Executive Summary and Recommendations ^*

On October 6, 2000 Sofiyska Voda - EAD /Sofia Water/ started to operate the water supply, wastewater and sanitation services for Sofia city. Sofiyska Voda /Sofia Water/ is a special purpose company established between the winner of the bid for a water concession - International Water Ltd. (IWL) /a company in consortium between US Bechtel Group and the British United Utilities International/, and the existing municipally owned utility company - ViK /Vodosnabdyavane i Kanalizatsia EAD/. “Sofia Water” was established initially with 75% of shares belonging to International Water Ltd. and 25%- to Sofia municipality through ViK EAD. The financial contribution of IWL was supported by the European Bank for Reconstruction and Development /EBRD/.

The Concessionaire’s responsibility is to operate and maintain the water supply and sewerage system during the Concession period and to design, plan, finance and construct the required capital investments.  The MoS retained ownership of all existing water and wastewater infrastructure assets during the Concession period. Ownership of new infrastructure assets, construed by the Concessionaire was also vested in the MoS.  The Concession company was entitled to the right to use those assets in accordance to the Concession Contract. The duration of the concession was initially determined to be 25 years, extendable for a further 10 years in accordance with the Municipal Property Act. A significant programme of capital investment was required in both the water supply and the wastewater systems to meet the target service standards and the Concessionaire was required to invest at least USD 150 million in capital works over the concession period. The Concessionaire had the obligation to make mandatory investment of the amount of USD 152 Million during the first 9 years of the concession period. It is the first transaction of that kind in Bulgaria and one of the biggest investment contracts for the period. Furthermore, the Concessionaire is responsible for the metering, billing and revenue collection and has the power to warn customers with disconnection for non-payment.

Thus, the concession contract left within the hands of the concessionaire, with predominant foreign participation, the implementation of the right to water and the provision of water supply as essential service.

Not surprisingly, the concession contract was concluded within a special legal and economic international context - the commitments undertaken by Bulgaria in the framework of the WTO, and namely under the GATS /General Agreement on Trade in Services/, combined with the conditionalities of the World Bank and the other international financial institutions pushing for liberalization of the water and energy sector, as well as of other essential services. This contract means as well that Bulgaria has become a target of the interests of the big water transnational companies /TNCs/ - a market clearly dominated by the biggest European and US actors at the moment.

Bulgaria joined the WTO as of December 1, 1996 after entering into force of the Protocol for the Accession to the Marrakech Agreement. The country applies all multilateral trade agreements, annexed to Marrakech Agreement from the date of accession without recourse to any transitional period. Bulgaria accepted as a single undertaking the three major agreements - GATT, GATS and TRIPS. Due to the fact that Bulgaria “jumped” into the WTO directly with the status of a developed country / being one of the first countries in Eastern Europe to do so/, the reforms of the transition period had to be conducted in a framework of open markets and strong international competition. Despite the scarce economic effect and the negative social impact of liberalisation, Bulgaria is firmly intended to join and pursue the WTO agenda. This is because the country wants to be recognised and accepted in the democratic international community.

By joining GATS the Bulgarian government had to start playing the GATS game and, subsequently, to follow its rules. GATS is the first multilateral agreement containing the commitment for a continuous liberalization of the trade in all services, essential services included, through binding rules. The aim of GATS is to increase international trade by removing any control and restrictions as fiscal policies, standards, conditionalities, environment protection, existing social standards or laws which maintain the public monopoly on some services. Exemptions are very limited in practice and commitments, once made, are irreversible. The Bulgarian government made a lot of horizontal commitments as well as commitments through a broad range of services; namely, Bulgaria is bound by liberalisation in the field of environmental services - wastewater, sanitation, litter collection, except for services in the exercise of state authority. There are no limitations for the commercial presence concerning sewerage, wastewater and other related services. The liberalization and deregulation of water supply services, in Bulgaria included, are subject to the pressure within the WTO. In the frame of the request – offer procedure launched, a high number of requests in the water sector were made mainly by the EU /apparently more than 70/ to the developing countries. There is unofficial information about the pressure that should be exerted also on states from Eastern Europe, too. The forthcoming Ministerial in Hong Kong is an important stage for the negotiations around this large amount of  “water requests”.

The Bulgarian government has not adopted safeguards and regulatory mechanism in order to protect the social-economic right of the Bulgarian citizens in the conditions of liberalization. The services sector is particularly relevant for women’ s employment and for the safeguard of other social rights but the gender implications are ignored as well. Women make almost 63% of the employed in services, according to the National statistical institute /NSI/. The share of women in the total amount of employed people in the middle of 2002 has been about 47%. Thus, women are much better represented in the sectors as education (79,6%), where they are 4,2 times more than men, health care (75,7%) and other social services, they are 3,9 times more than men, finances and insurance (61,7%), hotels and catering (57,7%) commerce (51,4%). According to the estimations of the specialised trade union for water supply and wastewater sector, women make about 36-38% of the people working there. It is a relatively high number, given the characteristics of the work the sector involves.

