Interview with Gerard Payen
Senior Executive Vice-president of Suez
Interview by CBC Radio's Bob Carty
Paris, France | Dec. 3, 2002

Gerard Payen, senior executive vice-president of Suez

EXPLAIN YOUR UNDERSTANDING OF THE 'WATER DIVIDE.'

The water divide is the divide between those who have water, the benefit of water every day, and those who have no access to safe drinking water. Those are more than one billion people around the world. That is a true divide.

There is a debate, not a divide, of the public sector versus the private sector. Some people try to oppose those two sectors. Our conviction is that this is fruitless, this is not efficient at all. The issue is to find a way for providing water to everybody. And by experience we know that providing water to everybody requires the experience of all - the private sector, the public sector, everybody has to work on this issue.

WHAT CAN PRIVATE CORPORATIONS DO BETTER THAN THE PUBLIC SECTOR?

I am not sure this comparison is very useful in general because there are very good public sectors. In the private sector you have people who are experienced and not so experienced. So you cannot compare in general.

What I know is that Suez has worked in this sector for more than one century. We can provide access to technologies and we have a very good research program, and so we can cope with unexpected issues very quickly. We also provide managerial skills - this is very important, this is where we can provide our value-added - from our experiences we can provide the service which in many ways can provide savings to the community.

In addition, the private sector provides something to the community. When you involve a private company you have to define the mission, the goals, the results you are looking for. And this is a benefit. In many cases, when only public servants are involved with delivering water services or sanitation services, the goals which are expected by the political decision-makers are not visible, they are not explained. When you establish a PPP, you have to define the goals, you have to have a water policy. In my experience, when you have a policy, you get results. When you involve the private sector, the community has more information and the situation is more transparent.

HOW CAN WATER CORPORATIONS MEET THE WATER NEEDS OF THE WORLD?

In the developing countries where more than five billion people are living, one out of five, maybe more, are lacking adequate services. And this is the result of a situation where the vast majority are served by the public sector. In fact, more than 97 per cent of the people are served by the public sector. The private sector is only operating in a few areas with less than three per cent of the developing area. So, I don't say that the private sector is THE solution. What I say is that the private sector can bring interesting solutions.

Our experience as Suez is that in the developing world it is possible to provide water to everybody. In the developing world, the poorer you are, if you live in a city, the more you pay for water. The poorer people cannot afford to pay for water services. In fact they are paying too much today. As a private company we have been able to provide access to water to more than seven million people in various countries. It's a huge number. And these people are very satisfied with the service we provide to them.

WHY COULD NOT THE PUBLIC SECTOR DO THAT?

The public sector is absolutely able to do that. But it is necessary that the conditions are favorable - which means the political will is sufficient and when you establish a public-private partnership it is a good opportunity for strengthening the political will regarding water access. In many cities where we arrive, we notice that the public utility is not well organized and could not invest enough in water networks. And when you do not invest regularly, very quickly the water service decreases.

EXPLAIN YOUR ATTITUDES REGARDING OWNERSHIP OF WATER ASSETS AND IF WATER IS A COMMODITY.

We currently supply water and sanitation services to more than 125 million people every day. So we have experienced many kinds of models. We are flexible - so we accept the conditions of the local governments. But, we could compare the efficiency of various models. And we know that in the developing world, it is not necessary to sell the water assets to a private company if you want to get results. The most efficient scheme is a public-private partnership (PPP), which is absolutely different from a privatization scheme. In a privatization scheme the government sells all the assets to a private company. And the private company is the owner for a century or more. In a PPP, there is no such sale. But there is a contract. There are goals which the private company has to achieve in a limited period of time. So it is better way of getting results. And, what is essential, it is possible to get the same results with a lower price for services to the people.

SUEZ IS NOT INTERESTED IN OWNING THE ASSETS?

We do not refuse but we are not really interested because we are looking for efficiency. We know that providing water services is such a political thing that partnerships have to be win-win-win projects. I mean that a water project has to benefit the people first. It also has to benefit the political decision-makers. And obviously it has to benefit the private partner. And the only way to organize a win-win-win project is to deliver the results with the lowest costs. And in a PPP you can organize lower rates than in a private scheme where there is an initial check, a very big check, for purchasing the assets.

IS WATER A COMMODITY?

Water is not a commodity. Water is a natural resource - a public good. The economical value of water in nature is nil. But water services have to be organized by government. And everywhere in the world the governments are responsible for allocating water resources between the various users. It is important to understand that when the private sector is requested to provide water and sanitation services, the price is never set by the private operator. It is always fixed by the government.

As private operators we have some costs which are the costs of a service. We provide a service. We extract water, we transport water, we purify water and bring this water to your home and after you use it we collect it. So this is a service. It has a cost and somebody has to pay for it. But water is not a commodity. It is a public good. It is also a social good. It is essential for life. That is a motto of Suez - we provide the essentials of life. And we have said for a long time that the right to access to water has to be recognized. But the right to the access to water is one thing. What is maybe more important is that the people have this right implemented. And this is where the experts, like people of Suez, have something to do. Daily we provide water to nine million people living under the poverty line and that is a way to implement the right to access to water.

WHY SHOULD INVESTORS INVEST IN A WATER COMPANY AS OPPOSED TO AREAS WITH A HIGHER RATE OF RETURN?

