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European Water TNCs:
Towards Global Domination?

With the active backing of European governments and institutions, EU-based water corporations until recently have been enjoying a spectacular expansion into markets around the world. Given the recent decision by the world’s largest water company (Suez) to pull out of major cities in the South, and the growing opposition to water privatisation in many countries, there are signs that the tide may be turning for the corporate water giants.

After a decade of sweeping privatisation, 460 million people around the world are now dependent on private water corporations for their supply (up from just 51 million people in 1990).[1] Water industry analysts expect the privatisation frenzy to accelerate and predict the number to reach 1.16 billion people in 2015.[2] During the 1990s, water corporations focused on conquering the newly privatised markets of the South. Their focus is now increasingly shifting to the more stable and profitable markets in Europe, the United States and Japan. While privatisation or public-private partnerships (PPPs) are still the exception in most industrialised countries today, analysts estimate that no less than 75% of European and 65% of US water utilities will be privatised by 2015.[3]

If current privatisation trends continue, the global private water market of the next decade will be firmly controlled by only a handful of giant corporations, all with headquarters in Europe. The world’s two largest corporations, France-based Suez and Vivendi, already control approximately 70% of the global private markets.[4] Based on a solid (and protected) position in their French home market (where they control 85% of private water markets), they have successfully pursued international expansion throughout the 1990s.[5] The only company which may threaten the dominance of Suez and Vivendi is the German ‘environmental services’ and utilities giant RWE, which has expanded its global water portfolio through acquisitions of companies such as the UK’s Thames Water and American Water Works.

Following the collapse of Enron and its ambitious water division Azurix, the runners-up in the global water markets are now almost exclusively Europe-based corporations. France’s Saur, as well as International Water and Severn Trent, both headquartered in the UK, hope to catch-up, but further concentration in the hands of the big three (Suez, Vivendi, RWE) is a more likely scenario. According to industry analysts these smaller companies are struggling to expand in order to survive, indeed “it may soon be a question of eat lunch or be lunch for the second tier.”[6]

The EU’s Helping Hand

The rapid global expansion of the European water giants would be impossible without the far-reaching support they enjoy from European governments, the European Commission and other international institutions. The World Bank, in which European governments play a decisive role, has dramatically accelerated water privatisation in developing countries by making water supply and structural adjustment loans conditional on privatisation. Through its affiliate, the International Finance Corporation (IFC), the World Bank has been directly involved in promoting and shaping privatisation processes in Buenos Aires, Manila and many other cities around the world.[7] The EU’s own European Investment Bank (EIB) plays a similar, but less well-known role.

European governments, particularly the French and British, are deeply committed to helping ‘their’ water corporations win new markets. The French government, for instance, played a very active role in helping Suez win the bid when the water supply in Buenos Aires was privatised in the mid-1990s.[8] Also, the European Union’s development aid spending on water in developing countries effectively subsidises the EU-based water corporations. Rather than supporting water infrastructure improvements, the aid budgets primarily go to ‘administrative restructuring’ and other costs related to introducing privatisation programmes.[9] This pro-privatisation bias is also at the heart of the EU’s Water Initiative, presented last August at the Johannesburg World Summit on Sustainable Development (WSSD). Boosting private sector involvement through subsidised Public-Private Partnerships is presented as a ‘win-win’ approach, however the only certain winners are likely to be Suez, Vivendi, RWE and other large EU-based water TNCs cashing-in on new water markets.[10] The European Union is also using the negotiations on services sector liberalisation within the World Trade Organisation (GATS) to further the market expansion interests of large EU-based water corporations.[11]

Broken Promises

After a decade of having privatisation hailed as a panacea for improving access to clean water in the cities of the South, it is now clear that the water TNCs have failed to improve the situation of the poorest. Numerous examples from throughout the South reveal a pattern of gross negligence, failed expectations, and broken promises on the part of the global water giants.[12] In order to win contracts, they routinely promise major investments in new infrastructure, price cuts and improvements in service. Once the bid is won, and a corporation has taken over a city’s waterworks, it often seeks renegotiation to allow socially disastrous price increases and the down-scaling of the promised improvements.[13] The water TNCs have shown an unfortunate tendency to ‘skim the cream’— concentrating on supplying those consumers who can pay market prices while doing very little for the poorer neighborhoods.

2002 was the year in which the water TNCs finally started admitting their inability to supply drinking water in low-income areas. J.F. Talbot, CEO of Saur, publicly questioned whether running privatised water systems in developing countries, is “a good and attractive business.”[14] Without government subsidies and loans, for instance from the World Bank, the TNCs would move out of the water business in developing countries, Talbot warned.[15] This is a dramatic turnaround after a decade in which privatisation was presented as the only way to modernise water delivery in the South.

Later in 2002, Suez shocked many by pulling out of both Manila and Buenos Aires, two cities often highlighted by the World Bank as shining examples of successful privatisation regimes. Suez has now embraced a crude policy of "preparing for departure"— simply leaving if a city’s water supply fails to bring in expected profits.[16] Suez also announced a more general shift of investments towards more profitable markets in industrialised countries. Investments in developing countries will be focused on the most promising ‘growth markets’, such as China.[17] The company is most of all trying to regain the confidence of the financial markets after its share prices dropped dramatically in 2002. When Suez sold-off Northumbrian Water in January 2003, an industry analyst concluded that “in the cold light of the day any part of the group which does not fulfil Suez’s profit criteria is fair game.”[18] Suez’s self-proclaimed commitment to solving the water needs of the world’s poorest only lasted as long as it served the company’s expansion strategies.

