Introduction

The work of International Financial Institutions (IFIs) in developing countries has been subject to intense criticism in recent years. Detractors of the International Monetary Fund (IMF) and the development agencies forming the World Bank (WB) Group do not only deem that the contents of the policies supported by IFIs are inadequate to overcome the difficulties that member states face, but also criticise the way in which said policies are forwarded to indebted countries, which has been perceived as short of an imposition.

In a context of loss of prestige, the role of the IMF and WB Group in the contemporary wave of privatisation of public services has attracted particular attention. Indeed, privatisation has been one of the central reforms sponsored by IFIs for reducing public deficit and stimulating economic growth in developing countries. Among the public services that have been transferred to private operators in recent decades, the case of water and sanitation in urban areas has merited special study. Given their social value and the magnitude of the business that they represent, the success or failure of privatisation processes of water services has attracted in-depth analysis from both supporters and critics of the work of IFIs.

This chapter will focus on the role of the WB Group in the privatisation of water services in the city of Buenos Aires. It is by now undisputed that the processes of water services privatisation that IFIs encouraged in Argentina were less than successful.

Introduction

Water cannot be replaced and is crucial for human and animal life on earth. These two simple statements clearly highlight the importance of water for the international community and its unique nature among other natural resources. The fact that more than a billion people lack adequate access to water should give a picture of the gravity of the problem we are facing. The problem has two main dimensions – the individual access to water services and the overall availability of water as a physical resource.

Against this background the paper seeks to address both these dimensions, by first considering whether foreign direct investments and international trade can be seen as instruments for coping with inadequate access to water for the individuals (2.1) and water scarcity (2.2) respectively. Then the paper explores the impact of both the international investment system (3) and the World Trade Organisation (WTO) regime (4) on States' capacity to deal with these problems. The main aim is to evaluate whether these two international regimes are capable of reconciling the conflicting needs in relation to access to water services and water scarcity.

Coping with Access to Water and Water Scarcity through Foreign Investments and International Trade

Ensuring universal access to water services and the fight against water scarcity are daunting challenges for several States. Financial constraints, infrastructural inadequacies and adverse natural events affecting the availability of the resource are just some of the factors that may hamper the pursuit of such objectives.

Introduction

Two events of significance for freshwater resources in the ‘Third World’ occurred in 1997. The World Bank (WB) set up the World Commission on Dams (WCD) in March 1997. In May 1997 the United Nations (UN) General Assembly adopted the United Nations Convention on Non-navigational Uses of International Watercourses in May 1997 (UN Water Convention). The first development was the culmination of a sustained critique of large dams by environmental and social justice movements in the ‘Third’ and ‘First’ worlds alike. The critique of large dams occurred in the context of the rise of neoliberal transformations within International Organisations (IO). The second was the culmination of sustained efforts to create a legal framework to resolve transboundary conflicts over freshwater and pave the way for transboundary institutions for water projects and dispute resolution. Development of the UN Water Convention spanned nearly all of the post-World War II period of economic ‘development’ and concluded against the context of rising concerns about ‘water wars’ and security.

Both events were, ex facie, about dams and development but nevertheless ramifying legal, institutional, local and global changes for water regimes in the ‘Third World’. Yet the discourses around the two events ran parallel without convergence or contestation, intra-discourse, seen at best, as a coincidence. There is nothing in the events per se that suggest the possibility that there might be anything more to the absence of connections in the discourses on the two events.

Introduction: Anomalies and Contradictions of Reform

A tragic conundrum of the turn of this century is that the changes so long awaited and demanded in our governing systems have appeared in the form of ‘reform’ – a term that serves as a euphemism for the unleashing of neoliberal orthodoxies across the spectrum of sectors and services. The word reform has come to index a politics of complicity between global commercial interests, international aid agencies, and national governments, aimed at transforming public resources into profitable enterprises. In the institutional arena, a reforming agency means one that has come under the financial and managerial disciplines of the commercial sector. The consensus on ‘best practice’ across sectors is one in which state agencies operate like profit-making businesses, firmly turning their backs on transfer-based or relief-oriented welfarism. This new order, then, spells an even greater alienation of public institutions from the public than was witnessed under bureaucratic regimes.

But reform of municipal water systems is tricky business in more ways than one. From a business perspective, these systems have scales of operation, capital intensity and tariff structures which are not easily amenable to commercialisation and/or privatisation. At a deeper level, the social, political and cultural contexts in which water as an element and water provision as a service are embedded pose a number of challenges to the project of commodification.

Introduction

In the words of the United Nations Development Programme (UNDP), water is ‘the stuff of life and a basic human right’. Thus, water is an essential element for life - including human life - on earth and as a result is a core concern in law. From a legal perspective, the UNDP rightly emphasises the importance of the human right dimension of water. Yet, in practice, water law is made up of a number of elements comprising a human right dimension, as well as economic, environmental or agricultural aspects. In particular, historically, one of the central concerns of water law has been the development of principles concerning access to and control over water.

Drinking water is directly essential for human life. Water is also indirectly essential, for instance, as an indispensable input in agriculture. Yet, despite the central role that water has always played in sustaining life, human lives and human economies, the development of formal water law has been relatively slow and often patchy. At the domestic level, colonial legislation first focused on the regulation of water for economic reasons, for instance, through the development of legislation concerning irrigation and navigation. Over the past few decades, increasing water pollution and decreasing per capita availability have led to the development of other measures such as water quality regulation and an emphasis on water delivery, particularly in cities, as well as environmentrelated measures. Yet, water law remains largely sectoral till date.

