How to avoid corruption and clientelism in governing public goods?

Zagreb, 26.07.2013 - Zagrepèani su olakšanje od velikih vruæina potražili uz gradske fontane. foto FaH/ Denis CERIÆ /dc

Although water is a common good, water services in Croatia are governed authoritatively and hierarchically, with the debate on a new model of governance still limited to „a choice“ between two supposed alternatives: either privatization, or status quo in terms of an ineffective, corruptive and clientelistic mode of resource governance.

Instead, the reform of governing water services should be based more on a network model of participative governance – concludes a comprehensive research on the governance of water services in the Republic of Croatia, conducted by Friends of the Earth Croatia, the Right to the City Movement, Green Istria, Heinrich Boell Stiftung, Art Workshop Lazareti and the Multimedia Institute, in cooperation with the Faculty of Political Science. The research was conducted within the framework of the “Corruption SONAR” project and has resulted in a publication entitled “Our water – an analysis of water service governance in Croatia”.

An untransparent system of water concessions, infrastructural losses of as much as 40 percent, uneven water prices, much lower coverage of water disposal than supply – these are just some of the issues with water management in Croatia. Their solving is made difficult by a system of governance that is only nominally decentralized, but in reality is concentrated in a single company, while the divide between formal competencies and real power relations makes personal contacts all the more important, resulting in risks of clientelism and corruption and making responsibilities harder to establish.

At the same time, while water services in Croatia are governed authoritatively and hierarchically, few have looked to other countries’ experiences and cautionary tales of such arrangements being conductive to privatization. Ineffective, clientelistic, often even corruptive water service management can, in the long term, contribute to the privatization of water services and infrastructure just to get rid of utility companies’ debt created by irrational spending of public funds.

However, the inclusion of independent experts, workers, civil society organizations and citizens as users in water service governance could reduce corruption and inefficacy, as well as increase service quality, all the while preserving the sustainability of water infrastructure and resources. These points were raised at a conference titled “Water management policies in Croatia”, organized by Friends of the Earth and their partners in Zagreb in late September.

source: Zelena akcija

Inclusion of citizens in water governance

“In the management of utility companies responsible for water supply and disposal, the dominant mode of thought is that the only available choice is between privatization or status quo, often meaning  ineffective, corruptive and clientelistic resource management. We believe that the debate needs to be expanded beyond those limited models and that there is a need to look into systems of management that provide various active social groups with a certain amount of control over water utility companies and the governance of water as a common good”, warned Enes Ćerimagić of Friends of the Earth; it is precisely this direction that is taken by the recommendations stemming from the comprehensive research on water services within the Corruption SONAR project.

The research deals with how the governance of Croatian water services compares with privatization arrangements and participative governance models in other European countries, in order to warn of the corruptive potential of privatization on the one hand and of clientelism in existing utility companies on the one hand.

According to results of the research, the single most powerful actor of the Croatian system is Hrvatske vode (Croatian Water Resources), who, along with the Ministry of Agriculture, make all the important decisions without appropriate consultation with policy implementers or other stakeholders, such as water utility companies, local self-government units, citizens and associations. In Croatia, the dominant model is that of bureaucratic management, but with added elements of new public management, such as granting concessions on waste water purification services and increasing reliance on sales of water services to consumers instead of budgetary funds.

“Elements of participative management are absent. A reform, initiated in order to achieve harmonization with EU standards, has led to the specialization of water supply and disposal companies, with their merging yet to come. Although this approach may contribute to the solution of the inefficiency problem, the experiences of other countries call for caution, since the outcome of these processes may be privatization, the same as in the case of irresponsible management”, warn the civil society organizations.

The organizations believe that a major portion of financial obligations for investments in water infrastructure should be covered by the state budget with the addition of EU funds, without significant increases in water prices or privatization. Since the crisis of water management is recognized to be a crisis of commodification on a global scale, Croatia should insist on the management of water as a public and common good. The organizations conclude that the necessary reform, instead of being based on a centralized and/or market-oriented approach, should be based on a network approach to participative management, according to best practices of those European cities that have re-communalized and democratized water services as a reaction to mismanagement on part of private or public companies.

Lidija Runko Luttenberger of the Opatija-based company Komunalac stated that “water management needs to take account of public interest, as multinational corporations are only interested in resource exploitation and contribute nothing to the community”. She went on to state that existing measures should not necessarily be changed, but that water policy and legislation should be modernized and environmentally acceptable approaches encouraged.

As usual, the Ministry of Agriculture, competent for the issue, repeats that there is no risk of privatizing the existing system of water service provision, as the legal and strategic framework doesn’t permit it and the upcoming Law on Water will meet a large portion of new needs. In the words of Vesna Trbojević from the Ministry, “the upcoming reform, with the goal of raising the quality of water services to the European level, rests upon the principle that the price of the service must ensure a complete return on investment”.

source: EPA

What do the experiences of other countries show?

News portal reminded what the experiences of other European countries are really like and how citizens react to them, using the examples of Italy and Greece, with commentary from Giuseppe Mastruzzo and Kostas Marioglou at the conference.

In Italy in mid-2011, at the initiative of citizens, a successful referendum against the privatization of water supply and disposal was held, leading to the city government of Naples to re-communalize the local water supply and disposal company in cooperation with the activist and academic communities and establish a governance system granting a certain level of control of the company to active social groups through participative democracy mechanisms.

An almost identical case of re-communalization of a water supply and disposal company took place in 2001 in France, after the courts had determined that the mayor of Grenoble had received a bribe from the head of one of multinational corporation Suez’s daughter companies in order to sign a harmful 25-year concession contract on water supply and disposal services.

The same corporation is now interested in privatizing the local water supply and disposal company in Thessaloniki; after a long campaign, a civic initiative succeeded in forcing the local government to hold a consultative referendum on the privatization along with the local elections. While the campaign and discussion still last, civic initiatives opposing privatization are offering different alternatives to the existing model of a public company controlled by corrupt political parties, with the possibilities ranging from a public company with elements of participative democracy to a cooperative owned by Thessaloniki citizens.

In Croatia, companies owned by local self-government units are currently the sole water service providers, with civil society organizations and the general public increasingly worried as it is still unclear whether and to what extent the measures for reforming water management in Croatia have been developed. Bearing in mind similar risks pertaining to concessions over motorways, strategic investment laws, golf courses and forest management – examples marked by a wholesale denial of any risks or drawbacks for citizens, local communities, society, the environment, the economy, public goods or democracy – there seems to be all the more cause for alarm.