Economical
Will we see in the future countries gathered in tense disputes at the World Trade Organisation over the price of water? It sounds unlikely, but until a few years ago the idea of this website would sound the same way. Yes, water may become a commodity in the future and countries with major water resources can take advantage of it, but we are unlikely to see a replication of the current situation with oil.
“Transportation is still the biggest challenge when you talk about selling water”, explains Stefan Deconinck. “If you use it in agriculture, for example, the price has to be nearly zero or it is not feasible economically”, he says.
The problem is that water as a commodity has limited transportability”, adds Adel Darwish.
“Here in the UK, for example, you can’t bring water from Wales to South East or from Scotland to Central England. The cost makes it not feasible.”
“It is cheaper to bring an iceberg from the pole. But with some management and the right technology, we can handle the problem.”
“The question is on those places where the water is scarce and there are already tension, plus poverty, where people cannot plan their own living, they can’t develop economically with agriculture”, he says
Agriculture is the biggest user of water, responsible for 70% of total consumption, but with higher levels in developing countries where water management is less advanced.
Exchange
Maybe the day where we see countries trading huge amounts of bulk water is far, but there is already – and for a very long time, actually – an intense exchange of water between countries going on.
“When you import or export food and crops you are in fact trading water”, argues Mr Darwish.
“The same observation is valid for drinks of any kind”.
“With drinks, you even have three uses of water: the water used in the agriculture of the grapes, the water used in the industry and the water itself inside the bottle”, he says.
Despite the big relevance water has in the people’s lives, its worth was always played down by the “Diamond-Water Paradox”, which justifies the higher price of a frivolous good, such as a diamond, due to its rarity.
In the last decades, water’s role in economy has also gained notoriety, even under investor’s eyes.
Intense industrialization, pollution of water resources and an increase of agricultural water use made water shortages more common.
When scarcity is good
Scarcity may be a bad thing for most, but it makes investors’ eyes shine with the opportunity of having a market with loyal customers, who cannot suddenly change their supplier.
Apparently, with governments unable to supply water to everyone, the private sector presented itself as a potential solution.
The World Bank bought the idea and between 1990 and 2002, started to increase the privatisation demands when asked for loans for water operations.
The body denies being forcing into privatisation anywhere, but the process goes on.
There are several signs that customers may not be benefiting most from this.
Water companies’ profits had been rising worldwide but so have water bills.
Thames Water for example, the most criticized company in the country for not meeting the leak targets established by the regulator, saw its profits rise by 31% in the last year, to £340m.
Water companies in UK are expected to earn around £2bn in 2006.
According to the regulatory agency Ofwat, water bills in UK have risen 5% above the rate of inflation between 1990 and 1995, 1% above inflation between 1995 and 2000 and will rise 4,2% above inflation between 2005 and 2010.
The only period where bills did not increase more than inflation was between 2000 and 2005, with a 2% gap between inflation and water bill price rises.