The arguments about the impact of trade liberalization, and namely of GATS, on women, shared by feminist organisations and experts, are valid also for Bulgaria:

-         The costs and the benefits from intensifying the monetary flows, the trade in goods and services, and the labour market are unevenly shared between women and men. It consolidates the traditional division of roles of women and men, just like it consolidates the other forms of social inequalities.

-         Trade liberalization impose significant constraints on governments - they have to remove regulations concerning labour rights, gender equality, social policies, which make obstacles to foreign investors - thus causing welfare losses; it impairs the capabilities and willingness of the government to start and to continue implementing gender equality and gender empowerment programmes.

-         It devalues the contribution of women to taking important decisions at political level, and also in the sphere of privatisation and trade at national and international level.

-         Trade liberalisation causes decrease in the purchasing power of the households and progressively increases obstacles for access of marginalized groups to basic services, with significant implications for women’s reproductive roles. Special implications are observed in women - headed households.

-         Women are finally responsible for the survival of the family, they have to compensate with their care and other work the lack of or the lack of access to basic services.

-         GATS affects women who make a high percentage of the employed in the services sector, especially in the health and education sectors; due to the division of labour in other sectors, like the water supply and sewerage sectors, for example, women are endangered from redundancies in the administrative departments.

-          Women are affected by the privatisation of basic services, as they are main beneficiaries of services as health, social security, and social assistance.

Bulgaria has ratified all the international treaties on fundamental human rights and freedoms and is bound by them, and namely by the International Covenant on Economic, Social and Cultural Rights. Given the vital importance of access to water, as well as the dangers for the enjoyment of this right, the UN Committee on Economic, Social and Cultural Rights at its 29^th session on 26 November 2002 issued a General Comment No. 15/2002 on the Right to Water /E/C.12/2002/11 /. The General Comment/GC/ is adopted in relation to art. 11 /right to an adequate standard of living/ and art.12 /right to health/ of the Covenant. The rights to water is declared as indispensable for leading a life in human dignity and a prerequisite for the realisation of the other human rights.The main requirements for the realisation of the right to water are: availability, quality, accessibility /in this respect, all water facilities and services must be sensitive, among others, to gender and life-cycle requirements/, economic accessibility, non-discrimination, information accessibility concerning water issues. Women should not be excluded from decision-making on the issues related to the right to water. State responsibility is explicitly stressed upon- state is responsible for ensuring the right to water, no matter by whom water supply is operated and it has to adopt a national water strategy and an effective regulatory system.

As specialized agencies of the UN, the World Bank /WB/ and the International Monetary Fund /IMF/ are related to the UN Charter and have special roles to play in the implementation of the two Covenants, especially in the ICESCR. According to the legal theory, states cannot be exempt from their HR obligations, when they adhere to another legal body. A point of inconsistency of the positions of the states forming the international financial institutions /IFIs/ and the WTO is that they opted for strict regulations and enforcement of the decisions only at the level of their financial and trade multilateral agreements, but left basic human rights without a reliable enforcement mechanism

In the case of the Sofia water concession, the foreign investor “International water” is related to the global Water oligarchy, which makes the driving force behind the otherwise legitimate claims for more investments, restructuring and privatisation. Their thirst for profit and control and global alliances with banks and governments made out of the right to water a mere commodity.

In Bulgaria we observed the same pattern of conduct and social implications of the activities of the water TNCs, identified in the investigation of the ICIJ /International Consortium of Investigating Journalists/ - they can be ruthless players who constantly push for higher rate increases, frequently fail to meet their commitments and when companies are fined for not achieving performance targets, they often don't pay, preferring to appeal rulings in lengthy and expensive arbitration and court proceedings.

It is not accidental that prior to the concession of “Sofia water” by the time of the finalisation of the concession contract, “International water” had failed already in Manila, the Philippines they provoked the famous riots in Cochabamba.

Although the investor r had no experience in Eastern Europe, it found a lot of assets in Bulgaria which opened good opportunities for profit: a strong deregulation and privatisation agenda of the government, with the respective conducing privatisation climate and legislation, an obsolete infrastructure of water supply, well qualified and trained personnel in the sector, favourable technical and climate conditions in Sofia. And last, but not least - citizens who are not used to stand for their rights, who do not go out in the streets.

