Privatisation of the water supply industry in select countries

Privatisation in the ECA region (former Eastern European and CIS countries) has moved forward in the last few years, mostly in Europe, but is still very limited in the CIS countries. Although there are still many hurdles to overcome lessons are being learned and put into application.
A restrictive legal framework, which does not allow for majority private ownership or particular types of contracts, such as concessions, is one of the major obstacles for PSP in the ECA region. Existing PSP in some cases, such as in Yerevan in Armenia, shows that an imbalanced legal base can create problems with the signed contract.
For the majority, and even for the most advanced countries such as Poland, high transaction costs could limit the number of PSP projects. Lengthy preparation times have been one of the major obstacles in the course of developing PSP projects. This has happened due to the lack of experience of the governmental sector in tendering and dealing with water sector contracts.
Current obstacles for PSP involvement also include EU grants requirements, which demand no more then a certain percentage of private ownership for a municipality to be eligible for the EU accession funds. The same requirements exist for government subsidies, thus discouraging municipalities from selling their assets.
While considering a privatisation option, municipalities have increasingly started to look at other alternatives besides PSP, basing their decisions on a case-by-case basis. Thus, competition exists not only among the international water companies; there is also a trend emerging that reflects growing competition between the public and private sectors.
The Czech Republic has led the way, followed by Hungary, in privatising its water utilities. The Czech waterworks assets are owned by local municipalities, which rent them to professional operating companies. Almost all the previously state-owned water and sewerage companies have been privatised in some way. Veolia is the largest foreign water concessionaire.
Hungary has been active in privatising by concession but unlike the Czech Republic the municipalities have usually retained majority ownership. There have been several cases of private concessions being reversed and operations being taken back into municipal control.