The Turning Tide

Despite water industry projections of a continued global privatization wave, there are clear signs that the tide is starting to turn. Earlier this year, Suez lost its 20-year contract for the water supply of Atlanta, Georgia in the US, after failing to live up to promised improvements in water quality.[19] Atlanta’s decision to cancel the contract is a serious setback for water privatisation in the US, already considered to be “cooling politically,” particularly when it concerns European corporations.[20] In Europe, a number of countries are tip-toeing towards privatisation by gradually increasing the role of the private sector, for instance through joint ventures or other forms of Public-Private Partnerships.[21] Water privatisation however remains a very controversial political subject in most EU countries and the European Commission has until now failed to gather sufficient political support for EU-level water liberalisation.[22]

In the South, hostility towards global water corporations is growing as a result of their often disastrous performance. An increasing number of Southern governments, including South Africa and Brazil, are beginning to reconsider the virtues of privatisation. Lula da Silva's new Brazilian administration has clearly signalled its opposition to further privatisation of water companies. "Privatisation has not resolved the water problems of most of the population," explains Olívio Dutra, the new Minister of Cities.[23] 2003 might become a turning point: a disastrous year for profit-centred water TNCs which may see their global expansion dreams crumble further, and a hopeful one for those struggling for people-centred water policies.


1: ”Cholera and the Age of the Water Barons”, The Center for Public Integrity, February 3 2003.

2: Masons Water Yearbook 2002-2003, quoted in “News from the global water industry”, Global Water Intelligence, December 2002.

3: ”Cholera and the Age of the Water Barons”, The Center for Public Integrity, February 3 2003.

4: Vivendi Environnement (VE), which runs Vivendi’s water investments, is currently undergoing major changes, including adopting a new company name. VE was split off from Vivendi Universal in July 2002, after the mother company collapsed under enormous debt build up during the leadership of Jean-Marie Messier. The French ministry of finance is now working with major French banks and state-owned companies to ensure that VE stays in French hands.

5: The French water market is effectively closed to foreign competitors. “Defending the Internal Water Empire”, The Center for Public Integrity, February 4 2003.

6: “News from the global water industry”, Global Water Intelligence, December 2002.

7: “The ‘Aguas’ Tango: Cashing in On Buenos Aires’ Privatization”, The Center for Public Integrity, February 6 2003.

8: “The ‘Aguas’ Tango: Cashing in On Buenos Aires’ Privatization”, The Center for Public Integrity, February 6 2003.

9: Only 64 million euro went to concrete water projects, whereas 168,2 million euro went to ‘water resources policy and administration’. Considering the absolute dominance of EU-based water corporations, this policy is in effect a new form of tied aid “Investing in the bureaucracy of privatisation – a critique of the EU water initiative papers”, PSIRU, February 2003.

10: “Investing in the bureaucracy of privatisation – a critique of the EU water initiative papers”, PSIRU, February 2003.

11: See for instance “WTO and Water: the EU’s Crusade for Corporate Expansion”, Corporate Europe Observatory, March 2003. See also http://www.gatswatch.org

12: For a very recent overview of privatisation failures, see “The Water Barons, a series of articles by the Center for Public Integrity, February 2003, http://www.icij.org/dtaweb/water/
Finger/Allouche in their historic overview show that water privatisation in the South has almost never delivered the promised results, with detailed case studies on El Salvador, Ivory Coast and The Philippines. The authors consider the privatisation trend to be unstoppable and irreversible and therefore propose strengthened government controls on TNCs running privatised water systems, forcing them into responsible behaviour. “Water Privatisation – Trans-National Corporations and the Re-regulation of the Water Industry”, Matthias Finger and Jeremy Allouche, Spon Press, London 2002.

13: ”Cholera and the Age of the Water Barons”, The Center for Public Integrity, February 3 2003.

14: “Investing in the bureaucracy of privatisation – a critique of the EU water initiative papers”, PSIRU, February 2003.

15. Ibid.

16: "Water multinationals in retreat", PSIRU, January 2003.

17: 24 million people out of China’s 1,4 billion inhabitants are currently supplied by private water corporations, but water markets have recently been liberalised and privatisation is underway in many cities. In what resembles a gold rush, European water giants are rushing in to win contracts in the wealthiest areas of China, such as parts of Shanghai. 400 of China’s 668 major cities are facing water shortages. “For European utilities, it represents an extremely attractive money-making opportunity”, Eurobusiness concludes. “Europe’s liquid gold”, Eurobusiness 2002, page 84-85.

18: “Suez Buoyed by market gains”, Global Water Intelligence, February 2003.

19: “Southern Discomfort”, Forbes Global, February 3 2003.

20: “News from the global water industry”, Global Water Intelligence, December 2002.

21: Although there are moves in Germany, Italy, Spain and other countries to expand the role of the private sector, “there is little evidence of serious political support for the opening up of the EU water market”. The UK and France are the exceptions as water is supplied mostly by private corporations. “The European Water Industry – Market Assessment 2002”, Key Note Ltd 2002.

22: The Danish business newspaper Børsen on August 19th 2002 reported that "the Commission has already proposed a directive which in strong language called Member States to open up the markets for water supply, stating that waste water management is not a public task. However, the proposal was watered down in the European parliament and probably will not survive this time around. But the Commission has not given up this case and has initiated two research projects which are to investigate advantages and disadvantages of market opening in the water sector, so the Commission is better prepared for the next water battle with the Parliament." (our translation) “Dansk privatisering først lige begyndt”, Børsen, August 19th 2002.

23: “News from the global water industry”, Global Water Intelligence, December 2002.

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