As water is a scarce resource there must be some rule over precedence in its use. Paramount is the right to quench thirst. Even appropriated water is overruled by the necessity to provide water for man and beasts where no other suitable supply is available.

Introduction

Global urban population growth, particularly in developing countries, is happening at an unprecedented rate. The world population rose from 750 million in 1950 to 2.9 billion in 2000, and the number of people living in urban areas has equalled the rural population in 2007, and is on the way to reaching sixty per cent by 2030. The sustainability of such a vibrant growth is contingent upon the availability of sufficient water for covering agricultural, domestic, commercial, industrial, environmental as well as other minor demands. If urban demand for water is growing, the availability of the resource has shrunk over the last decades due to massive diversions for agricultural needs. As hydrologists like to put it, many river basins around the world are reaching the stage of closure, which occurs when all available water in a basin is utilised. Reallocating water then becomes necessary, for instance when a particular user such as a city wants to increase its withdrawals. Under these conditions, water conflicts are likely to develop, and appropriate rules, policies, and organisations responsible for transferring water between users need to be in place.

Introduction

The Tirupur Water Supply and Sanitation Project (henceforth the Project) typifies an incongruity in water resource management and prioritisation. It is paradoxical that the textile industry which has over-extracted and polluted the water bodies in and around Tirupur for a decade now, has been given first priority in designing a water supply scheme. Also ironically, the scheme draws clean raw water (nearly 125 million litres per day) from a river source, but does not conceive of a design for the discharge and treatment of the same. Pollution caused due to industrial waste continues to plague Tirupur, even as state of the art technology is being installed to extract and transport water from distant sources. The scheme, in effect, has a direct bearing on the efforts to ensure recycling of waste water and ‘zero effluents discharge’ and in turn, the broader agenda of sustainable water management and conservation.

The Tirupur Water Supply and Sewerage Project has many firsts to its credit – ‘it is the first project to be structured on a commercial format; the first project-specific public limited company for water and sewerage with equity participation of major beneficiaries; first concession by a state government to a public limited company to draw raw water for domestic and industrial uses and to collect revenues; the first index-based user charges and direct cost recovery for urban environmental services; construction, operations and maintenance of infrastructure and related services by experienced domestic and international operators’.

Introduction

Many references to the term ‘sustainable development’ pervade discourses on the management of natural resources, particularly the diminishing supply of freshwater reserves worldwide. This entails reconciling the seemingly different goals of socio-economic development and environmental protection and conservation as essentially two sides of the same coin. Ultimately, efficient development strategies are those that sufficiently consider the finite nature of the water resource base and its dependent ecosystems. Addressing this concern, reforms in the water sector have increasingly mainstreamed environmental considerations into the elaboration of new laws or the review of existing legislation. This paper elucidates how environmental concerns are contained, reflected or given prominence within national water laws through a number of regulatory and other mechanisms – essentially, it examines the ‘greening’ of modern water laws.

The mechanisms examined in detail in this paper include minimum environmental flows of rivers, environmental impact assessment (EIA) requirements, the national ‘Reserve’ and protected areas and zones, environmental water trades and water trusts, ecosystem service payment schemes and the specific protection of aquifers in recognition of their ecosystem support function. This list is not exhaustive of the ways in which environmental protection is accommodated in the water law framework; indeed, many provisions contained in legislation which regulate water use incorporate the protection and conservation of surface or underground water bodies to some degree.

Introduction

The post-apartheid reforms in South Africa which put into place the existing water framework were intended to redress the disparities inherited from the prior racial segregation policies. Apartheid had entrenched stark inequalities between black and white communities also in the face of access to water, while the natural scarcity of national freshwater resources in South Africa also contributes to diminishing availability of water and increasing competition between the various users. Consequently, water reform policy and water justice became a central aspect of the new Government's policy of reconstruction and development and indeed remain very topical issues today. The right to water was entrenched in the constitution adopted in 1996 and in subsequent legislation, and its implementation was furthered a few years later by means of a policy of ‘free basic water’ adopted by the government.

The South Africa experience is interesting in that it sheds light on developments taking place in the context of renewed interest for the formalisation of a right to water in international law as well as in the national legal orders of a growing number of countries. While on the one hand the implementation of the right has resulted in the development of a policy of free entitlement to water for consumption and domestic use, there remain in South Africa huge disparities in access to basic water services and allocation of water, mostly as a legacy from the apartheid regime but also as the result of the application of an essentially economic approach to water policy.

Introduction

Plachimada is a small village in the Palakkad district of the state of Kerala. ‘Plachimada’ has become synonymous with debate on legal regime of control and use of ground water after the Hindustan Coca-Cola Beverages Private Limited (hereafter the Company) started a plant in Plachimada. The plant was commissioned in March 2000 to produce its popular brands such as Coca-Cola, Fanta, Sprite, Limca, Kinley Soda, Maaza and Thumps Up.

The local people in Plachimada started their protest against the Company within two years after the Company started production. The local people complained that the quality and quantity of ground water in the area has deteriorated due to over-exploitation of ground water by the Company. While the public protest against the company was growing, the Perumatty Grama Panchayat (hereafter the Panchayat) refused to renew the license of the Company in 2003.

The refusal to renew the licence of the Company by the Panchayat was the beginning of the legal battle. The issue reached the Department of Local Self Government, Government of Kerala for ‘appropriate orders’ as per the direction of the Kerala High Court. However, the legal battle did not end at the level of the Department of Local Self Government. The issue of ground water depletion and the refusal of the Panchayat to renew the license of the Company came before the Single Judge and subsequently before the Division Bench of the Kerala High Court as appeal. The matter is now pending before the Supreme Court of India.