MEMBER OF THE EUROPEAN COMMISSION
Brussels, 25 AVR. 2005
KG/cs/D(05)/2281
Dear Mr Hoedeman,
I have received the open letter signed by the European Federation of Public Service Unions and other organisations. I have given it a very careful reading since a number of significant issues are raised in the letter and I wish to set the record straight, especially on the issue of privatisation of water services. While I welcome the appreciation of my statement on public services made during my confirmation hearing, I must emphasise, that contrary to what is stated in the letter, this position is shared by the entire Commission and the Member States. Most emphatically this position cannot be described as pushing for the privatisation of water companies in developing countries.
The Commission Communication of 2002 on Water Management in Developing Countries (COM(2002) 132), approved by resolution of the European Council, calls for partnerships between public, private and civil society actors to be promoted, ensuring that those partnerships remain equitable and transparent, allow free and reversible choices on water services management, safeguard consumers' and investors' interests and maintain high standards of environmental protection Commission policy in this area was reinforced at the end of 2003 in a Communication (COM(2003)326) entitled: "The Reform Of State-Owned Enterprise In Developing Countries With Focus On Public Utilities: The Need To Assess All The Options". This Communication was approved both by the Council and European Parliament. It calls for the Commission to play a greater role in the reform process of public enterprises, a task left until now to the Bretton Woods Institutions, especially the World Bank. Its main messages are that:
* the Commission takes a neutral stance on the ownership of any enterprise in conformity with Article 295 of the EC Treaty relating to the EU internal market
* before a decision is taken to reform a state owned enterprise or public utility, all the reform options must be reviewed and their social economic and financial consequences assessed
* the best option should only be chosen on the basis of this assessment and be transparently implemented with adequate regulatory frameworks and monitoring mechanisms in place.
This position, that the involvement of the private sector in the delivery of water and sanitation services is a National or Local Government choice, is reflected in the ACP-EU Water Facility. Indeed, many of the signatories of your open letter were party to the consultation process for the development of the modalities of the Water Facility (some may even have submitted proposals to the Facility) and surely must be aware of this.
Expansion of the role of the private sector is not one of the objectives of the EU Water Initiative. The EU Water Initiative is focussed on achieving the water and sanitation MDGs and has clear objectives, which are to:
*.reinforce political commitment to action and raise the profile of water and sanitation issues in the context of poverty reduction efforts;
* promote better water governance arrangements, improve co-ordination and cooperation in the way that water-related interventions are developed and implemented; encourage regional and sub-regional co-operation on water management issues, using the integrated water resources management approach
* catalyse additional funding.
Through the multi-stakeholder approach of the EUWI, the EU has taken significant steps to move towards better coordination and increases in efficiency of assistance for water and sanitation. As the EU collectively is the largest water donor in the world, providing some €1.4 billion of development assistance annually, this has the potential to generate results on the ground. The EUWI Code of Conduct, drawn up by a multistakeholder group and about to be endorsed by the EUWI Steering Group, is clear on the role of the private sector:
"The international public and private sector water operators have much to offer in the way of capacity building, knowledge transfer and management support to partner country water operators. However, the involvement of the private sector in the delivery of water and sanitation services is a National or Local Government choice and service provision should be undertaken in the most efficient and effective manner whether public, private or appropriate combination of the two options."
The first report (October 2003) of the Finance Working Group of the EU Water Initiative includes, as an appendix, guidelines on water governance which emphasise that the primary responsibility for provision of water services should rest with national public authorities, although there is a need to involve a broader range of stakeholders. Public Services International, a signatory of the open letter, was a member of this Working Group at that time, although PSI no longer participates.
On the issue of GA TS, the EU has sought commitments from a number of partners on the services related to water (such as distribution of water or wastewater management), as part of its wider negotiating proposal on environmental services. However, the EU requests only cover water distribution. They clearly exclude any cross-border water transportation and do not cover access to water resources. In addition, these requests in no way seek to reduce the responsibility for public authorities to regulate the use of water, to impose fair pricing practices, and to choose whether and how the private sector may participate in the delivery of water. On all these points, the EU will continue to support our partner countries, including through the supply of technical assistance.
"It is unfortunate that the EU's position on provision of water services is misunderstood by the organisations who have agreed to put their names to the open letter. Their constructive engagement with the EU Water Initiative would be most welcome, not only to avoid the misunderstandings that clearly exist but also to help in achieving the objectives of the Water Initiative.
I hope that you will see fit to post my response on your web site alongside your open letter.
Louis Michel
ADDRESS: EUROPEAN COMMISSION, B-1 049 BRUSSELS - TELEPHONE: 00.32.2.295 96 00 - FAX 00.32.2.298 08 99 -
E-MAIL: louis.michel@cec.eu.int