KaiMikkel
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Re: multinational corporations - are they always bad for the sector?

A recent study apparently paints a fairly poor picture of water privatization:

www.theguardian.com/global-development/2...ure-lagos-world-bank
Kai Mikkel Førlie

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  • ggalli
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Re: multinational corporations - are they always bad for the sector?

Dear Christoph,

The Detroit disconnections are a bit more complicated than what is commonly portrayed. I wrote a blogpost earlier this year on it (please note some of the links cited in the text are found below and one of the video links is dead now, will try to find that back). What it boils down to is that residents are paying way too much for their water due to poor decisions made at the city level, and that 'rich' customers are not being shut off while poor households are.
In my view this example portrays exactly the problem that large utilities run solely as a stand-alone business are disconnected from the human reality that we all need water to survive, whether we're poor or rich.
You are very correct that in Lima, and many other cities, the poor which are not connected to the main water lines pay far more. In fact, the connection to the richer households are subsidised while the poor often have to mend for themselves. This is also the case for sanitation, most public money goes towards sewerage for wealthy areas and not towards on-site systems ( see for example this report by Tremolet consulting ). In my view the problem is not only dependent on unpaid bills, it is also part of the inability (or unwillingness) of city officials and utility managers to cater for these poor areas, often because they are so-called 'informal' or 'illegal' areas. This is first and foremost a political problem and this aspect should be resolved first, how to deal with technology and payment of bills comes later.

Best,
Giacomo
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  • christoph
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Re: multinational corporations - are they always bad for the sector?

Hi Giacomo, Ben and Marjin,

This post is very much related to this post (here). But aimed to the decisions on city level.
There are some aspects in the posts below I have a very different opinion.

Giacomo wrote

Distance allows us to make hard technocratic decisions which are not popular, but sometimes necessary. But distance also allows for inhumane practices to take place, especially when each person is working in a hierarchy and feels part of an overall machinery. For example, as was seen in Detroit last summer, someone disconnecting a water supply to a house which cannot pay the bill is just carrying out the decisions made by others.

Most important I do agree totally with disconnecting a water supply and that is not only in Detroit last summer – that is everywhere. People who do not pay their water bills are stealing water from the others! And I do not accept the social argument. In Lima (and many others cities) the poorest pay the highest price for water when they are NOT connected (5-10 times the tariff easily). Part of the problem are the non paid bills. There are several ways to solve the situation for people who are connected and really do not have how to pay due to social reasons. But simply not paying is not the solution.
So in my eyes it is not an “inhumane practice” or a “hard technocratic decision”. And for sure it has nothing to do with a large cooperation or a small utility- They all have to take hard decisions and have to implant them. You are right, small utilities (in a small town) you might be able to go to the mayor to complain about the water cut as he is your friend and the mayor orders the utility to reconnect the user. THAT is a real problem and we deal with that problem in all small utilities so it would be an argument FOR and not against larger utilities.

Ben wrote:

I feel you gave up on the belief that people, even the poorest uneducated ones, can and have the right to vote / decide / organize themselves in a democratic / cooperative way to choose their best water and sanitation management system.

I don´t agree with that.
a) "Not in my yard" is common practice to an extreme with Wastewater treatment plants – so you can not leave the decision with the persons - that has nothing to do with poor or rich.
b) Sanitation is human right but not a personal right on how you have it, it is THAT you have it.
c) Cooperative ways to choose sanitation – could you give one example how that could work? I can not imagine any.
As for private or public I already expressed my opinion.

Marjin wrote:

There could be a management committee with a presence both of the international agency and local representatives.

I think the decision is always of the country – externals should never rule, although I agree that they should strictly supervise the correct use of the money for the measures they are aimed to.

Christoph

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  • Marijn Zandee
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Re: multinational corporations - are they always bad for the sector?

Dear all,

I think that it is interesting to see these discussions form a perspective of oversight and accountability.

If we take, (from the tread referred to by Kai) the example of Unilever and soap. From my perspective in South Asia, if a company like Unilever can help make hundreds of millions of people here wash their hands with soap that is great and probably more than buckets full of NGOs can achieve. However, there is the argument of the environmental damage that Unilever does elsewhere. For me, it would be up to the people in Europe, who are informed about this, to make Unilever more accountable for its deeds in that respect.

For waste and or water utilities, in Europe we went from public to private entities and I would also think that a (partial) reversal may be a positive thing. However, if I look at the situation here in Nepal, a public entity runs a very high risk of getting colonized by patronage networks that connect to the political parties here. So I think here another, more creative solution to provide both services and oversight is needed.

