This report examines the growing involvement of the private sector in water servicesand the ability of private sector participation to improve access to water services forthe poorest citizens, especially in light of the UN Millennium Development Goals.Private Sector Participation (PSP) has been problematic in the area of improvingaccess to water for poor people due to the special nature of water, particularly thedifficulty in reconciling the economic value of the water itself as well as the serviceand the social value of water services. Determining the appropriate role of theregulator after the privatisation agreement goes through has also been the source ofmany problems, as PSP is often implemented in areas with a weak regulatoryenvironment. In addition, in 1992 the concept of Integrated Water ResourceManagement (IWRM) was developed that created a new method of watermanagement that called for a more holistic view of water resources and waterservices. IWRM calls for increased stakeholder participation in the water managementprocess and a recognition of water's ecological and economic value.In order to discuss and analyse PSP in relation to IWRM, two desk studies are used:the first concerns the PSP initiative in Cochabamba Bolivia and the second concernsthe implementation of IWRM in South Africa and the implementation of the policy ofFree Basic Water. The first desk study weights the economic value of water moreheavily than the social value while the second desk study focuses more on the socialvalue, than on the economic value. Four focus areas are identified for the analysis ofthe desk studies that address balancing the social and economic nature of water andassessing the institutional arrangements for water management. They include:extending access to marginal areas, affordability, community participation andtransparency and the role of the regulator. Finally, it is suggested that increasedefforts are needed to address the capacity building needs of local regulatoryauthorities and to assist in the creation of avenues of communication for communityinfluence on water management decisions. The combination of a weak regulatoryenvironment, a well organised utility in an area with little to no stakeholderparticipation will not result in improved access for poor people. Instead, privateutilities and water regulators should attempt to reconcile the economic, social andenvironmental values of water in the privatisation agreement in a way that reflectsthese values and improves access to water services to poor communities.
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