"At a City briefing by an international bank last week, a senior
executive said: 'Today everyone is talking about global warming, but my
prediction is that in two years water will move to the top of the
geopolitical agenda.'"
Water becomes the new oil as world runs dry
Western companies have the know-how - and the financial incentive -
to supply water to poor nations. But, as Richard Wachman reports,
their involvement is already provoking unrest
* Richard Wachman
* The Observer,
* Sunday December 9 2007
http://www.guardian.co.uk/business/2007/dec/09/water.climatechange
The midday sun beats down on a phalanx of riot police facing thousands
of jeering demonstrators, angry at proposals to put up their water bills
by more than a third. Moments later a uniformed officer astride a horse
shouts an order and the police charge down the street to embark on a
club-wielding melee that leaves dozens of bloodied protesters with
broken limbs.
A film clip from the latest offering from Hollywood? Unfortunately not.
It's a description of a real-life event in Cochabamba, Bolivia's third
largest city, where a subsidiary of Bechtel, the US engineering giant,
took over the municipal water utility and increased bills to a level
that the poorest could not afford.
Welcome to a new world, where war and civil strife loom in the wake of
chronic water shortages caused by rising population, drought
(exacerbated by global warming) and increased demand from the newly
affluent middle classes in the emerging economies of Asia and Latin America.
At a City briefing by an international bank last week, a senior
executive said: 'Today everyone is talking about global warming, but my
prediction is that in two years water will move to the top of the
geopolitical agenda.'
The question for countries as far apart as China and Argentina is
whether to unleash market forces by allowing access to private European
and American multinationals that have the technological know-how to help
bring water to the masses - but at a price that many may be unable, or
unwilling, to pay.
As Cochabamba illustrates, water is an explosive issue in developing
countries, where people have traditionally received supplies for free
from local wells and rivers. But in the past 15 years rapid
industrialisation, especially in places such as China, has led to
widespread pollution and degradation of the local environment.
A report out today from accountancy giant Deloitte & Touche says humans
seem to have a peculiar talent for making previously abundant resources
scarce: 'this is especially the case with water,' it observes.
According to the firm's findings, more than 1 billion people will lack
access to clean water by next year. Paul Lee, research director at
Deloitte, and one of the authors of the report, says: 'Demand for water
is expected to be driven by economic growth and population increases.
India's demand for water is expected to exceed supply by 2020.'
The World Wildlife Fund has forecast that in the Himalayas, the retreat
of glaciers could reduce summer water flows by up to two-thirds. In the
Ganges area, this would cause a water shortage for 500 million people.
Lee says: 'The lack of the most important form of liquid in the world is
therefore a fundamental issue and one that the technology sector can
play a major role in addressing.'
He and others, including the World Bank, believe that private industry
can - sometimes - solve problems by taking water out of government hands
and removing subsidies. If water becomes more expensive, so this
argument goes, people are more reluctant to waste it, although Taylor
agrees that government needs to make certain that the poorest sections
of society are protected, and that there is 'proper [price] regulation'.
By allowing prices to rise to help meet the cost of supply, companies
could upgrade infrastructure and, in many cases, build new systems from
scratch.
Even in Britain it is recognised that efficiency is vital to avoid
leaks. In the developing world, leakage can account for the loss of up
to 50 per cent of all clean water supplies in major cities.
But protecting the poor is not always easy. Take the example of
desalination. Although it offers a solution for countries where demand
exceeds supply, the technological process uses a huge amount of energy,
making it 'too expensive for many African and Asian countries', says Lee.
Max Lawson, senior policy adviser for Oxfam, says: 'We are sceptical
that private-sector involvement is the solution for very poor countries.
In fact, there is an argument that much greater public sector
involvement and cash is needed to channel supplies to where they are
most needed.' But Abel Mejia at the World Bank in Washington says the
organisation does not favour one form of investment over the other: 'We
lend to private companies and governments, but we are not ideologically
motivated. Solutions may need a mix of private and public money.'
The World Development Movement lobby group has in the past criticised
the World Bank's enthusiasm for private firms controlling water
projects; it prefers public-private partnerships, run on a
not-for-profit basis.
But it is in China - the world's biggest emitter of greenhouse gas -
that the water problem is most pronounced, as fears grow that the
country is turning into an ecological disaster area. The head of the
country's national development agency said recently that a quarter of
the length of China's seven main rivers was so poisoned that the water
was harmful to the skin. Moreover, water-related issues are sparking
popular protests after the sanctioning of dams and irrigation projects
that have displaced hundreds of thousands of people who have no recourse
to compensation. Beijing has passed legislation to punish companies that
pollute supplies but, in China, such laws can be difficult to enforce.
So pressing are issues surrounding water that China has invited Western
companies to run systems in many towns and cities. One of the biggest is
French-owned Veolia, once part of the Vivendi utilities empire. In parts
of China, water provided by Veolia no longer has to be boiled, but the
cost to consumers has doubled. For the middle class, the price is still
relatively low - but most Chinese are not middle class. Many say up to
half their income is now being swallowed by water bills. That leaves
Beijing between a rock and a hard place because, like many emerging
economies, it desperately needs Western know-how and technology to solve
its water problems, but it is anxious to avoid the kind of civil unrest
that the Bolivian government experienced in Cochabamba.
In the City of London, there is a growing realisation that investing in
water technology companies offers opportunities for savvy shareholders,
and possibly for ethical investors. 'There is also an appetite from
institutions for water-related investments - they know it's going to be
big,' says Julian Sevaux, managing partner at Stanhope Capital.
Olivia Bowen, an independent financial adviser at the Gaeia Partnership,
says: 'New climate change funds have recently come to market; some are
well established, such as Impax's Environmental Markets Fund.'
GE and Dow Chemical are among big US companies diversifying into water
services, while the UK-based Thames Water is expanding overseas.
But the crux of the problem remains: according to a report from Credit
Suisse, annual world water use has risen sixfold during the past
century, more than double the rate of population growth. By 2025, almost
two-thirds of the global population will live in countries where water
will be a scarce commodity. And that could lead to conflict, as United
Nations secretary-general Ban Ki-moon warned last week.
Asia looks vulnerable, with China planning to syphon off Tibet's water
supply to make up for shortages in the parched north. Elsewhere, the
Israel-Palestine conflict is at least partly about securing supplies
from the River Jordan; similarly, water is a major feature of the strife
in Sudan that has left Darfur devastated. When it comes to this most
basic of commodities, the stakes could hardly be higher.