One scenario could be to fund the service partly through a large international agency and for the most part with Nepalese public money through tax or tariffs. There could be a management committee with a presence both of the international agency and local representatives. The committee could then choose to let the work of the utility to be carried out by a company, be it local or international. As long as the committee is strong enough to make sure the public is served well for a reasonable price. The local committee members could maybe be appointed in a staggered process of elections to provide a candidate pool from which a lottery system appoints about 25% of the candidates to actual positions. I realize that there could be many objections to such an arrangement, but we need creative solutions to increase accountability, and this is just a sketch of an alternative system.

Regards

Marijn
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Re: multinational corporations - are they always bad for the sector?

Dear Giacommo,

Thanks for precising all this cause in your last post just the difference private vs public was understood. You said previously the topic pop up again and again ... it actually isn't when you clearly diferentiate small entrepreneurs and multinationals.

This discussion is about "how multinational corporations can be usefull in sanitation sector for the base of the piramid ?". The social distance you're talking about which "allows us to make hard technocratic decisions which are not popular, but sometimes necessary" is very scary to me, reminds me the shock doctrine from Naomie Klein. I feel you gave up on the belief that people, even the poorest uneducated ones, can and have the right to vote / decide / organise themselves in a democratic / cooperative way to choose their best water and sanitation management system.

This social distance is crucial, yes, but I belive for the exact opposite reason you're mentionning. Small local entrepreneur can be as bad as it gets, I doubt that the difference of salaries between him and the cheapest is 500 to 1 like in the multinationals, I doubt that he's got an account in caiman island and I doubt that he'll sign 500 people fired before lunch because it's the "hard technocratic decisions, not popular but necessary".

A lot of discussions on this forum are oriented toward decentralized more sustainable sanitation systems. I invite you to check on the very positive experiences of people taking back the water and sanitation governance. In Montpellier where I live (south of france), the end of the private contract with Véolia was the 1st municipal campain argument ! And the guy got elected, maybe not only for that but he did. The feeling all over france of take back power on this is massive, everyone is now talking about, having opinion, some debates are emerging in each neighborhood ... maybe in 3 years I'll tell you we're paying more and the service is less good, but the fact I could somehow participate to the decision as a citizen is priceless.

Best,

Ben

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  • ggalli
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Re: multinational corporations - are they always bad for the sector?

Dear Ben,
I'm not sure I understand your full point, but yes large multinationals are indeed different than small local entrepreneurs. However, this difference is also the case for small public utilities vs large public utilities. In the case I explained, Mumbai, the public utility is huge, making their distance to the 'common' (wo)man very large. Small utilities may have a closer connection to their customers (see for example this article from the latest Water Alternatives).

In fact, I believe that social 'distance' (even though this is an abstract concept) is crucial in understanding the mismatch between large utilities (be it private multinationals or public owned ones). Distance allows us to make hard technocratic decisions which are not popular, but sometimes necessary. But distance also allows for inhumane practices to take place, especially when each person is working in a hierarchy and feels part of an overall machinery. For example, as was seen in Detroit last summer, someone disconnecting a water supply to a house which cannot pay the bill is just carrying out the decisions made by others. These mechanisms allowing for dispersed decision making allowing for inhumane practices have long been seen in military practices (see for example Bauman on the Holocaust or more recently the drone warfare ).

What does this all mean? Well in my view large utilities or large multinationals are not necessarily very different. But then again, my experience is based on Mumbai, a city marked by stark social differences on multiple dimensions (caste, class, gender etc.). In other cases, where the large public utility has the explicit mandate to provide services to all citizens (the most famous case being the eThekwini utility) it may be completely different. But in this cases the utility has had to make a strong internal change to truly provide services to all citizens.

Oh and by the way, small local entrepreneurs might be very different than big multinationals but let's not over-romanticise them either.

Cheers,
Giacomo
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Re: multinational corporations - are they always bad for the sector?

Hi giacommo,

Thanks for entering in, please just notice that private sector is very different from multinational corporation, the title of this thread. Sad the link is expensive, seems interesting.
In the case of france sanitation management is 100% linked with water and controlled by both public and private entities, most of them giant multionals corporations.

In many programs I saw pertinent consultant actually checking "who was the appropriate guys to manage the water delivery" whether he was a functionary or a local entrepreneur, before going ahead with water projects. Public or private, this should be just be a tool box.

Multinational corporation is a very different matter than local private small entrepreneur.

Best,

Ben

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Re: multinational corporations - are they always bad for the sector?

Hi,
Interesting but also discomforting to see this topic pop up again and again, with much of the same arguments. I used to be a staunch opponent to the privatisation of water utilities and to some extent I still am. But let's face the facts, in many cases public water utilities are not able or do not have the mandate to deliver. Let me explain:

I spent 5-6 months living in Mumbai working in a an 'illegal' slum settlement. These people are denied water services by law (Maharashtra state law). Local activists are fighting against this law with some recent success. But the fact of the matter is that most public officials and engineers of the water utility are high caste Hindus from Maharashtra, they simply do not care or even despise low-caste communities or Muslims immigrating from North India (such as the case of the slum where I was working).

