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Essay on Ethics and Privatization of Public Systems

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Ethics problems of privatizing water supply services. Paper submitted for Ethics class, with good reseach on Chinese market.

Privatization of public systems has been going on in both developed and developing countries for many years, maybe with more strength on developing countries in the last decade because of their higher reliance on public companies.

The inefficiency of many public companies and its burden to the countries bearing them has been probably the reason most commonly used to justify them. Other reasons have also been: expertise of the private companies, fewer capital funds needed to start the project (in case of new projects) and less resources needed from the government to control the day-to-day operations from the company.

Water supply systems have also been a target for privatization in many countries, especially in low-mid income countries (see figure 1).


Fig 1: Investment in privatization of water supply systems in millions of dollars from 1991-2005 for low-mid income countries

As we can see in Fig 1 the areas with higher concentration of water supply privatization have been Asia pacific & Latin America.

Nevertheless, why is privatization of water supply controversial? Many countries establish in their constitutions that water is a right to their citizens and according to the United Nations Committee on Economic, Social and Cultural Rights, the access to water is a human right (November 26, 2002, “The human right to water entitles everyone to sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic uses”).

However, how can we ensure that this right is enforced when private companies are the responsible for providing the service? Let us see the t...


... middle of paper ...


...municipal concession should be between 8 and 12 percent, but the 2002 Opinion on accelerating the Marketisation of Urban Utilities indicates that Chinese authorities cannot issue guarantees to investors for privatizations. ) The fact is then that the central government is supportive of price rises but the provincial government, that has to deal with unpopular price rises, tends to protect the customers.

On the other side investors with bargaining power (mainly foreign investors) can manage in some cases to secure better deals, like provisions for compensation in the event of changes in regulations, a higher starting tariff, or a more beneficial tariff adjustment formula.

Definitely, the challenge for the Chinese authorities is to be able to develop a robust regulatory regime for privatization in water services that is suited to China’s specific characteristics.


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