I think water services as a business is attractive when you look at the needs. The potential market is enormous. We have worked in water services for more than one century. We have a very long international experience so we are well positioned to succeed in this business.

ARE WATER PROFITS BETTER THAN OTHER SECTORS?

Our profitability is in line with the requirements of our group in general. I mean, the water businesses - because there are several kinds of businesses - are very different from one country to another. In some countries we are regulated utilities. In most countries we operate by a contract. Some are only operation and maintenance contracts which are interesting for our customers and us but are not so ambitious as concession contracts. So, we manage to make money in all kinds of contracts and partnerships.

What is important for investors is that we are long-term players. We operate with long-term contracts, 15-20-25 years, and the result is a very stable business. When you are good enough to operate in good conditions, it lasts for a long time.

WHAT IS THE MOST ATTRACTIVE PART OF THE WORLD FOR SUEZ?

Well, we are able to operate everywhere. But potential opportunities are mainly in the USA, in China and in some countries where the market is moving. I do think our future lies in Europe, China and the United States. At least for a while. And this is where today we have more than 85 per cent of our activities.

DO YOU HAVE ANY SPECIFIC STRATEGY FOR CANADA AND THE USA?

Well, Canada is a very strange country. There are many people very vocal against private companies acting in water. Canadian people are not very used to that - they do not know how it could work. And we have tried several times, but I don't know if Canadian people are willing to work with private companies. So, we will wait.

In Halifax, we won an international contest for removing pollution from the harbor. It is a very huge contract. And we are very pleased that this success is in Canada because it will be viewed with interest by many decision-makers in Canada. It will be a success, I am very sure of that. Because we have the expertise, we know the technologies, we know it will be a success.

IS THERE LESS RESISTANCE TO PRIVATIZATION WITH WASTEWATER?

It depends. It depends on the location. The drinking water side is more sensitive in many countries, this is right. But we have a very strong experience. And on the drinking water side we bring something that is very important. We have a network of experts al around the world and this network can be mobilized in case of a problem. So the quality of the water of the water we deliver is very good.

So I think this Canadian experience in Halifax will be viewed as a success. And maybe private water operators will be more accepted in Canada. I hope so.

In the United States, the market is absolutely different. In the US all kinds of arrangements exist. You have regulated utilities. You have PPPs. You also have public sector arrangements, which is the vast majority. There are huge needs in the US. In the developing world, the priority is to provide safe drinking water to basic sanitation. But, in the case of the industrial countries the needs are about removing pollution, either for water or from waste water. And there the needs are enormous. All of our countries are having our natural resources damaged by human pollution. So it is important to invest in schemes which protect our environment from this pollution.

THERE HAVE BEEN CHARGES OF CORRUPTION IN FRANCE - ILLEGAL CONTRIBUTIONS TO POLITICAL PARTIES, PRICE FIXING AND SO ON - WHY SHOULD THIRD WORLD COUNTRIES TRUST YOU?

We have an ethical code, which is very precise. The image of our group is at stake. So we believe that our behavior today is absolutely trustworthy. Look at our records around the world and you will find that our track record is very good in fact. Other businesses are worse than ours.

Regarding corruption, I think it has to be known that when we arrive in a developing country, in a city where we have been awarded a water contract, the first thing that we do is to eliminate corrupt practices from the former public utility. This provides trust to the customer - as in Casablanca's change in customer satisfaction.

SO THIS IS OF THE PAST?

It is absolutely of the past.

WHAT IS THE ROLE OF THE WORLD BANK IN PPPS?

In the developing world, the public utilities have failed in many places. When I say they failed, it is because more than one billion do not have access to water. In some areas the private sector has been asked to come and provide the service. But the conditions for attracting the private sector are not so easy. So, how to do more? A very important idea is to combine the capacities, the skills, of all. The capacities of the local governments, of the aid agencies of the public sector, and the NGOs. If you combine all these different actors in a single project you get significant results.

We view the World Bank as a partner. They are a very important partner in the water sector, because they have water experience, and are deeply involved in water projects in several countries. So we work with them, trying to find appropriate solutions. The most important is having water policies organized in a sustainable way. And having a brand new infrastructure does not provide you sustainability. I think this is why private operators are appreciated by the World Bank. Because they are viewed as people who can commit themselves over the long time. In fact when we have a water contract for 20-30 years - in Buenos Aires or South Africa or other places - we have to deliver results over the long time. And our time is even longer than the time of the elected decision-makers. It is one of the things we bring. In Argentina we have a very big contract. It is absolutely a success.

AN EXECUTIVE OF SAUR SAYS THAT 'FINANCING SOLUTIONS FOR WATER INFRASTRUCTURE WOULD HAVE TO INCLUDE SUBSTANTIAL GRANTS AND SOFT FUNDING WITH THE WB GROUPS PLAYING A KEY ROLE AS FINANCIER AND COORDINATOR.'

The use of soft funding is common in the developing world. There is no reason this soft funding would benefit populations where there are public operators and not benefit the private operator. In order to create more projects, it would be wise to mix public funds, which means soft funding from public budgets, multilaterals, with private endeavors. By doing that we would create more projects - and benefit more people. So this idea of mixing soft loans, grant, to private initiatives… more and more people are talking about that.

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