Changing the ownership of the water utility from public to private will not change this! It will reduce the overall democratic control and increase the financial flows towards private gains, but the urban poor have no to little democratic control as it is. The same can be said about this remunicipalisation 'hype' which activists are claiming as a big success. If this is not coupled with overall changes in the water utility organisation, its staff and managerial processes than we have little to celebrate.
See for more academic work on this false dichotomy between public and private the work of Karen Bakker (e.g. " Privatizing Water ")

Lastly, we almost never hear about privatisation in sanitation. Why is that? Has it always been a private matter? Is it a 'silent' privatisation?
Giacomo Galli

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Re: multinational corporations - are they always bad for the sector?

Ben - You and I are on the same page with this.

And for more on the topic, I suggest that folks head over to an associated thread that Ben initiated:

Why would large companies (multi-nationals) invest resources into social businesses for the base of the pyramid?
Kai Mikkel Førlie

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Re: multinational corporations - are they always bad for the sector?

Chochabamba and all that, feels a bit like time travel to the (not so distant) past, when privatisation was the ideological pet of both supporters and opponents.

Gladly these times are over, privatisation has lost its appeal as a miracle solutions among long time supportes (governments, donors, WB, etc.). Especially the hope that private cooperations could bring in the needed capital for investments in the water and sanitation infrastructure has proved to be an illusion, and overall the pushing for private operation has become much less (I'm a bit surprised by Joe's observation of the contrary from the UN conference).

Private operation of urban water and sanitation systems is now mostly seen as just an option among others for municiaplities, with its advantagea and disadvantages. It can work well, if done well (in particular if concession contracts are well done). There are successfull examples of private operation, and there are failures. The same is of course true for public operation.

In Europe, there is now rather a trend of remunicipalisation of privately operated water and sanitation systems.

A recent Guardian article on the topic: www.theguardian.com/global-development/2...ure-lagos-world-bank

Generally, I think no option should be excluded or preferred on ideological grounds alone. But on the other hand, to be genereal, I think privatisation of public services works best and easiest, when it is possible to have a real market with competition and all that. This is more the case e.g. with telecommunications, less with water supply, or railway, for instance...

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Re: multinational corporations - are they always bad for the sector?

Dear all,

Thanks for sharing thoughts on this very interesting question.
I'd like to share here my little experience with big french corporations (named Suez and Véolia, the 2 biggest water companies in the world).

I worked 2 years ago in dominican republic where France offered a "cheap" loan for wastewater infrastructures, at the condition that french companies were contracted (very very common practice). They were so good at selling the brand new super technological activated sludge system to the local politics telling them "your country is modern, you don't want some old school smelly ponds" ... the day after we would visit the old plant (last loan from someone else) which were by passed within a month because there was litterally no training, no spare parts, no nothing to actually make it run. This mascarade was a shame but worked, and construction was engaged. No-one cared on the french side, development money was spread toward french companies and guys were actually laughing about "the less it works, the quikest they gonna contract us again" ... I don't know about other nation based funders, but I saw this kind of approach in many countries.

Other point, It's been proved with many cities going back to public managment in france that water prices decreased of average 20% after the change. I will not list the worldwide scandals of Véolia and Suez but I confirm that they are useless massive sharks in the water sector.

Last, please check out the public water management experience of Phnom penh :
"The public utility went from being an institution that was almost bankrupt and plagued with corruption and inefficiency to one that is now considered a model for good governance and high quality service".

Looking forward to more good examples of public water management !

Ben
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  • Marijn Zandee
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Re: multinational corporations - are they always bad for the sector?

Dear Joe,

To come back to the original question.

I think much of it depends on how you want to design the waste water treatment system and utility. Especially for cities and municipalities, there may be an argument to go for a (semi) centralized treatment system or network of treatment systems. Much along the piped sewer model in the North. Or preferably a version that is designed towards energy and nutrient recovery from the start. (Water availability is a major concern here).

If (big if) that is the service model you choose, then -in my view- working with larger corporations can make a certain amount of sense. Historically, development interventions based on larger and more complicated technologies have failed because of a lack of O&M. If (once again an if :-) ), there is a sustainable (taxation based) system for ongoing O&M, a modality could be considered where the corporation which installs the treatment system also takes responsibility for running it for at least a 15 year period. All this of coarse requires a certain political stability. But I think that especially for middle income countries such a model could be a good solution.

Regards

Marijn
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