So, in these conditions, the concessionaire could afford: to take advantage of the defaults in the concession procedure, by “overselling” its services; then to directed the investments towards the information and accounting system, instead of investing in the infrastructure in need for modernization; not to account properly for the investment and the use of the EBRD loan; to contract out essential water supply and sewerage services and to make a good part of the qualified personnel redundant; to push for continuous increasing of the water rates , to allow overcharging  and arbitrary cuttings of water supply, without informing the clients, and non - achievement of planned technical parameters ensuring the access to water. A survey conducted in the course of the research revealed the trend that women are more sensitive to worsening of the services and raising the prices by “Sofia water”. All the decision taken – about the concession and about its implementation were made with deficit of women’ s participation.

Media remained the main vigilant ally of the citizens during the last three years, characterized by gaps and non-compliance of the concessionaire with the initial contract.

At present and before taking a decision about the replication of the water concession model in other locations, the government has to analyse and assess the social and economic effects of the transaction. The Bulgarian government faces the dilemma- to answer the need for regulation of the water sector or to obey the agenda for liberalization and deregulation. It is essential that the State implement the General Comment on the Right to Water, ensure accessible water supply to all the citizens and regulate the water price rates, beyond the strict division of public water supply companies, municipal, or private ones.

Recommendations:

-         In the course of the interviews with experts it was stressed that with more investments allocated directly, without passing through a foreign investor, and despite the conditionalities of the banks the situation with water supply can be improved.

-         The establishment of big regional water companies with a democratic structure as alternative to the model of water concession were proposed by the experts in the field of water supply. This structure has to be combined of course with the establishment and democratic functioning of national regulatory and controlling bodies. 

-         In any reform, a socially balanced approach that takes into account the needs of people and local circumstances is preferable to any slavish imitation of models, as PPPs or 3Ps. The interests of workers in the sector must be guaranteed, as well as access to water and energy at reasonable prices for all citizens, especially the poor and disadvantaged.

-         Bulgarian government has to opt for transparency of the decisions taken in relation to WTO and GATS. In this respect - the citizens, the representatives of civil society, the trade unions have to be informed in advance about the decisions to be taken, they have to be consulted on all important issues of trade liberalisation

-        The government has to consult and account for to trade unions and civil society organizations - human rights, social NGOs, organizations of minorities and vulnerable groups, women’ s organizations about liberalization and restructuring in the sectors related to essential social services

-        The political decisions about the liberalization of essential services have to be taken with the participation of women and with respecting the opinion of women – the most affected and concerned by any restructuring of this sector.

-        In the meantime, all the implications of GATS in Bulgaria, and especially in the field of essential services, should be reviewed, analysed and assessed from the point of view of their human rights and social implications. Where needed, new laws, policies and programmes of the government in implementation of GATS should be stopped.

Bulgarian civil society has to start playing a leading role in supporting the international social movements working in the field of the implications of GATS, and namely on essential services and to support the appeals for STOPPING GATS: In implementation of that, civil society has to exert pressure on the Bulgarian government to accept, support and to lobby for the implementation of the resolution of the UN Sub-Commission on the Promotion and Protection of Human Rights, which calls upon “ all governments and international economic policy forums, including the WTO and its GATS Council, to conduct an assessment of the impact of GATS on the implications of international trade in basic services such as health and education services and their impact on human rights. An initial assessment would need to clarify what the GATS text actually means, and the political sovereignty implications of what governments will or will not be able to do as a result of the agreement”.

-         Bulgarian civil society should insist and exert pressure on the government, in order to:  make Bretton Wood institutions recognise that the treaties on human rights are binding on their members, that they ensure that their policies and programmes  are in compliance with the provisions of international  HR law;  make WTO adopt in its agreements legal safeguards for the protection of  basic human rights, the right to equality included, with effective legal mechanisms for implementation.

About the authors:

Prof. Irina Nikolova Moulechkova, Bulgaria, Ph.D., senior lecturer of International Public Law, University of World and National Economics (UNWE), Sofia and of International Protection of Human Rights. Ex member of the Supervisory Board of State Privatisation Agency. Articles and studios on International Standards of Human Rights and Women’s Rights, ILO standards with regard equal opportunities of women and men on labour market. One monograph on the status of individuals in International Public Law. Co-author of BGRF in Annual reports on Bulgaria for Social Watch - 1999, 2000, 2003. Co-author of the Final report: “Privatization’s Impact on Women during the Economic Transition in Bulgaria” 1999. Participation in the preparation of the Alternative report to the Third Periodical Report of Bulgaria on the implementation of ICESCR, presented at the 21^st session of the Committee on Economic, Social and Cultural Rights, 1999. Appointed by the President of Republic of Bulgaria as a member of the Commission for Protection against Discrimination in 2005.

Genoveva Tisheva, Bulgaria, lawyer, Executive Director of the Bulgarian Gender Research Foundation.

Contact: brfg@fast.bg

^* The Case Study is thepart of the WIDE (Women in Development Network) - BGRF Project ‘A Gender Perspective in Privatisation of Public Goods and Services’ funded by Heinrich Boell Foundation (carried out in 2003 and publication of the report in 2004)