No. 98: Water business in Japan and the world (17) (October 16, 2011)

Privatization trend in foreign countries

Privatization of the waterworks business by the public-private partnership started to increase present in the 1990s. In Europe, various kinds of partnerships between the pubic and private sectors developed in the waterworks business. In Great Britain, the Thatcher Administration drove the privatization policy strongly and fully privatized the waterworks business in the England and Wales districts. At present, a total of 24 companies including Thames Water manage the waterworks business in Great Britain. The Waterworks Bureau of the British government that supervises them has the power to impose a fine on a company that fails to satisfy the contract and even terminate the contract to keep providing high quality water service at reasonable cost.

In France, a company (currently Veolia) was established by the Napoleon III in 1853. That is, France has a history of more than 150 years in the public-private partnership in the waterworks business. Although local governments take charge of the operation, they are free to entrust private companies with the entire business including capital investment. At present, private companies manage 70% of the water supply and 60% of sewerage in terms of population using such approaches as the concession system that is a comprehensive approach to transfer the whole business including capital investment to a private company. In Germany, privatization is not as advanced as in Great Britain and France. Local governments virtually manage the waterworks business, but many of them separate the management of organization and accounting from the operation for efficient management of the entire waterworks business.

In Spain, local governments manage the waterworks business, but they are allowed to take various measures at their discretion. They can collaborate with the local government of the neighboring regions to build an extensive network and entrust private companies with the business operation. Private companies got involved in the water business in the 19th century. At present, private companies and the public-private partnerships account for 44% of the waterworks business in Spain. All the companies established on the public-private partnership are independent to pursue operational efficiency and public interest simultaneously.

The above measures in Europe are very instructive and informative for Japan facing austerity. Private companies to get involved in the waterworks business need the integrated ability to manage all phases including capital procurement effectively and efficiently for a long period. (To be continued)