Background

The Conclusions adopted at the Tripartite Meeting on Challenges and Opportunities Facing Public Utilities held in May 2003 reiterated the point stressed in the Conclusions adopted in 1999 that public utilities were essential services that played a vital role in economic and social development and that they must serve the public interest whether they were provided publicly or privately. Governments were ultimately responsible for ensuring reliable universal access and continuity of service under transparent and accountable regulatory frameworks. Increased competition and globalization in the utilities sectors in recent years has forced changes in regulatory frameworks as well as ownership structures of enterprises, in addition to business diversification of such enterprises. These have impacted job security and working conditions in the sector. Technological innovations can improve work efficiency, but an adequate level of staffing and sufficient training in the use of new technologies are still important for ensuring efficiency and the safety and health in the workplace and for the enterprises to remain competitive. The Meeting also encouraged the adoption of good governance and corporate social responsibility (CSR) by enterprises as they could provide them with strategies and initiatives for applying best practice, particularly when addressing social and employment issues at the time of restructuring. The participants of the meeting were convinced that good governance and CSR would demonstrate how efficiency and profitability on the one hand could go hand in hand with decent working conditions on the other.

Privatization of utilities services used to be encouraged during the last few decades because of the widely accepted belief that the private sector could deliver services much more efficiently than the public sector where public debts had accumulated. A number of multinational companies won contracts and went into many developing countries as investors with a firm conviction that their investment would be beneficial to both the development of the host countries and global expansion of their business operations. However, when privatized enterprises must comply with the principle of universal access as well as having to accept the decisions of regulatory institutions with regard to tariff fixing, for example, many realized the difficulty of making adequate investment for the kind of service improvement intended, particularly in countries where per capita income was still quite low to the extent that a significant tariff hike was not possible to ensure quick returns to the investment. In countries where regulatory institutions did not function properly, ordinary customers often experienced tariff hikes to the levels that were more than they could bear, and those who could not pay were denied the access, resulting in deteriorated service delivery as well as unsatisfactory returns to the investors. The services became unsustainable, and by the time the investors decided to withdraw from the host countries altogether, the people of the affected area were often left with unreliable services of poor quality or services they could not afford. There are many such examples of failed cases of public utilities that had been privatized throughout the world mainly because of dysfunctional or incompetent regulatory institutions.

More progress needs to be made as access to these services, particularly to clean water, is still often inadequate and inequalities persisted between countries and within countries. Ensuring universal access to clean water, which is vital to human health and survival, remains a challenge particularly in developing countries.

Probably the main challenge in these sectors is to strike a balance between commercial and business concerns, calling for cost-efficient, profitable operations; and broader public service values, that emphasize the provision of cheap, reliable and widely accessible services (whether or not the ownership is public). This duality is found in all the problems and in all the solutions relating to these services, and makes it demanding to reconcile what are sometimes conflicting requirements.